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EEOC Reduces Employee Pay Data Requirements

Tuesday, September 17, 2019

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Update

The Equal Employment Opportunity Commission (EEOC) has announced that it will not collect EEO-1 Component 2 data—pay information broken down by job category, race, sex, and ethnicity—in the future. The agency concluded that the burden imposed on employers to gather the data outweighs the usefulness of the data for the agency. However, Component 2 data for 2017 and 2018 still must be submitted by Sept. 30 this year and courts might intervene to compel the EEOC to gather the data in future years despite this announcement. The EEO-1 Component 2 online filing system is now available on the EEOC's website.


The Equal Employment Opportunity Commission (EEOC) released a sample form, instructions and FAQs to help employers submit employee pay data—due to the agency by Sept. 30—sorted by job category, race, ethnicity and sex.

Earlier this year, employers were required to submit EEO-1 Component 1 data that lists employees by job category, race, ethnicity and sex. Component 2 asks for employees' hours worked and pay information from their W‑2 forms, broken down into the same categories.

In 2017, the federal government decided not to gather Component 2 data, and worker advocates sued to force the EEOC to collect it. After a heated legal battle, the EEOC announced that employers must report Component 2 data from 2017 and 2018 payrolls by Sept. 30.

The EEOC's website provides information employers may need for filing Component 2 data, such as a sample form, an instruction booklet and FAQs for covered employers. 

Collecting the Data

The EEOC uses information about the number of women and minorities companies employ to support civil rights enforcement and analyze employment patterns, according to the agency.

Businesses with at least 100 employees and federal contractors with at least 50 employees and a contract with the federal government of $50,000 or more must file Component 1 of the EEO-1 form. However, only employers with at least 100 employees, including federal contractors, must file Component 2.

Under Component 2, employers must report wage information from Box 1 of the W‑2 forms and total hours worked for all employees, categorized by race, ethnicity and sex, within 12 proposed pay ranges.

"Employers may not use gross annual earnings instead of W-2 Box 1 earnings," noted Kiosha Dickey, an attorney with Ogletree Deakins in Columbia, S.C., and Jay Patton, an attorney with Ogletree Deakins in Birmingham, Ala.

[SHRM members-only HR Q&A: What are the filing requirements for the EEO-1 form?]

The report should show actual hours worked by nonexempt employees, an estimated 20 hours worked per week for part-time exempt employees, and 40 hours worked per week for full-time exempt employees.

As with Component 1 data, employers should select a pay period between Oct. 1 and Dec. 31 of the reporting year as the "workforce snapshot period" for Component 2 data, the agency guidance said.

"The only employees whose compensation and hours-worked data must be reported are those full- and part-time employees who were on the employer's payroll during the workforce snapshot period," Dickey and Patton explained.

Contentious Component

The federal government initially halted plans to collect pay data so it could review the appropriateness of the revised EEO-1 form under the Paperwork Reduction Act.

The worker advocacy groups that filed the lawsuit said the information would help them evaluate pay disparities and better serve their clients. Furthermore, requiring equal-pay data collection would "encourage companies to identify and correct pay disparities and allow the EEOC to more effectively and efficiently root out and address pay discrimination," they argued.

Business groups, however, have opposed the requirement. "The EEOC's pay-data collection rule creates another administrative burden for companies while raising questions about how the data will be used and analyzed," said Brett Coburn, an attorney with Alston & Bird in Atlanta.

"Employers in today's environment are acutely aware of the gender wage gap and recognize the importance of ensuring compliance with applicable federal and state requirements," he said. "Without formal guidance on how the EEOC will assess and publish the data, the only certainty is that this new rule will create opportunities for litigation."

Compliance Tips

"HR professionals can and should start preparing for expanded EEO-1 reporting now," said Arthur Tacchino, J.D., chief innovation officer at SyncStream Solutions, which provides workplace compliance solutions.

HR professionals should identify where employee pay and hour data are stored and begin gathering that information or figuring out how to extract it, he said.

"Once all data is collected, employers should then tackle the herculean task of filling out the actual form," he added, noting that HR professionals may want to check with vendors to see if they can assist with the process.

"Employers will report data through the Component 2 EEO-1 online filing system or by creating a data file and inputting their data in the appropriate fields in accordance with the data file specifications," Dickey and Patton said.

 

By Lisa Nagele-Piazza, J.D., SHRM-SCPSeptember 11, 2019

 

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