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CLIENT ALERT: EEOC Proposes to Require Large Employers to Report Wage and Hour Data

February 5, 2016

On January 29, 2016, the Equal Employment Opportunity Commission (the “EEOC”) announced proposed rule changes that would require all “large employers” (i.e., employers with 100 or more employees) and federal contractors to report employee wage and hour data in a revised Employer Information Report (“EEO-1”).  The proposed change, announced on the 7th anniversary of the signing of the Lilly Ledbetter Fair Pay Act, is one of several actions the Obama Administration has announced to “further advance equal pay for all workers.”  The proposed rule indicates that the wage information would be generated from employees’ W-2 forms.   If issued as a final rule, the proposed changes will take effect in 2017; the EEOC estimates that the proposal will cover more than 63 million employees.

Notably, as written, the proposed rule does not take into account any factors that may be valid reasons for pay variations, such as differing experience, performance, education, and tenure. Employers would be required to use W-2 data to allocate wages paid to employees in each of the 10 EEO–1 job categories into 12 pre-defined pay bands.  The EEOC believes that the use of pay bands will avoid the need to report the specific salaries of individual employees, thus presumably ensuring the confidentiality of employee pay data.  The EEOC claims that the reported data would be treated as confidential to the “maximum extent” provided by law, in accordance with the Trade Secrets Act and the trade secrets and confidential commercial information exemption to the federal Freedom of Information Act. 

In addition to expanding the reporting requirements for large employers beginning in 2017, the EEOC has proposed that all filers submit the EEO–1 form electronically, although filers may seek an exemption from the electronic filing requirement by using the existing EEO–1 process to seek permission to use special reporting procedures.

One of the many practical challenges created by the proposed rule is that employers likely will be required to re-work internal reporting processes because W-2s typically are not generated until the end of the calendar year, whereas the EEO-1 reports are due on September 30th of each year.  Practical business considerations such as these will undoubtedly be the subject of written comments in response to the proposed rule.  Comments are due on or before April 1, 2016.