What happened?

On July 5, 2024, the Equal Employment Opportunity Commission (EEOC) published in its spring regulatory agenda that it plans to release a Proposed Rule on Collecting Pay Data from employers.

What are the details?

Background:

• The EEOC is seeking to revive Component 2 pay data collection as part of your annual EEO-1 submission.

• Covered employers had to briefly submit this compensation information a few years ago after a contentious legal battle on the issue.

• The Trump administration dropped the requirement to report pay data.

• In 2019, a federal judge reinstated the requirement and ordered the EEOC to collect Component 2 pay data for both 2017 and 2018 from covered employers.

• Later in 2019, the EEOC announced that it would halt the collection of pay data during future EEO-1 reporting cycles due to the high burden on employers and the unproven usefulness of the program.

• The agency has not collected Component 2 data since then.

• A July 2022 study found pay data collection to be incomplete and partially unreliable. Despite these issues, the National Academies (NASEM) saw the potential value in the data and suggested improvements. The EEOC has acknowledged these insights for future data collection.

The Rule:

• The proposed rule could resemble Obama-era EEOC regulations, requiring employers to submit pay data (race, ethnicity, job category) in their annual EEO-1 report.

• The EEOC’s new focus on protected characteristics such as sexual orientation and gender identity, following the Supreme Court’s decision in Bostock, could lead to these becoming new required categories.

• The final rule is expected in late Spring/early Summer 2025, with data collection likely starting in 2026.

• The U.S. Department of Labor plans to modernize several compliance programs for federal contractors and subcontractors, considering modifications in light of Executive Order 13988.

• The U.S. Department of Labor plans to modernize several compliance programs for federal contractors and subcontractors, considering modifications in light of Executive Order 13988.
  • Agency rules may be more susceptible to court challenges due to the Supreme Court’s ruling when it abolished the Chevron Defense.

• Data collection could be halted by a new Republican administration, Republican control of Congress, or a court decision. It is likely not to commence until 2026 at the earliest.

Business Considerations

• Employers should track this development, as it could lead to burdensome changes down the road.
• Employers should consider reviewing the requirements for the 2017 and 2018 pay data collection and assess their ability to comply with future reporting requirements. This includes determining how W-2 pay data can be split into potential pay bands and EEO-1 categories, and how to report hours worked.
• Employers should conduct an audit of their pay practices to identify and address any areas of pay disparity. This should ideally be done under the protection of the attorney-client privilege.
• Employers should be prepared to act if any disparities exist. They need to determine whether these can be justified by legitimate and non-discriminatory explanations, or whether corrective action is needed to address pay gaps.
• Employers should stay informed on state law developments. Many states are considering pay data reporting laws of their own, and employers need to be aware of these potential changes.
• Employers should take the time to consider the mechanics of internal pay audits and any potential changes to compensation design that may close any pay gaps that could be revealed by an EEOC pay data collection. This is particularly important as they will likely have at least a year and a half before they have to submit any pay data to the EEOC.

Source References

• EEOC Regulatory Agenda
• EEOC Announces Independent Study Confirming Pay Data Collection is a Key Tool to Fight Discrimination – 07-28-2022

Resources

• Supreme Court Overrules Chevron Deference (VensureHR)

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