Employers with 100 or more employees take note: a major new reporting requirement may be coming your way next year.
On January 29, 2016, President Obama announced that beginning in September 2017, employers with 100 or more employees must report the earnings and hours worked for all of their employees. That’s right. Employers must disclose compensation information for all employees, including executives – which many employers consider to be highly confidential – to the EEOC.
Employers will be required to disclose this compensation data as a new category on the EEO-1 report, which employers already provide to the federal government and which contains workforce data sorted by race, ethnicity, gender, and job category. Specifically, the “revised EEO-1 will collect aggregate W-2 data in 12 pay bands for the 10 EEO-1 job categories” already used. The EEOC noted that it does not intend to require employers to track hours worked by salaried employees, but that it is seeking input on the issue.
Announced on the anniversary of President Obama’s signing the Lily Ledbetter Fair Pay Act of 2009 that addressed gender pay inequity, the EEOC intends this compensation reporting requirement to “assist the agency in identifying possible pay discrimination and assist employers in promoting equal pay in their workplaces.” The new rule also comes nearly two years after President Obama issued an executive order to require the same reporting from federal contractors. Recently, the National Labor Relations Board took up the issue of compensation transparency, emphasizing that employers cannot prohibit employees from discussing their compensation.
While many employers respect the rights of workers to discuss their own compensation, and strongly support equal pay for equal work, they may nonetheless still be wary of turning over compensation information for all of their workers. Many employers consider that to be highly confidential information and have concerns about the government’s ability to keep the information out of the hands of competitors. Public comment on the new rule is open until April 1, 2016, and we expect many to weigh in on this issue.
While the EEOC has couched this requirement as mere data gathering, this data collection can potentially carry significant risk for employers. Labor Secretary Thomas E. Perez noted that the “data collection also gives the Labor Department a more powerful tool to do its enforcement work.” The agencies could use this pay data to assess complaints of discrimination, focus agency investigations, and identify existing pay disparities that may warrant further examination. To mitigate this risk, employers subject to EEO-1 reporting should proactively analyze their compensation data and review for any red flags that may raise the ire of the EEOC.
We will be tracking this issue closely. Stay tuned.