EEOC to Require Pay Data From Employers Starting in 2017

In an on-going effort to close the pay gap for women and minorities, on January 29, 2016, the Obama Administration announced that the U.S. Equal Employment Opportunity Commission (EEOC) will now require federal contractors and employers with 100 or more workers to provide data related to pay practices. Starting in September 2017, the EEOC will request data on pay ranges and hours worked for all employees in addition to the information collected on employer EEO-1 reports. The EEO-1 report, also known as the “Employer Information Report,” is a compliance survey mandated by federal statute and regulations which must be submitted and certified no later than September 30th, annually. The report currently requires federal government contractors and companies with 100 or more employees to disclose employment data to be categorized by race, ethnicity, gender and job category.  In addition, employers will must report job categories and pay bands but will not be required to report specific salaries of each individual employee.  Employers will also be required to report on the total W-2 earnings as the measure of pay.

The new requirement will provide the EEOC and the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) with more insight into pay disparities across different industries and occupations as well as assist the agencies in investigating those employers who appear to be engaged in wage discrimination.  The EEOC’s announcement was made on the seventh anniversary of the Lilly Ledbetter Fair Pay Act which provides employees with a 180-day statute of limitations for filing an equal-pay lawsuit regarding pay discrimination after each paycheck.

The Obama Administration estimates that compliance with the new EEO-1 reporting requirements will cost less than $400 per employer the first year and a few hundred dollars per year after that.  The EEOC’s proposed revisions to the EEO-1 report were published as of February 1, 2016. Public Comment on the proposed changes will be open until April 1, 2016.

What This Means For Employers:

  • For the 2016 EEO-1 reporting cycle, all employers will submit information that is identical to the information collected by the currently approved EEO-1 report.
  • Starting in 2017, federal contractors and employers with 100 or more employees will submit the EEO-1 report with pay and related information before September 30th. These employers must report all W-2 earned income.
  • Although EEO-1 reporting is due on or before September 30th each year, the EEOC guidelines suggested that W-2 data can be imported into a human resources information system (HRIS), and a data field can be established to accumulate W-2 data for the EEO-1. Alternatively, employers could obtain this pay information by utilizing quarterly payroll reports for the previous four quarters. Employers that do their payroll in-house will be able to report this data utilizing most major payroll software systems or by using off-the-shelf payroll software that is preprogrammed to compile data for generating W-2s. For employers that outsource their payroll, there would be a one-time burden of writing custom programs to import the data from their payroll companies into their HRIS systems. Employers then must count and report the number of employees in each pay band. During the comment period, the EEOC seeks employer input with respect to how to report hours worked for salaried employees.
  • Beginning in 2017, all filers will be required to submit the proposed EEO-1 report electronically.

Given the EEOC’s new requirement, employers should start to audit their pay policies and practices as those employers who are engaging in pay disparity can expect an increase in pay discrimination cases based on the data collected as a result of the revised EEO-1 reports.

For more information regarding compliance with EEO-1 reporting obligations and how the new rule will affect your business, please contact Dina M. Mastellone, Esq., Director of the firm’s Human Resources Practice Group, at dmastellone@nullgenovaburns.com or 973-533-0777.

OFCCP Issues New Directive Aimed At Detecting Pay Discrimination Based on Gender, Race and Ethnicity

On February 28, 2013, the Office of Federal Contract Compliance Programs (OFCCP) issued new procedures for assessing contractor and subcontractor disparate pay practices. OFCCP rescinded its 2006 Compensation Standards and Voluntary Guidelines because they were too limited. Now, as Directive 307 makes clear, OFCCP’s goal is to engage in a more fact-specific approach and align its enforcement methodology with Title VII of the Civil Rights Act of 1964.

Directive 307 gives OFCCP compliance officers the following directions in assessing employer pay practices going forward:

  1. Analyze summary data such as overall pay differences based on race and gender and the number of employees affected by race or gender-based pay differences within job groups;
  2. Analyze individual employee-level data;
  3. Refine the investigative approach using a range of analytical tools and determine whether (a) there is a measurable difference in compensation on the basis of sex, race or ethnicity; (b) the difference in compensation relates to employees who are comparable under the wage or salary system; and (c) there is a nondiscriminatory explanation for the difference;
  4. Review all employment practices that may lead to compensation disparities, not just compensation policies. This development is a dramatic expansion of OFCCP’s compensation analysis, which formerly focused only on salary but now extends to overtime pay, shift differentials, commissions, bonuses, vacation and holiday pay, retirement and other benefits, stock options and awards and profit sharing;
  5. Develop pay analysis groups to test for statistical significance on large groups of employees;
  6. Inquire as to systemic, small group and individual discrimination to uncover possible systemic issues such as a pattern or practice of discrimination or a discrete employment practice with adverse impact;
  7. Review and test factors used for compensation decisions and evaluate whether the factors are relevant and applied consistently; and
  8. Perform an onsite investigation.

Directive 307 makes clear that OFCCP is taking a more sweeping approach to reviewing employers’ pay practices for unlawful discrimination as compared to traditional review guidelines that have been in place since 2006. Federal contractors and subcontractors should consider making a comprehensive review of their pay practices, policies and processes to determine the extent to which they will survive an OFCCP audit. A self-audit performed under the attorney-client privilege is a prudent and effective means to identify disparate pay practices, even if unintentional, and to address issues before they become the focus of an OFCCP audit.

For more information on Directive 307 and our firm’s OFCCP audit and compliance services, contact Patrick W. McGovern, Esq., pmcgovern@nullgenovaburns.com or Douglas J. Klein, Esq., dklein@nullgenovaburns.com, in our Labor Law Practice Group.

New OFCCP Directive Targets Applicant Screening for Criminal History Record

On January 29, 2013 the Office of Federal Contract Compliance Programs (OFCCP) provided guidance to federal contractors on hiring policies and processes that screen out job applicants who have criminal records. OFCCP’s Directive 306 cautions covered employers that hiring policies that summarily exclude applicants from employment based on a criminal record, without considering such factors as the age and the nature of the offense, may have a disparate, and therefore illegal, impact on racial and ethnic minority job applicants. OFCCP summarizes its current position as follows: “Policies that exclude people from employment based on the mere existence of a criminal history record and that do not take into account the age and nature of an offense, for example, are likely to unjustifiably restrict the employment opportunities of individuals with conviction histories. Due to racial and ethnic disparities in the criminal justice system, such policies are likely to violate federal antidiscrimination law.”

Directive 306 highlights several best practices to avoid liability for discriminating on the basis of an applicant’s criminal record. First, OFCCP suggests that employers not inquire about the applicant’s criminal record at all. But if the employer does inquire, OFCCP suggests that the employer ensures that its applicant screening policies and procedures include an individualized assessment of the applicant’s past criminal conduct and are narrowly drawn to screen out only applicants whose criminal convictions demonstrate unfitness for performing the job or jobs in questions. In other words, before a criminal conviction is considered as disqualifying, the OFCCP Directive cautions that the offense should be related to the job duties for which the applicant is being considered and the employer can articulate a business necessity for disqualifying the applicant.

Federal contractors and subcontractors should review their hiring processes to determine the extent to which they exclude minority applicants from employment based on criminal history, even if unintentionally, and have legal counsel review these policies, and the statistical results of applying them, to ensure compliance with OFCCP requirements.

For more information on Directive 306 and our firm’s OFCCP audit and compliance services, contact Patrick W. McGovern, Esq., pmcgovern@nullgenovaburns.com or Douglas J. Klein, Esq., dklein@nullgenovaburns.com, in our Labor Law Practice Group.