In 2016, the Equal Employment Opportunity Commission (“EEOC”) launched an initiative to expand the data collected through its Employer Information Report (EEO-1) in an effort to “assist the agency in identifying possible pay discrimination.” Specifically, the EEOC added a pay and hours reporting requirement (“Component 2”) to the list of elements for data collection. However, this expanded data collection initiative by the EEOC will be short-lived. The EEOC recently announced that it will not seek approval for the continued collection of EEO-1 Component 2 data.
The EEO-1 Component 2 data consist of taxable income and hours worked in a calendar year, aggregated by twelve pay bands and the same categories as the traditional EEO-1 Component 1 data (job category, race, ethnicity, and gender). The EEOC’s decision about what pay data to collect was ostensibly driven by the need to balance usefulness with the burden of collecting the data on employers. However, the EEO-1 Component 2 data seem to have failed on both fronts.
From a utility perspective, the requested Component 2 data include a measure of compensation that does not allow for appropriate pay equity comparisons, do not include any factors that could legitimately influence pay, and use job groupings that are too broad to identify similarly situated employees. The Office of Federal Contract Compliance Programs (OFCCP), the other government agency tasked with enforcing laws that prevent discrimination in the workplace, recently stated that it “will not request, accept, or use Component 2 data, as it does not expect to find significant utility in the data”.
The burden of collecting EEO-1 Component 2 data on employers also has proven to be significant. Preparing the current form requires extracting and combining information from a company’s Human Resources Information System (HRIS), payroll, and time keeping systems. This has been a challenging task for employers that do not have well-integrated systems.
Recent years have seen a tremendous increase in public demand for action to close existing pay gaps in general, and gender pay gaps in particular. Therefore, the EEOC is likely to renew its efforts to collect pay data and even has stated that going forward it may include a new reporting requirement by which employers would submit pay data or related information. To be prepared for such initiatives, employers should consider conducting proactive internal pay audits.