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Deadline looms for reinstated payroll reporting requirements

Judge revives Obama-era rules targeting wage disparity

A federal judge has resurrected payroll reporting guidelines adopted during the Obama administration that require large employers to break down wages and salaries according to the sex, race and ethnicity of their employees.

On March 4, U.S. District Court Judge Tanya S. Chutkan in Washington, D.C., vacated a stay issued by the Office of Management and Budget on revised pay-data reporting guidelines announced by the Equal Employment Opportunity Commission in 2016.

In National Women’s Law Center v. Office of Management and Budget, Chutkan found that the OMB’s September 2017 stay order was “illegal.”

“OMB’s action in staying EEOC’s collection of [pay data] was arbitrary and capricious for the same reasons the agency violated its own regulation: OMB’s decision to stay the collection of information totally lacked the reasoned explanation that the [Administrative Procedures Act,” she wrote.

On its face, the judge’s ruling meant that employers with more than 100 workers must comply with the revised requirement by the next reporting deadline.

muller-chip“It certainly is a pain for employers to have to watch the ping-pong match of the regulatory agencies and the courts in this instance, but employers should be used to that because they have to pay attention to the NLRB as well.”

— Chip Muller, Rhode Island Bar Association’s Labor Law and Employment Committee

The EEOC on May 2 posted notice on its website outlining how the agency intends to comply with the judge’s order. In its notice, the EEOC announced the “immediate reinstatement” of the “Revised EEO-1: Pay Data Collection” guidelines.

“EEO-1 filers should begin preparing to submit Component 2 data for calendar year 2017, in addition to data for calendar year 2018, by September 30, 2019, in light of the court’s recent decision in National Women’s Law Center,” the agency stated.

Business as usual?

Providence attorney Chip Muller takes the abrupt about-face in stride. He attributed the fact that employers now must scramble to meet new payroll reporting requirements they thought had been shelved to the “changing political winds.”

Muller, who represents employees in discrimination cases and advises employers on regulatory compliance, said lawyers and employers should by now be accustomed to the regulatory whip-sawing produced by Washington politics.

“It certainly is a pain for employers to have to watch the ping-pong match of the regulatory agencies and the courts in this instance, but employers should be used to that because they have to pay attention to the [National Labor Relations Board] as well,” said Muller, chairman of the Rhode Island Bar Association’s Labor Law and Employment Committee.

Title VII requires employers to “make and keep such records relevant to the determinations of whether unlawful employment practices have been or are being committed” and produce reports as mandated by the EEOC.

Beginning in 1966, the EEOC has required employers with 100 or more employees to file an “Employer Information Report EEO-1.” Until recently, the report consisted of what is now known as “Component 1” data.

Component 1 data categorizes employees by job category, race, sex and ethnicity. “Component 2” data entails reporting hours worked and pay information from employees’ W-2 forms by race, ethnicity and sex.

On Sept. 29, 2016, the EEOC announced that, beginning in March 2018, private employers with 100 or more employees — including federal contractors and subcontractors — would for the first time be required to report Component 2 pay data.

Under the new rules, EEO-1 filers would be required to submit the Component 2 data for a three-year trial period.

The agency said that the new requirements were designed to collect data to expose “persistent wage gaps” and “improve investigations” of possible pay discrimination.

“Collecting pay data is a significant step forward in addressing discriminatory pay practices,” said then-EEOC Chair Jenny R. Yang in announcing the revisions. “This information will assist employers in evaluating their pay practices to prevent pay discrimination and strengthen enforcement of our federal anti-discrimination laws.”

The agency set March 31, 2018, as the initial deadline for employers to file using the revised form for the annual EEO-1 Report.

The revised EEO-1 form tracks 12 pay bands used by the Bureau of Labor Statistics. The pay bands range from “$19,239 and under” to “$208,000 and over.” The form tasks employers with  tallying the total number of employees in each pay band under 10 separate job categories, ranging from service workers to senior executives and managers.

“After tallying the total number of employees in each pay band by job category, employers will enter this data in the appropriate columns of the EEO-1 report based on the sex and ethnicity or race of the employees,” the EEOC instructions state.

“It’s certainly complicated,” said Muller.

Stay imposed, lifted

The Trump administration made the revocation of the payroll reporting requirement a priority as part of its agenda of pro-business regulatory reforms.

On Aug. 29, 2017, the OMB issued a stay of the revised EEO-1 reporting requirement, notifying the EEOC that it had commenced a regulatory review of the revisions the EEOC had adopted in 2016. On Sept. 15, 2017, the EEOC announced the stay and instructed employers to follow the old reporting requirements until further notice.

In November 2017, the National Women’s Law Center and the Labor Council for Latin American Advancement sued the OMB. The lawsuit alleged the OMB had exceeded its authority under the federal Administrative Procedure and Paperwork Reduction Acts by staying the collection of pay data as part of the EEO-1 filing requirement.

Judge Chutkan agreed. In National Women’s Law Center, the judge ruled the EEOC’s previous approval of the revised EEO-1 form “shall be in effect.”

On April 4, the government filed a submission proposing how it would administer the collection of Component 2 pay data under the revised guidelines now back in effect under the judge’s decision.

In its filing, the government stated that EEOC Acting Chair Victoria A. Lipnic “has determined that it is necessary to exercise her Title VII administrative authority to adjust the collection deadline to Sept. 30, 2019, in order to accommodate the significant practical challenges for the EEOC to collect Component 2 data in response to the Court’s Order.”

Taking into account the “practicalities” of administering the reinstated reporting guidelines, in an April 25 order Chutkan directed the EEOC to “immediately take all steps necessary” to complete the EEO-1 Component 2 data collections for calendar years 2017 and 2018 by Sept. 30, 2019.

The judge further decided that the government’s decision to stay the revised reporting guidelines had the effect of tolling the three-year trial period. Accordingly, the judge declared that approval for the revised EEO-1 form, including Component 2 pay data, “shall expire no later than April 5, 2021.”

In response to the judge’s April 25 order, in addition to agreeing to the Sept. 30 deadline, the EEOC announced that it expects to begin collecting EEO-1 Component 2 data for calendar years 2017 and 2018 in mid-July.

The agency said it will notify filers of the precise date the survey will open on the agency’s online portal “as soon as it is available.”

“Filers should continue to use the currently open EEO-1 portal to submit Component 1 data from 2018 by May 31, 2019,” the agency said.

‘Treasure trove’ for plaintiffs

Employers have objected to the new reporting requirements as being overly burdensome in terms of cost as well as being a potential goldmine for plaintiffs’ attorneys. The EEO-1 guidelines do specify that all reports and information from individual reports will be kept confidential as required by §709(e) of Title VII.

However, Muller said he was not aware of any privilege that would permit an employer to withhold the information in the course of discovery pursuant to the statute.

“The EEO-1 is a powerful tool for the plaintiffs’ bar,” Muller said. “It provides plaintiffs’ attorneys a treasure trove of information that’s readily accessible.”

Eric R. LeBlanc is an employment lawyer in Cambridge, Massachusetts. According to LeBlanc, statistical information disclosing disparity in pay can be invaluable as circumstantial evidence of discrimination.

“It’s very powerful when it gets in front of a jury,” LeBlanc said.

As noted by Judge Chutkan in her decision, in 2016 the EEOC estimated that the additional cost of the new payroll reporting requirements would be a nominal $416.58 per filing, with each filer spending an additional 3.4 hours in reporting time. On the other hand, the U.S. Chamber of Commerce, which opposes the reporting requirement, estimated an annual additional cost of $1.3 billion for all businesses employing 100 or more employees.

LeBlanc, who represents employers and employees, said the costs of collating the data are naturally greater for the larger employers subject to the revised reporting standards.

“When you’re talking about companies with upwards of 30,000 employees, it’s a lot of work,” he said.

But Muller said that while the additional reporting requirement is unquestionably a burden on covered employers, it is not a “tremendous” burden.

“Anytime you’re collecting data, it’s a burden,” Muller said. “On the other hand, payroll companies are all automated now, and all the data is easily accessible through the payroll company. It’s something that employers will figure out how to do in an efficient fashion.”

LeBlanc also pointed out that employers had a year and a half to prepare for the reporting requirement when the EEOC originally adopted the guidelines. The groundwork laid back then should help employers meet the new deadline, he said.

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