EEO-1 Form Changes Suspended; Obama Overtime Expansion Officially Invalidated

by Pepper Hamilton LLP
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In the week leading up to Labor Day, two major employment law initiatives of former President Barack Obama’s Labor Department came to a halt. First, the White House Office of Management and Budget (OMB) put a stop to the revised EEO-1 form that would have required certain employers to provide the Equal Employment Opportunity Commission (EEOC) with new information on pay data and hours worked. Second, a federal district judge in Texas put the nail in the coffin of the increased salary-level test contained in the overtime revisions to the Fair Labor Standards Act (FLSA) that were scheduled to go into effect in December 2016.

Pay Data Reporting Obligation Postponed

As reported last year, the EEOC, as part of its effort to detect and remedy pay discrimination, revised the EEO-1 report so that certain federal contractors and all employers with 100 or more employees would be required to submit to the EEOC information on W-2 wages and hours worked for all employees. The first of these new EEO-1 reports was to be filed in March 2018. As many human resources practitioners recognized, the collection and processing of such data would be burdensome and costly. Further, the revised EEO-1 form was criticized for having little practical utility in combating pay disparities or addressing pay discrimination.

To the relief of human resources professionals everywhere, on August 29, the OMB sent a memorandum to the EEOC staying implementation of the pay data/hours worked information collection changes to the EEO-1 form. OMB wrote that “the revised collection of information lack[s] practical utility, [is] unnecessarily burdensome, and [does] not adequately address privacy and confidentiality issues.” Although companies are no longer required to collect and report information about employee wages or hours worked, companies are still required to complete the previously used EEO-1 form, which collects data on race, ethnicity and gender by occupational category (but not data on pay or hours worked). This form must be completed by March 31, 2018.

Even though the pay data reporting obligation is stayed for the foreseeable future, now may be a good time for companies to conduct an analysis of pay practices to determine whether any pay disparities exist along gender or racial/ethnic grounds. If such disparities do exist, companies can take steps to correct the disparities or determine whether there are legitimate, nondiscriminatory reasons for the disparities. Any pay equity analysis should be completed in partnership with legal counsel to preserve the attorney-client privilege and protect the analysis from disclosure to a government agency in the event of an investigation.

Obama Overtime Rule Declared Invalid

After issuing a preliminary injunction to block the implementation of the Department of Labor’s (DOL’s) amendments to the overtime provisions of the FLSA (Final Overtime Rule), on August 31, Judge Amos L. Mazzant III granted summary judgment to 21 states and more than 55 business group plaintiffs, concluding that the DOL exceeded its authority in enacting the Final Overtime Rule. Among other changes, the Final Overtime Rule would have raised the minimum salary threshold for the most common “white collar” overtime exemptions (i.e., executive, administrative and professional) from $23,660 per year to $47,476 per year, or from $455 per week to $913 per week. The salary threshold also would have been indexed to update automatically every three years.

Judge Mazzant concluded that the DOL exceeded its authority in raising the salary threshold to such a high level because it effectively eliminated the duties test prescribed by the FLSA. However, in clarifying his earlier ruling, Judge Mazzant recognized that it is permissible for the DOL to use a “minimum salary level as a test for identifying” executive, administrative and professional employees and that the use of a salary threshold figure should be “near the lower end of the range of prevailing salaries for these employees.” The judge found that implementing a $47,476 salary threshold was beyond the scope of DOL’s authority because “[t]his significant increase would essentially make an employee’s duties, functions, or tasks irrelevant if the employee’s salary falls below the new minimum salary level.” Judge Mazzant’s decision marks what is likely the official end to President Obama’s Final Overtime Rule.

We expect that President Trump’s administration will take steps (through either the legislative or regulatory process) to enact similar amendments to the Obama Final Overtime Rule, raising the minimum salary threshold to an amount greater than $23,660 per year but below $47,476 per year. In the meantime, cities and states continue to take action to raise the minimum wage and enact other wage statutes on a local level. We will continue to monitor the Trump administration’s statements and DOL actions regarding revisions to the overtime rule, as well as state and city initiatives regarding wage and hour issues.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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