You may have seen warnings that a federal judge has reinstated the EEOC rule requiring companies to disclose pay data on their annual EEO-1 forms, and that the first reporting deadline is just weeks away. We believe it is unlikely that the EEOC will require employers to submit pay data by the May 31, 2019 reporting deadline, but advise employers to be ready to collect the necessary pay data, in the event such a requirement might take effect.
UPDATE 03.19.19: On March 18, 2019, the EEOC announced that it was opening its online portal to receive 2018 EEO-1 data without pay data reporting and that the portal would remain open through May 31, 2019. With regard to the pay data component, the EEOC stated it was “working diligently on next steps” and “will provide further information as soon as possible.” This announcement by the EEOC confirms that employers will not be required to report on pay data by the May 31 deadline. We will share additional updates once the EEOC provides further information.
Legal Challenges to OMB's Decision to Suspend the Pay Data Rule
In 2016, the EEOC (under President Obama) revised its EEO-1 form to require employers and federal contractors with 100 or more employees to include pay data, categorized by gender, race and ethnicity, in their reports (see our previous client advisory here). The EEOC also extended the reporting deadline for calendar year 2017 (the first year requiring the new data) to March 31, 2018. But in August 2017, the Office of Management and Budget ("OMB") (under President Trump) suspended the new reporting rule (see our previous client advisory here).
Following OMB's decision, pay equity advocacy groups sued the OMB and EEOC, arguing that OMB's decision to suspend the pay data rule was improper. In March 2019, Judge Tanya Chutkan of the U.S. District Court for the District of Columbia agreed with the advocacy groups, holding that the decision was arbitrary and capricious and lacked adequate reasoning for imposing the stay. Judge Chutkan vacated the OMB's stay, apparently resulting in the rule taking immediate effect.
What Happens Next
Due to the federal government shutdown, the EEOC had extended the EEO-1 reporting deadline for calendar year 2018 (with no requirement that employers report pay data) to May 31, 2019. If no action is taken by the EEOC or OMB, employers will be required to provide pay data on the new EEO-1 form by May 31. But we see no need for employers to start scrambling yet.
The EEOC and OMB have until early April to determine whether or not to appeal the ruling. If an appeal is filed, the judge's ruling will likely be stayed pending the appeal, meaning the new reporting requirements will not come into effect.
In addition, the EEOC has the authority to extend reporting deadlines, and we anticipate that such an extension is likely in this case. The EEOC is aware of the significant cost, disruption, and confusion that would be caused by requiring employers to submit new EEO-1 forms by May 31. The EEOC can – and likely will – extend the deadline to report pay data both to give employers additional time to gather and report the required data, as well as give the EEOC time to determine its next steps.
It is equally likely that the pay data rule as currently written will never take effect. Current Acting EEOC Chair Victoria Lipnic initially voted against the rule, and she has expressed her opposition to it rule on several occasions since, expressing her belief that the EEO-1 pay data reporting requirements are the right way to achieve reduction in pay disparities.
And as of this writing, three out of the five EEOC Commissioner seats are vacant. Once additional commissioners are appointed by the administration, the EEOC's view regarding the pay data rule are likely to change. At that point, the Commission may choose to rescind or revise the rule, or make significant modifications to the reporting requirements.
Whether or Not Pay Data Reporting is Required, Pay Equity Remains a Hot Topic
Regardless whether the EEOC ultimately abandons the pay data reporting requirements, employers should still pay careful attention to the compensation data within the organization. Pay equity has been – and will remain – an area of focus for the EEOC, as well as the media, legislators, and plaintiff's attorneys. Several states have expanded their equal pay laws recently (see our advisories on changes to Washington, Oregon, and California laws) and changes have occurred on the federal level too (see our advisory here).
Given this scrutiny, we encourage employers to consider conducting attorney-client privileged reviews of their current compensation and taking steps to find and fix any unexplained pay disparities. For more information about when, how, and why to conduct a compensation analysis, view our webinar.
What Employers Should Do Now
We recommend that employers continue to prepare their 2018 EEO-1 forms for timely filing without including pay reporting data, pending some indication from the EEOC that the pay data will be immediately required. We will post an update if and when the EEOC provides guidance on this issue.
Determine whether your HR Information System is currently tracking the pay data necessary to complete the revised EEO-1 form.
Consider conducting a privileged internal analysis to proactively find and fix pay disparities.