A federal judge has ordered private employers with one hundred or more employees to start reporting for the first time their employees’ W-2 annual earnings and hours worked. The new requirement is part of a government campaign to improve the enforcement of federal laws prohibiting pay discrimination.
The employers’ reports for 2018, reporting the pay data for workers of different sexes, races, and ethnicities, known as “Component 2,” will be due by September 30, 2019.
The Obama Administration had attempted to start requiring the collection of the data in 2016, but the following year the Trump Administration stayed the requirement indefinitely. The new reporting requirements were originally supposed to have gone into effect by the annual filing deadline in March 2018.
U.S. District Judge Tanya S. Chutkan of Washington, D.C. has now declared that the stay was illegal, and cleared the way for the U.S. Equal Employment Opportunity Commission (EEOC) to start collecting the employee data in order to determine and analyze nationwide pay disparities by race, sex, industry, occupational groupings, and Metropolitan Statistical Areas.
The judge, a 2011 Obama appointee, also ordered the EEOC to collect a second year of pay data from employers, giving the agency a choice – to be announced by May 3 — between collecting employers’ 2017 data or making it collect 2019 data down the road. The court’s order also applies to federal contractors with 50 or more employees.
Pursuant to Title VII of the Civil Rights Act of 1964, employers are required to make and keep records relevant to the determination of whether unlawful employment practices have been or are being committed, and produce reports as mandated by the EEOC. The Equal Pay Act of 1963, for example, prohibits sex-based wage discrimination between men and women in the same workplace who perform jobs “that require substantially equal skill, effort and responsibility under similar working conditions.”
Since 1966, the EEOC has required that employers with one hundred or more employees file with the agency the “Employer Information Report EEO-1” (“EEO-1”), which requires employers to report the number of individuals employed by job category, sex, race, and ethnicity. These reports, known as “Component 1,” are due by May 31 this year.
In 2010, the EEOC had joined other equal employment opportunity enforcement agencies in seeking to identify ways to improve enforcement of federal laws prohibiting pay discrimination, leading to the requirement of additional data reporting by employers in 2016.
However, on August 29, 2017, Neomi Rao, an official of the U.S. Office of Management and Budget (OMB), sent a memorandum to the EEOC stating that OMB had decided to initiate a review and stay of the EEOC’s new collection of pay data under Component 2. She stated that OMB was concerned that some aspects of the revised collection of information lacked practical utility, were unnecessarily burdensome, and did not adequately address privacy and confidentiality issues. Judge Chutkan rejected those explanations in vacating the stay, which she concluded had been “arbitrary and capricious.”
The judge’s decision, announced from the bench on April 25, came in a lawsuit filed on November 15, 2017, by two public interest advocacy organizations, the National Women’s Law Center and the Labor Council for Latin American Advancement. They argued that the stay of the data collection requirement had not complied with applicable laws, and that they needed the additional employee data to advance their missions by using the data in their publications and as part of their public education and advocacy campaigns.
Lawyers for the federal government told Judge Chutkan that the EEOC would rely on an outside data and analytics contractor — at a cost of $3-million — to perform the collection of data that employers will now be required to report to the EEOC.
According to the EEOC, its preferred method of identification for the race/ethnicity categorization of employment data is self-identification. Employers are required to attempt to allow employees to use self-identification to complete the EEO-1. If any employee declines to self-identify, employers may consult with employee-provided information when on-boarded, or the employer may use visual observation.