shutterstock_600920939First, the good news: You won’t be sweating your usual EEO-1 submission deadline come this September. This year, employers who are required to file an EEO-1—private companies with 100 or more employees, or federal contractors with 50 or more employees—have a six-month extension on submitting the annual EEO-1 report to the Equal Employment Opportunity Commission (EEOC).

Now, the less-good news: The six-month extension is to account for some extra reporting you will need to take care of. So don’t be tempted to snooze on your EEO-1 until the new year rolls around.

New Requirements Signal Pay Discrimination Enforcement Effort

The 2017 EEO-1 is due by March 31, 2018. In addition to the information already required, this year’s report requires covered employers to provide employee pay data. It’s a change intended to improve investigations of pay discrimination based on gender, race, and ethnicity.

Dara DeHaven is an attorney with Ogletree Deakins in Atlanta. “This is a significant development and marks the first time pay information will be reported on the EEO-1 filing,” she said. “With access to this new data [set], the EEOC is sending a strong signal that it will increase its enforcement efforts.”

EEO-1 previously provided demographic information regarding the gender, race, and ethnicity of employees by job category. The revised form now also requires information about employees’ pay, as reflected in box 1 of their W-2 forms.

Differing Perspectives on the Change

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

Despite Yang’s optimism, employers and management attorneys have opposed the changes. They say the data collected won’t serve the EEOC’s intended purpose.

“Collecting pay data in the highly aggregated manner proposed will not help identify unlawful pay discrimination,” said Janese Murray on behalf of the Society for Human Resource Management. Murray is vice president of diversity and inclusion at Exelon Corp., an energy firm based in Chicago.

“Over time, pay is increasingly influenced by an employee’s chosen career path—previous jobs, experience, education, performance, and geographic locations, along with level of responsibility,” Murray said.

Mickey Silberman, an attorney with Jackson Lewis in Denver, said that employers will “undoubtedly be exposed to burdensome investigations based on false positives. Comparing people with respect to their pay is complicated, and relying on W-2 earnings may show a pay disparity when in fact none exists.”

For example, Silberman explained, a female employee may exercise a stock option in one year while a male employee exercises the option during another year. Stock options aren’t taxed until they’re exercised, so the pay data for the hypothetical employees would look different on their W-2 forms from one year to the next, even if they exercised the same options.

And, Silberman pointed out, many human resource information systems (HRIS)—which contain the demographic data about employees’ race and gender—don’t communicate well with payroll or timekeeping systems. He suggested employers may experience trouble and expense in collecting and compiling the data.

Prepare Now to Avoid False Positives

Cheryl Behymer, an attorney with Fisher Phillips in Columbia, S.C., says employers should get out ahead of any apparent disparities in pay. “Employers should consider conducting self-audits, preferably under attorney-client privilege, to determine in advance whether there appear to be any pay disparities that are difficult to explain through the application of legitimate business factors such as tenure or job-related education. These self-audits allow the employer to consider in advance how to address any pay disparities if it believes the disparities should be addressed through an equity adjustment.”

Take the following steps now as you prepare to file the new report:

  • Find out whether your current HRIS and payroll systems can generate the necessary reports.
  • Make sure any outside vendors understand the new requirements.
  • Ensure that your policies spell out how employees earn overtime, bonuses, commissions, and other types of compensation that go into W-2 Box 1 wages.
  • Make sure you can easily retrieve data about employees’ benefit choices because these can greatly affect W-2 income.
  • For each of the 10 EE0-1 job categories, determine which of your job descriptions fit each category. Ensure that you can support pay decisions that reflect different job responsibilities.
  • Identify existing pay bands your company uses. Map them to the new pay bands on the EEO-1 form.

Don’t Go It Alone

There’s no need to second-guess when it comes to these new requirements. The EEOC Q&A page has answers to many questions that may arise. And if you need more personal guidance or answers to any other compliance questions, don’t hesitate to contact your Axiom representative for help.