For many years, a majority of non-government employers, and federal contractors and subcontractors, have had to complete an Employer Information Report (EEO-1) annually, charting the number of their employees by gender, by race and by ethnicity in each job category set forth on the EEO-1. The purpose of the EEO-1 is to allow the Equal Employment Opportunity Commission (EEOC) and the Office of Federal Contract Compliance Programs (OFCCP) to identify job positions in which the percentage of certain races or nationalities, or one gender, is far less than in the general population, thereby suggesting discrimination may be in play.
Recognizing that pay disparity is one form of discrimination, the EEOC and OFCCP are seeking greater insight into pay practices, and to further that effort, they revised the EEO-1 to require summary pay data to be reported. Although this may sound like a fairly easy change to integrate into your long standing EEO-1 data collection and reporting practices, the devil’s in the details. Here’s a closer look at those details.
Companies That Must Include Pay Data On The EEO-1: Starting with the next report (the EEO-1 for 2017), employers (both private companies and government contractors) with 100 or more employees must include summary pay data on their EEO-1.
Federal contractors and subcontractors with 50-99 employees must submit an EEO-1 without having to include summary pay data; those with 49 or fewer employees do not have to submit an EEO-1. Private companies that do not have government contracts do not have to submit an EEO-1 if they have 99 or fewer employees.
Counting Employees for Purposes of the EEO-1: In the past, employers could choose a pay period that fell between July 1 and September 30 – the workforce snapshot period — to count full and part time employees. Beginning in 2017, employers may pick any pay period between October 1 and December 31 to count employees for purposes of determining whether the company is required to submit an EEO-1 and/or if summary pay data must be reported.
Summary Pay Data and How It Is Reported: Employers must report the total number of full and part-time employees they had during the reporting year for each of 12 pay bands, further broken down by gender and also by 14 race and ethnicity categories. Employers must then total the compensation earned by all employees falling in each pay band of each job category, broken down by gender, race and ethnicity, using the earnings reported in Box 1 of each employees’ W-2. The compensation or salary of each individual employee is not reported.
Aggregate Hours Worked: In order to allow the OFCCP and the EEOC to make sense of the summary pay data, employers also must report the number of hours worked for all employees in each pay band in each job/gender/race/ethnicity category. For non-exempt employees — hourly employees entitled to overtime under the Fair Labor Standards Act, actual worked hours must be used. For exempt employees, either actual hours may be used or an employer may choose to use 40 hours per week for full-time employees and 20 hours per week for part-time employees.
When to File the New EEO-1 Report: The long-used September filing date is now obsolete. The new EEO-1 filing deadline is March 31, allowing at least 3 full months from the workforce snapshot period for employers to do the hard work necessary to complete the new EEO-1. The EEO-1 for 2017 will be due March 31, 2018.
Prepare Now: The change to the EEO-1 adds a hefty layer of work, especially in this initial year of reporting payroll data. Employers should start now to ensure they are collecting the necessary data in an easily retrievable form to complete the new EEO-1 and that their pay practices are not in any way discriminatory.
Following are some steps employers should consider taking to prepare for the new EEO-1 requirements and to safeguard against claims of pay inequity and discrimination:
- Evaluate current HR information and payroll systems to confirm they are able to generate the required data to prepare the EEO-1.
- Review recordkeeping practices for your non-exempt employees to report hours worked.
- Identify and/or implement policies that clarify how employees earn overtime, bonuses, commissions, and other components of W-2 Box 1 wages.
- Identify job titles within each of the EE0-1 job categories and evaluate job descriptions for accuracy and to ensure they will support pay decisions that reflect different job responsibilities.
- Be familiar with the pay bands used by the EEO-1 and compare your employees in each pay band by job category, gender, race and ethnicity to identify apparent disparities; if disparities are present, review employee qualifications and performance to ensure you can articulate a non-discriminatory reason for the disparity.
Additional information, answers to frequently asked questions, a fact sheet, and a copy of the new form, can be found on the EEOC website. The lawyers at Faulkner Law Offices, PLLC can help you maneuver through this and other employment issues. We welcome your calls.