On July 28th, the Equal Employment Opportunity Commission (EEOC) released the findings of a study examining the EEOC’s first-time collection of compensation data. The study concluded that collecting pay data is an important tool for the EEOC to target its enforcement and investigation efforts and advance pay equity. The study was conducted by the National Academies of Sciences, Engineering and Medicine (National Academies), and it examined the EEOC’s EEO-1 Component 2 data collection, which required certain employers with 100 or more employees to submit data on the compensation of their employees, broken down into demographic and occupational groups.
In 2016, the EEOC voted to collect pay information from certain private sector employers and federal contractors. The Trump Administration stayed the collection of this data, resulting in a federal court rescinding the stay, and permitting the EEOC to complete its collection of 2017 and 2018 pay data under court order in 2020.
The pay data the EEOC collected, covered approximately 70,000 employers and over 100 million workers. By obtaining this data, the EEOC was able to identify a number of disparities along racial, gender, and ethnic lines. Specifically, the study found:
- Collecting pay data is necessary to assess pay practices and differences in compensation by sex, race, and ethnicity.
- The data the EEOC collected is unique and no other federal data collection captures the same information from private-sector employers.
- Response rates from employers submitting pay data were about 90% for this historic, first-time data collection, covering approximately 70,000 employers and over 100 million workers in each collection year, even though EEOC was not able to identify every eligible firm.
- Pay data would enable the EEOC to pursue a more data-driven approach to investigation and resolution of discrimination charges and could be used to help prioritize investigations and the allocation of resources; identify systemic discrimination; and analyze national, regional, and industry-based pay gaps.
- To improve the EEOC’s ability to enforce the law and address pay disparities, the EEOC should expand and strengthen its data collections, recommending several short- and long-term improvements that would not only enhance the reliability of any future pay data collection but would also make it easier for employers to produce the information.
According to EEOC Chair Charlotte Burrows, the report “confirms that federal pay data collection could be a unique and critically important resource for helping the Commission better identify and combat pay discrimination.” Yet the report confirms many of the flaws that the employer community warned about.
Next Steps for Employers
The Biden administration has not yet resumed collecting pay data, but the study signals that the EEOC is likely considering a revival of pay data collection. Importantly, the report recommends that the EEOC “conduct a field test to investigate issues of burden, data availability, and questionnaire design,” should the agency embark on a wage-reporting scheme in the future. The current EEO-1 form, which does not contain Component 2 reporting requirements, is set to expire on June 30, 2023.
While no action is required on the part of employers at this time, it is strongly recommended that employers continue to make it a priority to review and audit their current pay systems and identify and address any areas of pay disparity. By conducting a pay practices audit, employers can determine whether any pay gaps exist that might catch the eye of the federal government.
Employers should work with legal counsel to conduct this review under the protection of the attorney-client privilege. Due to the increased complications caused by varying state legislative developments, it is strongly recommended that employers involve their attorney in this analysis early on.