Proposed Changes to EEO-1 will further burden Employers

February 8, 2016

By Alex Jones

If you are an employer that submits an annual Employer Information Report (“EEO-1”) to the Equal Employment Opportunity Commission (“EEOC”), then your obligations may increase. On February 1, 2016, the EEOC proposed changes to the current EEO-1, which would require employers to submit compensation data and hours worked for their employees. If approved, the changes would go into effect in 2017.

Under the current EEO-1, employers with more than 100 employees must submit data about race, ethnicity, and gender across various job categories such as executive/senior level officials, managers, or service workers.

The proposed changes would require employers, in addition to reporting employees’ race, ethnicity and gender by job category, to also report employees’ annual W-2 wages and hours worked. Employee’s wages will be categorized into twelve pay bands. So for example, an employer’s EEO-1 report will state that a certain employee is an African-American manager in the 7th pay band (62,920-80,079) and worked X amount of hours.

By the EEOC’s own estimates, reporting this extra data will cost an employer an additional $400 per employee for the first year and gradually decrease in the following years. Many employers believe these estimates are too conservative, and the cost of compiling this data will be much more expensive.

The EEOC wants to aggregate this compensation data in order to detect possible pay discrimination. Critics say this raw data does not reflect the complexities that go into determining an employee’s salary. Factors affecting compensation such as productivity, education level, and tenure, which employers may legally use to determine compensation, will not be submitted in the EEO-1.

Although the proposed changes are not law yet, employers should be proactive in order to minimize the costs if they do go into effect. Employers should look at current employee compensation and correct any legitimate pay inequities.