EEO-1 DATA UPDATE: EEOC WILL NOT REQUEST PERMISSION TO COLLECT FUTURE PAY DATAMarch 31, 2020
As we have previously discussed here, the EEO-1 form gathers information on employee populations in certain defined bands of positions grouped by race, gender and ethnicity (“Component 1 Data”), and is required of employers with 100 or more employees. In September 2016, during the Obama administration, the EEOC finalized a rule expanding the data to be reported by covered employers to include Component 2 Data, which is comprised of (i) summary pay data based on W-2 wages, reporting the total number of full- and part-time employees by race and gender in each of 12 pay bands listed for each EEO-1 job category (executive level, professionals, sales workers, etc.), for each of the employer’s physical locations; and (ii) the number of hours worked by employees in each pay band.
On August 29, 2017, under the Trump administration, the OMB announced an immediate stay of the rule, citing the Paperwork Reduction Act (the “PRA”). The stay prompted a lawsuit brought by the National Women’s Law Center and the Labor Council for Latin American Advancement against the EEOC and the OMB, which resulted in a March 4, 2019 district court decision vacating the stay. Our memorandum discussing the decision, which the EEOC has appealed, can be found here. On April 25, 2019, the district court ordered the EEOC to collect Component 2 Data for 2018 and either 2017 or 2019. Our memorandum discussing the April 25, 2019 decision can be found here. The EEOC chose to collect 2017 Component 2 Data in addition to the 2018 data, and on February 10, 2020, the district court held that the EEOC had satisfied its obligations under the order. Our blog post discussing the February 10, 2020 decision can be found here. On its website, the EEOC stated that, consistent with the February 10 order, the EEOC “is no longer accepting filings of EEO-1 Component 2 pay data for either 2017 or 2018.”
With respect to any additional collections of Component 2 Data, as we discussed in our memorandum here, on September 12, 2019, the EEOC announced its intention to request that the OMB permit it to collect Component 1, but not Component 2, Data on 2019, 2020 and 2021 EEO-1 forms, while it reviewed the 2017 and 2018 Component 2 Data that was due to be collected by September 30. Comments on the EEOC’s proposal were due on November 12, 2019.
March 23 Notice
On March 23, 2020, the EEOC issued a notice announcing a request that the OMB permit it to collect Component 1 Data for the years 2019, 2020 and 2021. The EEOC also stated that it did not intend to seek OMB approval for collection of Component 2 Data. In the EEOC’s notice, it explained that it could not justify continuing to collect Component 2 Data because it “determined that the uncertain utility of the data was outweighed by the burden on employers collecting the data.” In assessing the practical utility of Component 2 Data and the burden of collection, the EEOC relied on public comments in response to the EEOC’s September 12, 2019 proposal, testimony from witnesses at a November 20, 2019 hearing discussing their experiences collecting Component 2 Data, testimony from labor economists, and the EEOC’s own burden calculations.
As to the utility of Component 2 Data, the EEOC explained that many commenters questioned the accuracy of the data on various grounds. For example, some commenters “argued that organizing the data into job categories and pay banks resulted in inaccurate and misleading comparisons,” and that aggregating W-2, Box 1 wage data “in wide pay bands across broad occupational categories” increases false positives and false negatives, rendering “the data of minimal to no utility for attributing any differences observed to the presence of illegal employment discrimination.” Ultimately, the EEOC concluded that it “cannot state that Component 2 data has significant practical utility in assisting the [EEOC] in fulfilling its mission in combating illegal employment discrimination.”
Addressing the burden of collecting Component 2 Data, as we discussed in our memorandum here regarding the September 12, 2019 proposal, the EEOC revisited the methodology that it used in 2016 to calculate the burden of collection and found that it relied on improper assumptions, including that employers would use automated systems to centralize EEO-1 data collection, and “significantly underestimated the burden of Component 2 collection.” In connection with its September 12, 2020 proposal, the EEOC developed a revised methodology to estimate the burden of Component 2 Data collection, which accounted for the burden of filing each different type of EEO-1 report. Under the revised methodology, the EEOC estimated that the total cost of collecting Component 2 Data was $366,443,051 in 2017 and $371,400,532 in 2018.
In its March 23 notice, the EEOC stated that the public comments “confirmed the EEOC’s revised burden estimates to submit Component 2” Data, and thus concluded that its new burden estimate was more accurate, and larger, than its 2016 burden estimate. With respect to any potential future Component 2 Data collections, the EEOC stated that if it decides to pursue a future pay data collection, “it will do so using notice and comment rulemaking and a public hearing pursuant to Title VII because a pay data collection would be a significant new collection and reporting requirement.” The EEOC added that it would align its process with recommendations from a 2012 study commissioned by the EEOC from the National Academy of Sciences, including by (1) developing a plan for the use of pay data before initiating any collection; (2) creating a scientifically sound pilot study to test the collection instrument and the plan for using the data; and (3) using a definition of compensation “that is measurable, collectable, and meaningful.”