Federal Court Overturns OMB’s Stay of EEOC Pay Data Collection Rule, Finding It Was “Arbitrary and Capricious”

Decision Reinstates Employer Requirement to Submit EEO-1 Forms With Pay Data Information by Gender, Race and Ethnicity March 8, 2019
On March 4, the Honorable Tanya S. Chutkan of the U.S. District Court for the District of Columbia vacated an August 29, 2017 decision by the Office of Management and Budget to stay the EEOC’s requirement that employers use a revised EEO-1 form to report pay data information by employee job position and gender, race and ethnicity. Judge Chutkan held that OMB’s decision was “arbitrary and capricious” and, thus, violated the Administrative Procedures Act. Nat’l Women’s Law Ctr. v. Office of Mgm’t and Budget, No. 17-cv-2458 (Mar. 4, 2019); see also 82 Fed. Reg. 43362 (Stay the Effectiveness of the EEO-1 Pay Data Collection). The court held that the OMB’s decision to stay the EEOC’s data collection in the revised EEO-1 form did not meet the standards set out under OMB’s own regulations governing an OMB decision to review and/or stay a previously approved collection of information by a federal agency.

The court’s decision means that the revised EEO-1 form is technically now in effect. The ordinary deadline for filing an EEO-1 report is March 31 of any calendar year. The EEOC’s website at the moment is outdated – it states that “the filing deadline for the 2017 EEO-1 survey has been extended to Friday, June 1, 2018.” As of the posting of this blog, neither the EEOC nor OMB have issued any statements or direction concerning whether the deadline for this year’s filing of 2018 data will be extended and/or whether employers will be required to use the new form. There is also no word on whether the government will appeal the decision. We are monitoring this issue and will provide more information as it becomes available.

Further complicating matters, however, is that the EEOC lacks a quorum. Only two of the five commissioners are seated: Victoria A. Lipnic, the Acting Chair, appointed by President Trump, and Charlotte A. Burrows, appointed by President Obama. A third Commissioner, Chai Feldblum, had been re-nominated by President Trump in December 2017, but her nomination never left committee and thus expired at the end of the 115th Congress. Under 42 U.S. Code § 2000e-4(c), at least three commissioners are required to constitute a quorum of the Commission. The EEOC also currently lacks a general counsel.

As background, the EEO-1 form is a form gathering information on employee populations in certain broad bands of positions by race, gender and ethnicity, and is required of employers with 100 or more employees. In September 2016, the EEOC finalized a rule expanding the data to be reported by employers to include: (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.

The pay data requirement was controversial. Many employer groups objected to the burden entailed in collecting and reporting the pay data, and also pointed out that the data required would be virtually meaningless as reported – as one example, because employees are sorted by 10 job categories, that may group together very disparate functions and employees with different educational and professional credentials.

On August 29, 2017, the OMB announced the immediate stay of the rule, citing the Paperwork Reduction Act (“PRA”). The OMB’s memorandum stated that it had determined that it was authorized under the PRA to review the previously approved EEOC collection of information because circumstances related to the collection had changed and the burden estimates provided by EEOC at the time of initial submission were materially in error. Specifically, OMB pointed to the fact that, since approving the revised EEO-1 form on September 29, 2016, the EEOC released data file specifications for employers to use in submitting EEO-1 data, but those specifications were not made available during the public comment process and, thus, the EEOC’s burden estimates did not account for the use of these particular data file specifications, which may have changed the initial burden estimate. The OMB asked the EEOC to submit a new proposal for the information to be collected for the EEO-1 form.

The stay prompted the lawsuit brought by the National Women’s Law Center and the Labor Council for Latin American Advancement against the EEOC and the OMB that resulted in this week’s decision. Judge Chutkan held that the OMB’s stay decision was arbitrary and capricious because: (1) its “assertion that the data file specifications were not contained in the Federal Register, thereby depriving the public of an opportunity to comment on them, is misdirected, inaccurate, and ultimately unpersuasive”; and (2) its assertion that the EEOC’s burden estimates did not account for the use of the particular data file specifications, which may have changed the initial burden estimate, “was unsupported by any analysis.”