EEOC’s Revised Pay Data Collection Rule is Back in Force

Uncertainty continues for the EEOC’s attempt to expand the collection of employers’ pay data. Last Monday, the D.C. District Court in National Women’s Law Center v. Office of Management and Budget, No. 17-cv-2458 (TSC) (D.D.C. Mar. 4, 2019), reinstated the EEOC’s revised EEO-1 form that increases employers’ obligation to collect and submit pay data.

In 2016, the EEOC revised its EEO-1 form that collects pay data from employers with 100 or more employees and certain other employers. The previous version of the EEO-1 form required employers to report only the number of employees across ten job categories according to race, ethnicity, and sex. The revised form, however, increases employers’ obligations: employers must submit aggregate W-2 earnings and hours worked in twelve pay bands for each of the ten job categories. The Orrick Employment Blog has posted previously on the revised EEO-1 form here, here, here, here, here, and here.

During President Obama’s tenure, in September 2016, the Office of Management and Budget (OMB) approved the EEOC’s revisions to the EEO-1 form. After the election and change in administration, however, in August 2017, OMB stayed  the revised EEO-1 form pending review. OMB concluded that the EEOC’s updated data file specifications for employers changed the estimated burden on employers and expressed concern that “some aspects of the revised collection of information lack practical utility, are unnecessarily burdensome, and do not adequately address privacy and confidentiality issues.”

The National Women’s Law Center and the Labor Council for Latin American Advancement subsequently filed suit against OMB. Last Monday, the District Court found that OMB’s stay of the EEOC’s collection of pay data was “arbitrary and capricious” in violation of the Administrative Procedure Act (APA). After a lengthy discussion about whether the plaintiffs had standing to sue and whether OMB’s stay was a reviewable final agency action, the court found that OMB’s decision to stay the collection for information lacked a reasoned explanation required by the APA. The court said that OMB could not rely on the EEOC’s updated data specifications for its change in position as the data specifications did not change the information the EEOC sought to collect and were “hyper-technical formatting changes that have no real consequences for employers.” Further, the District Court found that OMB did not analyze the data file specifications to determine whether they meaningfully changed the employers’ burden of collecting pay data. Accordingly, the District Court vacated the stay and ordered that the revised EEO-1 form go into effect. At present, affected employers must provide their updated EEO-1 form by May 31, 2019.

The path forward for employers remains uncertain. First, it’s possible that the decision may be appealed, for example, on organizational standing grounds, whether OMB’s stay constituted a reviewable final agency action, and/or what constitutes a reasoned explanation of agency action. Second, the EEOC could extend the deadline for employers to submit the EEO-1 form, just as it did after the government shutdown earlier this year. Third, the EEOC could reverse its position on the revised EEO-1 form entirely. Currently, the EEOC has only two members, Commissioner Charlotte Burrows, who has stated that she favors the revised EEO-1 form, and Acting Chair Victoria Lipnic who voted against it. A potential tiebreaker could be the President’s nominee for EEOC Chair, Janet Dhillon, who said during her confirmation hearings in September 2017 that she would favor replacing the revised EEO-1 with some other type of employee compensation data collection.

It also remains to be seen how the EEOC will use the pay data that it collects, with or without the revised form. Since the revised EEO-1 form was first approved in 2016, the EEOC has created a new Office of Enterprise Data and Analytics (OEDA), led by Chief Data Officer Dr. Chris Haffer. OEDA plans to use powerful data analytics tools to analyze employer data, including data submitted via EEO-1 forms.

While the EEOC contends that the revised EEO-1 form will allow it to better assess pay discrimination, employers are rightfully concerned that the form may indicate “false positives,” as the broad EEO-1 job categories are not designed to group employees who perform similar work (as defined by federal and state equal pay and anti-discrimination statutes). Additionally, the form’s structure fails to account for bona fide factors that legitimately explain pay differentials (including, for example, performance, productivity, advanced skills or expertise, and other factors recognized under both state and federal law). The use of W-2 data also has the potential to be misleading because of how certain types of compensation are (and are not) reported. One easy example is a situation in which two employees receive the same amount of stock options, but one chooses to exercise in a particular calendar year and the other does not.

Employers should keep a close eye on how these events unfold over the coming days and weeks. We will do the same and report on any important updates.