5 minute read | March.31.2021
As COVID-19 vaccination programs gain speed across the country, and employers consider long-term reopening plans, the Equal Employment Opportunity Commission (EEOC) has announced that starting April 26, 2021, it will begin the EEO-1 data collections it had delayed for nearly a year due to the pandemic. Recognizing the ongoing impacts of the pandemic, however, it is providing twelve weeks (instead of just 10) to complete submissions. Employers will need to submit two years of data (for 2019 and 2020) by Monday, July 19, 2021. Unlike the last time, employers will not need to submit “Component 2” pay data (as we reported here).
Although this year’s EEO-1 data collection is not new, it raises new questions and challenges because it comes in the midst of seismic shifts in the way employees work, and in light of other new laws and regulations that employers must consider. For example, many employees have now worked remotely for over a year, often in geographic locations other than where their former office is located, and may continue to do so on a long-term basis. Additionally, although the EEOC officially dropped its Component 2 pay data collection efforts last year, California promptly resurrected its own state version, requiring the first report by today (as we reported here). And finally, state and local protections are on the rise for employees who do not identify according to the binary male/female sex categories required by the EEO-1.
A major question for many employers this year is which “establishment” to group employees under. The EEOC has defined “establishments” as physical locations, which is not always helpful in today’s virtual world. Previously, the EEOC indicated that employees who are remote or telecommute should be counted under the “establishment” to which they report, but most of the EEOC’s previous guidance has been removed from the website, so its current position is unclear. California has provided more clarity for its report, instructing that employees should be assigned to their EEO-1 “establishment” but that “[t]o the extent employers need additional guidance . . . employers [should] assign employees to the establishment that the employee formally reports to during the Snapshot Period.” If the employee reports to more than one establishment during the Snapshot period, employees should be assigned to the establishment they “report[] to for the majority of their work.”
Another question is how to handle the EEO-1 requirement to report employees by male and female sex, when many employers (often consistent with state or local laws) are increasingly grouping employees by gender, including non-binary. The EEOC has not addressed this issue for the current report, but previously, for the Component 2 pay data report, it had issued an FAQ stating that employers could include the information on the certification page, in the comment box prefaced by the phrase: “Additional Employee Data.” Some employers will likely follow this approach, but for large multi-establishment employers, using the comment box to account for non-binary employees is hardly efficient. Other employers may keep separate records and categories for the federal EEO-1 reporting than they do for purposes of state or local laws or requirements. For example, under California’s Gender Recognition Act, California officially recognizes three genders (female, male, and non-binary), and the DFEH instructs that for purposes of the pay data reports, employers should use these gender categories.
Employers also should give thought to the process they use to categorize employees. Self-identification is likely the preferred method under most state and federal regulations—as well as under the previously-available EEOC instructions and the current guidance for California’s pay data report. After that, however, identification methods may differ. Some employers have traditionally defaulted to visual identification, which the EEOC previously indicated was permissible. California, however, instructs employers that if employees decline to self-identify, they must be categorized as female, male or non-binary “using current employment records or other reliable records or information such as an employee’s own pronoun.”
We anticipate the EEOC will provide clarity on at least some of these and other questions when it releases its filing support materials (here) in the next month.
Making sure that EEO-1 reports for public companies are accurate will be even more important going forward as pressure for public disclosure of EEO-1 data comes from a variety of stakeholders. Activist shareholder groups are recalibrating their priorities for 2021 when it comes to human capital management issues and looking to measure progress on DEI. These activist shareholders are seeking the disclosure of EEO-1 metrics from some of their target companies.
More significantly State Street Global advisors, a long-term investor in more than 10,000 public companies across the world, as part of its asset stewardship program, is focused on the ways in which gender, racial, and ethnic diversity impacts them as investors. Starting in 2021, State Street will ask companies in their investment portfolio to make relevant disclosure available to shareholders about their gender, racial, and ethnic diversity. Specifically, by 2022, State Street is asking their portfolio companies to provide measures of the diversity of the firm’s global employee base by providing diversity data by gender, race, and ethnicity broken down by industry relevant employment categories or levels of seniority, for all full-time employees. In the United States, State Street is asking employers to use the disclosure framework set forth in the EEO-1 form and is asking for public disclosure of that form. This kind of asset stewardship from major asset managers like State Street may end up moving the needle more on DEI than any government initiative has done in the past.
What is clear is that EEO-1 reporting will take on increasing significance in the future, and companies should carefully review their processes for collecting and reporting this data.