September 2017 - Are you ready for the New EEO-1 Report?
The beginning of July conjures many images for Americans – barbecues, picnics, fireworks. But for many employers, July also triggered preparation for the annual EEO-1 Report filing. Until this year, covered employers were required to file their reports no later than September 30, and the data submitted had to be from any pay period in July, August, or September.
But in 2016, the Equal Employment Opportunity Commission announced changes to the EEO-1 Report. As a result, employers have a reprieve this summer! There is no EEO-1 Report filing deadline in 2017.
Before you get too excited, though, remember that employers must file “new and improved” EEO-1 Reports by March 31, 2018, with compensation information for 2017. The new reporting requirements mandate that covered employers provide information on total compensation and total hours worked by race, ethnicity, gender, EEO-1 category, and designated salary bands. Here’s a sample of the new report.
As we have previously discussed, the revised EEO-1 Report requires that employers provide substantially more information to the government, and this additional information is intended to assist the government in ferreting out employers committing pay discrimination. Even though there is some uncertainty regarding whether the new EEO-1 Report will be required by the Trump Administration, employers should be proactive and prepare to comply with these new requirements unless and until the requirements are officially withdrawn.
With that in mind, what can and should employers do to ensure they are prepared to submit the additional data (from a pay period in October, November, or December 2017) by March 2018?
First, employers should assess any potential logistical issues.
Do you have more than 100 employees, triggering the use of the revised reporting form? If an employer is not a federal contractor and has less than 100 employees, then the reporting requirements do not apply at all. If the employer is a federal contractor and has between 50 and 99 employees, then it should continue to use the old version of the report without the “enhanced” data reporting requirements.
How will “total hours worked” for exempt employees be reported if the employer has records of hours worked? Employers have two options: (1) They may choose to report a “proxy” of 40 hours per week for full-time exempt employees and 20 hours per week for part-time exempt employees, or (2) they may report the actual number of hours worked.
What “snapshot” of your workforce will you use for reporting purposes? Employers have the option of using any time from October 1 through December 31. However, to take advantage of the annual accounting and tax reporting mechanisms already in place, most employers are likely to use December 31 so that they will not have to run entirely different reports for total compensation. If an employer selects any other date, it will need to calculate total compensation for a different one-year period.
Ensure that you can separate your employees into the different salary bands designated by the EEOC:
$19,239 and under
$19,240 – $24,439
$24,440 – $30,679
$30,680 – $38,999
$39,000 – $49,919
$49,920 – $62,919
$62,920 – $80,079
$80,080 – $101,919
$101,920 – $128,959
$128,960 – $163,799
$163,800 – $207,999
$208,000 and over
Is all of the data required by the report “housed” in the same system, or will you need to combine data from multiple sources? For example, is race, ethnicity, and gender stored in the same place as hours worked or total compensation? If not, additional programming may be required to deliver the information accurately and efficiently.
Have you collected race, ethnicity, and gender information from all of your employees? If not, you should consider issuing a voluntary self-identification survey to capture missing information.
After the logistical issues are ironed out, employers should turn to strategic issues to help minimize the likelihood that the government will target them for investigation regarding their pay practices. I do not believe that this report will be a practical enforcement tool due to the divergent jobs in each EEO-1 category, as well as the significant differences between individual employers. Nonetheless, there are some recommended steps to reduce your chances of receiving a Commissioner’s charge, or being selected for a compliance review by the Office of Federal Contract Compliance Programs if you are a federal contractor.
Examine your EEO-1 categories. Are all job titles appropriately classified? You don’t want your data unnecessarily skewed because you are including employees in the wrong groups. As job duties change over time, so too may the proper EEO-1 category. This is an excellent time to review the assignment of each job title to an EEO-1 category.
Conduct a privileged compensation analysis. Have you determined whether pay differences are explained by legitimate factors such as seniority, time in job, etc.? If not, it would be wise to find them and make any necessary corrections before the data is set at the end of 2017.
Consider performing a practice run at completing the report before the deadline of March 31, 2018. This would allow you to discover potential complications or problems with your internal data and reporting process. Preparing a draft report would also provide an opportunity to see how the data may be viewed by the government. For example, are the top salary bands in each EEO-1 category comprised of white males, or is there good distribution among the races and genders throughout each EEO-1 category?
Even though a lot is up in the air politically, and even though March 31, 2018, seems a long way off, federal contractors should not delay preparation to comply with the new reporting requirements. Because of the volume and nature of information being requested, contractors are unlikely to be able to “turn on a dime” based on future political developments that may or may not occur. Do not wait until the last minute to consider these issues and develop an action plan for compliance.