The EEOC’s New Collection of Pay Data—Fifty Years in the Making

The EEOC’s New Collection of Pay Data—Fifty Years
in the Making
J. Lane Crowder 

President John F. Kennedy first signed the Equal Pay Act into law in 1963. Since that time, the EPA has been one of a group of federal laws providing protection from discrimination to employees by prohibiting wage discrimination on the basis of gender. Despite significant reductions in the pay gap between men and women since Congress first enacted the EPA, the EEOC has determined that pay disparities still exist. On January 29, 2016, the EEOC first announced its proposal to revise the Employer Information Report (EEO-1) under which employers had been providing data regarding their workforces for fifty years.1 The proposal included a requirement that employers and federal contractors with 100 or more employees provide the EEOC with pay data segregated by race, ethnicity, sex, and job categories.

In addressing the need to change longstanding EEO-1 data collection, EEOC Chair Jenny R. Yang emphasized, “More than 50 years after pay discrimination became illegal it remains a persistent problem for too many Americans. Collecting pay data is a significant step forward in addressing discriminatory pay practices. This information will assist employers in evaluating their pay practices to prevent pay discrimination and strengthen enforcement of our federal anti-discrimination laws.”2 Secretary of Labor Thomas E. Perez agreed, stating, “We expect that reporting this data will help employers to evaluate their own pay practices to prevent pay discrimination in their workplaces. The data collection also gives the Labor Department a more powerful tool to do its enforcement work, to ensure that federal contractors comply with fair pay laws and to root out discrimination where it does exist.”3

On March 16, 2016, the EEOC held a public hearing on the proposal during which fifteen witnesses testified. On July 13, 2016, the EEOC announced additional time for the public to release comments regarding the proposed update of EEO-1 reports. The additional comment period just recently closed on August 16, 2016. Although employers have been providing EEO-1 data on their workforces pertaining to race, ethnicity, sex, and job categories for decades, the new proposal would require employers to provide additional information regarding summary data of pay ranges and hours worked.4

In explaining the need for additional pay data in its notice published in the Federal Register on July 14, 2016, the EEOC noted that some of the public comments received during the initial comment period questioned whether pay disparities based on unlawful discrimination still exist. The EEOC rejected that suggestion and emphasized:
Based on federal data and a robust body of research, the Commission concludes that: (1) Persistent pay gaps continue to exist in the U.S. workforce correlated with sex, race, and ethnicity; (2) workplace discrimination is an important contributing factor to these pay disparities; and (3) implementing the proposed EEO-1 pay data collection will improve the EEOC's ability to efficiently and effectively structure its investigation of pay discrimination charges.

First, persistent pay gaps exist in the U.S. workforce correlated with sex, race, and ethnicity. As of 2014, for women of all races and ethnicities, the median annual pay for a woman who held a full-time, year-round job was $39,621, while the median annual pay for a man who held a full-time, year-round job was $50,383.

The EEOC has found that African American and Hispanic women face the most significant pay gap with respect to white, non-Hispanic men. The agency cites studies indicating African American women earn almost 40 percent less than white men, and Hispanic women earn 44 percent less than white men. Other disparities exist between African American and Hispanic women and white women.

The EEOC has concluded that voluntary compliance with the collection of pay data “is an important part of the effort to prevent discrimination and improve pay equity … ”7 In justifying the need for additional pay data, the EEOC asserts that it—along with the OFCCP—lacks specific data that would be helpful in investigating potential pay discrimination.8

In its second comment period, the EEOC declined to increase the size of the employers who would be required to submit additional pay data and determined that all employers with 100 or more employees would be required to collect the additional information.9 However, the EEOC did agree to change the filing deadline beginning in 2017 for new EEO-1 reports to March 31 of the year following the reporting year, so that employers could use information gathered for W-2 earnings forms. Thus, EEO-1 reports for 2017 would be due on March 31, 2018.10 The EEOC reasoned that changing the deadline for EEO-1 reports would reduce the recordkeeping burden of employers and allow them to align the EEO-1 report with W-2 data. However, the EEOC declined to require reporting only every other year and determined to require the EEO-1 reports to be submitted yearly.11 The EEOC also determined it would use pay from Box 1 of the W-2 form as a comprehensive measure of an employee’s pay.12

In determining how to define how many hours an employee worked, the EEOC determined to use the definition of “hours worked” provided in the FLSA and rejected the “service hours” approach found in the Affordable Care Act.13 With respect to exempt employees, the EEOC is providing employers with two options for collecting “hours worked” data in response to employer comments regarding the significant number of hours per week an exempt employee may work. The EEOC will allow employers either to designate exempt employees as working 40 hours per week for full-time exempt employees or 20 hours per week for part-time exempt employees. The alternative is for the employer to provide the actual number of hours worked by each employee if the employer is keeping accurate records of such data.14

During the second comment period, the EEOC did not change its proposal to collect pay data for twelve pay bands used by the Department of Labor’s Bureau of Labor Statistics Occupational Employment Statistics. The proposed pay bands will collect data in twelve pay categories with a minimum pay in the bottom band of $19,239 and under and a maximum pay category of $208,000 and over. The EEOC expressed its hope that the ability to analyze pay data would allow the agency to use statistical tests to “identify significant disparities in reported pay” to support its investigations of pay discrimination.15

The EEOC expects to provide additional technical guidance to employers through seminars, webinars, training, outreach and educational materials.16 It hopes to promote voluntary compliance with pay discrimination laws, including Title VII and the EPA, by helping employers identify and correct discriminatory practices.17

The EEOC also expressed its continuing commitment to protecting the confidentiality of employer data with its current restrictions on disclosing any EEO-1 data prior to the initiation of a proceeding involving the information. The EEOC further emphasized its “robust cyber security and privacy program” provided in accordance with the Federal Information Security Modernization Act of 2014. 18

Although times have certainly changed since 1963, a review of recent cases examining EPA claims reveals that wage discrimination on the basis of gender still exists. For example, in Woodard v. Medseek, the plaintiff, a vice president in technical services at a healthcare technology company, claimed that she received less pay than several males who performed similar work in similar positions. 19 Although she earned $115,000 per year, she hired a male to work underneath her at an annual salary of $160,000 and raised the issue of her pay several times with her supervisors. She alleged her male supervisors began to ignore her when she informed them she was pregnant. She further had evidence that one of the supervisors had stated he wanted to eliminate all women in leadership roles in technology in the company. Following plaintiff’s return from maternity leave, the company laid her off.20 She brought a claim under the EPA claiming wage discrimination on the basis of gender. The court noted that under the EPA a plaintiff must demonstrate she was paid less than employees of the other gender for substantially similar work.21 The United States Supreme Court has directed that a plaintiff must demonstrate disparities in pay between employees of opposite gender for “‘for equal work on jobs the performance of which requires equal skill, effort and responsibility, and which are performed under similar working conditions.’”22 Once the plaintiff has made such a showing, an employer can raise one of four affirmative defenses under the EPA: “(1) a seniority system; (2) a merit system; (3) a system which measures earnings by quantity or quality of production; or (4) a differential based on any factor other than sex.” 23 In Woodard, the district court denied the defendant’s motion for summary judgment based on direct evidence of discrimination and the clear difference between the plaintiff’s pay and the salary of the male employee whom plaintiff supervised and who performed substantially similar work.24

In another recent case, Reardon v. Herring, the district court denied the motion to dismiss filed by the defendant, the Virginia Office of the Attorney General, relating to the plaintiff’s EPA claim.25 The plaintiff was an Assistant Attorney General in the Attorney General’s Office. When she was hired, she had been a member of the Virginia Bar for twenty-six years, but had only practiced law for eight years.26 Her starting salary was $62,000, even though the pay range for AAG’s in her same division was $70,000 to $90,000.27 When plaintiff complained of the discrepancy between her pay and the salary guidelines, her employer raised her salary by $1,000 one year and then by another $1,000 the next year. In 2015, the plaintiff was making a little more than $65,000, and the AG’s office decided to increase the salary guidelines for her position to between $90,800 and $136,200. It terminated plaintiff’s employment shortly after increasing the pay for plaintiff’s position.28 Plaintiff alleged she was paid less than the other attorneys in her division, all of whom were male. The plaintiff’s salary was over $11,000 less than the next lowest paid attorney. The district court determined issues of fact existed regarding whether the plaintiff was exempt from the EPA as a policymaking employee of a state government and held that she had alleged enough facts to survive the defendant’s motion to dismiss.29 Relying on Fourth Circuit precedent, the district court found the plaintiff only needed to allege that she shared a common core of tasks with the male comparators and that their job descriptions were not decisive.30 In another case from the Eastern District of Virginia, Taylor v. Millennium, the plaintiff survived a motion to dismiss her EPA claim even though she reported to different supervisors than her male comparators and supervised different employees.31

In an interesting twist for an EPA case, in Schleicher v. Preferred Solutions, Inc., a male employee sued his employer, whose CEO was a woman, for discrimination in violation of the EPA.32 The male plaintiff, along with a female coworker, ran the healthcare information technology staffing group. However, each employee voluntarily selected different methods of compensation. The employer paid the plaintiff 20 percent of the profits of the group and paid the female employee a $100,000 base salary and a 10 percent draw from the group’s profit pool.33 Between 2009 and 2013, the plaintiff earned $694,159.38 more than his female coworker performing the same job responsibilities. However, the plaintiff experienced a number of conflicts with the company’s CEO and other employees, and in 2013, it changed his salary structure to match that of his female coworker. At the end of the year, the CEO terminated the plaintiff. 34

The plaintiff sued for violation of the EPA. The Sixth Circuit affirmed summary judgment in favor of the employer on the plaintiff’s EPA claim.35 The plaintiff argued that the defendant had violated the EPA by maintaining the significant pay disparity between the two employees performing substantially similar work for more than three years.36 He then argued that the defendant violated the EPA a second time by lowering his salary to match his female coworker’s salary. The statute forbids an employer from lowering an employee’s salary to cure an underlying EPA violation.37 The Sixth Circuit noted that an employee does not have to establish discriminatory intent under the EPA, unlike claims under Title VII.38

In analyzing the plaintiff’s claims, the Sixth Circuit determined that the employer had never violated the EPA because the female coworker had voluntarily chosen to be compensated less than her male counterpart. Thus, the defendant did not violate the EPA by lowering the plaintiff’s compensation because it was not doing so to cure an underlying EPA violation.39 The court concluded that the two supervisors' pay differential was based on a factor other than sex—namely the female employee’s voluntary choice to be paid mostly on a salaried basis due to her discomfort with having her entire compensation based on a riskier profit pool percentage.40 The court further held that the plaintiff had failed to demonstrate a genuine issue of material fact regarding pretext and affirmed the district court’s award of summary judgment to the employer.41

These cases, all involving different facts and highly compensated employees, demonstrate that significant pay disparities between men and women continue to persist across the employment spectrum. As the courts and the EEOC acknowledge, some of these disparities are based on legitimate factors other than sex. However, in some cases it appears that discrimination based on gender may underlie the pay disparity. With the EEOC implementing the new pay data rules in the near future, the agency will have yet another tool in its arsenal to ferret out illegitimate disparities in pay based on sex.

Lane Crowder is an attorney in Baker Donelson's Chattanooga office. As a member of the Business Litigation Group, she concentrates her practice on commercial and employment litigation. She represents corporations and health care facilities in a wide variety of cases, including employment discrimination claims and contract disputes.

Endnotes
1See www.eeoc.gov/eeoc/newsroom/release/1-29-16.cfm.
2See Id.
3Id.
4See www.eeoc.gov/eeoc/newsroom/release/7-13-16.cfm.
5See Agency Information Collection Activities; Notice of Submission for OMB Review, Final Comment Request: Revision of the Employer Information Report (EEO-1), 81 Fed. Reg. 45481 (July 14, 2016) (citing Carmen DeNavas-Walt and Bernadette Proctor, U.S. Census Bureau, Income and Poverty in the United States: 2014, Current Population, 6 (2015), Table 1: Income and Earnings Summary Measures by Selected Characteristics: 2013 and 2014, https://www.census.gov/content/dam/Census/library/publications/2015/demo/p60-252.pdf).
6 81 Fed. Reg. 45482 (July 14, 2016) (citing Joan Farrelly-Harrigan, U.S. Dep't of Labor, Women's Bureau, Black Women in the Labor Force (Feb. 2016), https://www.dol.gov/wb/media/Black_Women_in_the_Labor_Force.pdf and Michelle Vaca, U.S. Dep't of Labor Blog, Celebrating Hispanic Women in the Labor Force (Oct. 6, 2015), http://blog.dol.gov/2015/10/06/celebrating-hispanic-women-in-the-labor-force).
781 Fed. Reg. 45483 (July 14, 2016).
8Id.
981 Fed. Reg. at 45484.
10 Id.
11Id.
1281 Fed. Reg. at 45485.
1381 Fed. Reg. at 45488.
14Id.
1581 Fed. Reg. at 45489.
1681 Fed. Reg. at 45491.
17Id.
1881 Fed. Reg. at 45492.
19No. 14-1794, 2016 WL 1392071 (N.D. Ala. Apr. 8, 2016).
20Id. at *3-6.
21Id. at *6.
22Corning Glass Works v. Brennan, 417 U.S. 188, 195, 94 S. Ct. 2223, 41 L. Ed. 2d 1 (1974) (quoting the EPA).
23Woodard, 2016 WL 1392071, at *20 n. 10.
24Id. at *7-9.
25No. 16-34, 2016 WL 3181138 (E.D. Va. June 3, 2016)
26Id. at *1.
27Id.
28Id. at *2.
29Id. at *13.
30Id. at *14 (citing Brennan v. Prince William Hosp. Corp., 503 F.2d 282, 291 (4th Cir.1974)).
312016 WL 927185, at *10 (E.D.Va. Mar. 4, 2016).
32No. 15-1716, 2016 WL 4088741 (6th Cir. Aug. 2, 2016).
33Id. at *1.
34Id.
35Id.
36Id. at *4.
37Id. (citing 29 U.S.C. § 206(d)(1)).
38Id. at *6.
39Id.
40Id. at *7.
41Id. at *8.

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