Businesses with 100 or more employees subject to proposed new rule targeting gender discrimination.
By Mathew Parker
One of President Obama's central priorities has been to expand protections for the American workforce. In order to accomplish this goal, during his administration, a number of federal agencies have issued new rules requiring employers to take various affirmative steps. On January 29, 2016-exactly seven years after the Lilly Ledbetter Fair Pay Act was signed into law-the Equal Employment Opportunity Commission (EEOC) proposed a new rule aimed at expanding the pay transparency requirements for employers. In a proposed revision to the current EEO-1 Report, the EEOC will require employers with 100 or more employees to disclose detailed pay data, including a breakdown of this information by gender, race and ethnicity. The EEOC will most likely share this pay data with various federal agencies to assist them in identifying pay disparities across these lines. The proposed rule is expected to become effective for the EEO-1 Report due on September 30, 2017.
Implications for Ohio employers
By way of background, the EEO-1 Report is the annual compliance survey that requires employers to disclose information about their workforce, categorized by race/ethnicity, gender and job category. In general, the EEOC and other federal agencies use this information to support civil rights enforcement and to analyze employment patterns, such as the number of women or minorities within companies, industries or regions.
Under the proposed new rule, the EEOC and other federal agencies will use the expanded pay data to investigate complaints of pay discrimination, identify pay discrepancies among men and women and minorities and non-minorities, and uncover discriminatory pay practices. The pay data will also be aggregated and published so that employers can self-audit their own pay practices and eliminate any pay gaps.
As the proposed revision to the EEO-1 Report lends even greater governmental access to employee information, it is likely that federal investigations and audits will only increase. Indeed, Secretary of Labor Thomas Perez praised the EEOC's proposed rule as "a more powerful tool for his agency to do its enforcement work." In addition, the White House declared that the EEOC's proposal would cover more than 63 million employees and "help focus public enforcement of (the United States') equal pay laws and provide better insight into discriminatory pay practices across industries and occupations."
Unfortunately, the proposed rule will likely have the unintended consequence of unnecessarily red flagging some legitimate pay practices or resulting in unproductive investigations, as it does not provide employers an opportunity to disclose any context or legitimate, non-discriminatory reasons for their pay decisions.
What can employers do now?
It is wise for employers to take proactive steps before they will inevitably be required to disclose pay data in the September 2017 EEO-1 Report. The best way for employers to be proactive and limit their potential exposure to federal investigations and audits is to review their current pay practices and address any pay disparities and red flags now. In fact, employers can analyze all of the pay data that they will eventually have to disclose using the exact same tests employed by the EEOC and other agencies to expose pay gaps.
By auditing their pay practices now, employers will be able to get ahead of any problems early on to hopefully avoid a federal investigation or audit. Employers will also be able to control the outcome of any disparities or red flags by determining on their own whether any pay disparities may be justified by legitimate and non-discriminatory reasons, or whether they must take corrective action to fix any unjustifiable pay gaps. Additionally, by examining the data on how pay is calculated and being transparent about it, employers can receive the added benefit of calming ever-increasing employee concerns about lagging wages or pay discrimination.
Mathew Parker is an associate in the Columbus office ofFisher & Phillips. His practice involves the representation of employers in various types of employment litigation. He also counsels employers regarding various day-to-day employment policies and practices.