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Corner Office: Be Prepared for New Regulations

by David F. McComb, Esq. and Grace H. Flanagan, Esq.
The U.S. Equal Employment Opportunity Commission (“EEOC”) has proposed new reporting obligations by employers. Ostensibly aimed at enforcing equal pay laws, the proposed revision, published on Feb. 1, 2016, would require employers to include information on employees’ pay and hours. Under the current laws, employers with more than 100 employees, or more than 50 employees and a federal government contract worth $50,000 or more, are required to file annual Employer Information Reports (EEO-1) to provide the EEOC with data on their employees’ ethnicity, race and sex, by job category.

According to the EEOC, the combination of the new and previously mandated employee information “will help focus public enforcement of our equal pay laws and provide better insight into discriminatory pay practices across industries and occupations.”

What does this mean for businesses? The proposed change will require companies to expend additional resources to prepare the reports. The EEOC states that most of the information is already being collected for tax purposes. Employers, however, will be required to take this information and compile it into an EEOC filing that breaks down employee pay into 12 pay bands. The time and cost involved will be significant.

What’s more, there is no guarantee that the increased data will give the agency a more accurate picture of pay disparity issues. Numbers alone are often not an accurate indicator. Reviewing pay data along with information on employee ethnicity, race and sex, without other subjective pay factors, may lead to unfounded equal pay claims. In those situations, the legal and administrative expense of defending an EEOC investigation and educating the EEOC will be borne by the employer. It comes as no surprise to labor and employment lawyers that the EEOC has in the past misinterpreted evidence or exaggerated its significance—resulting in unnecessary cost to businesses. Recently, several federal courts have sanctioned the EEOC for pursuing frivolous claims. It remains to be seen what impact, if any, the sanctions have on the agency’s overall enforcement strategy.

If the intended purpose of the proposed revision—a step forward toward pay equality and transparency—enables employers to address those issues, it will be a good thing. It is unclear what impact, if any, the employee pay data will have on private actions, as the EEO-1 reports are required to be kept confidential by the EEOC.

If enacted, the proposed regulation is slated to become effective in September 2017.

A shareholder at Zarwin Baum DeVito Kaplan Schaer Toddy, P.C., David F. McComb handles complex commercial and employment litigation matters. Grace H. Flanagan is an associate in Zarwin Baum’s commercial litigation and business practice groups. To learn more, visit Zarwin.com.

Published (and copyrighted) in Philly Biz, Volume 1, Issue 4 (March, 2016).
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