Employers Beware – Look at Your Pay Practices Now!

Two significant changes have taken place with respect to discrimination and equal pay laws.  Employers should recognize the impact of these laws and conduct self-assessments to minimize the potential of litigation. 

The Equal Employment Opportunity Commission (“EEOC”) just yesterday released a final regulation with respect to the EEO-1 form that requires businesses to now disclose extensive data on diversity and compensation.  Businesses with 100 or more employees must submit pay data by race, ethnicity, and gender on its EEO-1 report.  The EEO-1 form currently asks for demographic information on the workforce in 10 categories.  The revised form requires employers to provide the demographic information according to pay earned in each category.  According to Thomas Perez, the Secretary of Labor, collecting the pay information “is a significant step forward in addressing discriminatory pay practices.” 

The EEOC has extended the reporting deadline to March 31, 2018.  We recommend that employers who are obligated to report complete a “draft” report now for internal review and consideration.  This will give employers an opportunity to examine any potential issues, and take proactive steps to avoid an EEOC investigation, well before the reporting deadline.  To maintain the confidentiality of the “draft” report, we recommend that employers conduct this evaluation with the assistance of legal counsel. 

Even employers who do not have the EEO-1 reporting obligation should consider auditing pay practices.  In 2015 California enacted the Fair Pay Act which requires employers to pay the same wage to employees engaging in “substantially similar work when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.”  Not only is this new requirement ambiguous, unwieldy and difficult to understand, the law imposes on the employer the obligation to prove why one worker is paid less than a co-worker. 

These changes in the law – California’s Fair Pay Act and the revised EEO-1 form – make it much easier for lawyers to file claims of discrimination.  In fact, the Fair Pay Act encourages litigation.  Not only can an employee recover the difference between what (s)he was paid and what others were paid, the employee can recover an equal amount as liquidated damages, and attorneys’ fees.  Of course, attorneys’ fees are also awarded under discrimination laws as well. 

The EEOC claims that the proposed rule will increase the annual cost associated with completing a EEO-1 report by $25 million nationwide, and will also impose a one-time compliance cost of $27 million.  The U.S. Chamber of Commerce claims the revise reporting requirement will cost employers more than $400 million.

A copy of the revised EEO-1 form can be found here:  https://www.eeoc.gov/employers/eeo1survey/upload/component-1-and-2-sample-2017-eeo1-report.pdf