At a White House event Friday honoring the seventh anniversary of the Lilly Ledbetter Fair Pay Act, federal officials laid out a proposal to have private companies include pay data in annual reports on the race, gender and job categories of their employees.
President Barack Obama said the more detailed reports would “help us do a better job enforcing existing equal pay laws,” underscoring the Equal Employment Opportunity Commission’s point that the added data would buoy its efforts to sniff out cases of pay discrimination.
The proposal, if adopted, would do more than just sharpen the commission’s regulatory teeth. It would make the commission a bigger player in combating employment discrimination—an area that has been dominated by private prosecutions.
“It really has fallen to individual employees, and employees who join together, to be the primary enforcement mechanism for anti-discrimination laws. This could represent an important shift in that,” said Katherine Kimpel, the managing partner of Sanford Heisler Kimpel’s office in Washington, who teaches a course on anti-discrimination law at Yale Law School.
Although additional funding will be needed for the commission to take on a more formidable role, Kimpel said the proposal would make the agency a more meaningful partner in the enforcement of pay discrimination.
“What this is going to identify are those really egregious violations,” she said.
But after an initial review of the proposal, members of the defense bar raised doubts about whether the additional reporting requirement would have the desired effect. At the core of their skepticism was the belief that the annual submissions—known as Employer Information Reports, or EEO-1s—would give rise to unreliable conclusions about differences in pay.
The forms list 10 employee categories, descending from “executive/senior official” to “service workers.” Federal contractors with at least 50 employees and companies with more than 100 employees are required fill out the gender and racial makeup of their workforce in each category.
Brett Coburn, a partner in the Atlanta office of Alston & Bird, said compensation within those categories can vary for entirely legitimate reasons, such as an employee’s experience level and education.
“The biggest issue, as I see it, is the report asks for a bunch of data that, at the end of the day, isn’t going to be very useful. Garbage in is only going to give you garbage out, so to speak,” Coburn said.
“I’m not sure how you would use the information this proposal calls for to even identify potential issues,” he added. “Basically it’s creating a game that doesn’t really have a result at the end of the day.”
Coburn said companies generally do not spend much time scrutinizing their EEO-1 reports. The task of completing those reports, he said, is treated as a “nonevent.” But if the requirement for pay data is adopted and begins in September 2017, as the commission hopes, companies will spend more time scrutinizing their reports, he said. The stakes will be raised.
For many companies, the new requirement would represent an “operational and administrative intrusion,” said Gregory Keating, chairman of Choate, Hall & Stewart’s labor employment and benefits group. (Kimpel, the plaintiff’s bar member, described the notion of an administrative hassle as “uncompelling.”)
Keating said the commission has put forth its proposal with the understanding that it will be easy for companies to incorporate W-2 forms into their annual reports. That process, he said, is not as simple as flipping a switch.
In a prepared statement, the commission’s chairwoman said the proposal would benefit businesses, allowing them to better comply with anti-discrimination laws after analyzing their own compensation practices.
“More than 50 years after pay discrimination became illegal it remains a persistent problem for too many Americans,” said Jenny R. Yang, chairwoman of the commission. “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.”
The proposal’s Feb. 1 publication in the Federal Register will open a two-month comment period. Keating said the new proposal unquestionably opens a new area of exposure, and he expects “a lot of comment is going to flow.”
“Big picture, I think this is a momentous development that will have major impact that will garner the immediate attention of the business community because it represents a draconian shift,” Keating said.
“This isn’t an area of exposure where the stakes are insignificant or the litigation wouldn’t be complex and protracted,” he said. “We’re talking about potential challenges down the road to perceived systemic pay disparities. Those types of litigation are complex and protracted and expensive.”