New proposed rules targeting gender pay equality are raising concerns among employers who fear that compliance may cost time and other resources while doing little to solve the problems of unequal pay.
The Equal Employment Opportunity Commission late last week announced plans to require businesses to provide summary data about how much they pay their workers. The proposal is wide-reaching, requiring employers with 100 or more workers to report what they pay their workers, broken down by gender, race and ethnicity, across 10 broad job categories.
We’re talking about a tremendous amount of employers and a tremendous amount of data, and it’s data [employers] don’t really have yet.
“We’re talking about a tremendous amount of employers and a tremendous amount of data, and it’s data [employers] don’t really have yet,” says Nancy Hammer, senior government affairs policy counsel at the Society for Human Resource Management.
“There will be a lot of burden to produce this information, but it’s not going to give the government direction to close this pay gap,” Hammer says, adding that SHRM and its members generally believe that pay should be handled in individual capacities.
The rule is aimed at fighting discrimination against workers based on factors such as gender and race, the EEOC says.
“More than 50 years after pay discrimination became illegal, it remains a persistent problem for too many Americans,” EEOC Chair Jenny Yang says. “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 antidiscrimination laws.”
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What frustrates employers most, Hammer says, is that they don’t have an understanding of how the data is going to be used to address the problem of unequal pay.
“The biggest concern I’m hearing from members is the data that they are going to collect isn’t going to be very helpful in rooting out discrimination,” she says, adding that the ruling is premature, and that smaller steps, such as incenting employers to assess their pay practices, should be taken first.
The move instead creates significant administrative burdens for employers, experts argue, despite contention from the agency that the additional paperwork requirement won’t be overly onerous, since it will be added to the EEO-1 form that companies with 100 or more employees already file annually with the government.
“Even if the employer has already performed a robust pay-equity analysis recently, they will need to undertake a mini-audit to assess the impact of the proposed report,” explains Connie Bertram, the head of the D.C. labor and employment practice for Proskauer. “It’s unlikely that their prior audits would have undertaken such an analysis — such as compensation disparities based solely on EEO-1 categories, W-2 compensation and total hours.”
There will be a lot of burden to produce this information, but it’s not going to give the government direction to close this pay gap.
Additionally, Bertram says, the proposed changes “fail to address how the EEOC would account for the myriad of other factors that impact an individual’s pay, like performance, education and seniority.”
“It does not define how hours worked will be determined in the individual cells,” she says. “Employers will likely be required to adjust annual hours information to account for employees who have worked part time or less than a full year. Although payroll vendors will likely develop programs for preparing reports, particularly during the initial year or two, employers will have to make certain that their reports are compliant.”
The public has until April 1 to comment on the ruling. If adopted, employers will have to provide data on pay ranges and hours beginning in September 2017.
It’s a good-news, bad-news situation for employers, says Kate Gold, an employment attorney with the Los Angeles office of law firm Drinker Biddle & Reath.
“Most employers I work with generally support pay equity, so from that standpoint, it’s not bad news that new legislation and administrative action is shining a light on pay practices and closing the gender wage gap,” she says. “Many employers will see that in the ‘good news’ category.”
Despite laws that require equal pay for equal work, many women still are paid less than men doing the same jobs. According to a White House fact sheet, women account for almost half of the American workforce, but “a typical woman who works full-time still earns 79 cents on every dollar a typical man does.”
But angst lies in other aspects of the proposed rule, Gold says, which include the revised EEO-1 form, the administrative burden of further reporting requirements and the potential for a follow-up investigation by the EEOC. An additional concern, she says, is that by providing pay data to the EEOC, companies risk disclosure of confidential, competitive information (such as employee salaries).
“Because the EEO-1 form does not provide any context for explaining pay data, or lend itself to explaining pay disparities among broad job categories, such as ‘professionals,’ it’s a blunt instrument for measuring pay equity and could be easily misunderstood or misconstrued,” Gold says.
The bottom line for employers is to start paying attention now.
“The revised EEO-1 form is not likely to go into effect until late 2017, so employers have time now to get their proverbial houses in order before reporting pay data to the EEOC,” Gold says. “Employers need to examine what they are paying employees for substantially similar work and must be able to explain any apparent disparities with factors other than gender, such as seniority, skills, performance, education, experience and credentials.”
