Potential litigation and near-certain business pushback loom over the EEOC as the agency’s new Democratic majority gears up to revisit an abandoned requirement for businesses to annually report their pay data by race and gender.
The Equal Employment Opportunity Commission is widely expected to restore a submission known as EEO-1 Component 2 in the coming months. That collection, which was intended to help address pay gaps for women and minorities, generated controversy and legal challenges across the Obama and Trump administrations.
“We recognize that because most employees don’t know what their colleagues are paid and don’t know how to file a charge, if they are shortchanged, it’s on us to find those cases,” said EEOC Chair Charlotte Burrows at the National Industry Liaison Group Conference in Phoenix earlier this month.
But a revival of the pay data collection is not without its critics. Some business groups argue that it’s too difficult for employers to provide and isn’t useful for the commission, leaving the EEOC open to potential litigation over the rollout.
The EEOC has not collected pay data since 2019 after the practice was reinstated by a federal judge. It was first finalized in 2016 by a Democrat-chaired commission, before the Trump administration deemed it too burdensome for businesses, kicking off several years of litigation.
The agency still collects EEO-1 workforce demographic data from companies with more than 100 employees, which does not include pay information.
While the commission has not disclosed specific plans for pay data collection, Burrows, who sets the agenda for the panel as its chair, has said that it will be soliciting public input on the issue and considering an advisory group’s recommendations.
Litigation Concerns
To reinstate pay data collection, the agency can either use the Administrative Procedure Act or the Paperwork Reduction Act.
Employment lawyers anticipate the commission will use the PRA, as it has done previously, for efficiency. They said the statute also lacks a private right of action, meaning an individual or organization can’t sue to block the agency’s collection.
“There are no standards under the Paperwork Reduction Act to challenge what is the final agency action. That’s the really critical difference,” said former EEOC Commissioner Victoria Lipnic who is currently a partner at Resolution Economics.
Lipnic, a Republican who opposed the original pay collection, said the commission may still see lawsuits seeking to prevent the agency from using the PRA to collect pay data information. They could argue that the process should go through the APA and its traditional notice-and-comment process to permit opportunities to challenge the data collection, she said.
Under the PRA, the Office of Information and Regulatory Affairs must evaluate the usefulness of the data, the burden the collection has on employers, and the tools the agency has to keep the data secure, according to employment law attorneys.
Though violations of the PRA itself cannot be the subject of private lawsuits, the commission could still face litigation.
Individuals may nevertheless try to sue the EEOC in federal district court claiming it didn’t take into account issues of privacy, confidentiality, and utility in its data collection, said Larry Lorber, labor and employment counsel at Seyfarth Shaw LLP.
But Lorber said suits would be easier if the EEOC uses the APA to revive Component 2, as plaintiffs could bring allegations under that statute that the commission doesn’t have general authority to collect the data at all.
“Before deciding whether or how to proceed with a future pay data collection, the Commission will seek and carefully consider the views of employees, employers, unions and members of the public,” said EEOC Director of Communications Victor Chen. “Any new pay data collection would be preceded by public notice, a public hearing, approval by the Commission, and robust opportunities for public input.”
Past Legal Battles
In 2017, the National Women’s Law Center sued the government after the Office of Management and Budget halted the collection of pay data, which was scheduled to begin in March 2018.
The OMB under the Trump administration found that the EEOC’s initial estimates of burden for pay data collection were “materially in error,” according to a memorandum in support of the defendants’ request for summary judgment.
However, Judge
If the EEOC cannot prove that the data is useful, then the collection won’t withstand White House or court scrutiny, according to Jim Paretti, an attorney at Littler Mendelson P.C. and a former commission staffer and senior counsel.
“The argument you’d make is if it’s a wholly specious collection or something that is going to be a tremendous burden to employers and have absolute minimal utility to the agency, certainly under the Administrative Procedures Act you’d be able to make that claim,” he said.
Lipnic said she voted against the pay report because she didn’t think the data being gathered was useful given the broad categories in the collection.
“It’s a regulatory action, so you have to weigh the burden,” she said. “And I did not think it was justified by the burden that it created.”
Business Impact
The National Academy of Sciences, Engineering, and Medicine issued a study last year evaluating the usefulness of the EEOC’s previous data collection.
On its website, the EEOC said the report found the data collection was effective enough that it “may be used to prioritize investigations and the agency’s allocation of resources to identify potential pay discrimination.”
Nita Beecher, labor and employment counsel at FortneyScott LLC, who served on the NAS panel that conducted a 2012 study on pay data, said the EEOC could adjust pay bands and collect Box 5 W-2 data, which she said accounts for annualized pay, instead of Box 1 data, which accounts for non-wage forms of compensation, including some benefits.
This would be a quick way to move the data collection process along and use it more effectively, she said.
“Pay data is different, and it doesn’t lend itself to being collected the way that race and gender data do,” she said. “You’re really only going to know that your professionals are being paid similarly, or not similarly, to other people in the industry. But that doesn’t tell you about any specific professionals.”
Businesses are concerned the raw pay data the EEOC collected in the past lacked crucial context that could justify why some pay discrepancies exist, said Marc Freedman, vice president of workplace policy at the U.S Chamber of Commerce, which opposed the EEOC’s previous Component 2 report.
“All you’re going to see is a broad demographic spread that says X number of people in certain demographic categories and certain income bands are being paid ‘this’ much,” Freedman said.
While the data collected by the EEOC is confidential, the agency often shares it with the Labor Department’s Office of Federal Contractor Compliance Programs, which could make it subject to the Freedom of Information Act, he added.
But pay data can serve as a valuable tool to identify companies that need to be investigated for Equal Pay Act compliance, said Emily Martin, vice president for education in the workplace at the National Women’s Law Center.
“It is a red flag, and those red flags are in a system where there are limited enforcement resources, where it’s really hard for the EEOC to identify pay discrimination,” Martin said.
Some states like California and Illinois have initiated statewide pay data collection initiatives, and new state laws are requiring disclosure of salary ranges in job postings to help close persistent gender-and race-based wage gaps.
“I really think the federal government is kind of behind the curve on these topics,” Beecher said.
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