HR Policy PRA Comments on EEO

Submitted via the Federal eRulemaking Portal: http://www.regulations.gov

Bernadette Wilson
Executive Officer, Executive Secretariat
Equal Employment Opportunity
Commission, 131 M Street NE
Washington, DC 20507

RE: Notice of Information Collection – Request for new Control Number for a Currently Approved Collection: Employer Information Report (EEO–1) Component 1; Revision of Existing Approval for EEO-1 Component 2

Dear Ms. Wilson:

The HR Policy Association (“the Association”) welcomes the opportunity to provide comments to the Equal Employment Opportunity Commission (EEOC or “the Commission”) regarding its intention to seek approval under the Paperwork Reduction Act to remove Component 1 from OMB control number 3046–0007 and to not renew Component 2 under OMB control number 3046–0007.[1]

The HR Policy Association represents the most senior human resource executives in more than 395 of the largest companies in the United States.  Collectively, these companies employ more than 12 million employees in the United States.  All of the Association’s member companies are required to file EEO-1.

The Association’s member companies have a longstanding commitment to eliminating unlawful compensation discrimination in the workplace and recognize that it is responsibility of all employers to compensate their employees in a nondiscriminatory manner.  However, the Association strongly recommends the Commission not renew the EEO-1 Component 2 reporting requirement for the following reasons:

• It will NOT help the EEOC better understand the scope of the pay gap
• It will NOT help the EEOC assess complaints of discrimination;
• It will NOT help the EEOC more effectively focus agency investigations, and will misdirect and waste agency and employer resources; and.
• It will NOT encourage employers to self-monitor or help employers analyze and evaluate their pay practices to prevent pay discrimination.

The Association’s detailed comments and reasoning are more fully described below after the overview of the EEO-1 Component 2 reporting requirement.

Overview of the EEO-1 Component 2 Reporting Requirement

Under the EEOC’s current EEO-1 reporting requirement, employers with 100 or more employees are required to report the number of employees by race, ethnicity and gender that fall within 12 prescribed compensation bands for each of the 10 EEO-1 job categories.[2]  Which pay band an employee is assigned to is determined by W-2 data during a “workforce snapshot period” between October 1 and December 31 of the reporting year.[3]  Large employers are also required to report the total number of hours worked in the last year by employees that fall within each of the 12 prescribed compensation bands for each of the 10 EEO-1 job categories, by race, ethnicity and gender.[4]  For salaried employees who are exempt under the Fair Labor Standards Act, employers can report a proxy of 40 hours per week for full-time exempt employees and 20 hours per week for part-time exempt employees, multiplied by the number of weeks the employees were employed during the EEO-1 reporting year.[5]

According to the EEOC, Component 2 serves a number of purposes.   Specifically, the reporting requirement will be used to:

• Conduct an early assessment of charges of discrimination;[6] and 
• Periodically publish reports on pay disparities by race, sex, industry, occupational groupings, and Metropolitan Statistical Area.[7]

The EEOC also said it would provide enhanced technical assistance and support to employers with seminars or webinars, training, and outreach and education materials.  Such materials may include best practice guides and self-assessment tools to promote voluntary compliance and assist employers in identifying and correcting discriminatory pay policies and practices. They may also identify practices that could lead to pay discrimination, such as subjective pay decision-making practices, establishing salary by relying heavily on prior salary, and setting salary based in large part on negotiations. 

Finally, the EEOC would conduct outreach to other stakeholders, including employees and their advocates, and academic researchers. Outreach to employees and their advocates would focus on ‘‘know your rights’’ trainings with respect to equal pay for equal work and also include training about how to use the EEOC’s planned aggregated pay data reports for research and informational purposes.

Component 2 Data Will NOT Help the EEOC Better Understand the Scope of the Pay Gap

With the Component 2 reporting requirement, the EEOC seeks to better understand the scope of the pay gap.  However, the proposed reporting requirement is a duplicative information collection for purposes of understanding the scope of the pay gap.  The EEOC already has access to Census Bureau micro-data that has far more information for understanding the pay gap than the aggregate data the EEOC proposes to collect by broad pay bands and the assumed hours of work for salaried employees.   Actual pay and hours worked data by detailed occupation and industry codes, educational attainment, and ethnicity, race, and gender categories, is already collected and publicly available at the person level from a number of federal surveys.  Component 2 data will have absolutely no utility over and above what information is already collected by various federal agencies.

The EEOC can and should use the Census Bureau micro-data to provide enhanced technical assistance, best practice guides and self-assessment tools to promote voluntary compliance and assist employers in identifying and correcting discriminatory pay policies and practices.  The Census Bureau micro-data can also be used to conduct outreach to other stakeholders, including employees and their advocates, and academic researchers.

Component 2 Data Will NOT Help the EEOC Assess Complaints of Discrimination

There can be no legal or enforcement use for Component 2 data because the Equal Pay Act and Title VII of the Civil Rights Act of 1964 do not permit the consideration of broad aggregates of data from dissimilar jobs combined into arbitrary pay bands to be used to assess complaints of discrimination.  In fact, the EEOC's own compliance manual and the Sage Report used to develop the information collection recognize broad aggregations of data are essentially useless for legally assessing compensation discrimination complaints, and a number of federal courts have reached the same conclusion.

The EEOC has long recognized that differences in education, experience, training, shift differentials, job classification systems, and market factors, can legitimately explain compensation differences.[8]  Thus, pay differences even between employees in comparable jobs are insufficient to assess compensation discrimination complaints.  Even the Sage Report, which the EEOC used to develop the proposal, recognized the limited use of the proposed data collection when it stated “summary data at the organization level will likely be of very limited use in EEOC practice.”[9]  Moreover, a number of courts have held that although similarly situated employees need not be identical, they must be “directly comparable to the plaintiff in all material respects....”[10]  

The EEO-1 combines completely dissimilar jobs, which is a fundamental problem with Component 2 data regarding its use for assessing compensation discrimination complaints.  Because there are only ten EEO-1 job categories, employers are forced to categorize employees in pay bands who perform vastly different work.  For example, Component 2 requires an employer to combine lawyers, buyers and purchasing agents, human resources specialists, management analysts, accountants, and computer programmers as “professionals” in order to assess discrimination complaints.   Under current legal standards and EEOC policy, any compensation discrimination assessment based upon such broad EEO-1 job groupings would be meaningless.

Finally, when assessing a discrimination complaint, the EEOC already has the ability to collect all of the detailed data it needs to conduct an investigation.  The Component 2 information request is unnecessary in this regard.

Component 2 Data Will NOT Help the EEOC More Effectively Focus Its Investigations

With the reporting requirement, the EEOC has said it seeks to more effectively focus agency investigations, and identify employers with existing pay disparities that might warrant further examination.  However, information collection will not accomplish these objectives, and is more likely to generate significant numbers of “false positives” that will waste EEOC resources and inappropriately target non-discriminating employers, who will then need to spend significant time, money and resources defending themselves against meritless allegations.  Further, the information collection is likely to generate significant numbers of “false negatives” where true discriminators would be identified as non-discriminators and the EEOC thus would fail to target them for investigation.

Notably, in 2006 the OFCCP rescinded its Equal Opportunity Survey after an analysis of actual federal contractor data found the survey’s 

“Predictive power to be only slightly better than chance.  Screening on the basis of the model produced large numbers of false positives, that is, the model predicted numerous instances of systemic discrimination in the sample where OFCCP identified none… of 637 establishments that would be classified by the EO Survey results as suspected of having systemic discrimination, 93% would be false positives.… Furthermore, the EO Survey model wrongly classifies a significant portion of true discriminators as non-discriminators, and thus would not target them for compliance evaluations.”

Like OFCCP’s rescinded EO Survey, the broadly aggregated data in Component 2 will likely mislead and misdirect EEOC and employer resources at great cost.  There is simply no circumstance under which broad, aggregate compensation and hours data can be used effectively target employers for review.  Moreover, utilizing a proxy of 40 hours per week for full-time FLSA exempt employees and 20 hours per week for part-time FLSA exempt employees will further generate misleading results.  Employers typically do not record hours worked for salaried employees who are exempt from the Fair Labor Standards Act, and using 2,080 hours for full-time salaried employees will skew the data and potentially bias any statistical analysis the EEOC performs on the data.  The impact of this data limitation is serious.  According to data from the Bureau of Labor Statistics, 59 percent of the U.S. workforce is paid by the hour, and 41 percent is paid on a basis for which an employer may have no accurate work hours.[11]  To assume a standard number of hours fails to encompass the vast differences in hours worked by exempt employees.

Moreover, if the EEOC uses the Mann-Whitney and Kruskal-Wallis tests on the collected data to “detect discrimination,” then it is highly likely the data would lead to false positives and false negatives.[12]  Like the previously rescinded EO Survey, the EEO-1’s Component 2 data will not help the EEOC more effectively focus agency investigations.

Finally, Component 2 data is meaningless and misleading because it’s based on aggregate pay data that blurs legitimate variances and distinctions in pay.  For example, employees who work night shifts, swing shifts and/or weekends are often paid a differential to account for less desirable work schedules.  Use of W-2 data, which includes not only base salary but also commissions, tips, overtime pay, shift differentials and bonus payments ignores the fact that some types of pay are determined more by an employee's skill and effort than an employer's pay policies.  Further, combining employees who work part-time or partial year with full-time and full-year employees will result in very misleading results.  Nevertheless, the statistical tests the EEOC announced it is planning to use on the collected data cannot account for these legitimate differences in pay.

*           *          *

For the reasons outlined above, the Association strongly recommends the Commission not renew the EEO-1 Component 2 reporting requirement.  If the Association can be of further assistance, please contact Mark Wilson at 202-315-5575 or [email protected].

Sincerely,

Mark Wilson
Vice President, Health & Employment Policy
HR Policy Association