A Deeper Dive into the Pay Gap

Many HR professionals are trying to figure out if the Equal Opportunity Employment Commission's newly proposed revisions to its EEO-1 form are really justified or if they will simply turn out to be one gigantic administrative burden.

By Carol Patton

When President Obama recently laid out new rules that would require large companies to report salary data based on race, gender and ethnicity, he not only set up the federal government to actively police pay disparities that have resisted other reform efforts, he also shook up the HR world.

"This was really quite a surprise, the EEOC really kept this under wraps," says Kerry Chou, senior practice leader at WorldatWork, an HR association in Scottsdale, Ariz. "Certainly, one of the primary objectives is to be able to have more information at [the EEOC's[ disposal that it can look at for possible discrimination and then go to the next step in terms of audits and investigations on companies."

Currently, the form requires employers to provide data about employees' ethnicity, race, and sex, by job category. However, starting in September 2017, employers with more than 100 workers -- both private industry and federal contractors -- will need to report additional data involving employees' W-2 earnings and hours worked, according to the Federal Register.

While no one argues against equal pay, Chou says pay needs to be based on many factors, such as education, experience and employee performance. Consider a male employee with a graduate degree, who has been successfully performing his job for multiple years, compared to a female employee who holds the same position but possesses limited experience and education. These revisions do not enable employers to provide any explanation regarding why this male employee may earn more than his female counterpart.

Chou says President Obama's administration has a tendency to "unreasonably penalize a vast majority of companies that are trying to do the right thing in terms of getting more data and increase [their] burden to provide more and more data."

By proposing these revisions, is the government acting in a responsible and prudent manner?

Perhaps. But when employers provide this data at a very broad level with no opportunity for HR to explain any differences, Chou says he wonders what specific data will raise red flags and potentially launch EEOC investigations, even though salary variances may be completely legitimate. He says no employer wants to unnecessarily go through the laborious and expensive cost of an investigation.

As with many employers, he says, WorldatWork is still reviewing the revisions to determine if they offer any gain or advantage when weighed against the additional administrative efforts demanded of HR.

However, U.S. Secretary of Labor Thomas Perez believes these revisions are a powerful tool, says Laura Morse, chair of the labor and employment group at the Lane Powell law firm in Seattle.

"It's no coincidence that this announcement was made seven years to the day of the signing of the Lilly Ledbetter Fair Pay Act in 2009 by President Obama," she says, adding that President Obama's administration is bothered by the small gains in women's pay when compared to men's pay. In 2009, she says, women earned 77 cents on the dollar. Seven years later, that figure has only risen to 79 cents.

Still, Morse is concerned about the revisions and doesn't support them. She says it's troubling to think that this "blanket data or blunt instrument" could actually open employers up to liability where none existed before nor should exist solely based on raw data.

Several years ago, she says, the same executive order was directed toward federal contractors who have since been providing this type of information. So far, only 1 percent of identified claims have revealed discriminatory, unequal pay practices, she says.

Besides, the current system isn't broken, says Morse.

"We haven't yet seen or heard from the EEOC that the system is broken such that these cumbersome administrative reporting requirements are necessary," she says. "[Employees] have opportunities if they feel subjected to unequal pay . . .  .[They] can pursue the statutory remedies that are provided . . .  ."

Over the past several years, the EEOC has been much more aggressive, been given more funding and has developed a strategic plan for systematic investigations, says Kate Gold, a partner in the labor and employment litigation group at Drinker Biddle & Reath in Los Angeles.

"I'm seeing a lot more activity from the EEOC than we have seen before," she says. "Based on that general experience, it wouldn't surprise me if [the EEOC] put its money where its mouth is and actually starts to follow up on some of these [investigations]."

Although the EEOC has tremendous authority and power, she says, HR can only hope that this information won't be misused and that there will be a fair process for an investigation and response.

However, that doesn't mean HR professionals should sit on the sidelines. She says they can take action by submitting comments about the revisions before the April 1 deadline. For example, they can address how the current form can be enhanced or inquire about the rules for supplementing a form with explanations.

Meanwhile, Gold also encourages employers to engage in pay audits well before the revisions may go into effect.

"You really have to start doing these pay audits," Gold says. "You can't put your head in the sand about this even though it will be a really big job to get through this. Creating matrices of different job titles and what they get paid, and then trying to see where they might have disparities and how to explain them. Employers are just going to have to bite the bullet."

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Feb 8, 2016
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