Written Testimony of Jessica Stender Senior Counsel for Workplace, Justice, and Public Policy at Equal Rights Advocates

Meeting of November 20, 2019 - EEOC Convenes Public Hearing on the Proposed Revision of the Employer Information Report (EEO-1)

Thank you for the opportunity to provide testimony on the Equal Employment Opportunity Commission's ("EEOC" or "the Commission") September 12, 2019 Notice of Information Collection ("the Notice").[1] The Notice indicates that the EEOC intends to submit to the Office of Management and Budget (OMB), in accordance with the Paperwork Reduction Act ("PRA"), a request for a three year approval of Component 1 of the Employer Information Report ("EEO-1"), but it does not intend to request renewal of the Component 2 pay data collection of the EEO-1 Report.

My name is Jessica Stender and I am Senior Counsel for Workplace Justice and Public Policy at Equal Rights Advocates ("ERA"). ERA is a national, non-profit legal organization that has worked for over 45 years to advance and protect equality, opportunity and economic security for women and their families, with a focus on women's workplace rights and education equity. A primary focus of our work is to promote equal treatment in the workplace by combatting barriers to advancement and ensuring equal pay and employment conditions free from discrimination.

For these reasons, we strongly supported the revision to the EEO-1 approved by the Office of Management and Budget (OMB) in September 2016, requiring covered employers to provide annual reports to the EEOC with summary data about employee pay, broken down by job category, sex, race, and ethnicity ("Component 2"). This revision constituted an important step forward in the fight to address pervasive pay discrimination, which is harmful to not only the women who are paid less than their male counterparts in virtually every industry and occupation in this country, but also the families they support, the communities where they live and the overall economy.

The Notice states that while the EEOC intends to submit a request to OMB for a three-year approval of Component 1 of the EEO-1 in accordance with the Paperwork Reduction Act (PRA), it does not intend to request renewal of Component 2.

The Notice states that contrary to the EEOC's prior determination in 2016, the EEOC now concludes that "the unproven utility" to of the pay data as defined in Component 2 is outweighed by the burden imposed on employers.[2] However, the Notice does not provide any analysis or assessment of the utility or benefits of the pay data, which is by definition a necessary part of the equation, since it must, pursuant to the PRA, be balanced against any burden to employers. Moreover, the EEOC issued the Notice before the current court-ordered Component 2 pay data collection period has concluded. The Commission has therefore not yet had an opportunity to perform a complete analysis of the pay data itself, which is necessary to support a conclusion regarding its utility. Finally, the Notice does not provide sufficient information as to the methodology underlying its new analysis and conclusion as to the burden thereby preventing appropriate outside assessment.

The Component 2 compensation data constitutes an important tool to help uncover and combat pay discrimination and other forms of discrimination reflected in compensation; effectively and efficiently guide allocation of enforcement resources; and encourage employer self-analysis and compliance with equal pay and anti-discrimination laws. ERA therefore strongly urges the EEOC to request renewal of the Component 2 and ensure the continued collection of this critical data.

1. EEO-1 Component 2 Pay Data Collection Will Help Identify And Address Pay Discrimination, A Significant Contributor to the Persistent Gender Wage Gap

A. The Pay Gap is a Persistent Feature of the U.S. Labor Market

In 1963, Congress passed the federal Equal Pay Act to combat pervasive "wage differentials based on sex."[3] More than 55 years later, women make up almost half of the workforce,[4] more than half are the primary breadwinners in their households,[5] and they receive more than half of bachelor's, master's and doctorate degrees.[6]  Yet, on average, women continue to earn less than men in virtually every occupation for which there is sufficient data to calculate an earnings ratio.[7]

U.S. Census Bureau data reflect that women working full time, year round, typically make only 82 percent of the median annual wages made by men working full time, year round.[8] For women of color, the gaps are much larger. African American women and Native women typically make only make 62 percent and 57 percent, respectively,[9] and Latinas make only 54 percent[10] of the wages white, non-Hispanic men typically make for full-time, year-round work. The wage gap persists across industries,[11] occupations,[12] and education levels,[13] and exacts a heavy toll not only on women, but on families, communities, and the economy as a whole. Eliminating the gender wage gap would reduce the poverty rates of working women and their families by more than half and would add $512.6 billion to the national economy.[14]

B. Pay Discrimination Is Often Hard to Detect by Both Employees and Employers Alike

One obstacle to effective enforcement of equal pay laws is that pay discrimination is often "hidden from sight" and can be a result of unconscious biases or historical inequities. Thus, affected employees and in some cases - especially in larger companies - employers themselves, may not be aware of it's existence. The prevalence of "pay secrecy" policies,[15] whereby employers discourage or prohibit their employees from discussing or disclosing pay, compounds the problem and often prevents employees from gaining the information necessary to identify and challenge pay discrimination.

Moreover, some employers do not systematically evaluate their internal compensation policies and practices. They are therefore unaware of pay disparities and other potentially discriminatory practices and fail to take corrective action ensure compliance with the law.

For these reasons, government enforcement of equal pay and other anti-discrimination laws, as well as employer self-evaluation, are critical strategies for combating pay discrimination and continued collection of Component 2 pay data will promote and support both of these strategies.

C. Component 2 Pay Data Collection Will Assist in Enforcement Efforts by Helping Agencies Identify Potentially Unlawful Pay Practices

Access to employer workforce data is an important tool for uncovering and assessing potential unlawful discrimination. For that reason, Title VII authorizes the EEOC to collect data from employers as reasonable, necessary, and appropriate for enforcement.[16] In fact, for over 50 years, employers have been required[17] to report workforce demographic data broken down by race, ethnicity, gender, and job category to the EEOC and OFCCP and these agencies have used this data to assist in their enforcement efforts.

Similarly, access to pay data specifically will be a helpful tool to identify potential pay discrimination, i.e. employees of the opposite sex who are paid different amounts despite performing substantially equal work,[18] as well as occupational segregation, a labor market trend wherein certain classes of workers are concentrated in specific industries or specific jobs and/or wage levels within an individual company or the broader industry.[19] Both are significant contributors to the wage gap; and thus, exposing and addressing them via pay data reporting is one critical strategy to addressing closing the gap. In fact, recent research indicates that pay data collection does, in fact, help to close wage gaps.[20]

The Component 2 pay data collection will help the EEOC and OFCCP to more efficiently use their limited enforcement resources by allowing them to identify patterns across and within industries and take a closer look at outliers to determine whether a violation of equal pay or other anti-discrimination law may have occurred. A pay gap that is exposed in the Component 2 data will not necessarily be indicative of a legal violation in and of itself; however, it can prompt the agency to take closer look to determine whether there is a lawful basis for the wage disparity.

The data may also expose other forms of potentially unlawful discrimination. For example, if an employer's data shows that women - or employees who are members of another protected class such as race - are consistently overrepresented in the lower-paid positions which leads to persistent gender or racial pay gaps within a given company, this could constitute a violation of other antidiscrimination laws such as Title VII.

The form and type of data set forth in Component 2 of the EEO-1 is useful and appropriate for enforcement efforts and imposes minimal additional burden on employers. Component 2 data tracks the long-established EEO-1 job categories that covered employers have had to report on for over 50 years,[21] thus simplifying the reporting process for employers, as they do not have to learn a new structure for categorizing internal job titles. Using the EEO-1 job categories is also helpful for enforcement because it enables agencies to compare the wage gap in specific job categories among a variety of different employers in the same industry and metropolitan area. The data will enable agencies to assess where wage gaps are pervasive throughout an industry as a whole, but also identify where there may be specific employers with larger pay gaps than others within a particular industry. This will help guide their investigatory and other enforcement activities by prompting them to do conduct additional investigation and analysis of employers where violations are more likely. Before the EEOC began collecting Component 2 data, the agency could already evaluate the distribution of workers broken down by sex, race, and ethnicity within the EEO-1 job categories of a given company through the demographic workforce data already being reported. The addition of pay data reporting gives the agency another tool to assess potential wage discrimination by performing a more in-depth investigation of on outlier employer whose pay data reflect a wage gap that is disproportionately larger than that of the relevant industry overall.

In addition to helping the agency target affirmative enforcement efforts for a more efficient use of resources, the data can also be useful in the initial assessment of a charge of pay discrimination filed by an employee and in guiding the focus of the ensuing investigation. Specifically, after receiving a charge, the EEOC could analyze the reported pay data within the relevant EEO-1 category of the company to evaluate whether aggregate pay disparities exist. This will provide helpful context for the EEOC's initial assessment of a charge and it can also help to inform the type of additional information or data needed from the employer to evaluate the pay discrimination claim.

Because the EEO-1 categories consist of several different jobs, some argue that disparities reflected in the data for a given category are not necessarily indicative of unlawful pay discrimination, e.g. unequal pay for substantially equal work performed by employees of the opposite sex, and therefore make the data useless. However, EEO-1 data - both Component 1 and 2 - is not intended to be direct evidence of a legal violation, but rather one of many tools for the agency to use in order to assess the broader picture when evaluating a specific charge of discrimination or determining where to direct affirmative enforcement efforts. Similar to the EEO-1 data collected over the past 50 years, rather than constituting direct proof of pay discrimination, Component 2 pay data can serve a helpful tool to inform investigative procedures in order to determine whether unjustified and unlawful wage gaps do, in fact, exist.

Moreover, the specific jobs within a given EEO-1 category are often fairly consistent among different employers in a given industry, and thus, the Component 2 compensation data will help to show broader patterns within the EEO-1 job categories. This is instructive as it enables the agency to benchmark specific industries or labor markets to gain an understanding of the trends in wages and flag employers that diverge from the norm in order to conduct further investigation to determine if there is a legal violation, such as pay discrimination between employees of different sexes doing equivalent jobs. The data may also flag deviations from broader industry compensation patterns that may be driven by other forms of discrimination that result in workers of a specific sex, race or ethnicity being concentrated in higher or lower-paid positions.

The specific type of the data reported pursuant to Component 2 is also useful for accurately assessing pay and compliance with the law. Specifically, the fact that employers are required to report W-2 earnings data ensures a more accurate measure of total employee compensation since this includes all earned income, including compensation sources in addition to base salary, such as bonuses, overtime pay, and stock options. This is important because pay discrimination might manifest in the additional sources of compensation provided by an employer, which would not be reflected if employers were only required to report base pay. Importantly, because employers are already legally required to maintain the information in W-2 forms,[22] the required reporting of this compensation data in the Component 2 report imposes little additional burden.

Similarly, the reporting of the total hours worked by employees is also useful to the analysis of the pay data because it can provide relevant context for any disparities that are revealed, including demonstrating where a the differential is due to differences in hours worked by employees in a specific EEO-1 category within a company or among various employers in a given industry. As with the W-2 data, employers are already required to track and maintain records of hours worked, and thus, the additional reporting burden is minimal.

Finally, the EEO-1 will enable comparisons of pay data broken down by both gender as well as race and/or ethnicity, which recognizes the reality that women often experience discrimination based on characteristics in addition to their gender, such as race or national origin, resulting in larger pay gaps for women of color, as outlined above. The EEO-1 data categories will help to illustrate where such intersectional discrimination may exist.

D. Component 2 Pay Data Collection Will Promote Employer Self-Evaluation and Compliance

In addition to assisting enforcement agencies in investigating and assessing potential wage discrimination, the required data collection and reporting via the Component 2 form will encourage more employers to proactively review and evaluate their pay policies and practices. Where such an internal pay audit process reveals a pay gap, this will prompt further investigation by the employer and incentivize them to self-correct by rectifying any unjustified pay disparities between employees.

Similarly, the process of conducting an internal audit can help employers identify patterns of occupational segregation that they may not have been aware of and which is especially common in large companies. This may spur employers to assess and potentially adjust their practices related to outreach and recruitment, hiring, promotion and/or performance evaluation, to ensure more equal representation of workers from different demographic groups at all wage levels within a company.

Employers are already obligated to ensure compliance with equal pay and other anti-discrimination laws. In fact, some companies already perform voluntary internal audits and make adjustments when necessary to rectify unjustified wage gaps and/or ensure more equal representation throughout the company.[23]

1. The Notice Makes a Premature Determination As to the Utility of Component 2 Data and Provides Insufficient Information as to the New Burden Analysis

The Notice states that the "unproven utility to its enforcement program of the pay data as defined in the 2016 Component 2 is far outweighed by the burden imposed on employers."[24] Pursuant to the PRA, the EEOC is required to balance the utility of the data against the burden of its collection. However, the Notice does not provide any information as to what, if any, analysis was performed to evaluate the utility of the data and/or what determinations were made in this regard. It is therefore impossible to determine whether and how the EEOC analyzed the utility of the data, as it is required to do.

In fact, at the time the EEOC issued the Notice on September 12, 2019, the agency was in the midst of collecting pay data for 2017 and 2018, as required by an order of the District Court for the District of Columbia.[25] Because the pay data collection deadline had not yet been reached, the EEOC had not received the full data set and was therefore not equipped to conduct a thorough or complete analysis of the data or make an informed determination as to its utility (or, for that matter, the actual burden on employers of reporting it). Even if the EEOC did perform an analysis on the partial data received as of that date, due to the lack of information in the Notice, it is impossible to evaluate and comment on any such theoretical analysis, which is central to the balancing test and ultimate determination.

The Notice concludes that the burden methodology employed by the EEOC in 2016 underestimated the burden on employers of reporting pay data through the EEO-1. However, there is insufficient information in the Notice about the new burden estimate, and the new determination appears to disregard certain relevant factors. 

The Notice indicates that single establishment (Type 1) filers have an average estimated burden of 45 minutes, and that the average estimated burden for multi-establishment (Type 2) filers would range from 3.5 hours to 9.5 hours cumulatively depending on the number and type of reports submitted.[26] This results in an average estimated burden per filer of five hours.[27] There is no explanation in the Notice for the basis of these time estimates, which prevents outside assessment. Additionally, the Notice appears to disregard the fact that many large employers' payroll systems are automated, which makes compensation data more easily accessible. The evaluation also fails to factor in the likelihood that many multi-establishment filers will choose to file through a digital file upload, which takes less time than manually completing multiple forms online. Additionally, the new burden analysis fails to acknowledge that the burden on employers of reporting Component 2 pay data will likely go down with continued reporting as employers gain experience with the process and institute or fine tune additional pay data collection and/or reporting systems.  Finally, it appears the EEOC did not assess or address the actual experience of the employers who had reported the 2017 and 2018 pay data as of the date of the Notice in order to inform the new burden analysis.

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The gender wage gap has not changed in a statistically significant way for over a decade.[28] At the current rate of change in the annual earnings ratio, it will take another 40 years, until 2059, for men and women to reach wage parity.[29]  It is therefore critical that the agencies charged with enforcing equal pay and anti-discrimination laws are able to take proactive steps to identify and better address pay discrimination, which is a significant contributor to the gender wage gap. For these reasons, we urge the EEOC to request renewal of Component 2 of the EEO-1.