Quick Hit: In a court filing, the EEOC announced that “that it is able to undertake and close the collection of 2018 EEO-1 Component 2 [pay] data by September 30, 2019.” To do so, EEOC would have to engage a third-party contractor at a cost of over $3 million. The filing came in response to a federal judge’s order requiring the EEOC to provide guidance regarding if, when and how it will collect Component 2 data , after that court lifted the stay  issued by the Office of Management and Budget (“OMB”) on Component 2 data collection.

Key Takeaways: The judge overseeing the case will have the final word on this matter, but at this time it appears that employers may end up having to file Component 2 pay data by September 30, 2019. Even if the Court agrees with the EEOC’s proposal, technical questions remain – such as whether employers will have to submit 2017 or 2018 data (in its filing, EEOC advocates for the use of 2018 data).

Employers should not underestimate the burden and time required to prepare the Component 2 data. Employers should immediately begin to assess how they can technically prepare the data for the report while we await further guidance. Contractors should also review their EEO-1 classifications to make sure they are accurate.

In the meantime, employers’ traditional EEO-1 data submissions (“Component 1”) are still due by May 31, 2019.

More Detail: Component 2 of the EEO-1 requires employers with more than 100 employees to submit aggregate pay data for their employees to the EEOC. The key elements of the process are as follows:

  • The employer must pick a payroll period between October 1 and December 31. Data for all full and part-time employees employed during that payroll period will be included in the Component-2 report.
  • For each employee in the selected payroll period, the employer will report earnings and hours data aggregated according to the EEO-1 job categories to which the employees are assigned.
      • For each EEO-1 job category, the employer must indicate the number of employees falling within each of 12 pay by sex and race/ethnicity. Employers are required to use W-2 “Box 1” earnings to determine the pay band into which each employee falls.
      • For each EEO-1 job category, the employer will aggregate hours data for all employees in the pay band by sex and race/ethnicity. Hours worked will be calculated for non-exempt employees by using their FLSA recorded hours, and for full-time exempt employees by multiplying 40 hours by the number of weeks they worked in the applicable year.

The EEOC’s statement is replete with caveats about the burden and challenges associated with preparing to receive this pay data. The EEOC is currently unprepared to do so. In order to meet the September 30 deadline, it will have to engage the services of a third party contractor, at a cost of over $3 million. Even so, the EEOC warned the court of the “serious risk that the expedited data collection process may yield poor quality data because of the limited quality control and quality assurance measures that would be implemented due to the expedited timeline.”

Also worthy of note is that the OMB’s original approval of collection of the Component 2 data expires on September 30, 2019 – the deadline proposed by the EEOC. It would appear unlikely that the OMB would renew its approval given that, after a change in Administrations, it stayed  its prior approval. It is therefore possible that the EEOC will be forced to expend $3 million on a new data collection system of limited utility – and employers will be forced to scramble to make submissions to that new system – that would only be used once.

Stay tuned for further developments.