EEOC To Analyze EEO-1 Component 2 Pay Data with Independent Assessment

3 minute read | July.21.2020

On July 16, the EEOC announced plans to fund an independent study to evaluate pay data submitted by employers for fiscal years 2017 and 2018 through Component 2 of the EEO-1 form, both to inform potential next steps for the data, as well as to guide any potential future collections.  As we reported last March, after a tumultuous history, the EEOC decided against renewing its request for authorization to continue collecting pay data under Component 2 of the EEO-1 form, which reflected employees’ W-2 earnings and hours worked across broad job categories, broken down by gender, ethnicity, and race. The EEOC’s decision in March ended a four-year saga – including litigation – over whether the pay data collection would go forward at all.  Much of the controversy stemmed from critiques that the burden and confidentiality concerns implicated by the Component 2 submissions outweighed any potential benefit, particularly given the form’s reliance on W-2 earnings (as opposed to base pay or total compensation awarded for work performed in a given year), combined with the breadth of the pay bands and job categories used, as well as the inability for most employers to accurately track or report hours worked by exempt employees (as we reported here, here, here, here, here, here, here, here, and here). Despite last March’s announcement, the EEOC has not stated whether or how it plans to use the data it already has collected.

According to the EEOC’s press release, the agency unanimously voted to commission a year-and-a-half long study by the National Academies of Sciences, Engineering, and Medicine’s Committee on National Statistics (CNSTAT). CNSTAT is no stranger to the study of pay data – it previously published a study in 2012 entitled “Collecting Compensation Data from Employers,” which assessed the utility of collecting pay data by government agencies, including how such data could be used by the EEOC to carry out its enforcement responsibilities, and gave recommendations for targeting employers for investigation regarding their compliance with antidiscrimination laws. The current study is scheduled to commence on July 1, 2020, with an estimated completion date of December 31, 2021. It will assess the “quality and utility” of the EEO-1 Component 2 data for fiscal years 2017 and 2018. Specifically, it will “examine the fitness for use of the data, including the utility of pay bands in measuring pay disparities and potential statistical and analytically appropriate uses of the data.”

The study is intended to comport with the EEOC’s obligations under the Information Quality Act, which requires the EEOC to evaluate the “quality” of the data it collects. The Act defines “quality” as “utility, objectivity, and integrity.” According to its guidelines for compliance with the Act, the EEOC will “review the quality of information before it is disseminated to the public, and treat information quality as integral to every step of its development of information, including creation, collection, maintenance and dissemination.”

Last Thursday’s announcement appears to confirm that employers must await the outcome of the CNSTAT study to learn how or whether the data they furnished to the EEOC for 2017 and 2018 will be used. The EEOC’s prior March 2020 statement alluded to using the pay data in connection with Title VII proceedings, but did not provide details. In the meantime, regular internal analyses of pay data – conducted under attorney-client privilege to inform legal advice and assess legal risk – remain a best practice for employers, both to ensure pay equity among employees and maintain compliance with antidiscrimination obligations. Stay tuned to this blog for updates on this evolving issue.