Fall is fast approaching, and employers need to be aware of a new EEO-1 reporting requirement. More specifically, by September 30, 2019, covered employers will, for the first time, need to submit EEO-1 Report Component 2 data to the Equal Employment Opportunity Commission (EEOC). Employers have questions, so here are some answers:
1. Understand What the EEOC Is Doing
For over 50 years, as part of the EEO-1 Report (Component 1), the EEOC has collected data from covered employers with 100 or more employees on the sex, race/ethnicity and job category of their workforce. This was the EEOC’s attempt to ascertain if employers were instituting fair hiring practices, but it has not been enough. In today’s legal landscape, there is a focus on achieving pay equity and making sure all individuals, regardless of protected class, are paid fairly and equally based on merit, skills and experience.
Therefore, for the first time in September 2019, pursuant to a revised EEO-1 form, the EEOC will collect Component 2 data on wages and hours worked. Specifically, employers will be required to report W-2 wage information within 12 pay bands and total hours worked for all employees by sex, race/ethnicity and job category on a single payroll period chosen between October and December 31 of each reporting year (2017 and 2018), referred to as the workforce snapshot period.
Keep in mind that a workforce snapshot period does not need to be the same for 2017 and 2018, and it does not need to be the same pay period used for submitting EEO-1 Report Component 1 data. Also, an employer doesn’t have to choose a period in which it has 100 or more employees. An employer will only submit Component 2 data for both full-time employees and part-time employees on the employer’s payroll during the workforce snapshot period in 2017 and 2018.
2. Determine If You Need to File EEO-1 Report Component 2
Not all employers need to file EEO-1 Report Component 2 data. An employer is only required to submit Component 2 compensation data if:
• For 2017, the employer has 100 or more employees during the chosen 2017 workforce snapshot period; and
• For 2018, the employer has 100 or more employees during the chosen 2018 workforce snapshot period.
Additionally, federal contractors with 50-99 employees are not required to report Component 2 compensation data. Federal contractors with 1-49 employees, and other private employers with 1-99 employees, are not required to file Component 2 data or Component 1 data.
3. Understand What Reports Need to Be Filed
A single-establishment employer (an employer doing business at only one establishment in one location) must complete a single Component 2 EEO-1 online data record. However, for employers doing business at more than one establishment (a multi-establishment employer), compensation data must be submitted for all of the establishments.
A multi-establishment employer must submit:
• A Consolidated Report, which includes summary pay and hours worked data for employees in the company’s headquarters and at each establishment; and
• An individual report for each establishment with 50 or more employees.
For establishments with fewer than 50 employees, the employer must file an establishment list or establishment report, similar to the list or report required for Component 1.
4. Collect the Data on Compensation and Hours Worked
For the compensation/earnings data, W-2 Box 1 earnings must be reported for each year for all employees identified in the workforce snapshot period. To do this, tally the total number of employees who fall into each of the 12 specific compensation bands by EEO-1 job category, gender and race/ethnicity. Include all employees employed during the workforce snapshot period even if the employee was no longer employed at the year’s end. Gross annual earnings may not be used in place of Form W-2’s Box 1 earnings.
For the hours worked data, an employer must report hours worked, in the aggregate, for all employees in the snapshot period, by gender and race/ethnicity. Employers should use the Fair Labor Standards Act (FLSA) definition of hours worked and generally not include paid leave (e.g., sick leave, vacation leave or paid holidays).
For nonexempt employees within the meaning of the FLSA, report the annual sum of hours each nonexempt employee worked.
For FLSA-exempt employees, an employer may either:
• Report actual hours worked by the exempt employees if the employer already maintains accurate records of this information; or
• 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. File the EEO-1 Report Component 2 Data
At the moment, the EEOC website portal is open, and employers must file the EEO-1 Report Component 2 data by September 30, 2019, either via the Component 2 EEO-1 Online Filing System, or by creating a CSV data file and inputting data in the appropriate fields in accordance with the data file specifications.
Employers will receive their User ID via a notification letter mailed through the US Postal Service and an email sent to the registered EEO-1 email address on record. A password will be set up during initial entry into the system, after the employer’s User ID, Federal Employer Identification Number (FEIN) and email address have been verified.
Once an employer completes all its reports, remember to have an authorized official for the organization certify that the information reported is accurate and prepared in accordance with the instructions. Be careful and take steps to protect the confidentiality of information when filing since web-based communications may be subject to tampering from an outside source.
6. Do What You Can to Prepare
Providing information on wages and hours worked to the EEOC will provide it with a unique window into an employer’s pay practices and may lead to an EEOC investigation or charges of pay discrimination. After all, the EEOC’s goal in obtaining this information in the first place is to encourage employers to conduct self-audits, identify and correct pay disparities and improve enforcement of federal laws prohibiting pay discrimination.
Therefore, a prudent employer should get ahead of the game and review its pay practices to make sure that all individuals are being paid fairly based on merit, skills and experience. Be sure to correct any wage disparities, and consider using a pay equity audit to assist you. Being proactive and addressing any discrepancies now before they escalate may help minimize the risk of a future investigation or charge.