The Equal Employment Opportunity Commission EEO-1 Component 2 Pay Data Reporting Rule

Operator:  Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's Labor & Employment Law Practice Group, was recorded on Tuesday, September 3, 2019, during a live teleforum conference call held exclusively for Federalist Society members.      

 

Wesley Hodges:  Welcome to The Federalist Society's teleforum conference call. This afternoon's topic is on "The Equal Employment Opportunity Commission EEO-1 Component 2 Pay Data Reporting Rule." My name is Wesley Hodges, and I am the Associate Director of Practice Groups at The Federalist Society.

 

      As always, please note that all expressions of opinion are those of the expert on today's call.

 

      Today we are very fortunate to have with us two experts: Mr. G. Roger King, who is the Senior Labor and Employment Counsel at the HR Policy Association, and he'll introduce our other guest. And after our speakers have their discussion, we will have an audience Q&A, so please keep in mind what questions you have for our speakers.

 

Thank you very much for sharing with us today. Roger, the floor is yours.

 

G. Roger King:  Thank you, Wesley. On behalf of The Federalist Society Labor & Employment section, I would like to welcome you to our conference call this afternoon. My name is Roger King. As noted, I am with the HR Policy Association and have been on the Society's Labor & Employment Executive Committee for the last few years.

 

      We're fortunate to have on with us today Jim Paretti, long-time colleague and friend. Jim is a Shareholder with the Littler Mendelson law firm. He's been with Littler firm for about a year, I think, Jim?

 

James Paretti:  Just about, yeah.

 

G. Roger King:  Yeah, and before that, he was with the Equal Employment Opportunity Commission for approximately eight years, serving as Chief of Staff for Commissioner Lipnic and then Acting Chairman for Lipnic. So he has a very rich and thorough background with respect to EEOC matters, including particularly the subject of our call today, Component 2 issue of the EEO-1 reporting pay data rule. Jim, let's talk about the history of this discussion of pay data reporting and how it came about.

 

James Paretti:  Sure, sure. And before we do that, I just remind our listeners, on the Society's website is a PowerPoint deck. We are not broadcasting that in real time today, but you are able to download it and access it either during our presentation today or subsequent to it.

 

      Just to lay out very briefly before we get into the substance of this discussion, I thought we'd talk about how we ended up where we are with respect to the EEO-1, what's required on this new form and what needs to be filed, what the future may bring with respect to future iterations of the form or other types of pay data collection, if they were to happen, and then if we have some time, perhaps touch on just a few other open issues at EEOC that the Commission is now poised to address because as we start -- and before, Roger, I think before we get to EEO-1, I think it's important to look at what the current composition of the Commission is. Because frankly, up until May, the Commission had -- since the start of the new administration in 2017, there had not been a Republican majority at the Commission.

 

In January 2017, President Trump appointed then-Commissioner Vicky Lipnic as Acting Chair, but she was one of five members of the EEOC. There was one Republican opening and three Democrats, so she was outnumbered 3 to 1. At the end of that year when former Chair's term expired, went down to 2 to 1. And actually, in the beginning of January of this year, the good news is the numbers equaled out, and she was 1 to 1. The bad news is you still can't win a vote 1 to 1.

 

And more significantly, the EEOC had actually lost its forum. So even if it wanted to address some of the policy issues that were out there, it lacked the power to do so. The day-to-day operations of the agency obviously continued, but any big questions or policy decisions were put on hold. That changed back in May of this year when the U.S. Senate confirmed Janet Dhillon, Republican, to be the chair of the EEOC. She joins Commissioner Lipnic, whose term expires next year.

 

      More recently, the Senate reconfirmed Democratic member Charlotte Burrows, and her term now extends through July of 2023, meaning we have a three-member Commission, two Republicans, one Democrat, with two openings, a Republican opening and a Democratic opening. With respect to the Republican seat, the White House has actually announced its intent to nominate Keith Sonderling. If that's a name that's familiar to you, he was the Acting Wage and Hour Administrator before Cheryl Stanton was confirmed, and he still is the Deputy Wage and Hour Administrator at the Department of Labor, a good friend and colleague. So he's up for the Republican nomination.

 

      They've not yet named, or not yet floated, a Democrat name for that opening. My expectation would be that perhaps when they do, they will try to package those two together and get a very quick, perhaps even unanimous, consent request.

 

      And the other item of note before we turn to the meat of the day is also in the beginning of August, the Commission got its first Republican general counsel in the new administration. Since January of 2017, the seat was filled by an acting career deputy. It was only in August of this year that the President's choice Sharon Fast Gustafson, a practitioner in Virginia, was confirmed to be the general counsel, and she assumed office just last month and is well on her way.

 

      So I put this out there because as we talk about some of these issues today, the Commission has been in a difficult place. Even if Lipnic had wanted to move forward on some of these priorities, she simply lacked the votes to do so, and then ultimately, lacked the quorum to do so. Now that we have a quorum at the agency and a Republican majority, I'm hopeful that we'll start to see some re-visitation of prior administration policies, including very much the one we're going to talk about today, this EEO pay data.

 

G. Roger King:  Yeah,  that is very important. And I think the nomination of Keith Sonderling is one that we want to pay close attention to. We're hopeful, Jim, that the Senate will expeditiously move on that nomination while we do have a quorum who would be, I think, very helpful, to have all of the Republican member spots filled. And then we look forward to, then, the Democrat vacancy being filled also.

 

      Let's talk about EEO-1 Component 2 Pay Data in a historic sense.

 

James Paretti:  Sure. This is not a new idea. We'll talk about how the prior administration put it into effect, but the concept or the idea that the federal government would collect compensation data for purposes of rooting out paid discrimination, it's not a particularly new idea. Anyone who's practiced in this area will know the Paychecks Fairness Act, which is the wish list of wage and hour and pay equity discrimination items on the left, that bill has been circulating in some form or fashion for literally, I think, close to 30 years now. And each iteration of the bill has included some requirement that the EEOC or another agency collect compensation data, the theory being that with this data in hand, the agency is best suited to root out pay discrimination, be strategic in its bringing of cases and such.

 

As we'll talk about on the call today, I think that's -- an overstatement is far too kind. Really, the information gathered on this form when it is filed is just not useful information. It's not going to help the agency, particularly in terms of bringing cases of pay discrimination or even targeting cases of pay discrimination. There is a reason this was a partisan proposal that went through at the end of the Obama administration. It was a 3-2 vote. Both Republicans were staunchly opposed, for a number of reasons which we can talk about. But being in the minority, they got rolled.

 

So in the fall of 2016, EEOC's proposed regulations went final, and they announced that they would begin collecting pay data on an expanded EEO-1 form, with the first collection due in March of 2018. Now, that's important just to note that this was a September/Fall 2016 announcement, but they would begin collecting in March of 2018. That was roughly an 18-month ramp up time, both for the agency but more for employers to begin to prepare their HRIS system to the extent they needed to be changed or tweaked such that they could generate and prepare this data.

 

I think there's been a myth out there that, "Oh, all the EEOC is asking for is a simple report that anyone in HR can run on their desktop in 15 minutes. What's the big hassle? What's the big concern?" Well, the cost estimates on it, even the conservative ones that the agency relied upon, put, I think, the 3-year cost at something like $55 million, and that's a low estimate. I saw estimates that were higher, but that tells you right there that this is not simply a press a button, file the form, and everything will be hunky-dory.

 

So this requirement went into effect at the end of 2016. The agency was preparing to collect it in March of 2018. Lo and behold, we have a new administration taking office in January of 2017. What happens next? Well, a group of employer associations petition the Office of Management and Budget. And by way of background, when the federal government seeks to collect information in any sort of organized fashion of survey data collection, it had these fees. Requests have to be approved by the Office of Management and Budget, whose job it is to do a cost-benefit analysis and look at alternatives and all those other things.

 

And, not surprisingly, the Obama OMB had approved the collection. In February of '17, a bunch of employer groups appealed to OMB and asked them to revisit that approval. And that petition sits out there for about six or so months. In August, at the end of the summer of '17, OMB announced it has reviewed the file and, in fact, is staying its prior approval of the compensation data piece of the EEO-1. The old form, which we'll talk about, would continue to be in effect, but this dramatically expanded collection was no longer approved and would not go forward.

 

G. Roger King:  And we call this expanded form Component 2.

 

James Paretti:  Correct. Component 2 is now what includes the expanded pay data collection. Frankly, Component 2, if you break it up, makes Component 1 somewhat obsolete because all of that information is there, it's just a little more granular. But for the caller's benefits, I'd say being at the agency, I think the position was, "Great. This thing is -- OMB has come to its senses. The cost of this is just not worth the benefit. The data's not that useful. Put a stake in it, she's done."

 

Washington being Washington, of course, nothing is ever truly dead. And shortly after OMB announced its stay of its approval, a group of worker advocate groups, National Women's Law Center, one or two others, filed suit in the District Court of the District of Colombia claiming that OMB's revision or stay of its prior approval was unlawful under the Administrative Procedures Act, and that it was arbitrary and capricious, and then more broadly argued EEOC's -- it was required to collect this data.

 

I laugh, and I think -- so those on the call can appreciate, the form that we're going to talk about was expanded from roughly 140 data cells to more than 3,600 data cells per form per establishment. And only in Washington would that be accomplished by something known as the Paperwork Reduction Act. Let that sink in. We increase reporting requirements by a factor of 200, but we did it under paperwork reduction.

 

So that said, case goes to court in the fall of 2017. I think most observers thought it was a beyond a long shot case. I don't think anyone thought that the plaintiffs had much of a chance to prevail here, given the deferential standards of the APA. But stranger things have happened. And cut to March of 2019 where the U.S. District Court for the District of Colombia holds that, in fact, OMB's stay of its prior approval was unlawful, was not supported in the record, and, hey presto, these pay data reporting requirements are now back in force and the judge is going to require the EEOC to collect this data. After a bunch of motion practice back and forth, ultimately the schedule that was worked out or agreed to was that EEOC would collect two years of compensation data, and it would do so by September 30 of this year, 2019. It would do that on Component 2.

 

Component 1, which is the prior form, which I think most folks have gotten used to over the years, it's not particularly burdensome. It tallies the number of employees you have by race, gender, and ethnicity across a range of job categories. That form would be filed separately. And, in fact, that form was due on May 31st of 2019, and that deadline was also extended because of the government shutdown. January was when EEOC usually prepared the stuff, prepared the website, and their doors were closed as part of the shutdown. So Component 1 was due to be filed on May 31, 2019. That's in the rearview. But now we turn to Component 2, which is required to be filed by September 30th.

 

Important points: People ask, "Well, who's required to file Component 2 of the form?" Now, Component 1 you're required to file if you're an employer of 100 or more, subject to Title VII, or if you're a federal contractor with 50 or more employees and a sufficient threshold of government contract. With respect to Component 2, that second part falls out of the equation. The agency is not requiring employers with less than 100 employees to file this form. But if you have 100 or more employees, whether you're a government contractor or not, you're a private sector employer. You are required to file. As I mentioned, that's due September 30th of this year.

 

And what is required on Component 2?

 

G. Roger King:  Before we go there, before we jump there --

 

James Paretti:  -- Sure, Roger.

 

G. Roger King:  We're going to come back to the pending litigation regarding this matter.

 

James Paretti:  Sure.

 

G. Roger King:  The Department of Justice has filed an appeal with the United States Court of Appeals for the District of Colombia, and we're going to talk a bit about that in a few minutes. But I want to emphasize this matter is not complete as far as litigation at this juncture.

 

James Paretti:  That's correct.

 

G. Roger King:  And we're going to see some additional developments from the court of appeals, we think. But we'll come back to that in a minute.

 

James Paretti:  Sure.

 

G. Roger King:  Let's go back to the September 30th filing and what's required.

 

James Paretti:  Sure. So September 30th, the forms are required to be filed. And, really -- also, I should note, employers are required to file two forms, one for calendar year 2017 and one for calendar year 2018. They're both due on the same day in 2019, but one covers calendar year 2017 wages, the other covers 2018.

 

And what's required on this form? Essentially, employers are required to add two data points to this One, the hours worked for employees sorted out by race, ethnicity, gender, and job category; and two, the salary for employees broken up by race, ethnicity, and gender, grouped into one of twelve salary pay bands. So if you've done an EEO-1 before, you know you look to the fourth quarter, you pick a snapshot payroll period. Those are the employees you're reporting on. That's the head count that matters. If they were -- fell off the rolls after that or if they were not on the books before that, they're out of the equation, but it is those folks are in your subject pay period for whom you now have to collect and file this data.

 

So as a matter of preparation and filing, what do you need to gather to get this together? Well, obviously, you need some way to tie this information to the employee because for many folks, your HRIS system may not talk to your EEO systems, may not talk to your payroll systems. So as our compliance folks at Littler have advised, you need something. That could be an employee ID number or a unique identifier, something that's going to allow you as the filer to track this information and make sure it correlates. It's important to note that when you are filing with the EEOC, the data is aggregated, it's anonymized. You are never reporting individual salaries or even any individual's particular statistics. But with respect to preparing the data for collection, we recommend something that'll allow you to tie these pieces together.

 

In addition to that, you'll need their location, their date of hire, if they were terminated in the pay period, their job title, their EEO-1 category with respect to race and ethnicity, FLSA status, are they exempt or non-exempt, the hours they've worked per week if there's a standard schedule, and ultimately, the W-2 Box 1 earnings and total hours worked for the year for those subject employees. If you have the PowerPoint deck up in front of you, I'm looking at slide 10. They'll start to go through and explain for each employee in the snapshot period, the employer's required to report the annual W-2 Box 1 year-end earnings. And Box 1 includes wages, tips, overtime, some fringe benefits; does not include elective deferrals such as 401(k)s or 403(b)s.

 

But it was a criticized number because it also reflects -- the money that's included, that reflects a lot of choices that individual employees might make. "I might want to work more overtime. I need more shifts," or "I'm taking less time and working less." It starts to look like there's a pay disparity when, in fact, this may just be the result of individual decisions. At the time, EEOC's position or its articulated reason for choosing W-2 Box 1 was that they felt that was the data most available to the most employers under the theory that they were not trying to require employers to create new data points or collect new data information, but W-2 Box 1 wages would be available to all. So for purposes of reporting, you look back to '17, you look back to '18. You have your payroll provider get to you the W-2 wages that were reported for those employees in Box 1.

 

G. Roger King:  So Jim, I think bonuses also are included in the Box 1, if I recall correctly.

 

James Paretti:  Yes, that's correct.

 

G. Roger King:  And this expanded data -- and this really is a considerable expansion from EEO-1 so-called Component 1 or initial filing. If you look through this data, this expands considerably what a covered employer has to gather and report.

 

James Paretti:  Oh, absolutely. There's no question. As I mentioned, an employer is required to file one of these forms for each of its establishments as well as a consolidated report and a headquarters report. So if you are a multi-establishment employer, you are filing tens, perhaps hundreds of these forms, and they are each containing upwards of 3,600 data cells. It's an enormous amount of information which, if it were remotely useful, perhaps we could have an argument about whether the wick was worth the candle. But given that it is so aggregated, given that it is collected and sorted in a way that doesn't allow for proper comparisons, it's really not very useful.

 

      Continuing, you'll see, on the EEO-1 -- and to say, I should note on the form, if you go to EEOC's website and connect yourself through to the EEO-1 page, they have a number of useful resources including frequently asked questions, a sample form. It puts some of this in context to how exactly what you're looking for, how you're collecting it, and how you're reporting it. So if you are obviously responsible, I would urge you to look at that sooner rather than later. And if you do, you'll see the traditional EEO-1 job categories that includes things like executives, professionals, administrative support workers, laborers and helpers, as well as now a proposed set of twelve salary bands. And I won't read you the numbers, but they start with roughly $19,200 and less, on up to the twelfth, the highest one, which is more than $208,000 or more. So there are 12 ranges of salary, 10 EEO-1 job categories, and your job is to fill these data cells by race, ethnicity, and gender for each.

 

G. Roger King:   So Jim, regarding the job categories, there's no assurance whatsoever, no way to authenticate or validate whether the job duties and responsibilities of employees from various employers are similar, the same, or substantially different.

 

James Paretti:  That's exactly right. And the example we've cited often is the professional category. Assume that you're a hospital. You have folks in the professional category that includes surgeons, nurses, dieticians, lawyers in the general counsel's office, your accountants and bookkeepers, if they are on your staff, a wide range of jobs and positions with varying, widely ranging duties. And anyone who is practicing in the pay discrimination area knows the test is, is someone getting paid less for substantially similar work under substantially similar conditions?

 

      The formulations are sometimes a little different, but the point being you need to be comparing apples to apples. Is one engineer doing the same work as another engineer, and if they are, if one's getting paid more or less, what's the reason for that, or is there any reason to think that has any discriminatory impact. It does not work. And you can't prove a case by saying, "Well, my white male engineer is earning more than my black female vice-president because those people are doing two very, very different jobs." By combining the data together, it makes it somewhat muddled and a lot useless, I would submit.

 

G. Roger King:  Further, individuals could choose whether to work full-time, part-time, whether they want to work at a particular position by their own choice, whether they want to work in a particular area of the company, whether they want to live in a particular part of the country. There's so many discretion points, even within a job category doing what you just described, that it would not appear that this information has any utility whatsoever.

 

James Paretti:  That's absolutely right. And as we talk about it, we'll get a little bit more into the lawsuit and the appeal and where we stand. But in connection with the court's ruling back in the spring that this was required, the court held an evidentiary hearing where the EEOC's own chief data officer, who I will add was not present when this form was adopted in 2016. He joined the agency late of 2017. But he was very blunt in testifying in open court that it was his view that this information would not be in any way useful to the agency in terms of carrying out its mission. He also talked at length about the burden on the agency of trying to collect this information, particularly on an expedited time table.

 

      The fact, is for better or for worse, the judge seemed to think well, EEOC, you always knew you could've lost this lawsuit. Why weren't you preparing to collect this data in case you lost? Well, anyone who's ever done a PNL will tell you that you don't spend money preparing for something that you think it is highly, highly unlikely you are going to have to do. The judge didn't seem to really take any of that into account because she was bulldozing her way through here such that, yes, we now have the agency being ordered by a federal court to collect data which the agency itself says it doesn't think is particularly useful. We don’t know what your dealings position is on this. She obviously wasn't at the commission at the time.

 

      Vicky Lipnic's position is abundantly clear. She, from the beginning, had thought this was an enormous waste of time and wrote a strong dissent when this thing was pushed through. But nevertheless, here we are. And as folks are seeking to comply, we'll talk about what else needs to be on that form. And, again, I urge you to take a look at the sample form. We have an excerpt in our PowerPoint deck.

 

      But we've talked about gathering W-2 Box 1 wages. The other thing you need to gather, the data point for each subject employee, is the total number of hours worked in the calendar year. And that's not the hours worked in the payroll period, it's the total worked in the calendar year. Now, for exempt employees, that may not be exceedingly difficult because you are presumably tracking their hours worked for purposes of wage and hour law, overtime compliance, all of those things. Most responsible employers of any size track their exempt employees' time for good reason. It's part of the payroll system.

 

      At the same time, very few employers, I submit, track their exempt employees' time. If you have someone that's being paid the same way that they worked 35 hours a week or 60 hours in a week, if they're earning a salary and all the other, you're probably not tracking their time in any meaningful way. So what, then, are you supposed to report to the EEOC? Well, with respect to the non-exempts, EEOC asks that employers report the total number of hours worked as maintained in your payroll system.

 

      With respect to exempt employees, employers have several choices. If you are that small number of employers who actually tracks your exempt employees' time in an accurate fashion, you can certainly use those numbers. If you have a very standard work week, say 35 hours a week, you could use that as your proxy. But absent of either of those two things, EEOC does provide that you can use for exempt workers a proxy of 40 hours per week for full-time workers, 20 hours per week for part-time workers, multiplied over the number of weeks worked in the year.

 

So to make that a little more concrete, if you have a full-time exempt employee in the snapshot pay period who's worked 50 weeks out of the year, that person would be reporting -- you could report 2,000 hours. That's 40 times 50. A part-time worker, you could report 1,000 hours, 20 times 50. What I think is particularly noteworthy is that 20-hour proxy in particular makes no distinction between -- when it says part-time, that could be anything less than 35 hours. If you have someone working one shift a week or someone working three days a week, they're both getting reported the same way in a manner that, again, just makes the data particularly unuseful in terms of trying to figure out what, if any, are the root causes of pay disparities among similarly situated individuals.

 

G. Roger King:  And that's assuming they are similarly situated.

 

James Paretti:  That's right, of course.

 

G. Roger King:  So we have a compounding impact here of non-utility, frankly.

 

James Paretti:  Yes.

 

G. Roger King:  It's a mass of data that's expensive and time-consuming for employers to put together and report. And then trying to determine, Jim, if it means anything is a total guess, it seems to me.

 

James Paretti:  Yeah. Again, I think having been at the agency, I saw the prior -- what the old form, EEO-1 was used for. And I will say, it was not -- you don't have a room full of people in the basement of the agency looking at these things as they come in and pouring over them trying to find disparities. What you would see is perhaps in a paid discrimination case or a hiring discrimination case is the investigator might pull the EEO-1 form just to get a rough sense of does it look like there's something going on here or does this generally look somewhat consistent?

 

I remember one case in particular where an employer in a given region had a very imbalanced workforce on a gender basis. And the employer's position was, "Hey, we advertise. We do everything we can to recruit women. We just can't recruit women into these jobs." Well, the investigator looked at their EEO-1, and then pulled a couple of EEO-1s from comparable competitors in the same market in the same region, and interestingly enough, those employers did not seem to have the same difficulties recruiting and retaining female employees. Did that mean there was discrimination at issue? Absolutely not, but that gives you a sense of what this form might be looked for in terms of guiding an investigation.

 

But with respect to the expanded form, Component 2, I just don't think there's enough meaningful information there for even a talented investigator to discern whether there's any statistically significant disparities. More to the point, given that everything is so aggregated, it's been well-reported by those who have studied this stuff that the likelihood of false positives is increasingly high on the form, again, because you're never comparing apples to apples. The statistical test that were identified that EEOC said it would use as a benchmark, those have been subject to some criticism. As I am decidedly not a statistician, I will not try to explain what those criticisms are, only to say, at least to me, they were convincing.

 

And as I said, start with the premise that at this point, I don't think the agency much wants to collect this data. They've so much as said they don't consider it to be useful. But they are at the loaded end of a gun being pointed by a district court judge. And, Roger, as we talk about the appeal, I think there's definitely some arguments that the judge has gone exceedingly far in how she has micromanaged this process, in a way that, perhaps, goes far beyond what she even has power to do under the Administrative Procedures Act.

 

G. Roger King:  No question. Let's hold that just --

 

James Paretti:  -- Sure.

 

G. Roger King:  -- another moment. Jim, what about the question well, why do I have to file this at all? I don't agree. Is there a penalty?

 

James Paretti:  Sure.

 

G. Roger King:  What are the ramifications if an employer doesn't file?

 

James Paretti:  Right, well, a couple things. One, I am advising our clients to say, "Oh, I'm facing this EEO-1 Component 2." We, of course, advise our clients to comply. It is what is required under Title VII, and the agency expects it to be filed. The penalties, however, I'm often asked exactly that question, Roger. What are the penalties for non-compliance? And really, particularly if you are not a federal contractor, the penalties are fairly weak. The penalty for not filing an EEO-1 form under Title VII is that the EEOC is empowered to go into court to get the court to order you to file an EEO-1 form. That's really the sum and substance of it. There's no civil monetary penalty. It's not like some of the other provisions in Title VII where damages will continue to accrue. If you don't file this form, EEOC can go into court and say, "Judge, make them file the form."

 

I will say in the course of an investigation—and this is highly speculative—if it's three years from now and you're trying to defend a pay discrimination case, and the investigator goes and says, "Oh, I'll pull up their 2018 Component 2," and well, you didn't file. Does that mean anything? Is that an admission of guilt? Absolutely not. Does it mean the investigator might take a little closer look at the case or give you a little bit of the stink eye? Possibly. But, again, I stress that it's very -- that's a lot of ifs and speculations from what might land down the road. But if you're not a government contractor, the penalties are very, very slight.

 

      If you are a contractor, it is a potential -- at least the potential is there that if you didn't file this form, you could be disbarred from the federal contractor list. I think that would be highly unlikely given a number of factors. One is we've talked about the fact that the agency is not really gung-ho on this. They're doing it because they're being forced to. Given that this is the first year of reporting this, employers have been required to do so on a dramatically accelerated basis, I just don't see a set of facts where this EEOC and this administration comes after -- or OFCCP for that matter, comes after folks and say you didn't file this or you filed it incorrectly and they're going to really try to take you out to the woods.

 

G. Roger King:  Excuse me.

 

James Paretti:  Oh, that's fine. That's fine. It's just, I don't see that happening in the cards.

 

G. Roger King:  Jim, but what about an extension request? How does the Commission respond to those kinds of requests as well?

 

James Paretti:  A good question. In the past, the Commission's been able to afford certain extensions depending on when the form was due to expire. Without getting into the super weeds here, OMB's approval, technically, of this form technically runs through September 30, 2019. At least it would be OMB's position that after that day, EEOC is not allowed, not permitted to collect information on that form.

 

      Now, the judge in her order purports to have tolled that suspension such that it may extend further, but I think the agency is going to take the position, at least to the extent that it can, that September 30th is the cutoff date. And I don't know that they are going to be in a position to offer extensions because as I said, as printed on the form, its validity is really good -- it was only approved through calendar year September 30, 2019. So I would not in this instance bank on EEOC being able to offer an extension. When they had put Component 1 up earlier this year, there was a little bit of a footnote that allowed for -- gave an email address and if you need an extension, please contact us. They've not highlighted that with respect to Component 2. So that's not something I would necessarily bank on.

 

      Similarly, there are provisions in EEOC's regulations that provide for a hardship exemption. If preparing and filing this information is too great a burden on an employer, they may seek a dispensation from EEOC by claiming it's undue hardship. That would probably require showing what would be the cost of preparing this information, is it able to be done in a timely fashion, all of those things, and making one's case. I will tell you in my experience, those were infrequently asked for.

 

      Again, with the prior EEO-1 form, I don't know that people felt it was so burdensome. And they were certainly were not addressed in any consistent fashion. They were a case-by-case basis, and frankly, it was my understanding that these were usually of the, "Oh god, it's two days out and our mainframe just crashed, and we can't get to any of our data today. Is it possible to have a few extra days to file?" It was that more than, "The cost of preparing for this is going to crush us." But that, I'm obligated to point out that that provision is still out there in the regulations.

 

G. Roger King:  Jim, let's talk about confidentiality in this data again before we get to the litigation on appeal. How much has this data really held in confidence by the EEOC, and then maybe more importantly, the OFCCP?

 

James Paretti:  Very good question. With EEOC, in setting aside the sum of raised issues and just more generally, forget the agency holding it in confidence, nowadays, when OMB or OPM can have their data breached, any agency is vulnerable to that. So certainly, some have raised those concerns, but I think that's a broader question.

 

      With respect to how the information is maintained confidentially, EEOC is required under the statute to not release this information in any identifiable format. And I don't know that that's ever been something that they've even been accused of. So EEOC keeps this information confidential. They will not release it, not even with respect to a FOIA request.

 

      OFCCP, on the other hand, they are subject to FOIA of this information. They're not subject to the same requirement of confidentiality that EEOC is. And for a long time, OFCCP was rather helpful in taking the position that oh, compensation data, they viewed it as confidential information so long as you marked it as such, and they would give -- if your data is FOIA, you, as the employer you had the opportunity to object to it being disclosed. OFCCP was fairly good about giving employers the opportunity to make that case and then them carrying through with it to say that yes, we believe that this information is proprietary and confidential.

 

In recent years, that position has slipped a little. I think agencies have taken a position of in an era of glassdoor.com and Oracle and all these other companies posting their wage and earnings statements online or their demographic, maybe this stuff isn't as commercially protected as it once was. Jim Paretti, I personally think that while that may be great for Oracle, but that's not something my company wants to do.

 

But the good news is the recent Supreme Court case addressing confidentiality under FOIA does give employers a bit of a roadmap here, and this is one. When you file these forms, you'll see at the end of the form there's like a 1000-character comment box, and one of the things we are advising all of our clients is to identify that this information is being submitted. It is confidential. It is proprietary. It contains trade secret. Because the Supreme Court in its decision held that a FOIA disclosure of confidential information, if the employer has treated it and has maintained it as such, it's much more difficult for an agency to then disclose it or for someone to obtain it by way of FOIA. So that's a good use of your time to make sure that anything you submit here is marked via that comment form as confidential information.

 

G. Roger King:  So employers, when they do file this information, they should note this is confidential data, not available in the public domain, and should be treated as such. And per the Supreme Court's ruling that you just mentioned, we think that's helpful.

 

James Paretti:  Yes. I think that that definitely puts employers in the strongest footing that they can. We've also seen that OFCCP has indicated to EEOC that it would not be -- that it would only be looking at some of the Component 1 data. It does not seem as interested as obtaining Component 2 data. I don't know that that is going to hold, but that was certainly something that was raised in at least one conversation.

 

      But, again, I think if your goal here is to comply and use as many belts and suspenders as you can, you file the data, you indicate that it's being filed confidentially, that it's trade secret. And then if and when that FOIA request comes, and the OFCCP offers you the opportunity to object, you're on the strongest ground that you can to object to its disclosure.

 

G. Roger King:  Well, Jim, let's also talk about the filing protocol here. There is expanded space as we understand it for employers that must file to state any caveats or concerns they may have about the accuracy of the information they are filing, particularly given the short time frame they had to gather this information, and any other caveats or outliers they think. So that's something we would urge employers to give consideration to also, correct?

 

James Paretti:  Very, very much so. And it's important to remember, particularly when we were talking earlier about hours worked, and I said a 20-hour proxy may not reflect anything looking like reality. I have had clients, HR professionals, say, "I'm not comfortable. How can I certify that this is accurate? Even if they tell me to use 20, that's not an accurate number. I know that, but how can I certify it?" When you do certify the form that you are filing, you are certifying to the agency that you have filled it out in accordance with its instructions. So for example, where it tells you put a salary in a band rather than list an individual salary, or use this proxy for hours, if you can certify that you've followed the EEOC's instructions, I think you're in a good place.

 

      I still have advised clients to put in that comment field if they have the space for it something to the effect of, "This is a good faith effort to comply with all instructions as promulgated by EEOC." You need to find the language that works for you, but something that indicates that you've made the effort, you've tried to gather the information as best you can, you're submitting it in the time fashion that you can, recognizing that everybody was up against the gun this year.

 

      And again, I come back to I just don't see this agency in this timeframe using this form as sort of a cudgel to folks or trying to play -- there have been many, many agencies, and EEOC among them, have often been accused of playing "gotcha" sometimes. That's sort of a trick the federal government's very good at. I really do believe that this is not going to be one of those times and that the agency is not barking on a "gotcha" situation.

 

G. Roger King:  Well, we certainly hope that is the case, but it remains to be seen in administrations to come, I would suppose.

 

James Paretti:  Absolutely.

 

G. Roger King:  So one other area, Jim, that I know we are, at the HR Policy Association, advising our members is track, to the extent they can, the burden financially and operationally that's being placed upon them to gather and file this information. So when and if this issue surfaces again in litigation or in regulatory discussions, employers can say, "This cost us X to comply with the operations of our HR department, or payroll department, or hit with Y hours, time, etc." So this so-called burden analysis, I think, would be helpful for employers to track to the extent that they can.

 

James Paretti:  Yeah, I think that's correct. If they can do that, they should, and maintain that data. And the reason why is we talked about what does the future hold for EEO-1 and collection compensation data? As I mentioned at the top of the call, we now have a Republican majority. We have a new Chair. We have the only seated commissioner who Republicans voted against this form. I would think that this may be the year for this form, but that they revisit this policy in years going forward, at least again while we are in a current administration. What the next administration or the next Democratic administration might do, that's a harder question.

 

      But insofar as EEOC and others may look to assemble a record to say, "Hey, we went through two years of this data collection. We've decided we no longer -- we're not going to do it anymore, or we want to at least evaluate what we got before we require employers to file it again," certainly to the extent that a record can be developed that says, "Hey, employers spent this much money to provide this information. The Agency spent this much money to process it, and at the end of the day we don't find that there's much useful there," that's absolutely going to be of help to them. And that's in an administrative develop a record way.

 

Anecdotally, I will also tell you, and I'm not telling tales out of school, I know Commissioner Lipnic had stated it publicly. More than once as she was out in the field, she had small business employers, maybe 120 employees said, "This is going to cost -- retooling my systems is going to cost me $70,000, $80,000, $90,000, just to make a small number of tweaks, let alone the large number of tweaks that the agency's going to require. This is just not money that we can spare."

 

I think that was a very compelling anecdote and number to her. So to the extent employers are able to track what this is costing them, the burden in terms of resources, time, system upgrades or changes, that will all be to the good if and as the Commission deals with this issue going forward, and/or if I have to step back in Court on this issue going forward, which maybe now is a good time to talk about.

 

G. Roger King:  Let's go to the litigation. We've put it off from the front end of this call. So the case has been appealed by the Department of Justice. It's pending in the United States Court of Appeals for the District of Colombia. Two amicus groups have filed, one a very broad-based amici group of 14 business entities, trade associations, led by the U.S. Chamber of Commerce, the HR Policy Association, National Association of Manufacturers, and many others. So what do we predict, if anything, Jim, about how the court of appeals handles this litigation and ultimately deals with it?

 

James Paretti:  Well, if I had to predict on this one, I would've predicted that this would've gone by on a motion to dismiss. So, so much for my prognostication. I think the issues on appeal before the court right now are fairly narrow. There are issues of standing, whether the plaintiff associations who have brought this case even have the standing to do so, whether the judge had the power to validate under the Administrative Procedures Act, what was supported in the record. But I do think there is a strong argument. Generally speaking, the remedies under the Administrative Procedures Act, if the judge finds a regulation to not pass muster, is to strike down the regulation and remand it back to the agency.

 

G. Roger King:  Exactly.

 

James Paretti:  End of story. That's what happened with the wellness regulations that the Obama EEOC promulgated in 2016 as well. They were sued in court. Those regulations went down and the judge, while he was initially inclined to say, "Oh, I'm going to order you to -- it's struck down, and this is how you're going to re-promulgate, and this is the time certain by which you're going to do it, and all these others." In response to the brief, the judge very quickly realized that that was somewhat beyond his authority, even as an Article III judge, and wheeled it back to say, "Okay, my power here is limited to vacating the regulation, holding that it's invalid, and the rest of what goes forward and what happens in the future, that's up to you, EEOC and OMB."

 

This judge in this case took very much the opposite approach and is really down to the level of requiring, not quite weekly but every third week, status reports, status updates, what is the agency doing. She's held that the statute -- that the approval period for this form has been tolled for the amount of time it had been stayed which would extend it sometime into, I want to say, April of 2021. She's required the agency to do it by date certain, really has gotten up in the agency's grill, for lack of a better way to say it, in a way that I'm just not sure that the appeals court is going to find she was in power to do.

 

That said, to those sitting on this call today, we'd say, "Well, it's the 3rd of September. You're telling me this is due on the 30th. That's 27 days. Is it likely that the court of appeals is going to do something in the interim to stay that?" I think that's not exceedingly likely. The Department of Justice never did seek an expedited ruling or seek a stay of the district court's order pending the appeal. I think that ship may have sailed.

 

Is it possible that something by way of OMB or the agencies themselves might do something before the reporting deadline at the end of the month? That, too, I have to say, is possible. Can't say how likely it is or isn't, but what I have advised my clients to do is that if you're going to comply with this form, and you should, if you're gathering this information, do the tweaks you need to your system, pull the data, get the forms ready. You don't get bonus points for filing early. You don't get extra credit for turning in your homework before it's due.

 

So if it were me and my confidential financial information, I wouldn't wait until September 30th to pull it together, but I would certainly wait until the last possible moment to actually hand it over to the government, given that this case has had so many procedural twists and tricks and turns throughout. But to me, I would hold on to it for as long as I can and only give it at the last minute. As you might recall, Roger, with the overtime regulation, we had employers very much preparing to comply, and then --

 

G. Roger King:  -- We had a court ruling that --

 

James Paretti:  -- court ruling that it was invalid right before it was to become effective. Does that recoup the money the employers have spent? No, it doesn't. But on the other hand, it shows you that even on the eve of effective dates, sometimes things are enjoined, reversed, or otherwise tweaked. So we'll see what happens with respect to the appeals court. We'll see if anything comes out of the agencies, but apart from that, I think the briefing schedule in the appeals court is not due to close until the first week of October --

 

G. Roger King:  -- That's correct.

 

James Paretti:  --  and that's without any extension. So it doesn't seem likely at this moment that much relief is going to come from the appeals court in any timely fashion.

 

G. Roger King:  And we don't expect oral argument on this appeal to occur until late this year, absent some unusual development. And on the stay issue, the employer committee, I know, was quite disappointed that DOJ did not seek either expedited ruling for appeal purposes or seek a stay in the district court. That still is a potential in the court of appeals, but the court of appeals, as a general rule, is not inclined to grant stays, particularly if that issue has not been raised below. But, nevertheless, we shall see.

 

James Paretti:  The possibility remains out there. The other thing I would note, and Roger, you made reference to with the amicus brief, while the administrative record was replete with information about what the burden to employers was here, including EEOC's cost estimate, petitions filed by business groups and comments filed that those business groups that show that those numbers were unnaturally low, there was plenty of information in the administrative record to show that this was a significant burden on stakeholders in the employer community. The judge really didn't pay much attention to that as she processed the case. She looked at this as an Administrative Procedures Act case, never really took into account employer burden.

 

So as the department is appealing the case, the issues in front of the judge are really Administrative Procedure Act issues. Is there standing? Is an action arbitrary and capricious? But the amicus groups which have filed have done a very good job of putting in front of the appeals court the real-world impact of this, the fact that this is not simply press a button and file a report, that this requires significant time, effort, and expense of employers. It puts them in exposure with regard to the confidentiality of the data are getting out there and that its result is largely not helpful information.

 

Is that directly relevant to the legal point at hand? Perhaps not, but I'm of the belief that if bad facts make bad law, good facts can sometimes make good law. And with respect to the burden on employers here, I think we have good facts that have been put very nicely in front of the district court of appeals.

 

G. Roger King:  Yeah, I would agree with you, Jim. And I would commend anyone on this call that is deeply interested in this subject to look at the amicus brief filed by the U.S. Chamber, HR Policy Association, NAM, and others. I think as Jim just mentioned, that brief really does spell out in very vivid terms the practicality index issue here. I also would emphasize to those on the call, if you have not pulled up Jim's PowerPoint on this issue, including resources that he cites at the end, I would urge you to do so. It is very helpful, Jim. It's very well done, and it lays out what we've been talking about in some considerable detail.

 

James Paretti:  You'll also find at the back of the site, as I mentioned, there were a couple of other general EEO-1 updates. I think rather than venture into new turf, at this time in the call, maybe it would now be a great time to turn it over if we do have any questions from our callers that we might be able to answer for you today. Certainly, if it's a broad question, it's one we'd be happy to field. If it's a specific question, perhaps I can answer it, or Roger can answer it. If not, we can try to circle back with you on that.

 

Wesley Hodges:  Jim, looks like we do have one question. Let's go ahead and go to our first caller.

 

David Tryon:  Hi, it's David Tryon. Two quick questions -- well, maybe they're quick. The first is whose brainchild was this new regulation for this new form? I assume there was some advocacy group that thought this was a good idea and persuaded the EEOC to pursue it.

 

      Second of all, do you know if there was full compliance with the Regulatory Flexibility Act at the beginning when this regulation was initially proposed in that if it imposed a significant burden on a significant number of small businesses that it first had to be -- go through the Office of Advocacy?

 

James Paretti:  I think I'll answer the first part of that question, and then I'll turn it over to Roger to answer the second. With respect to whose brainchild this was, I mentioned at the start of the call this has been out there in some form or fashion for decades. I mean, it started with the folks with the 70-cent wage gap, 70 cents on the dollar, and those discredited figures. This is always going back to, again, maybe even the '90s, been seen as an effort to oh, this is how we can close that so-called wage gap and root out pay discrimination.

 

Specifically, I think not surprising, most of your left-leaning groups, I want to say the National Partnership for Women and Families, the National Women's Law Center, NELI, which is the Employment Law Institute, all of those folks. It's the usual suspect on the left. I don't know that this particular project is the brainchild of a single individual who said, "Aha!" But it has certainly become an article that's safe on the Democrat's side with respect with wage equity and pay equity issues that this is something that the government needs to be doing.

 

And in the last administration, they had three Democratic commissioners, and Chair Jenny Yang was firmly convinced that if the agency collected this information, it could probably hint to street benchmarks, it could target its resources in ways that I just simply don't think the data gets you there. But obviously, there was a difference of opinion. Roger, I'll turn it to you on the question of Reg Flex.

 

G. Roger King:  Before I do that, the National Women's Law Center, the lead plaintiff in this case, they've been very active. They argue that they are having to expend resources to gather this type of data they otherwise would not have to expend because the EEOC should collect this data. It's a rather interesting argument. It gets into the standing issue. We think there are excellent arguments that the plaintiffs here do not have standing.

 

The Regulatory Flex, I think that's a good point. Even more so, Jim, I think the Paperwork Reduction Act -- this particular regulation, if it holds, tears the Paperwork Reduction Act in shambles. And it's almost laughable, frankly, because what the prior commission majority did during the prior administration absolutely did not follow the Paperwork Reduction Act whatsoever. We're talking about millions of data point collections here that were never anticipated by anybody in the employer community. This is one of the worst examples, I think, one could find of a regulation by the administrative state. It just makes no sense.

 

James Paretti:  I think that's exactly right and truly the definition of administrative red tape. Did the EEOC go through the exercise in respect to submitting? It did publish the 60-day notice. It did its required hearing under the PRA. It published the 30-day notice. It revised its numbers. It provided them to OMB and OIRA for review. They included the cost-benefit analysis, and presumably, OMB looked at that as well.

 

      I was obviously not privy to what went on behind those closed doors, being in the minority. Did they go through the exercise? It appears so. Was this somewhat of a foregone conclusion, particularly when you see what it costs and what the utility is? To me, the only logical answer is yes, that this was somewhat of a foregone conclusion, and any attempt to comply with Reg Flex and some of the other requirements were really an attempt to just check the box there.

 

G. Roger King:  Perfunctory at best.

 

James Paretti:  Perfunctory at best. Well said.

 

G. Roger King:  And the cost burden analysis, by the way, that the prior commission majority articulated was debunked and rebuked and really responded to in various ways by a study that the U.S. Chamber did suggesting that the cost-benefit analysis here was way off. Not even close, right, Jim?

 

James Paretti:  I think that's correct. The Chamber ultimately estimated the cost of something along the order of $400 million, where I think EEOC's final numbers to OMB said something like $57 or $58 million, which I would argue that even $58 million is money poorly spent when what you're getting is disinformation. But certainly, $400 million is worse.

 

      Well, thank you. Those were two very good questions in one. I think that brings us to the top of the hour, and I want to be respectful of people's time. So, Wesley, unless something additional has come in, I thank the callers for their attention today and participation. I hope it's been useful. I urge them to take a look at the PowerPoint, and thank you for the opportunity to speak to you.

 

Wesley Hodges:  Jim and Roger, thank you so much for your time and, again, for a wonderful presentation. On behalf of The Federalist Society, I would like to thank our experts for the benefit of their valuable time and expertise today. We welcome all listener feedback by email at [email protected]. Thank you all for joining us. This call is now adjourned.

 

Operator:  Thank you for listening. We hope you enjoyed this practice group podcast. For materials related to this podcast and other Federalist Society multimedia, please visit The Federalist Society's website at fedsoc.org/multimedia.