How Your Organization’s EEO-1 Pay Data Could Fall into the Hands of Third Parties

EEO-1 reports for 2019 are now required to include hours-worked and pay data information on their employees for calendar years 2017 and 2018. This information is part of the report’s new “Component 2” filing, and needs to be submitted to the U.S. Equal Employment Opportunity Commission (EEOC) by September 30, 2019.

Component 2 tracks employees by annual salary, in thousands of dollars, divided into 12 unique pay bands corresponding to each of the nine EEO-1 job types. Each employee’s gender and race are also included. An example of the EEOC’s proposed Component 2 format can be found here.

When submitting the EEO-1 Report containing this Component 2 pay data, companies are essentially providing the EEOC with an informal snapshot of their pay structures. Very likely, this information could show pay gaps between workers of different genders, ethnicities, and other differences performing comparable work, exposing companies to potential litigation and enforcement action.

Even more troubling for companies is the fact that this pay data information may be subject to disclosure to potentially adverse third-parties who may want to use it for litigation or to start a regulatory investigation.

There are at least three legal mechanisms providing for third-party access to EEO-1 pay data that employers should be aware of before they submit their EEO-1 Component 2 pay data.

1) “Section 83” Request to the EEOC

Before filing suit against an employer for violation of federal employment law (with the exception of the Equal Pay Act), an employee or former employee must file a “charge” of discrimination with the EEOC. A charge is a signed statement asserting that the organization engaged in employment discrimination and requesting the EEOC take remedial action. After receiving a charge, the EEOC may take one among a series of steps, including:

• sending an invitation to mediate to the charging party and employer;
• starting an investigation;
• or dismissing the charge.

In any event, after receiving a charge, the EEOC creates a “charge file” which is a collection of all the records compiled by the EEOC pertaining to that charge. If the charge pertains to pay discrimination, EEO-1 pay data may be contained in the charge file.

Under the EEOC Compliance Manual (CM), Section 83 addresses procedures pertaining to the disclosure of charge files. Distilling statutes, regulations, and case law in this area into a checklist of sorts for EEOC staff, Section 83.3 (“Persons to Whom Disclosures May Be Made”) advises that charging parties under Title VII or the ADA may request and obtain the charge file pertaining to their charge.

There is precedent for third-parties obtaining information about other companies from the EEOC. In EEOC v. Associated Dry Goods, seven employees filed gender and race discrimination charges against a department store. In connection with its investigation, the EEOC requested statistics, documents, employment records, and policies related to the department store. The department store refused to comply unless the EEOC guaranteed that this information would not be turned over to the complainants. The EEOC declined to make this guarantee, citing the CM, Section 83, and accompanying regulations. The department store filed suit in federal court, seeking to have the CM invalidated in light of a Title VII anti-disclosure provision. The U.S. Supreme Court ruled against the department store, holding a charging party is not the general public and that they have a right to review EEOC-collected data pertaining to an EEOC charge and a potential lawsuit. This ruling is now embedded in CM Section 83, which states that “providing information to parties from their files is not ‘making public’ as meant by [Title VII and the ADA].”

In short, if employees believe they were subject to pay discrimination and they file a Title VII or ADA charge with the EEOC, they can request the charge file, which may include the EEO-1 pay data reports, among other data and documents relevant to their claim.

2) Freedom of Information Act (FOIA) Request to the EEOC

Another avenue for disclosure of EEO-1 pay data to third parties is via a Freedom Of Information Act (FOIA) request. FOIA is the sunshine statute. It provides for the public release of government-collected data and information, and is described as “the law that keeps citizens in the know about their government.” FOIA is broader than a Section 83 request; it applies to all forms of agency records and information, including charge files. Perhaps for this reason, a FOIA request is a more formal, more structured, and less flexible method of disclosure than a Section 83 request. To obtain EEO-1 pay data using FOIA, an employee or former employee must have (1) filed an EEOC charge and (2) actually filed suit in court. In most cases, the EEOC has 20 working days (excluding weekends and holidays) to issue a determination on the FOIA request, although this may be extended if more information is sought from the requester.

3) FOIA Request to the OFCCP

A FOIA request for EEO-1 pay data may also be submitted to the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP). Generally, the OFCCP requires EEO-1 data from all federal contractors with 50 or more employees and a contract, subcontract, or purchase order of $50,000 or more. Unlike a Section 83 request or a FOIA request to the EEOC, a FOIA request to the OFCCP does not require an EEOC charge or lawsuit to have been filed. In fact, members of the general public may file a FOIA request asking the OFCCP to disclose information in its possession — including EEO-1 pay data. Courts have “uniformly” held that the disclosure restrictions on the EEOC do not apply to the OFCCP. However, OFCCP notes that some companies consider EEO-1 data to be confidential commercial or financial information; it attempts to balance these interests by allowing companies to raise objections to the release of information before making a FOIA determination.

The Value of a Pay Equity Audit

Knowing that your EEO-1 pay data may be exposed to third parties, experts from various HR, payroll, human capital, and legal organizations are strongly recommending employers undertake a pay equity audit to better understand if their pay data may open their companies to scrutiny. Specifically, a pay equity audit will allow employers to (1) know what levels of exposure their pay data may present, and (2) take action to address this exposure before being targeted with an EEOC charge or lawsuit.

Many federal and state regulators, independent of the EEO-1 Report, also are encouraging employers to conduct equal pay audits. The OFCCP has established guidelines for federal contractors to conduct pay equity self-audits and then correct any issues that are found before they lead to violations.

Several states incentivize organizations to conduct self-audits by offering safe harbor protections in the event of an equal pay claim. It is important to note, however, that these state safe harbors do not act as defenses to claims brought under federal law, or other non-pay-equity-related state law claims.

A proactive Pay Equity Audit identifies pay differences between employees that cannot be explained due to job-related factors. It is a multi-disciplinary effort that requires extensive domain knowledge expertise in labor law across various jurisdictions, such as econometrics, statistics and statistical modeling, workforce data management, and knowledge of regulatory audit processes by agencies such as the OFCCP and EEOC.

The immediate rationale behind this recommendation is that a proactive pay equity audit will give EEO-1 filers key insights about how their pay practices may be viewed by the EEOC or OFCCP — before turning this sensitive data over to the federal government. What is not as widely known is that it is not just the federal government that will have access to the EEO-1 pay data. Potentially adverse third parties, including employees, former employees, and competitors have three legal avenues for seeking pay data. A pay equity audit not only identifies potential, but also should provide actionable solutions — so that employers can be proactive, instead of reactive, on pay equity issues to avoid litigation or regulatory scrutiny.

To view the guide on this topic, please click here.