Employers with more than 100 employees will soon be required to submit detailed reports on how their workers are paid, broken down by gender, race and ethnicity. The Equal Employment Opportunity Commission passed a rule requiring the reports in 2016, but the rule was halted by the Office of Management and Budget (OMB). Now, a judge has ordered the rule to move forward. What remains unclear is whether companies will have to begin submitting the reports by the original deadline of May 31.
The government already require some wage information with demographic data each year. For example, the SEC requires public companies to post a comparison between their CEO’s total compensation and the median pay of employees. The EEOC currently requires a summary of pay and demographic information.
The new rule requires companies to submit a more granular analysis to the EEOC. Employers will have to note the gender and race statistics for each job category and within 12 pay ranges for each of their physical locations. The new rule also calls for aggregated W-2 data and the number of hours worked in 10 job categories. The data would be kept confidential.
The EEOC took six years to develop the rule, which is intended to make pay gaps more visible, to encourage internal changes among companies and to improve enforcement of the Equal Pay Act and other federal equal pay legislation.
Requiring companies to measure and report on pay could have an impact
According to Bloomberg, several business schools cooperated in a study of Denmark, which began requiring detailed reporting several years ago. The study found that when companies with over 35 employees began reporting pay information by gender, the gender-based pay gap decreased by 7 percent. Presumably, the required reporting made companies aware of the pay gap.
Still, there is some question about the administrative burden this will have on employers. The U.S. Chamber of Commerce, which opposes the new rule, estimates that burden to be over $400 million annually. The EEOC’s estimate is around $53 million annually, and the Chamber claims that the EEOC “materially underestimated” the cost of the rule.
Lawsuit opposing the rule harshly turned back by court
The OMB decided to delay and review the rule in 2017, and the National Women’s Law Center sued to have the rule put back in force. A U.S. District Judge recently ordered the OMB to enforce the rule, calling its decision to delay the rule “arbitrary,” meaning that the OMB presented no rational argument for doing so.
“OMB’s decision to stay the collection of information totally lacked the reasoned explanation that the [Administrative Procedures Act] requires,” the judge wrote.