As you may have heard, the Equal Employment Opportunity Commission (“EEOC”) released revised EEO-1 reporting guidelines on July 13, 2016 (for an overview of the new guidance in its entirety, see EEOC Issues Revised EEO-1 Proposal). These new guidelines apply to employers with 100 or more employees and require them to report, among other things, hours worked by exempt and non-exempt employees, subdivided by gender, race, ethnicity, job classification, and pay band. For an example of the proposed new reporting form, click here. Although employers and other members of the public will have until August 15, 2016 to comment on the revised proposal, it is unlikely that any further substantive revisions will be made. Currently, it appears that employers will be required to submit the new EEO-1 form on March 31, 2018, giving them approximately a year and a half to prepare their recordkeeping systems to capture the newly required data. Therefore, employers are advised to review, and update if necessary, internal recordkeeping systems to be prepared to report hours worked, and pay data, for calendar year 2017 when filing the EEO-1 on March 31, 2018.
What Are “Hours Worked” And Why Does The EEOC Want Them?
In response to employer requests for guidance concerning the definition of “hours worked,” the EEOC has specified that, for employees covered by the Fair Labor Standards Act (“FLSA”), their hours should be recorded as follows:
Non-exempt Employees: The EEOC should report “hours worked” as defined by the FLSA. “Hours worked” includes time when the employee is actually working (either at the employer’s premises or remotely). Therefore, “hours worked” would not include meal time, vacation, PTO or other leave, even if the non-exempt employee is paid for that time off, and even though the compensation for those hours will be reflected in the W2 data provided on the EE0-1 form.
Exempt Employees. Employers have two options: (1) provide the actual hours of work of exempt employees if the employer already maintains accurate records of this information, or (2) 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 individuals were employed during the reporting year.
The EEOC provides a few reasons for requiring disclosure of hours worked. First, if the EEOC discovers a pay disparity, it intends to use this information to it assess whether a disparity is caused by the part-time or full-time status of the respective employees, rather than by gender, race, or ethnicity. Second, the EEOC intends to use the hours worked data to assess whether employees in protected classes are subject to discrimination in terms of hours instead of pay, with an employer habitually assigning more hours and overtime to some employees while denying it to others.
Next Steps For Employers
Employers are well-served to apply the same analysis that the EEOC intends to use while doing internal audits to determine if there are statistical concerns, and the reasons behind the patterns. The employer can then consider if actions are warranted now to remediate any issues before 2017, or, be able to explain the legitimate business reasons for any disparities if called upon to defend pay practices.
Employers should also audit time-keeping protocols and policies to be sure that non-exempt employees are accurately recording “hours worked”. Employers should also confirm that their HRIS systems can run reports of hours worked, that do not include paid time off. Additionally, if employers intend to report actual hours worked for exempt employees, rather than the 40 hour proxy for full time employees, then the same recommendations apply.
For assistance with an employee payroll audit or advice concerning EEO-1 forms or other federal or state fair pay act requirements, contact Valerie Kahn, Kate Gold, Lynne Anderson, or any member of the Drinker Biddle & Reath’s Labor & Employment Group.