Counseling & Compliance Training - Page 58 of 87

Get the Most Out of Your Employee Payroll Audit

Employee payroll audits, which have long been recommended as a best practice for corporations that want to stay on the right side of the law, have become even more critical with the current proliferation of labor and employment laws at the state level. Among other things, the California Fair Pay Act, which went into effect on January 1, 2016, places new demands on California employers that in many cases can only be effectively satisfied by means that include a payroll audit.

Earlier this month, we held a webinar to discuss the CA Fair Pay Act requirements and what employees should do to comply. Below you will find some of the key takeaways.

What is the California Fair Pay Act?

The new law goes further and imposes more obligations on employers than longstanding federal and state equal-pay and employment-discrimination laws. More than simply requiring employers to pay men and women equal pay for the same work, the California statute prohibits employers from paying members of one sex less than the rates paid to employees of the opposite sex “for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.” And the employees of opposite sexes whose jobs and pay are being compared need not work together in the same establishment. There are several important defenses to liability under the law, such as the employer’s use of a bona fide factor that is not sex-related.

How can a payroll audit help?

Determining what types of work are “substantially similar” in terms of skill, effort, responsibility and working conditions is no easy task. That’s where a payroll audit can help.

On a step-by-step basis, a properly conducted audit will identify potential problems under the California Fair Pay Act by identifying positions that have “substantially similar work,” analyzing the pay of these workers by gender, finding any disparities in pay, and determining whether any defenses apply. For example, does the company have a bona fide seniority system or merit system, or is there a business necessity for the disparities in pay?

In addition to these complex Fair Pay Act questions, employee payroll audits remain desirable or necessary for other purposes, such as ensuring that employees are treated fairly under the company’s employee benefit plan and that certain employees or groups of employees are not excluded from the plan.

What steps should be taken?

When conducting a payroll audit, it should be done with review and consultation of attorney with the end goal of identifying and quickly addressing disparities that cannot be explained adequately or need to be corrected. It is important to note that the audit is subject to attorney/client privilege and/or work product protection. The following are key steps in the audit process:

Consider all job titles/descriptions across all geographic regions
Consider how to identify or sort based on disparate geographical locations
Compare the positions that have “substantially similar work”
Determine if the statutory exemptions apply
Identify explanations for disparities
Address disparities that can’t be explained
Determine what action needs to be taken

Ongoing Compliance

From a compliance perspective, the number one benefit to conducting employee payroll audits is the ability to determine what action needs to be taken to address and correct disparities if they exist. Failure to address disparities that can’t be explained within the requirements of the California Fair Pay Act or the Federal Pay Act can result in penalties, sanctions and, in some cases, litigation with the DOL and/or IRS. Ongoing compliance should include regular review of the following:

Handbooks and policies to remove outdated references to “equal” work
Policies that prevent employees from discussing or asking about other employees’ compensation
How compensation decisions are made and adjust if necessary
Job descriptions – update and describe as comprehensive as possible
Record keeping – records must be kept for three years
Training of HR personnel, senior management on the new law and how it should be applied in setting compensation at hiring

Click here to watch the full presentation.

Click here to view a PDF of the presentation.

California Employers: New Poster to be Posted April 1, 2016

Did you recently update your workplace posters? Time to do it again.

In California, all employers have obligations to satisfy workplace posting, such as posting information related to wages, hours and working conditions. The workplace posters must be placed in an area frequented by employees where these posters may be easily read during the workday.

As a result of new amended regulations pertaining to the California Fair Employment and Housing Act (“FEHA”) going into effect on April 1, 2016, certain covered employers must post a new poster on April 1, 2016. Employers with 5 or more employees (full-time or part-time) are covered by the FEHA and must post a specific notice, which replaces Pregnancy Disability Leave (“PDL”) Notice A. This new poster, titled “Your Rights and Obligations as a Pregnant Employee,” provides clarifications of the PDL, including, but not limited to, the following:

Eligible employees are entitled up to four months of leave per pregnancy, and not per year;
The four months means the working days the employee would normally work in one-third of a year or 17 1/3 weeks; and
PDL does not need to be taken all at once, but can be taken on an as-needed basis as required by the employee’s health care provider.

For a copy of this poster, click here.

Under the California Code of Regulations, “[a]ny FEHA-covered employer whose work force at any facility or establishment is comprised of 10% or more persons whose spoken language is not English shall translate the notice into every language that is spoken by at least 10 percent of the workforce.” The Spanish version of the foregoing notice should be available soon at http://www.dfeh.ca.gov/Publications_Publications.htm.

Any time employers are required to update their posters and/or new (or amended) regulations are issued, employers should take the opportunity to ensure their workplace posters and their employee handbooks and policies are up to date and compliant.

For further information, please contact the author or any member of our Labor and Employment Practice Group.

Courts in New Jersey Continue to Endorse “Awkward Theory” of Individual Liability in NJLAD Cases

Referred to by some courts as an “awkward theory” of liability, employers and supervisors should be aware that courts in New Jersey continue to recognize the viability of individual liability claims under the “aiding and abetting” provision of the New Jersey Law Against Discrimination, N.J.S.A. §10:5-12(e).

Personal Liability for Supervisors: Title VII vs. NJLAD

Unlike Title VII of the federal Civil Rights Act, which does not provide for individual employee liability, New Jersey courts have held that in addition to “employers” being liable under NJLAD, supervisors can be personally liable for their illegal conduct under an “aiding and abetting” theory. The New Jersey Supreme Court recently clarified the expansive definition of “supervisor” for purposes of the NJLAD as an employee who is (1) authorized to undertake tangible employment decisions affecting the plaintiff, or (2) authorized by the employer to direct the plaintiff’s day-to-day work activities. Aguas v. New Jersey, 220 N.J. 494, 529 (2015).

To hold a supervisor liable as an “aider and abetter” under the NJLAD, a plaintiff must show that the individual (1) performed a wrongful act that caused an injury; (2) was generally aware of his or her role as part of an overall illegal activity at the time that he or she provided the assistance; and (3) knowingly and substantially assisted in the principal violation. Tarr v. Ciasulli, 181 N.J. 70, 83084 (2004). Aiding and abetting requires “active and purposeful conduct.” Cicchetti v. Morris County Sheriff’s Office, 194 N.J. 563, 595 (2008).

What Makes this Aiding and Abetting Theory so “Awkward”?

Courts applying New Jersey law have yet to follow a uniform rule in situations where the plaintiff alleges that a supervisor aided and abetted the “employer” in violating the NJLAD based on the supervisor’s own conduct (i.e., as the sole actor engaged in the wrongful conduct). In other words, what happens when the supervisor is the only person alleged to have engaged in the wrongful conduct? Two distinct lines of cases have developed in this area of the law – one finding supervisory employees can be personally liable for aiding and abetting their own/the employer’s wrongful conduct (e.g., Hurley v. Atlantic City Police Dep’t, 174 F.3d 95 (3d Cir. 1999), and another refusing to impose individual liability (e.g., Newsome v. Admin. Office of the Courts of N.J., 103 F. Supp. 2d 807 (D.N.J. 2000). See Aiding and Abetting Your Own Conduct, New Jersey Law Journal, Volume 209 (July 16, 2012), Employment Counselor, Number 241 (Sept. 2010).

A string of recent decisions by New Jersey state and federal courts suggest that this “awkward” theory is here to stay. For example, in Yobe v. Renaissance Electric, Inc., 2016 WL 614425 (D.N.J. Feb. 16, 2016), the court denied a motion to dismiss the plaintiff’s NJLAD disability retaliation claims against his former supervisor, who was the only person alleged to have engaged in the retaliatory conduct. The defendant argued that the plaintiff’s claim failed as a matter of law because a supervisor cannot “aid and abet” his own conduct. Citing to the Third Circuit’s “prediction” in Hurley that the New Jersey Supreme Court would hold a supervisor personally liable under NJLAD, and an unpublished, non-precedential decision by the New Jersey Appellate Division in Rowan v. Hartford Plaza Ltd., 2013 WL 1350095 (App. Div. April. 5, 2013), the court in Yobe concluded that “[w]hile it is concededly an ‘awkward theory’ to hold an individual liable for aiding and abetting his own conduct, it would thwart the NJLAD’s broad and remedial purpose, and make little sense, to construe it as permitting ‘individual liability for a supervisor who encourages or facilitates another employee’s harassing conduct, while precluding individual liability for the supervisor based on his or her own discriminatory or harassing conduct.’”

Impact on Employers and Individual Supervisors

In discrimination, hostile work environment and retaliation cases brought under the NJLAD, it is common for a plaintiff to name his or her former supervisor as an individual defendant, particularly if the supervisor is the person who made the decision to take an adverse employment action against the plaintiff. Naming the supervisor, particularly a high-level manager, might be viewed by the plaintiff as a tactical move to encourage an early settlement by driving a wedge between the employer’s interest in defending its business decision and the supervisor’s reputational or financial impact concerns. Absent a showing of fraudulent joinder, a plaintiff’s naming of his or her supervisor as a defendant might prevent the employer from removing the action to federal court based on complete diversity of citizenship. In addition, legal fees could increase if separate legal representation for the employer and the supervisor is required. These important issues should be considered and discussed with counsel at the outset of the case. Because the NJLAD does not provide for individual liability for aiding and abetting if the employer is not found liable, the best defense is a unified one between the employer and the individual supervisor.

Spring Cleaning in California: The Fair Employment and Housing Council’s New Regulations

On April 1, 2016, the California Fair Employment and Housing Council’s (FEHC) new Fair Employment and Housing Act (FEHA) regulations take effect. The overarching purpose of the new FEHC regulations is to harmonize the regulations with recent court decisions. However, employers should take note of some of the more significant changes the new regulations impose, including: (a) expanding and clarifying the scope of employers covered under the FEHA; (b) requiring employers to develop specific, detailed anti-discrimination/anti-harassment policies and internal procedures; and (c) enlarging employers’ training and related recordkeeping obligations. Notably, the new regulations also clarify employers’ potential liability for claims regarding alleged failure to prevent unlawful harassment or discrimination, as well as the remedies available.

More Employers Are Covered

The FEHA only covers employers who regularly employ five or more persons. See Cal. Gov’t Code § 12926(d). Under the prior regulations, to “regularly employ” five or more individuals meant that the employer employed five or more individuals in each working day in any 20 consecutive calendar weeks in the current or preceding calendar year. The new regulations further clarify that, in determining whether an employer regularly employs five or more individuals, consideration must be given to out-of-state employees. Thus, under the new regulations, an employer who employs only three employees in California is still an “employer” for purposes of the FEHA if it employs two or more employees outside of California (see footnote 1). The new regulations further clarify that, in counting the number of employees, individuals on leaves of absence or suspensions are counted.

Expanded Anti-Harassment, Anti-Discrimination, And Anti-Retaliation Policy And Procedure Requirements

Under the FEHA, employers have an affirmative obligation to prevent unlawful harassment and/or discrimination. To that end, pursuant to California Government Code Section 12950(b), employers are (and have been) required to distribute the DFEH’s brochure (DFEH-185) on unlawful sexual harassment, or provide the information in a comparable writing. However, the FEHC’s new regulations mandate that, in addition to the preexisting obligation with respect to providing the DFEH’s brochure (or comparable information), employers must now promulgate their own anti-discrimination and anti-harassment policies that satisfy a variety of detailed requirements.

Specifically, under the new regulations, employers’ anti-discrimination/anti-harassment policies must:

• Be in writing;
• List all current protected categories covered under the FEHA;
• Indicate that the FEHA prohibits coworkers and third parties, as well as supervisors and managers, with whom the employee comes into contact from engaging in conduct prohibited by the FEHA;
• Create a complaint process to ensure that complaints receive:
- -An employer’s designation of confidentiality, to the extent possible;
- -A timely response;
- -Impartial and timely investigations by qualified personnel;
- -Documentation and tracking for reasonable progress;
- -Appropriate options for remedial actions and resolutions; and
- -Timely closures.
•Provide a complaint mechanism that does not require an employee to complain directly to his or her immediate supervisor, including, but not limited to the following:
- -Direct communication, either orally or in writing, with a designated company representative, such as a HR manager, EEO officer, or other supervisor;
- -A complaint hotline;
- -Access to an ombudsperson; and/or
- -Identification of the Department of Fair Employment and Housing (DFEH) and the U.S. Equal Employment Opportunity Commission as additional avenues for employees to lodge complaints.
•Instruct supervisors to report any complaints of misconduct to a designated company representative, so that the company can try to resolve the claim internally (see footnote 2);
•Indicate that when an employer receives complaints, it will conduct a fair, timely, and thorough investigation that provides all parties appropriate due process and reaches reasonable conclusions based on the evidence collected;
•State that confidentiality will be kept by the employer to the extent possible, but not indicate that the investigation will be completely confidential;
•Indicate that if, at the end of the investigation, misconduct is found, appropriate remedial actions will be taken; and
•Make clear that employees shall not be exposed to retaliation as a result of lodging a complaint or participating in any workplace investigation.

Under the new FEHC regulations, employers must disseminate their policies by one or more of the following methods:

Providing printed copies of the policies to all employees with an acknowledgment for employees to sign and return;
Sending the policies via email with an acknowledgment return form;
Posting current versions of the policies on a company intranet with a tracking system to ensure that all employees have read and acknowledged receipt of the policies;
Discussing the policies upon hire and/or during new employee orientation/training; and/or
“Any other way that ensures employees receive and understand the policies.”

In addition to providing the policies in English, any employer whose workforce contains 10 percent or more of persons who speak a language other than English must translate their policies into any language(s) spoken by 10 percent or more of their workforce.

Updated Training And Related Recordkeeping Requirements

Pursuant to section 12950.1 of the California Government Code, employers with 50 or more employees have been and are required to provide supervisory employees with a minimum of two hours of sexual harassment training. Pursuant to the new FEHC regulations, in addition to satisfying the existing statutory requirements, the mandatory training must also:

•Instruct supervisory employees of their obligation to report potential sexual harassment, discrimination, and/or retaliation of which they become aware;
•Provide an overview of the remedies available for sexual harassment victims in civil actions, as well as potential employer/individual exposure and liability; and
•Cover “abusive conduct,” as used in Government Code section 12950.1 (see footnote 3), in a “meaningful manner,” including by: (a) providing a definition of abusive conduct; (b) explaining the negative effects of abusive conduct on the victim and others in the workplace; (c) specifically discussing the elements of abusive conduct; (d) providing examples of abusive conduct; and (e) emphasizing that, unless the conduct is especially severe or egregious, a single act shall not constitute abusive conduct.

In addition to the above updated training requirements, the new FEHC regulations require employers to maintain training-related records for at least two years. Records to be maintained include, but are not limited to: (a) the names of the participants; (b) the dates of the trainings; (c) sign-in sheets; (d) copies of all certificates of attendance or completion; (e) information regarding the type of training; (f) copies of all written or recorded materials comprising the trainings; and (g) the name of the training provider.

Clarifying Liability For Failure To Prevent Unlawful Discrimination Or Harassment

Recent case law confirmed that California employers cannot be held liable in a civil action for a stand-alone claim for failure to take reasonable steps necessary to prevent sexual harassment or discrimination if there is no underlying unlawful harassment or discrimination. The new FEHC regulations codify that authority and take it further in several respects:

•First, the regulations clarify that, in undertaking the individualized assessment of whether an employer failed to take all reasonable steps to prevent unlawful discrimination or harassment, consideration should be given to a variety of factors, including, but not limited to: (a) the size of the employer’s workforce; (b) the employer’s budget; (c) the nature of the employer’s business; and (d) the facts of each particular case.
•Second, the regulations provide that the DFEH may independently seek non-monetary preventative remedies for an employer’s failure to take all reasonable measures to properly prevent harassment or discrimination even if there is no underlying liability for discrimination, harassment, or retaliation.

Take Aways

California employers (and any out-of-state employers with at least five employees total and one employee in California) should promptly review and revise their anti-discrimination and anti-harassment policies. In conjunction with that effort, employers should ensure that their procedures with respect to disseminating policies and handling employee complaints satisfy the new requirements. Employers with 50 or more employees should ensure that their sexual harassment trainings encompass the additional topics and should begin retaining all records relating to such trainings for at least two years. For assistance with ensuring compliance, employers should seek advice from qualified California employment counsel.

______________________________

While such out-of-state employees are counted in determining whether an employer falls under the FEHA’s ambit, the new FEHC regulations clarify that out-of-state employees “are not themselves covered by the protections of the … FEHA if the wrongful conduct did not occur in California and …was not ratified by decision makers or participants located in California.”
For employers with 50 or more employees, mandatory sexual harassment training must also instruct supervisors to report any complaints of misconduct to a designated company representative.
See California AB 2053, effective January 1, 2015.

In FLSA Settlements, the Permissible Scope of Releases and Confidentiality Provisions May Be Broader Than You Think

Courts and the U.S. Department of Labor (“DOL”) often refuse to approve Fair Labor Standards Act (“FLSA”) settlements: (1) in which the employee’s release of claims is not narrowly limited to wage claims; or (2) that seek to restrict public disclosure of the settlement terms. Because FLSA settlements are arguably only enforceable if approved by a court or the DOL, these conditions sometimes impede the ability of parties to resolve FLSA disputes. A recent court decision may offer a solution. In Lola v. Skadden, Arps, Meagher, Slate & Flom LLP, 2016 BL 29709 (S.D.N.Y. Feb. 3, 2016), the Honorable Richard J. Sullivan, U.S.D.J., allowed the parties more leeway in resolving FLSA claims, adopting an approach likely to facilitate settlements.

Case Background

Plaintiff David Lola, an attorney, worked for a staffing agency that placed him at the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, where he performed document review work for 15 months. He later filed a lawsuit in the United States District Court for the Southern District of New York against the staffing agency and the law firm (as joint employers), alleging that they had misclassified him as exempt under the FLSA and failed to pay him overtime when he worked more than 40 hours a week. He filed the lawsuit on behalf of himself and as a putative collective action on behalf of other, “similarly-situated,” contract attorneys.

The parties ultimately negotiated a settlement agreement and submitted it to the Court for approval. The agreement provided that Lola and two other individuals who opted into the lawsuit (and plaintiffs’ attorneys) would receive a total of $75,000 in exchange for, among other things, dismissing the lawsuit, releasing claims against the defendants and limiting disclosure of the terms of the settlement.

Judge Sullivan approved the settlement, issuing a written decision to address the release of claims and confidentiality provisions of the parties’ agreement.

Release of Claims

Under the settlement, the plaintiffs agreed to waive both FLSA and non-FLSA claims against the defendants. Judge Sullivan observed that some courts “have refused to approve [FLSA] settlements with broad releases of claims, concluding that they conflict with the FLSA’s remedial purposes.” However, Judge Sullivan explained, “there is nothing inherently unfair about a release of claims in an FLSA settlement.” The Court concluded that the release of claims in this case “was the fair result of a balanced negotiation, in which Plaintiffs were represented by able counsel.” In reaching this conclusion, the Court highlighted these facts: (1) the release was mutual; (2) plaintiffs were not aware of any “actual, existing, or meritorious claims” that they were waiving; and (3) plaintiffs were not waiving any future claims. Under these circumstances, the Court determined that plaintiffs “could reasonably conclude that the provisions releasing claims were an acceptable compromise.”

Non-Disclosure of Settlement Terms

Judge Sullivan also observed that several courts have “rejected FLSA settlements containing confidentiality provisions that restrict plaintiffs’ ability to talk about the settlement.” The Court acknowledged that, “in certain cases, confidentiality provisions may excessively restrict plaintiffs’ ability to discuss settlements” and, therefore, undermine the purposes of the FLSA and the public interest in assuring that employees receive fair wages. According to the Court, however, the FLSA “imposes no per se bar on confidentiality provisions in settlements.” Instead, “the fairness of restrictions on the parties’ ability to disclose details of a settlement depends on the particular circumstances of any given case.” Under the circumstances in this case, the Court ruled that the restrictions were fair. Here, the agreement stated that plaintiffs and their counsel: “will not contact the media or utilize any social media regarding this Settlement or its terms” and, if contacted, they will respond, “no comment” or “[t]he matter has been resolved.”

Judge Sullivan reasoned that, in the absence of the non-disclosure provision, “Plaintiffs would be free to decline commenting on the case in response to any future inquiries by the press or otherwise” and, therefore, “it is difficult to see why they should be barred from adopting such a posture in advance of settling the matter.” The Court explained that, “since no one can force Plaintiffs to opine on the case in the future anyway, it is by no means irrational or improper for Plaintiffs to compromise words for dollars as part of a global, arms-length settlement” (emphasis in original). Given that a plaintiff is “allowed to accept less than the maximum potential recovery on the basis of litigation risk,” the Court explained that a plaintiff should also be permitted “to make nonmonetary concessions, such as minor restrictions on his right to comment on the case.” Again, the Court stressed, “this provision is the result of fair bargaining between well-represented parties and embodies a reasonable compromise that does not conflict with the FLSA’s purpose of protecting against employer abuses.” Notably, the settlement agreement was publicly-filed, so anyone interested in discovering its terms was free to do so. The parties simply limited the ability of plaintiffs to disclose them.

Conclusion

Employers sometimes litigate FLSA cases that they would rather settle, because they are concerned that a settlement will not ensure finality. Employers worry that a narrow release will not bar the plaintiff from filing another lawsuit after collecting the settlement payment or that the plaintiff may publicize the settlement, thereby encouraging copycat lawsuits. Judge Sullivan’s decision in Lola offers a potential solution for employers. Under the right circumstances, a settlement agreement can include a broad release of claims and the parties can agree to limit disclosure of the settlement terms.

EEOC and DOL Propose Increased Reporting Requirements for EEO-1 Reports

On the seventh anniversary of the federal Lilly Ledbetter Fair Pay Act, the Equal Employment Opportunity Commission (“EEOC”), in partnership with the U.S. Department of Labor, Office of Federal Contract Compliance Programs (“OFCCP”), announced a proposed rule to collect data from employers that will be used to identify discriminatory pay practices. Under the proposed rule, companies with 100 or more employees, both private employers and federal contractors, would be required to report wages from W-2 earnings and total hours worked for all employees by sex, race, and ethnicity within a 12-month period. It is projected that these new proposed requirements will affect over 63 million employees.

This proposed rule is now in the comment period until April 1, 2016. The EEOC also plans to conduct a public hearing regarding the new rule at some point. If things progress as expected, this rule becomes effective for the September 30, 2017 reporting period.

While the EEOC highlights that the proposed rule also is a benefit to employers because it assists employers “in evaluating their pay practices to prevent pay discrimination” and to avoid enforcement actions, there are legitimate concerns regarding how such data will be interpreted and used by government agencies. Some concerns include the strong likelihood of this data producing false positives and the ability to keep this information confidential.

Pay Data

Currently, the EEO-1 form collects data regarding the number of employees, along with their sex, race and ethnicity, in 10 specifically designated job categories. Under the proposed rule, an employer also would be required to report the number of employees by their sex, race, and ethnicity, within 12 specified pay bands in each of the 10 job categories. These pay bands track the 12 pay bands used by the Bureau of Labor Statistics in the Occupation Employment Statistics survey. The specific pay bands are:

• $19,239 and under;
• $19,240 – $24,439;
• $24,440 – $30,679;
• $30,680 – $38,999;
• $39,000 – $49,919;
• $49,920 – $62,919;
• $62,920 – $80,079;
• $80,080 – $101,919;
• $101,920 – $128,959;
• $128,960 – $163,799;
• $163,800 – $207,999; and
• $208,000 and over.

The proposed new section of the EEO-1 form is available on the EEOC’s website (click here).

The pay data will be taken from employees’ total W-2 earnings for a 12-month period looking back from a pay period between July 1st and September 30th. The EEOC believes the benefit to using W-2 earnings is that it includes total earnings, including wages, salaries, and other compensation such as commissions, tips, taxable fringe benefits, overtime pay, shift differentials and bonuses. Also, the EEOC insists that using W-2s places the least amount of burden on an employer because this information is already gathered and most human resources information systems allow for calculations for any 12-month period, not just the calendar year.

A concern for employers is that there is no way to indicate on the EEO-1 form neutral factors, such as experience, education, or performance that might account for or explain any pay differentials. Accordingly, it is anticipated that this data may produce many false positives which will force employers to exert additional time and resources to defend their pay practices.

Total Number of Hours Worked

Under the proposed rule, an employer would also have to record the total number of hours worked by employees, broken down by sex, race, and ethnicity, in each pay band. The EEOC states that the reason for providing the number of hours worked is to take into account part-time or partial-year employees. Specifically, data on number of hours worked “will allow analysis of pay differences while considering aggregate variations in hours.”

As the rule is currently drafted, it is unclear how this information will achieve that purpose when it does not take into account factors which could skew results such as overtime hours, or other supplemental earnings like bonuses or commissions, which may be less due to part-time work. Another issue not addressed by the EEOC is how hours for salaried employees would be calculated. In fact, the EEOC acknowledges that it is not certain how to report hours worked for salaried employees and is requesting employer input on that issue.

Data Analysis

The EEOC states that it plans to use the pay data to: (1) assess complaints of discrimination; (2) focus agency investigations; and (3) identify existing pay disparities that may warrant further examination. The agency claims the information from the pay bands will be used to “compute within-job-category variation, across-job-category variation, and overall variation” to discern potential discrimination. The EEOC plans to develop statistical tools for staff to use on their computers so that they can conduct this type of analysis. The EEOC will also publish aggregate data so that employers can conduct their own analysis of their pay practices

Yet, the EEOC has not identified what statistical methodology it plans to use. Thus, it is not possible to assess whether the EEOC’s statistical analysis would hold up under judicial scrutiny or would be rejected by the courts.

Confidentiality Concerns

The EEOC does not guarantee that the pay data will be kept confidential and not subject to FOIA requests through both the EEOC and the DOL. Specifically, the EEOC states that Title VII forbids it from making public the EEO-1 data before a Title VII proceeding is instituted. As for OFCCP, it promises to keep the EEO-1 data confidential “to the maximum extent permitted by law, in accordance with the Freedom of Information Act Exemption 4 and the Trade Secret Act.”

The EEOC attempts to counter any confidentiality concerns by claiming that since the data is provided in the aggregate and not on based on individual employees, there is no confidentiality issue. Aside from the fact that it’s really more of a privacy issue, that response underplays the importance that the compensation data could provide to competitors and ignores the free discovery that it would provide to the plaintiff’s bar by allowing access to this pay data.

Next Steps

Given the complexity of defending discriminatory pay claims, in preparation of the enactment of this new rule employers should conduct pay equity analysis to assess any issues prior to submitting any pay data. Additionally, companies affected by the proposed rule may wish to consider submitting comments.