The Equal Employment Opportunity Commission (EEOC) recently issued additional guidance about how employers should compile data needed to file EEO-1 Form, Component 2 reports covering companies that were involved in mergers, acquisitions and spinoffs during 2017 and 2018.
Around the same time, EEOC chairman Virginia A. Lipnic dealt with reports that some employers had continued to believe that appeals to the court decision imposing Component 2 will block its implementation before the Sept. 30 filing deadline. That simply will not happen and the current deadline will hold firm, she declared. “The goal is to have everyone comply by the end of September.”
She was speaking at the Industry Liaison Group (ILG) National Conference, where she also took the opportunity to criticize the way the matter has been handled by the federal judge who issued the decision re-imposing the Component 2 requirement and establishing the deadlines. The ILG membership consists of attorneys who deal with affirmative action matters.
Lipnic said she realizes that collection of the employment data that is now required is not a simple matter for employers. She noted that having to go back to 2017 to assemble the data “is not in any way easy,” but reminded employers that this is exactly what the federal judge has ordered. In Lipnic’s opinion, “This is no way for public policy to be made.”
She also stressed that the lesson learned by the EEOC is, “If you want your interests to be heard, you must intervene” in the court process. The commission was hamstrung in filing an appeal in the immediate aftermath of the court decision because it did not have enough commissioners to form a quorum, due to Senate delays in confirming nominations made by President Trump.
The Component 2 form requires the collection of extensive employment data organized by 12 pay bands that range in salary from about $19,000 to more than $208,000 a year across 10 job categories. This information then must be divided by the same racial, ethnic and gender groupings that employers previously used when submitting demographic data in earlier EEO-1 Forms in use before the Obama-era changes were made.
At the same ILG conference, EEOC’s chief data officer Chris Haffer also said there would be no automatic extension of the comment deadline and explained that “data clean up” would likely take until at least January 2020, after which the files would go to EEOC for analysis of the resulting data’s quality and utility.
The tangled history of this proceeding reaches back to the Obama Administration when the EEOC created a new EEO-1 reporting system intended to force employers to file expanded reports containing more detailed data about pay differentials that may or may not exist among their employers based on race, ethnicity or national origin and gender.
The Trump-era commission had sought to remove and simplify the enormous additions added to the EEO-1 Form reporting requirements by the Obama-era EEOC. However, a federal judge overturned that decision and issued a series of orders requiring that the data be gathered so that university-level researchers can investigate and assess the state of pay equity for women and minority groups in the United States.
What Is Required
Employers are required to submit a report for employee pay data applicable to 2017 by the same Sept. 30 deadline also imposed for reporting the final installment of the 2018 data. Both sets of the Component 2 data must include aggregated data for both 2017 and 2018 regarding employees’ pay and hours worked.
Employers are required to draw this data from one single payroll period of their choosing that occurred between Oct. 1 and Dec. 31 of each of the reporting years. These employers, including federal contractors, are required to submit Component 2 if they had 100 or more employees during both of these workforce snapshot periods.
According to attorneys Guy Brenner, Kate Gold and Jordan Simon of the law firm of Proskauer Rose, the new answers added to what EEOC says are frequently asked questions pertain primarily to situations where ownership of the employing enterprise has changed.
In its guidance, EEOC advises that acquiring companies are responsible for submitting Component 2 data of their acquired entity—whether the transaction occurred before or after the acquiring company’s workforce snapshot period. Similarly, where two companies merge to form a new entity, the new entity must report its Component 2 data, regardless of whether the merger occurred before or after the workforce snapshot period.
Where a purchasing or newly-formed company does not have access to a former entity’s Component 2 data, they should note that in the comments box on the certification page in the EEO-1 online portal. For acquisitions that closed in 2018, the acquiring company would not be required to report the 2017 Component 2 data of a purchased company if the purchased company would not have been obligated to report its own 2017 Component 2 data (i.e., if it had less than 100 employees in 2017).
With respect to spinoffs occurring in 2018, newly-created subsidiaries are not responsible for reporting their 2017 Component 2 data. The former parent company, however, would be responsible for filing the 2017 Component 2 data for the employees of the spun off company. Parent companies that sold a part of their business in 2018 are not required to file the 2017 or 2018 Component 2 Data for the sold entity—the purchasing company has that responsibility.
The EEOC has also provided guidance for Professional Employer Organizations (PEOs). A PEO is not responsible for filing Component 2 data of entities that are former clients at the time of filing. When an agreement between a PEO and a client company does not cover 100% of the client’s workforce, the client company, not the PEO, must submit the Component 2 data.
“Employers that have undergone mergers, acquisitions or spinoffs in 2017 and 2018 should consult the FAQs to determine their reporting requirements,” the attorneys advise. Reports will be analyzed by the University of Chicago’s National Opinion Research Center (NORC) “In addition to the website materials, we understand messages to the NORC HelpDesk are being returned promptly,” they added.
EEOC also is directing employers who have additional questions about the EEO-1 Form to contact the NORC HelpDesk. The center can be contacted toll‑free at 877-324‑6214 or by email at [email protected] Additional information and advice is available from the EEOC at: https://eeoccomp2.norc.org/info The commission also is offering the answers to employers’ frequently asked questions at: https://eeoccomp2.norc.org/faq.
What is clear from the recent developments at the federal level, as well as pay equity laws passed on the state and local governments, is that legal and regulatory efforts to create equal salary outcomes are not only here to stay, but are likely to increase in intensity and scope for all employers, the Proskauer Rose attorneys warn.