There’s important news for employers concerned with advancing their Diversity, Equity, and Inclusion (DEI) efforts. The U.S. Equal Employment Opportunity Commission (EEOC) has announced that collections of 2019 and 2020 EEO-1 Component 1 Data, postponed in 2020 due to the Covid-19 crisis, will begin in April 2021.
Some background: As part of its efforts to enforce equal opportunity legislation, the EEOC has long since required employers to submit the EEO-1 report. This report is a federally mandated compliance survey requiring that employee data be categorized by job category, gender, and race/ethnicity.
Here’s what employers with at least 100 employees (and federal contractors with at least 50 employees) need to know about the EEO-1: Applicable employers are required to report on the racial/ethnic and gender composition of their workforce by specific job categories, referred to as Component 1 data. As the agency did not collect 2019 data last year, the EEOC is requiring reporting for both 2019 and 2020.
Component 2 data refers to pay data that employers had previously been required to file as part of their EEO-1 report. According to HRDive, the EEOC had “required employers to report pay data under EEO-1 Component 2 for the 2017 and 2018 calendar years [in Fall 2019], but after a lengthy and controversial saga, the agency decided in 2019 not to renew its Component 2 collection.”
While Component 2 has not yet been revived, employers would still be wise to plan for Component 2 collection to return on the federal level. Additionally, over the past few years, there has been a significant uptick in individual state laws enacted to accord greater protection against pay discrimination. Starting with California in 2016, followed by New York, New Jersey, Illinois, Massachusetts, and Oregon in 2019, multiple states have expanded the scope of pay equity to cover not only equal pay for equal work, but for “substantially similar” or “comparable” work. Some states, such as Massachusetts and Oregon, have included safe harbors to incentivize pay equity. And just this year, California became the first state to require employers to report on their pay data (SB 973), modeling this reporting on EEO-1 Component 2 reporting.
So how should employers prepare? The answer is to monitor the ongoing progress of their DEI efforts on a monthly basis, with the help of an expert partner. In the future, when this type of reporting needs to be publicly disclosed, such employers will be able to do so with confidence, and to provide the data to demonstrate that improvement was made. As reported by Reuters, “American companies are coming under increasing pressure from investors to publicly disclose information about diversity among employees.” Reuters also quoted one expert as saying, “We think it’s inevitable that those data points will be disclosed and we think companies should get ahead of it.”
More evidence that public disclosure is on the rise is shown in this report from Just Capital: “As of January 2021, only 6.3% of America’s largest corporations disclosed the type of intersectional data that could be derived from an EEO-1 Report. That is just 59 companies out of the 931 companies we studied in our 2021 Rankings of America’s Most JUST Companies, but it is up by 27 from December 21. We expect to see more movement in 2021 as more pressure comes from investors, standard-setters, and advocates alike.” Similarly, Barron’s notes that “Half of the 100 largest publicly traded companies in the U.S. have agreed to make publicly available the so-called EEO-1 data on the racial, ethnic and gender makeup of their workforce that they report to the Equal Employment Opportunity Commission.”
In preparing for future public disclosures, and ultimately in creating a more fair and inclusive workplace, conducting a Pay Equity Audit is invaluable. Doing so will provide essential insights into not only what’s wrong, but actionable strategies for getting things right. This will help employers capture the metrics needed to show verifiable, measurable progress in their DEI efforts. To learn more about achieving pay equity, click here.
Also, as mentioned previously, California’s SB 973 went into effect this year, with the first annual reporting due on March 31, 2021. Applicable employers should proactively educate themselves on:
The requirements of the new law
Key dates and deadlines
What types of employment data are required
Why monthly tracking is essential
How the law will be enforced
What to do now
Conducting a pay equity audit is a key component to ensuring equitable compensation within your organization. Just as important as the analysis is how you communicate findings and progress with various stakeholders. Download The Pay Equity Communications Planner to learn best practices for discussing compensation, both internally and externally.