No later than September 30, 2019, employers with 100 or more employees must file EEO-1 Component 2 to report workforce pay data for the years 2017 and 2018. In light of the approaching deadline, we want to update employers briefly on the status of the reporting obligation, offer some key tips for compliance, and finally, explain why this reporting obligation may be a one-time deal.
The Component-2 reporting requirement stems from an Obama-era rule that added the collection of pay data to the demographic data currently required by Form EEO-1 (Component-1). In 2017, the U.S. Office of Management and Budget (OMB) stayed this requirement indefinitely, but earlier this year, a federal district court ruled that the stay was improper. The court ruled that the revised EEO-1 form must take effect in 2019, and that the EEOC must collect the required pay data. OMB has appealed the district court’s decision, and some employers initially delayed compliance based on speculation that the appeal might void the reporting obligation. However, briefing on the appeal is not scheduled to be completed until October 9, and so unfortunately, any relief from the appeal will not arrive until after the reporting deadline has passed.
To help employers meet their Component-2 reporting obligation, we offer the following summary of key points:
- Employers must submit Component-2 pay data for one “workforce snapshot” period for 2017 and one workforce snapshot period for 2018. The data includes W-2 wage information and hours worked, broken out by gender, race/ethnicity, and job category.
- Employers are covered by the Component-2 reporting requirement if they employed 100 or more employees during the applicable workforce snapshot period for the relevant reporting year. Thus, an employer could be required to submit Component-2 data for 2017 and 2018, for both years, or for neither year.
- The workforce snapshot period is any employer-selected pay period between October 1 and December 31 of the reporting year. The snapshot period need not be same period as that chosen for the Component-1 data. Moreover, the snapshot periods for 2017 and 2018 need not match each other. In other words, if you employed fewer than 100 employees for any pay period during this timeframe (even if you employed more than 100 employees at other times during the year), then you are not required to submit Component-2 pay data for that year.
- The employer should report pay data for employees who are employed during the respective snapshot period, and only those employees. This is true regardless of whether the employee worked the entire year or not, and also regardless of whether or not the employer employed different employees at different times during the year.
- The compensation data in the Component-2 report has two components: pay data and hours-worked data: The pay data that the employer should report is W-2 Box 1 income only. Again, this applies regardless of whether the employee worked the entire year. For example, if an employee is hired at an annual salary of $100k but only works 6 months that year, the employer still must report total W-2 wages for the year (even though that number will not accurately reflect the employee’s annualized salary).
- Component 2 also requires reporting of hours-worked data. For each non-exempt employee employed in the snapshot period, the employer should report the hours the employee actually worked for the entire reporting year. For exempt employees, employers have the option to report actual hours worked or to report a proxy of 40 hours per week for each full-time employee (20 hours for part-time employees), multiplied by the number of workweeks for which the employee was employed during the reporting year. This rule applies unless the exempt employee was given a different standard workweek (e.g., employee was given a standard 30 hour workweek), in which case the employer may use that proxy number for that employee instead. Additionally, please note that hours worked includes only hours actually worked, and does not include paid time off, such as vacation, sick leave, and holidays.
- Employers doing business at only one establishment in one location must complete a single Component 2 report. Multi-establishment employers must submit a report for their headquarters and all of their establishments, and they also must submit individual reports for each establishment with 50 or more employees. For establishments with fewer than 50 employees, the employer must file an establishment list or establishment report (similar to Component 1).
For additional instruction, the EEOC has developed helpful materials such an instruction booklet for filing, a user’s guide, sample form, and other reference documents. These materials can be accessed via this link: https://eeoccomp2.norc.org/info
Fortunately, the Component-2 reporting obligation may be short-lived. On September 11, 2019, the EEOC issued a statement declaring that it will not renew the Component-2 requirement next year. In the statement, the EEOC cited the “unproven utility [of the data collection] to its enforcement program” and the “burden imposed on employers” to comply (an estimated $53.5 million in each of 2017 and 2018). The EEOC concluded that further examination is needed before imposing further pay reporting obligations.
So, for those imaginary folks who are enjoying their Component-2 gathering experience, savor it while it lasts! For everyone else, remember to submit your reports by the September 30 deadline, and keep your fingers crossed that the obligation does not renew.