Second Run at Pay Data Collection Poses New Challenges for EEOC

The EEOC’s renewed pass at a rule requiring companies to disclose employee pay data will encounter a legal and compliance landscape that’s changed since the agency’s first attempt in ways that stand to make the new regulation easier to successfully challenge.

The Equal Employment Opportunity Commission said in its latest regulatory playbook released this month that it intends to make another effort to gather pay data annually from employers organized by race, sex, and job category after an ill-fated first try at a collection requirement in 2016.

The success of that endeavor will depend in large part on the agency’s ability to defend itself against challenges by employer groups, which have already raised concerns about the burden of the pay data collection project.

While in some respects companies have grown more accustomed to sharing data about pay and diversity in recent years, there have also been setbacks to agency power.

The US Supreme Court’s Loper Bright Enterprises v. Raimondo decision is expected to make it more challenging for agencies to prove they have statutory authority to issue certain rules, potentially fueling litigation against EEOC pay data collection.

“You’re going to have lawsuits flying,” said Larry Lorber, management-side labor and employment counsel at Seyfarth Shaw LLP.

‘Substantive’ Regulations

The EEOC’s first attempt to collect compensation data beginning in 2016 drew its share of controversy.

The Obama-era initiative was stayed before implementation after the US Office of Management and Budget under President Donald Trump deemed collection too burdensome. Civil rights groups sued the OMB and EEOC, winning a reinstatement of the policy in 2019. EEOC collected compensation data for just a few months before voluntarily ending the practice.

The agency still collects EEO-1 workforce demographic data from companies with more than 100 employees, but that doesn’t include pay information.

This time, the commission has signaled it intends to go a different legal route to add a pay data collection requirement. Instead of using the Paperwork Reduction Act to request the disclosures, it will likely draft a formal regulation using standard Administrative Procedure Act rulemaking.

Unlike the PRA, this approach guarantees a traditional notice-and-comment regulatory process. The APA also allows an individual or organization a private right of action to sue to block the rule through a claim of agency overreach.

And following the June 28 Supreme Court decision in Loper Bright, an APA suit challenging the EEOC’s statutory authority to promulgate a pay data rule may be harder to beat.

The ruling eliminated the longstanding Chevron doctrine, under which courts deferred to reasonable agency interpretations of ambiguous statutes, easing the way for litigation challenging new regulations.

“They have to be thinking about Loper Bright,” said Victoria Lipnic, a former acting chair of the commission and partner at Resolution Economics. “It makes the outcome and whether regulations or guidance from agency will stand much more uncertain.”

Attorneys and advocates anticipate the agency will point to Section 709(c) of Title VII of the 1964 Civil Rights Act for statutory authority to collect pay data. The law gives the commission the power to prescribe reports and records from employers as needed for the enforcement of the antidiscrimination law.

The agency otherwise generally lacks the authority to issue regulations under Title VII.

However, the statute doesn’t specifically reference pay data collection. Opponents may be able to argue that gathering new data with the purpose of identifying pay discrimination is a “substantive” regulation, rather than just a recordkeeping order, said Lorber, who is also a member of the US Chamber of Commerce’s EEO subcommittee.

Additionally, opponents may be able to argue that reading the statute in a new way now—decades after Title VII was enacted—goes beyond the agency’s authority.

“These are substantive regulations asking for employers to submit data on compensation,” Lorber said. “They’ve never done that before.”

A spokesperson for the EEOC said in an emailed statement that there would be a public hearing and robust opportunities for feedback for any data collection effort.

“Any proposal to collect pay data would incorporate an approach to advancing pay equity in a way that maximizes equal opportunity and that also appropriately balances data utility with employer burden, while also protecting the confidentiality of the collected data,” he said.

Growing Trend

But advocates for pay equity say employers should now be well equipped to comply with the regulations, especially in light of similar requirements in other jurisdictions.

California and Illinois both began requiring certain pay data disclosures in the last four years, and the European Union has passed its own law for member states.

“There has been a trend in recent years towards more transparency around pay,” said Vasu Reddy, director of state policy for workforce justice at the National Women’s Law Center. “The opposition can come from a place of the fear of the burden being greater than the actual burden will be.”

The pay data will help the EEOC understand which industries and sectors to focus education and guidance resources on, and for which types of disparities, Reddy said.

The data may also help the EEOC enforce equal pay provisions, said Deborah Vagins, director of the Equal Pay Today coalition.

“You can’t address what you can’t see,” said Vagins, who was previously chief of staff for EEOC Chair Charlotte Burrows. “The civil rights community and the community that works on employment protection has been advocating for this for a long time.”

The EEOC also can look at how the last pay data collection attempt went and make adjustments.

Though there was a high level of compliance, there was also a high rate of error, according to an EEOC-commissioned study by the National Academies of Sciences, Engineering, and Medicine.

The commission may be interested in moving away from a survey format toward collecting raw data to better match employers’ internal systems, said Donald Tomaskovic-Devey, director of the Center for Employment Equity at the University of Massachusetts Amherst and a member of the NASEM panel.

“The first time you collect data you often learn about problems you didn’t anticipate,” he said.

Burden of Disclosure

Even for companies that took part in the original collection cycle, a renewed initiative would still be a big lift, said Emily Dickens, chief of staff at the Society for Human Resource Management, a professional association for HR managers. The personnel, data management systems, and job titles at a company may have changed in the intervening years.

“We think that the requirement lacks any practical utility,” she said. “It’s hard for us, and especially our members, to envision any uniform pay data collection tool that could provide meaningful information about the reason for particular employees’ pay.”

Though some companies already disclose diversity data in annual reports to shareholders, business groups have also raised concerns about data that’s collected being revealed to the public.

In late 2023, a federal court in California ordered the Department of Labor’s Office of Federal Contract Compliance Programs to release EEOC-collected data from government contractors on race and gender in the workforce in response to a Freedom of Information Act request. The DOL has appealed.

Michael Eastman, senior vice president for policy at the Center for Workplace Compliance, said although his organization works with employers interested in pay disparities, they don’t typically analyze their pay in the way the EEOC is asking them to.

“When you look in more detail at what’s going on in most of these pay gaps, there’s frequently nothing there,” he said.