Big Brother is still watching – and it doesn’t know why

In election years, the gap in the average rate of pay of men and women takes center stage in political debates. Few dispute the underlying premise that individuals should be paid based on business-related factors, regardless of their gender.

In an effort to portray heightened vigilance for this principle, the Equal Employment Opportunity Commission and its counterpart dealing with the federal contractor workforce have proposed a new reporting requirement that is stunning in its reach, and stunning in its lack of utility in demonstrating that pay discrepancies are a result of discrimination. With this proposal, the EEOC is attempting to become the national pay monitor. 

{mosads}Employers have always had to report the basic demographic and position distribution of their workforce on a form called the EEO-1. While the practical use of this form and the information it develops is marginal, the government and employers can use the data to get a broad view of the makeup up of their workforce and track changes to help promote continued diversity. Notwithstanding the form’s negligible roll in enforcing the laws on the books, the EEOC proposed a dramatic increase in the amount of data it will require employers to file with the government, proposing that employers report what they are paying their employees and how much time their employees are working – even though employers do not record the time of their salaried employees. 

To understand the scope of this increase in required record keeping and reporting, the current EEO-1 form requires employers to fill in 180 boxes of aggregated data for each of their facilities; the new form would have employers fill out a staggering 3660 boxes.

Here’s the ironic, only-in-Washington twist: The EEOC finds support for this new requirement under the Paperwork Reduction Act. 

As its name implies, the Paperwork Reduction Act is supposed to limit the amount of information and paperwork the government requires from its citizens. It requires agencies like EEOC to tailor information requests to collect only useful data in a way that is not overly burdensome and ensures privacy and confidentiality of the data. These are points the EEOC has obviously missed.

Proving discrimination requires a comparison of similar jobs and an analysis of business-related reasons for pay differences such as experience or shift. Various technical methodologies exist to make these comparisons, but the overriding command is that the jobs be substantially similar. Comparing the salaries of computer engineers with lawyers, for example, does not give rise to useful analysis. Yet the proposed EEO-1 will do precisely that. Moreover, the EEOC admits there is no current legal purpose for the data it proposes to collect, stating, “The EEOC does not intend or expect that this data will identify specific, similarly situated comparators or that it will establish pay discrimination as a legal matter.”

The EEOC also claims it will compare compensation profiles from competing companies to determine if one company pays less than another. Of course, comparing pay across companies is irrelevant when it comes to compensation discrimination analysis because it is comparing apples and oranges. In the private sector, it is a company’s prerogative to pay their employees at a rate regardless of what its competitors pay.EEOC states that after about three years of collecting this data, it will publish its analysis of pay in the United States on an industry and location basis. Simply put, the EEOC has absolutely no basis to assume that it has the competency to suggest what employees should be paid. As a matter of law and commonsense, EEOC should not be able to force employers to disclose information that will have absolutely no utility. 

That the proposed data will be entirely useless to the EEOC is even more troubling considering the tremendous burden this proposal will place on employers forced to produce it. At the outset, the EEOC claimed the revised EEO-1, which requires more than 20 times the data of the existing EEO-1, would cost over 75 percent less than preparing the current EEO-1. But in the face of disbelieving outrage in the first round of the proposal process, the EEOC admitted it was wrong and increased its estimate of burden. However, EEOC’s new estimate of the yearly burden – about $50 million – is still woefully short of the $400 million that the U.S. Chamber of Commerce estimates. And of course, EEOC’s figures are simply assumptions; they are not based on actual data from employers who have to complete the form.

Finally, federal law also requires that the information collected in proposals such as the EEOC’s be kept confidential.  In its original proposal, the EEOC devoted one paragraph to discussing confidentiality, suggesting that since it was never subject to a data leak, the new information would be similarly protected. Again, after facing a spate of incredulous comments, the EEOC now states that the data will not be compromised because it follows federal government confidentiality standards. It must be assumed these are the same standards followed by the OPM, the FDIC, the White House, the Pentagon, and now the NSA, among others. But how well did those standards work? In and of itself, the fact that the EEOC has never been compromised is of little solace. EEO-1 data collected up to this point is really of little practical use but the new data demands are quite different. Salary data and other information could be more appealing to competitors, hackers, or others interested in getting detailed information about U.S. businesses and their employees, which could be misused in a variety of ways.

Criticism of the proposed EEO-1 should not be misconstrued as reflecting a lack of concern for an illegal gender pay gap. But a massive new government data sweep that is unconnected to legal standards for determining pay discrimination – or any other practical purpose, for that matter – will only layer more red tape on job creators, adding nothing to this debate. Fortunately, since it has the final authority to administer the Paperwork Reduction Act, the Office of Management and Budget can determine whether this woefully ill-conceived request can go forward.

Whether the OMB takes that responsibility seriously will be a telling commentary on whether our government works as practically or efficiently as it could – and should.

Camille Olson is a partner of Seyfarth Shaw LLP and the chairwoman of the U.S. Chamber of Commerce’s equal employment opportunity policy subcommittee