A federal judge in the District of Columbia has ordered that the pay data collection component of EEO-1 reports, which never took effect, be restored.

Background

The pay data survey, proposed in early 2016 during the Obama Administration, would require employers to report in their annual EEO-1 reports the number of employees in 12 “pay bands” in each of the 10 EEO-1 categories. (That’s a hundred and twenty “bands.”) The federal Office of Management and Budget initially approved the revised EEO-1 Report form that would have allowed employers to provide this information.

The requirement to submit pay data was to apply to employers with 100 or more employees, and to federal contractors with 50 or more employees. To make it easier for employers to comply with the requirement, the EEO-1 filing deadline of September 30, 2017, was moved to March 31, 2018 (with reports to be due on March 31 every subsequent year).

However, after the election, in August 2017, the Office of Information and Regulatory Affairs, a branch of the Office of Management and Budget, stayed the requirement that employers provide compensation data. According to a memorandum from Neomi Rao, Administrator of the OIRA, to Victoria Lipnic, Acting Chair of the Equal Employment Opportunity Commission, the EEOC could continue to use the new form, but only to collect the “traditional” EEO-1 information (the number of employees by race, sex, and ethnicity in each of the 10 EEO-1 categories).

(Rao has since been confirmed to serve as a judge on the U.S. Court of Appeals for the District of Columbia Circuit, filling the seat was vacated when Brett Kavanaugh became a Supreme Court Justice.)

Employers submitted only the basic information in March 2018, and were expecting to do the same in 2019. (The 2019 EEO-1 filing deadline has been extended to May 31, 2019, because of the government shutdown.)

Meanwhile, the National Women’s Law Center and the Labor Council for Latin American Advancement had filed suit in the District of Columbia against the OMB, the OIRA, and the EEOC, and their directors at the time, alleging that the pay survey component of the EEO-1 reports was unlawfully suspended. On March 4, 2019, U.S. District Court Judge Tanya Chutkan ruled in favor of the plaintiffs.

Judge Chutkan’s order in National Women’s Law Center v. Office of Management and Budget nullified the stay, which presumably means that the pay survey reporting requirement is back in effect. As of March 11, 2019, the EEOC had not yet issued a statement about the decision or indicated how it intends to proceed.

The court’s decision

After finding that the two plaintiffs had standing to sue and that the stay was, in effect, a “final agency action” that could be subject to legal challenge, Judge Chutkan found as follows:

• The OMB violated its own regulations in reviewing the pay data collection requirement after having previously approved it. According to the court, once the OMB approves proposed requirements, it can undertake a review only if “relevant circumstances have changed or the [regulatory] burden estimates provided . . . were materially in error.” The court found that neither of these requirements was met.

• The OMB also violated its own regulations in issuing the stay. The OMB can stay a previously approved action only “for good cause shown” and “after consultation with the agency,” in this case the EEOC. The court found there was no good cause shown for the stay.

• The OMB’s stay was arbitrary and capricious because it was not supported by a reasoned analysis. Although the OMB contended that the data file specifications, issued after the OMB’s 2016 approval, were the primary reason for the subsequent review and stay, the court found that the OMB failed to consider comments supporting the requirement while considering objections to the requirement that did not address data file specifications at all. Even the Rao Memorandum said only that the data file specifications “may” increase the regulatory burden for employers.

What this means for employers and their counsel

The court’s decision leaves a number of questions unanswered. Should employers submit pay data with their 2018 EEO-1 Reports (currently due May 31, 2019)? Or can they wait until their 2019 EEO-1 Reports are due (currently March 31, 2020)? Since the court’s ruling means that the stay, in effect, never existed, will employers have to supplement their 2017 EEO-1 Reports?

Of course, it is possible that the government defendants will appeal Judge Chutkan’s decision to the D.C. Circuit. The EEOC currently lacks a quorum, but if President Trump’s nominee, Janet Dhillon, is confirmed, the EEOC will have a quorum again and can decide whether to issue new regulations rescinding the requirement (after notice and comment), or leaving the requirement in place.

Attorneys who represent employers should continue to monitor developments and advise their clients accordingly.

March 13, 2019/by Labor