Labor & Employment Law Update

The Equal Employment Opportunity Commission (EEOC) recently proposed eliminating the requirement for covered employers to provide workforce demographic information through the annual EEO-1 Report. If finalized, the change would reduce a longstanding federal reporting obligation for many employers.

However, employers should not assume that elimination of the report will make workforce demographic information irrelevant. To the contrary, employers may have good reasons to continue collecting and analyzing this information, even if they no longer have to submit it to the EEOC.

Federal, state, and local anti-discrimination laws would remain in place and workforce demographic information can continue to serve as an important tool for identifying potential risks, conducting compliance analyses, and evaluating workplace practices.

EEOC Proposes Eliminating EEO-1 Reporting

The EEO-1 Component 1 Report currently requires covered private employers to provide workforce demographic information categorized by factors including race, ethnicity, sex, job category, and employment location. Generally, private employers with 100 or more employees are covered, as are certain federal contractors with at least 50 employees.

The EEOC’s proposed rule would rescind the regulations requiring the EEO-1 and several other demographic reports, as well as associated recordkeeping and record-preservation requirements.  Importantly, the proposal is not yet final. Employers should continue preparing for and complying with current EEO-1 requirements unless and until the regulations change.

Should Employers Continue Collecting Demographic Data?

In many cases, yes.

The EEO-1 serves a federal reporting function, but the underlying information can serve other legitimate purposes. Employers can use workforce demographic data to identify potential disparities in hiring, compensation, promotions, terminations, and other employment decisions.

For example, an internal review may reveal that employees within a particular demographic are being promoted at significantly lower rates than similarly situated employees. That information could prompt the employer to investigate whether there is a legitimate explanation or if further review is warranted.

The U.S. Chamber of Commerce made a similar point in comments submitted to the EEOC, noting that workforce demographic data can remain useful for compliance, risk management, and identifying employment-related trends even if EEO-1 reporting is eliminated.

Benefits of Workforce Demographic Data for Employers

Employers may wish to continue collecting workforce demographic information for several reasons:

Compliance and Risk Assessment

Regular demographic data reviews can help employers identify potential disparities before they become litigation or administrative claims. Understanding trends in hiring, compensation, promotion, and termination allows employers to address concerns proactively.

Pay Equity Analysis

Eliminating a federal reporting requirement does not eliminate the underlying legal prohibitions against compensation discrimination. Demographic information can be an important component of meaningful pay equity analyses and broader compensation reviews.

Defending Employment Decisions

The same information that can help identify potential problems can also help employers evaluate and defend discrimination allegations. Historical workforce data may provide context for employment decisions and help demonstrate legitimate, nondiscriminatory business reasons.

State and Local Compliance Requirements

Multi-state employers should evaluate whether state or local laws impose separate reporting, recordkeeping, or pay equity obligations. The EEOC’s proposal itself recognizes the need to consider the relationship between federal reporting requirements and state requirements.

Considerations Before Collecting Demographic Data

If employers choose to continue collecting demographic information, they should do so with clear compliance and business purposes in mind.

Employers should consider:

• Who has access to the data;
• Whether the information should be maintained separately from personnel records;
• How long the information should be retained;
• Whether certain demographic analyses should be conducted at the direction of counsel;
• How the employer will protect confidential information; and
• The legitimate business or compliance purpose for the information collection.

Employers should also ensure that any internal analyses lead to appropriate follow-up, investigation, or corrective action where necessary.

Employer Action Items

The existing reporting framework has not yet been eliminated, but employers can use this development as an opportunity to review their broader approach to workforce demographic data. In particular, employers should:

1. Continue complying with current EEO-1 requirements until the legal requirements actually change.
2. Determine what demographic information the organization currently collects and why.
3. Identify any applicable state or local requirements.
4. Evaluate whether the organization uses demographic data for pay equity, promotion, hiring, or other compliance analyses.
5. Review data access, confidentiality, and retention practices.
6. Consult employment counsel before eliminating existing collection or retention practices.