Judge reinstates Obama-era pay-reporting rule
"I imagine there are a lot of questions being posted and everyone is trying to figure out what this means,” one labor and employment lawyer says.
A Washington judge’s order reinstating an Obama-era rule that requires greater disclosure of private workforce pay data has put new pressure on employers and management-side lawyers, as a deadline to comply with the regulation approaches and uncertainty lingers over whether the government will challenge the ruling.
The Trump administration failed to provide sufficient reasoning to block enforcement of the new pay-data reporting rule, U.S. District Judge Tanya Chutkan of the District of Columbia said in her decision this week. The regulation, which requires disclosure of pay information based on gender, race and ethnicity, was adopted by the U.S. Equal Employment Opportunity Commission as one measure to spotlight and combat pay disparities.
Chutkan’s order means that employers with more than 100 workers must comply with the new reporting requirement by May 31. The EEOC has not said whether the agency will try to extend the deadline, and the U.S. Justice Department has not indicated whether the government will try to quickly appeal the ruling. The National Women’s Law Center was a plaintiff in the case, filed in 2017 after the Trump administration scuttled the pay-data rule.
Labor and employment specialists are now faced with advising corporate clients whether and how to comply with the reinstated rule, which companies had long resisted as burdensome and potentially an open invitation for lawsuits confronting alleged workplace disparities.
“Right now, my advice for employers is to hit pause,” said Guy Brenner, a Proskauer Rose labor and employment partner in Washington. “No one thought they would have to submit this report and this is not an insignificant burden. I imagine there are a lot of questions being posted and everyone is trying to figure out what this means.”
U.S. government lawyers who defended the block on the new rule had cautioned Chutkan against any reinstatement, saying such a move “could upset the current expectation of filers, who may not be aware of this litigation nor its potential impact on their obligation.”
Chutkan said the government’s “speculation is unsupported by the record.” The judge said the revised pay data collection “had been in place for almost a year by the time it was stayed.” Companies, the judge said, “were on notice that the stay could be withdrawn at any time.”
Jenny Yang, a former EEOC chair during the Obama administration, said the revised form was crafted with the aim of encouraging employers to set compensation practices in a job-specific way and to help the agency fight a culture of secrecy about how much employees are paid.
“Pay data collection is long overdue,” Yang said. “We would have had the second year of data by the end of March if there hadn’t been a delay in the process.”
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In the backdrop of the case is an increasing spotlight on equitable pay in the United States, where reports show women make 80 cents on the dollar to men in comparable positions. There have been calls for increased transparency from federal, state and local lawmakers in recent years to address wage gaps.
The business community pushed back against the new pay-data reporting requirements, arguing they were onerous and would not properly address why there were gaps. Companies in recent years, in part sparked by the #MeToo movement, have begun to take on pay equity analyses and other efforts.
Klair Fitzpatrick, a Morgan, Lewis & Bockius employment partner in Philadelphia, said clients were preparing to comply with the changes, even though they believe they impose “burdensome requirements and have the potential to be misused.”
Fitzpatrick said the firm has been pushing companies to conduct pay equity studies and take into account how the government will look at their pay, as well as other factors such as what influences the pay.
“It’s really in an employer’s best interest to be proactive before the government asks for data,” Fitzpatrick said. “We’re looking at the bigger picture: What does my employment population look like and where do we have issues? The #MeToo movement and other efforts have propelled employers to focus on these issues.” She added: “I’m not saying it’s going to be easy.”
Jay Patton, a shareholder at Ogletree, Deakins, Nash, Smoak & Stewart, said employers need clarity and that the May 31 reporting deadline would create compliance headaches for companies.
“To have employers do it now would be a major change and cause serious restructuring in how data is kept and collected for the filing process,” he said.
Meanwhile, there are imminent changes at the EEOC itself, as the Trump administration’s nominee to lead the agency recently cleared a committee vote and is awaiting confirmation. The nominee, Janet Dhillon, has indicated support for pay-data collection, but perhaps not in the revised form that was just reinstated.
Littler Mendelson shareholder James Paretti Jr. in Washington, a former senior counsel at the EEOC, said the agency is scrambling. The revised reporting requirements included expanded data points that mean more information for both companies—and the agency—to process.
“Employers have relied on OMB’s stay and have not put resources into tracking the information,” he said. “EEOC similarly has not prepared their infrastructure.”
Erin Connell, an employment partner at Orrick, Herrington & Sutcliffe in San Francisco and co-chair of the firm’s pay equity task force, suggested it would be “reasonable to push back the deadline and address the moving pieces.”
Regardless of whether or not the new pay data rules are implemented now, or later this year, management attorneys said the spotlight on compensation equality won’t be soon to fade. State and local governments have ramped up their own rules in recent years, and numerous class actions will keep attention on complaints of disparities. Companies are also feeling greater pressure from shareholders and boards of directors.
“We will see this issue surface in some form or another,” said Fisher & Phillips partner Cheryl Behymer.
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