U.S. employers once again face the possibility of being required to report pay data to the Equal Employment Opportunity Commission (EEOC). The commission may introduce a proposed new rule on this in early 2025.

But despite past challenges to the rule and significant uncertainty surrounding its eventual success, it may behoove employers to start preparing now, experts suggest.

Webinar: A Path to Disclosure: Embedding Pay Equity into Your Sustainability Reporting

The rule — which was similarly proposed in 2016 and ultimately failed — would require all employers subject to EEO-1 reporting to supplement the demographic data they already report with data on pay and hours worked, broken down by gender, race and ethnicity, and job category.

The new iteration of the rule could also include pay data categorized by sexual orientation and/or gender identity, following the Supreme Court’s extension of Title VII protections to those classes, said Greg Hoff, assistant general counsel and director of labor and employment policy at the HR Policy Association.

The rule, intended to help close pay gaps, would serve as an incentive for employers to analyze and address pay disparities, in addition to fortifying the EEOC with data that could be used for enforcement.

The EEOC first proposed a pay data collection rule in 2016 during the Obama administration. The following year, the Office of Management and Budget under the Trump administration halted the initiative, but it was revived by a court order in 2019. However, after a short collection period that fulfilled the requirements of the court order, the EEOC chose to stop collecting the data.

The EEOC later commissioned a study by the National Academies of Sciences, Engineering and Medicine, which noted that a substantial portion of the data collected contained errors and was unreliable, but that, in general, this type of data could be useful if the collection process were improved.

With the proposal once again on the table, here’s what employers should know.

Employer Response to Rule

Gathering and reporting pay data in the format required by the rule could pose a significant administrative burden on businesses, Hoff said.

“This is a huge compliance lift in terms of time and money for the employer,” he said. “It takes a lot of different moving parts to collect all this data, and it’s not easy to collect it in the way the EEOC wants it collected. For instance, job types are defined by the EEOC and not the employer, and not everyone fits into those neat little categories.”

Additionally, the way the data is gathered may not provide an option to share context on pay gaps that are not related to discriminatory practices, he said.

There was significant employer outcry about this rule when it was first proposed, and that can be expected again, said Sheila M. Abron, partner and co-chair of the affirmative action and federal contractor practice group at Fisher Phillips.

“Those in opposition to the reporting felt this was an overreach, and the information would not be presented in a meaningful and usable way,” Abron said.

The EEOC has indicated it will seek public comment during the process of proposing and potentially instating the pay-collection rule — which offers an opportunity for employers to share concerns about the rule, Hoff said.

Hoff also recommended employers keep an eye on any litigation arising in connection to the rule. Challenges to the rule may carry more weight now following the Supreme Court’s overturning of the Chevron doctrine, which more easily enables courts to reverse agency rules.

“I think the EEOC will face an uphill battle in court,” he said.

Effect of the Presidential Election

As the EEOC anticipates releasing a proposed rule in January 2025, the results of the 2024 presidential election may play a role in the rule’s eventual outcome.

“[The election] is likely going to be a big factor,” Abron said. “The prior pay data reporting was born during one administration and then challenged and withdrawn during the following administration.”

However, Hoff suggested if the Republican party emerged victorious in November, it is not a guarantee the rule will be immediately shot down, as the EEOC will retain a Democratic majority until at least 2026, meaning employers can expect the rule will be proposed early in 2025, no matter what.

The full rule-making process is a long one, with several potential barriers to final success, but Hoff reiterated that litigation likely would be the main decider, regardless of who is president.

Start Preparing Now

Businesses can start preparing now by internally reviewing their employee compensation and conducting a pay equity analysis.

They also should ensure their internal record-keeping of demographic and job categories aligns with EEOC reporting categories to ease the potential reporting process down the road, Abron said.

Learn: Performing a Pay Equity Analysis

Addressing pay gaps now — even when it’s challenging — will likely serve employers well, whether or not the EEOC rule moves forward, Hoff said, given the continually increased emphasis on state pay transparency laws. Some states, such as California, already have pay data collection requirements in place.

“We’re a long way from this EEOC pay data collection happening — at least a year — and there is a chance it never ends up actually happening,” Hoff said. “As far as what has a more realistic chance of impacting practices, state pay transparency laws are what you should be looking at.”

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