New York advances bill requiring employers to report worker race, gender data

Dive Brief:

A New York bill that would require certain employers to report employee race, gender and ethnicity data passed the state senate March 20.
Under S. 636, limited liability companies required to file an EEO-1 report with the U.S. Equal Employment Opportunity Commission would have to submit “substantially similar” information to the New York secretary of state, who would then make the data publicly available on the secretary’s official website.
With the exception of a lone Democrat dissenter, S. 636 passed 41-21 strictly along party lines, according to Legiscan.com. The bill is now with the state assembly for consideration.

Dive Insight:

Transparency, seen as critical to achieving diversity, equity and socially responsible corporate governance, is the impetus behind S. 636, according to a justification provision in the bill.

”[C]ompanies often tout their commitment to diversity, equity & inclusion (DEI), environmental goals, or other causes, but there is little data available to the public the verity these claims,” the provision stated. In addition, “current and prospective employees have an interest in evaluating the DEI practices of employers, but do not have access to the company-wide employee demographic data needed to make such an assessment,” it explained.

“Having this data publicly available creates an environment where we can hold our companies accountable,” the provision points out. Making the information public would also “provide consumers and employees with the data to make good decisions” and “provide investors with the information to deploy capital in a manner in keeping with their values.”

Transparency related to corporate DEI efforts recently received backing from another source. Earlier this month, the U.S. Securities and Exchange Commission said Eli Lilly may not exclude a DEI-related proposal from proxy material for an upcoming annual meeting.

The proposal was submitted by shareholder As You Sow, a Berkeley, Cal.-based advocacy group. It requests that Eli Lilly report to shareholders on the efficacy of the company’s DEI efforts, with metrics on hiring, retention and promotions that include gender, race and ethnicity data.

The SEC rejected Eli Lilly’s argument that its current public disclosures “substantially implement” the data the proposal seeks. The SEC also found the proposal “transcends ordinary business matters because it raises human capital management issues with a broad societal impact and does not micromanage the Company.”

Many business are not required to share such data publicly, but EEOC requires private employers with 100 or more employees and federal contractors with 50 or more employees and contracts of $50,000 or more to annually report data about employee race, gender and ethnicity by job category, according to the agency.

The reports are submitted on the EEO-1 form, which is then used for a variety of purposes, including research, enforcement and self-assessment by employers, according to an EEOC guidance. The EEO-1 data collection for 2022 is scheduled to open in mid-July 2023, according to the EEOC’s EEO-1 web page.

There are no financial penalties for not filing the EEO-1 report, but civil penalties can be severe, an October 2022 blog post by attorney Marina Lyons, a member of Dorsey & Whitney’s employment group, pointed out. For one, the EEOC can obtain a federal court order compelling a company to file the report, which could potentially lead to a contempt charge, Lyons said.

Employers should also be aware that the EEOC is considering whether to reinstate a pay reporting requirement to the EEO-1, Lancer Muchin attorney Elizabeth Rice noted in an August 2022 blog post. The requirement, part of Component 2, was in effect during 2017 and 2018.

HR teams probably have much of the data they need to comply with Component 2, experts told HR Dive in 2019. The pay data reporting process boils down to roughly three steps, a compliance executive said: surveying employees for their demographic information, collecting payroll and hours worked, and reporting the information to the EEOC.

If disparities come to light and can’t be explained by factors such as education and experience, the employer may have to make adjustments, an attorney cautioned.