Labor & Employment Law Daily OMB’s stay of the EEOC’s revised EEO-1 form vacated
Thursday, March 7, 2019

OMB’s stay of the EEOC’s revised EEO-1 form vacated

By Kathleen Kapusta, J.D.

“The government’s deficiency is not that it failed to explain OMB’s ‘reasoning,’ but that OMB’s reasoning lacked support in the record,” the court stated, finding that vacatur was the appropriate remedy.

Declaring “illegal” the Office of Management and Budget’s stay of the EEOC’s pay data collection, a federal court in the District of Columbia found that OMB’s deficiencies were substantial and that it was unlikely the government could justify its decision on remand. Vacating the stay, the court granting summary judgment to the plaintiffs in this lawsuit—the National Women’s Law Center and the Labor Council for Latin American Advancement—and ordered that the previous approval of the EEOC’s revised EEO-1 form “shall be in effect” (National Women’s Law Center v. Office of Management and Budget, March 4, 2019, Chutkan, T.).

In 2010, the EEOC joined other agencies to identify ways to improve enforcement of federal laws prohibiting pay discrimination. Six years later, in accordance with procedures established by the Paperwork Reduction Act of 1995 (PRA), the agency published a Federal Register notice (the 60-day notice) announcing its intent to seek a three-year approval from OMB of a revised Employer Information Report (EEO-1) data collection. The notice explained that the revised data collection would have two components: Component 1 would collect data about employees’ ethnicity, race, and sex, by job category (the same date already being gathered by the EEO-1 form) and Component 2 would collect data on employees’ W-2 earnings and hours worked.

Second notice and OMB approval. The notice anticipated that employers would provide the information either through online filing or by uploading an electronic file and the EEOC estimated that the new pay data collection would increase the reporting time per filer by 3.4 hours. On July 14, 2016, the EEOC published a second Federal Register notice (the 30-day notice) seeking a three-year approval from OMB of a revised EEO-1 data collection. The EEOC estimated that the addition of Component 2 would increase the filing cost for each EEO-1 filed by $416.58. OMB approved the proposed collection on September 29, 2016.

The EEOC subsequently released an instruction booklet along with information about the revised EEO-1, including data file specifications for employers who planned to file through data upload. The data file specifications included a sample EEO-1 form for pay data collection and a “data file layout” form.

Stay. A little less than a year after OMB’s approval, the Office of Information and Regulatory Affairs (OIRA) administrator sent a memo to the EEOC stating that OMB had decided to initiate a review and stay of the EEOC’s new collection of pay data under Component 2. The memo directed the EEOC to publish a notice in the Federal Register announcing the stay but “confirming that businesses may use the previously approved EEO-1 form in order to comply with their report obligations for FY 2017.”

The plaintiffs subsequently sued the OMB and others alleging that they were injured by the stay. The defendants moved to dismiss and both parties filed cross-motions for summary judgment.

Standing. Addressing a challenge to the plaintiffs’ standing, the court first found that while neither had any claim to informational standing, under D.C. Circuit precedent—specifically People for the Ethical Treatment of Animals v USDA (PETA) and Action Alliance of Senior Citizens of Greater Philadelphia v. Heckler—they had organizational standing. They showed the loss of pay data caused a “concrete and demonstrable injury” and their declarations established that they would have used the pay data in their publications and as part of their public education and advocacy campaigns. Further, they showed that they used their resources to counteract the harm caused by the stay of the data collection.

Pointing to the EEOC’s statement that it expected to periodically publish reports based on aggregated EEO-1 data collected from Component 2, the court found the plaintiffs demonstrated causation and redressability. And while the government argued it could not have caused the plaintiffs to incur costs because the EEOC never before collected Component 2 pay data, “the baseline for measuring the impact of a change or rescission of a final rule is the requirements of the rule itself, not the world as it would have been had the rule never been promulgated,” the court explained, noting further that this argument was also inconsistent with both PETA and Action Alliance, where the D.C. Circuit found injury in fact even though the plaintiffs claimed an entitlement to information to which they previously did not have access.

Also rejected was the government’s argument that the plaintiffs lacked standing to challenge a decision rendered in the context of an informal adjudication to which they were not a party. Noting that the memo relieved covered employers from their obligations to provide Component 2 pay data in the future, and that the EEOC’s Federal Register notice did the same, the court found the government supplied no precedent holding that an OMB determination under the PRA is considered an adjudication, “and this court will not set a new course.”

Final agency action. The government also argued that OMB’s decision to reconsider and stay the EEOC’s collection of pay data was not a final agency action and thus was not subject to judicial review. But the decision, said the court, marked the consummation of the agency’s decision making process. Nor did OMB have to review and stay the data collection. Further, before the stay, covered employers were legally obligated to submit the Component 2 pay data to the EEOC by March 31, 2018, and by eliminating this mandatory requirement, the stay created legal consequences for the employers no matter whether OMB ultimately decided to approve or disapprove the pay data.

The government’s also argued that because the stay did not directly affect the plaintiffs’ rights or obligations, they did not have any legal right to the pay data the EEOC would have collected. But the correct test, said the court, asks whether the stay has legal consequences, not whether it affects the plaintiffs’ legal obligations. Noting that the defendants failed to account for the fact that this case involves the interplay between the OMB and the EEOC, and by staying the EEOC’s collection of information, OMB effectively stayed its own prior approval of the collection—an approval that was granted only after two rounds of notice and comment—the court concluded that “If such disapproval would have been judicially reviewable, it does not make any sense that OMB could evade judicial review by first approving the collection and then staying it.”

OMB regulations. Under its own regulations, observed the court, OMB may review a previously approved collection of information only when “relevant circumstances have changed or the burden estimates provided by the agency at the time of initial submission were materially in error. And if either requirement is met, it may stay a prior approval of a collection of information not contained in a rule, but only for “good cause” shown and “after consultation with the agency.” And here, it did not show that circumstance had changed, that the burden estimate provided was materially in error, or good cause.

Rings hollow. While OMB argued that the data file specifications for employers to use in submitting EEO-1 data were not contained in the Federal Register notices as part of the public comment process or outlined in the supporting statement for the collection of information, the court pointed out that both EEOC notices described in detail the information it proposed to collect. Further, the 30-day notice explicitly stated that the EEOC would post online the new data file specifications as soon as OMB approved the information collection and the 60-day notice directed employers to a website with sample data collection forms. “Plainly,” said the court, “OMB and employers expected some file specifications, so OMB’s assertion that anyone was caught off guard by the mere posting of data file specifications rings hollow.”

The only “changed circumstance” alleged by OMB was the release of the data file specifications and the court found this far from a “changed circumstance” in any meaningful sense. There was simply no changed circumstance as the EEOC proceeded exactly as planned and as OMB had approved.

No good cause. No did OMB demonstrate good cause for the stay as it did not explain in any substantive way why it believed the revised EEO-1 was contrary to PRA standards. Further, OMB’s stated reason when issuing the stay also conflicted with its prior findings that the EEOC’s data collection had practical utility, was designed to minimize the burden on reporting employers, and provided adequate privacy and confidentiality protections, said the court, noting that OMB failed to explain these inconsistencies.

Arbitrary and capricious. The agency’s actions in staying the collection of Component 2 was also arbitrary and capricious as its decision totally lacked the reasoned explanation required by the APA. And while the government relied on four letters received after the posting of the file specifications, which expressed concern about the lack of adequate notice and comment, for support of its claim that OMB’s decision to stay the EEOC’s collection of Component 2 information was a reasonable interpretation of the regulations and supported by the record, the memo did not indicate that OMB relied on the letters or even took them into consideration. Further, one of the letters did not even discuss the data file specifications and the others did not provide any analysis or conclude that the specifications increased the burden on EEO-1 filers. In addition, the court observed, the government omitted mention of the comments OMB received in support of the data file specifications.

Significant formatting changes. As to the government’s claim that Component 2 required significant formatting changes, the court noted the memo did not reach that conclusion. And even if OMB had relied on a finding of “significant formatting changes” at the time of the stay, its conclusion would have lacked analytic and evidentiary support. The government’s position rested on hyper-technical formatting changes that have no real consequences for employers, said the court, noting that while there may be instances when formatting changes could be burdensome, “that is not the case here.”

Further, OMB and the regulated entities knew what the formatting would look like before OMB gave its approval to the Component 2 collection, and the government failed to demonstrate any likelihood that the data file specifications meaningfully increased the burden on employers. “Indeed,” said the court, “neither the Rao Memorandum nor the administrative record as a whole demonstrates that before issuing its stay, OMB ever analyzed the data file specifications in an effort to determine whether they meaningfully changed the burden of collecting Component 2 information.”

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