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Finally, More Regulations - OFCCP Proposes Requirement For Contractors To Submit Annual Compensation Reports

August 7, 2014

By Michael G. McClory

The collective groan you heard yesterday morning came from the federal contractor and subcontractor community. The U.S. Department of Labor’s Office of Federal Contract Compliance Programs announced that it plans to require contractors and subcontractors to annually file an Equal Pay Report.

In tomorrow’s Federal Register OFCCP will publish a notice of proposed rulemaking regarding the planned new requirement. OFCCP is trying to pass this off as a relatively routine request for information that imposes a de minimis added burden on contractors.

“This notice of proposed rulemaking (NPRM) would amend the regulation by adding a requirement that certain Federal contractors and subcontractors supplement their Employer Information Report (EEO-1 Report) with summary information on compensation paid to employees, as contained in the Form W-2 Wage and Tax Statement (W-2) forms, by sex, race, ethnicity, and specified job categories, as well as other relevant data points such as hours worked, and the number of employees.”

The Bullard Edge disagrees. This is not a routine request and it would substantially impact contractors. Here are four observations about the 151-page Equal Pay Report proposal.

First, OFCCP correctly states that the new report is one that only a “subset” of contractors/subcontractors will be obligated to file (but, see item three below). That subset consists of contractors/subcontractors that already must file an EEO-1 report, have more than 100 employees, and have a contract or subcontract valued at $50,000 or more.  

Second, OFCCP is marketing the fact that it is not proposing to collect individual employee compensation data through this report. Rather, it would ask contractors to submit data reflecting total W-2 earnings for all workers in each EEO-1 job category. The agency also would ask for this aggregate information to be divided by race, ethnicity, and sex. Contractors will understandably be concerned about the confidentiality of any data released to OFCCP; in the hands of a competitor, aggregate data by job category, when combined with hours worked for that category, can reveal a great deal about a contractor’s pay structure.

Third, OFCCP explains that it intends to use this information to develop summary industry standards information, which it will publish. The agency contends that this summary information will have broad utility.

“The published data will be made available to support and encourage genuine, in-depth, contractor self-assessments of their compensation policies and practices. OFCCP believes that the publication of data for contractors to use would significantly promote deterrence and voluntary compliance with their obligations under Executive Order 11246. The advancement of the societal goals of nondiscrimination in the workplace, and closing the pay gap, are the by-products of deterrence and compliance.”

Reading between the lines of this passage, The Bullard Edge believes that the publication of summary industry information will lead to more wage claims being pursued by individuals. Summary industry information would minimize considerations related to merit (such as training, experience, and performance) and related to the circumstances of individual employers. Nevertheless, individuals are likely bring pay discrimination claims asserting that their individual pay is below industry standards and attributing that difference to considerations of race, ethnicity, or gender. We foresee that this data might also be used to support claims claims against non-contractors.

Fourth, related to this, The Bullard Edge also believes that OFCCP will use the reports to identify contractors for audit.  The agency will compare contractor reports against summary industry standard information and then select for audit those contractors with pay deviations from the industry standard (by an as yet undisclosed amount).

The OFCCP developed and issued this notice of proposed rulemaking at the instruction of President Obama. Following the publication of the notice in the Federal Register tomorrow (August 8, 2014), there will be a 90-day period (through November 6, 2014) for the submission of public comment

The Bullard Edge will continue to follow the progress of this proposed rule. We are also interested in hearing your reaction.

Best regards,

The Bullard Edge

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About the Editor

Be informed, engaged and sometimes entertained

Michael G. McClory joined Bullard Law in 1997. He likes talking about employment law, debating it, proposing revisions to it and even complaining about it.  Perhaps so they could get some work done, his colleagues at Bullard Law suggested that he start a blog about employment law issues (broaden the conversation). And that is how this blog came to be. 

The blog is a forum for discussion about employment, labor and benefits law - new laws, proposed laws, case decisions and social events. Mike will share his views and invites you to respond.  Reader feedback is valuable and will be featured from time to time. Join the discussion with Mike and sign up for the Bullard Law Blog today.

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