Employers Should Act Now to Avoid Potential Data Minefields: The OFCCP’s New Proposed Rules for Collecting Compensation Data from Federal Contractors

Money Bag

On August 8, 2014, the Office of Federal Contract Compliance (“OFCCP”) proposed new annual reporting requirements for federal contractors and subcontractors.  The proposal requires additional pay information and will become effective in early 2015, unless the OFCCP decides to amend them.

In April of this year, we posted that President Obama had signed a memorandum and executive order designed to address race and gender-based disparities in compensation. The memorandum directed the Department of Labor (“DOL”) to propose a rule within 120 days requiring federal contractors and subcontractors to submit “summary data” on employee compensation by race and sex to the DOL using a “tool” to be developed by the agency. The executive order signed along with the memorandum bans federal contractors from retaliating against employees for discussing their compensation with each another in an effort to “enhance the ability of Federal contractors and their employees to detect and remediate unlawful discriminatory practices” in pay.

Last week, on August 8, 2014, the DOL published its proposed rule implementing this directive.  The proposed rule requires federal contractors and subcontractors to submit an annual Equal Pay Report on employee compensation to the OFCCP.  If implemented, this new requirement will apply to employers who file EEO-1 Reports, have 100 or more employees, and have a federal contract or subcontract of $50,000 or more for at least 30 days.

The new Equal Pay Report is proposed to require: the total number of employees within a particular EEO-1 job category by race, ethnicity and sex; total individual wages for all employees in the job category by race, ethnicity and sex; and total number of hours worked by all employees in the job category by race, ethnicity and sex.  Based on the submitted data, the OFCCP will then publish summary pay data by industry and EEO-1 job category.  In addition to review by the OFCCP, this will provide employers the ability to assess their own pay data to take voluntary compliance measures.

So what does this mean for employers who do business with the federal government?  Aside from the burden of compliance, the DOL has indicated that it intends to use the compensation data submitted by employers to establish compensation standards and for enforcement purposes to evaluate selected employers whose data may suggest possible pay disparities from the standards based on gender or race.  In the meantime, employers should take this time to partner with their legal counsel to review their compensation practices and preemptively ascertain and resolve potential compensation disparity issues before the rule becomes final in early 2015.

Moreover, employers who want to comment on the proposed rule and its requirements can submit comments on the DOL’s website until November 6, 2014.  The DOL expects to issue a final rule in the first half of 2015.