The "Equal Pay Report" - Yet Another New Regulation Requiring Compliance by Federal Contractors

Foley & Lardner LLP

The Equal Pay Report – yet another obligation being imposed on federal contractors is coming to you soon. The Office of Federal Contract Compliance Programs (“OFCCP”) released information on another new rule that will require all federal contractors and subcontractors to prepare and file a summary compensation report on an annual basis. The Proposed Rule was published in the Federal Register on August 8, and allows for a 90-day comment period from the public. (Comments may be submitted on line.) The Proposed Rule will apply to companies that file EEO-1 reports, have more than 100 employees, and hold a federal contract or subcontract of $50,000 or more.

The Equal Pay Report will require covered companies to electronically file, via a web-based portal designed by the OFCCP, three pieces of information regarding employee compensation: (i) the total number of workers within each specific EEO-1 job category set out by race, ethnicity and gender; (ii) the total IRS Form W-2 wages, defined as the total individual W-2 wages for all workers in the job category, set out by race, ethnicity and gender; and (iii) the total hours worked, defined as the number of hours worked by all employees in the job category, set out by race, ethnicity and gender. (The Equal Pay Report should not require the submission of any individual pay information – only collective.) According to the OFCCP, this information will allow it to direct its enforcement activities toward federal contractors whose summary data suggests potential pay violations.

The OFCCP has suggested that the Equal Pay Report will be one piece of its broader strategy intended to combat the current disparity in pay suffered by women and persons of color. The Proposed Rule was created in response to President Obama’s Presidential Memorandum – Advancing Pay Equality Through Compensation Data Collection – a directive to the Secretary of Labor to specifically develop a rule requiring federal contractors and subcontractors to submit to the Department of Labor summary compensation data. According to the Presidential Memorandum, “Effective enforcement of [the federal laws prohibiting pay discrimination], [has been] impeded by a lack of sufficiently robust and reliable data on employee compensation, including data by sex and race.”

Unfortunately, as anyone who has been through an OFCCP compensation investigation knows, the type of summary data required by the Equal Pay Report is not sufficient to identify illegal pay discrimination, because the summary data fail to take into account regular factors that can affect compensation such as education, experience, time in position, performance, and a number of other relevant concerns. Additionally, the EEO-1 categories by which the data are summarized are extremely broad and include any number of varying types of positions with significantly different duties and responsibilities. Use of the Equal Pay Report to direct investigations may thus be no better than using chicken wire to separate grains of sand, but it appears that will not stop OFCCP from trying anyway.

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