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OFCCP proposal would require covered federal contractors to electronically submit compensation data as supplement to EEO-1 Report

August 7th, 2014  |  Cynthia L. Hackerott

Covered federal contractors and subcontractors with more than 100 employees would be required to electronically submit an annual “Equal Pay Report” on employee compensation, under a proposed rule announced by the OFCCP on August 6, 2014. The new report would be added as a supplement to the existing EEO-1 Survey reporting requirement. The long-anticipated Notice of Proposed Rulemaking (NPRM) will be published in the August 8, 2014 edition of the Federal Register and open for public comment from August 8 through November 6, 2014. This proposal has been in the works at the OFCCP since 2011, and President Obama signed a Memorandum in April 2014 to expedite the process. A webpage with FAQs and other information on the proposal is available at: http://www.dol.gov/ofccp/EPR.

Proposed reporting requirements. Current regulations require that all employers in the private sector with 100 or more employees, and some federal contractors with 50 or more employees, annually file the EEO-1 Report with the Joint Reporting Committee (a joint committee consisting of the EEOC and the OFCCP). The OFCCP’s proposal would revise its regulations at 41 CFR Part 60-1, which set forth the reporting obligations of covered federal contractors and subcontractors under Executive Order (EO) 11246. Specifically, the proposal would amend the regulation at 41 CFR 60-1.7 to require that:

• employers who file EEO-1 Reports, have more than 100 employees, and a contract, subcontract, or purchase order amounting to $50,000 or more that covers a period of at least 30 days, including modifications, submit two columns of additional information to the EEO-1 Report in a new Equal Pay Report to the OFCCP. Covered employers would submit the following three pieces of information: (1) the total number of workers within a specific EEO-1 job category by race, ethnicity and sex; (2) total W-2 wages defined as the total individual W-2 wages for all workers in the job category by race, ethnicity and sex; and (3) total hours worked, defined as the number of hours worked by all employees in the job category by race, ethnicity and sex.

• covered federal contractors and subcontractors electronically submit the proposed Equal Pay Report using a web-based data tool. The OFCCP states that the web-based portal for reporting and maintaining compensation information will be designed to so that it “conforms with applicable government IT security standards.”  The agency will also establish a process for requesting an exemption to the electronic filing requirement.

• contract bidders make a representation related to whether they currently hold a federal contract or subcontract that requires them to file the proposed Equal Pay Report and, if so, whether they filed the report for the most recent reporting period.

The proposal would also extending existing agency sanctions to federal contractors and subcontractors for the failure to file timely, complete, and accurate Equal Pay Reports, and the representation of compliance.

Goals. The Equal Pay Report is one component of a larger strategy to address the reality that, despite five decades of extraordinary legal and social progress, working women still earn only 77 cents for every dollar that working men earn, the OFCCP says, adding that the pay gap is even greater for African American women and Latinas. To this end, the preamble to the proposed rule states that its goals are:

• Increasing contractor self-assessment of compensation policies and practices, and expanding voluntary compliance with the OFCCP’s regulations, to advance the OFCCP’s mission of ensuring nondiscrimination in employment and decreasing the pay gap between males and females and between people on the basis of race.

• Providing probative compliance information, including data on industry and/or labor market standards, to promote industry-wide deterrence within the federal contractor community and lead to modified compliance behavior in the compensation arena.

• Making data-driven enforcement decisions that support the efficient use of limited enforcement resources. The OFCCP states that it will strategically deploy its resources to focus on conducting compliance evaluations of contractors that are more likely to have compensation discrimination violations.

• Shifting, to the maximum extent possible, compliance evaluation costs from contractors that are likely to be in compliance with OFCCP’s existing regulations prohibiting pay discrimination to contractors that are more likely not to be in compliance.

• Contributing to the stability of working Americans by helping minimize the pay gap and promoting broad societal policy objectives of nondiscrimination and equal pay. The OFCCP anticipates increasing its capacity to identify more violations and obtain prompt remedies through a better-informed scheduling process for the estimated 4,000 compliance evaluations it conducts annually. The agency also asserts that effective anti-discrimination enforcement can promote economic efficiency and growth.

Costs. The cost of the proposed rule would be $684 per contractor establishment or $2,176 per contractor company, according to the OFCCP’s estimates, and the first-year cost of the proposed rule would be $46,250,189, which includes the one-time burden, annual recurring, and annual operations and maintenance costs. The agency asserts that it is avoiding costly new recordkeeping requirements and minimizing to the extent feasible the compliance burden by using existing reporting frameworks contractors already maintain in electronic payroll records, including W-2 earnings, and the longstanding categories and definitions that apply to the EEO-1 Report.

Release of data. Under the proposal, the OFCCP would release aggregate summary data on the race and gender pay gap by industry and EEO-1 category to the public annually as soon as practicable. This data will enable contractors to review their pay data using the same metrics as the OFCCP and take voluntary compliance measures, the agency asserts. Moreover, the OFCCP plans to provide training and technical assistance to contractors that will explain the standards and how contractors could use them to conduct their self-assessments. This information could reflect the industry and/or labor market, or some other relevant aggregate grouping of the data received by the OFCCP.

In the OFCCP’s view, the publication of this data for contractors to use would significantly promote deterrence and voluntary compliance with their obligations under EO 11246. Further, the agency claims that the advancement of the societal goals of nondiscrimination in the workplace, and closing the pay gap, are the by-products of deterrence and compliance. Therefore, the agency is interested in comments on the cost to contractors of conducting these self-assessments of the data provided pursuant to the Equal Pay Report against published industry standards.

In addition, the preamble of the proposal asserts that the disclosure of compensation data summarized at the industry level will enable contractors to assess their compensation structure along with those of others in the same industry, and provide useful data to current and potential employees. The OFCCP reasons that some of these employers will not want to be identified as having pay standards that are significantly lower or different from those of their industry peers, since this may encourage valuable employees to consider moving to other employers, or discourage applicants who see that higher paying jobs may be available elsewhere. Employers do not want to be known as one of the lowest paying members of their industry, and may voluntarily change their pay structure, the OFCCP believes.

Confidentiality concerns. According to an OFCCP “Fact Sheet” on the proposal, the Equal Pay Report would not collect any individual pay information or any information on factors such as education or experience that may affect pay. The agency states it will protect the confidentiality of the Equal Pay Report data to the maximum extent permitted under existing law.

IPEDS report. The OFCCP is also interested in amending the regulation to 41 CFR 60-1.7 by adding a requirement that employers who file the Department of Education’s Integrated Postsecondary Education Data System (IPEDS) report, have more than 100 employees, and have a contract, subcontract, or purchase order amounting to $50,000 or more that covers a period of at least 30 days, including modifications, also file the OFCCP’s proposed Equal Pay Report. Thus, the OFCCP is particularly interested in comments related to the need to collect additional compensation data from postsecondary academic institutions in light of the scope of their existing reporting obligations with the U.S. Department of Education.

Background. This proposal has been in the OFCCP regulatory pipeline since August 10, 2011, when the agency OFCCP published an Advance Notice of Proposed Rulemaking (ANPRM) in the Federal Register (76 FR 49398 – 49401) regarding its consideration of the development of a tool that would be designed to effectively identify contractors that are likely to violate Executive Order 11246. The ANPRM did not contain the proposed tool; rather, the agency sought stakeholder comments on issues relating to the scope, content, and format of the tool to ensure that it is an effective and efficient data collection instrument. Over 2,400 comments were submitted prior to the closing of the ANPRM comment period on October 11, 2011.

Noting that this tool was in development at the OFCCP, President Obama, on April 8, 2014, signed a Presidential Memorandum (Memorandum) instructing the Secretary of Labor to establish new regulations requiring federal contractors to submit to the Department of Labor (DOL) summary data on compensation paid to their employees, including data by sex and race (79 FR 20751- 20752). Enforcement of equal pay laws is “impeded by a lack of sufficiently robust and reliable data on employee compensation, including data by sex and race,” the Memorandum explains, adding that the President’s National Equal Pay Task Force identified this lack of data as a barrier to closing the persistent pay gap for women and minorities.

The Memorandum directed the Secretary of Labor to issue a proposal on these new regulations within 120 days of April 8, 2014. On May 5, 2014, the OFCCP submitted the NPRM to the Office of Budget and Management (OMB) for review, and on August 5, 2014, the OMB approved it for Federal Register publication.

According to the OFCCP, the newly announced NPRM reflects:

(1) extensive stakeholder input collected prior to and during the 2011 ANPRM;

(2) the specific criteria set forth in the Memorandum to maximize the efficiency and effectiveness of the OFCCP’s enforcement programs, minimize the burden placed on federal contractors, and use data to encourage greater voluntary compliance with the law; and

(3) additional stakeholder input collected during listening sessions held following the release of the Presidential Memorandum.