Tag Archives: compensation tool

OFCCP Releases Proposal Requiring Contractors to Disclose Compensation Data Annually

On August 6, 2014, the Office of Federal Contract Compliance Programs (“OFCCP”) released a Notice of Proposed Rulemaking requiring federal contractors and subcontractors with 100 or more employees to submit an annual equal pay report. This compensation data tool was published in response to President Obama’s April 8, 2014 Presidential Memorandum calling for proposed regulations to be published within 120 days.

The equal pay report will have a significant impact on federal contractors. According to OFCCP, the equal pay report will “enable OFCCP to direct its enforcement resources toward federal contractors whose summary data suggests potential pay violations, while reducing the likelihood of reviewing companies that are less likely to be out of compliance.” The proposed rule was officially published in the Federal Register on August 8, 2014. There is a 90-day public comment period with comments due by November 6, 2014.

Who Must File

The proposed rule applies to prime contractors and first tier subcontractors (and construction subcontractors of any tier) who are required to file EEO-1 Reports, have more than 100 employees, and have a federal contract, subcontract, or purchase order amounting to $50,000 or more lasting for at least 30 days (including modifications).

OFCCP is also considering covering postsecondary academic institutions that file the IPEDS report with the Department of Education.

Requirements of Equal Pay Report

The NPRM contemplates requiring covered federal contractors to submit an equal pay report that includes the following information:

  • Total number of workers within each EEO-1 job category by race/ethnicity and sex;
  • Total W-2 wages for all workers in each EEO-1 job category broken down by race/ethnicity and gender; and
  • Total hours worked for all employees in each EEO-1 category by race/ethnicity and gender.

No individual employee pay data will be required.

Reporting Method

OFCCP plans to design a web-based portal for covered contractors to report and maintain compensation information. OFCCP indicates that the webportal would be protected by applicable government IT security standards where contractors key in their data electronically or upload their forms into the system using the standard formats provided by OFCCP.

Data May be Basis for Audit Not Sanctions

Data from the proposed equal pay report would not in itself result in any sanction or adverse action against the contractor for compensation discrimination, according to OFCCP. However, OFCCP will use the information to prioritize contractors for compliance evaluations. If OFCCP selects a contractor for a compliance evaluation, that review would cover compensation data beyond what is in the contractor’s equal pay report and would involve a more specific and detailed data request that are typical in an OFCCP compliance evaluation.

Aggregate Data

OFCCP is also considering publishing aggregate information based on pay data collected from the equal pay report, but the data will not be specific to any particular contractor. The data could include ranges or averages by industry, labor market, or other groupings.

Effective Date/Comments

OFCCP is proposing an annual reporting window of January 1 to March 31. The data in this report would be based on W-2 earnings for the prior calendar year (Jan. 1- Dec 31) for all employees included in the contractor’s EEO-1 report for that year, which will generally align with the time period covered under a contractor’s W-2 filings.

Implications

The practice of OFCCP using the equal pay report to target its enforcement efforts could potentially eliminate OFCCP’s current random audit selection process and replace it with a targeted selection process. Despite the potential constitutional concerns, contractors should strongly consider conducting proactive pay equity analyses now, so that any areas of concern can be addressed before data is reported to OFCCP. This should include a total compensation analysis since contractors will need to report total compensation (i.e., all wages contained in the Form W-2) rather than just base salary.

Contractors should also be wary of potential confidentiality issues. Although OFCCP attempted to allay contractors’ confidentiality fears, the data, much like EEO-1 reports, could be turned over to private plaintiff’s attorneys for use in civil litigation. OFCCP believes that the Freedom of Information Act (“FOIA”) would exempt the disclosure of contractor data if it can be shown that (1) the contractor is still in business (2) the data is confidential and sensitive, and (3) the release of data would subject the contractor to commercial harm. For now, it is unclear whether these exemptions would actually shield contractors’ pay data in all cases.

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Filed under Compensation, Department of Labor, OFCCP

OFCCP Announces Timeline for Issuing Proposed Rules on President Obama’s Compensation Agenda

The Office of Federal Contract Compliance Programs (“OFCCP”) plans to issue proposed rules implementing President Obama’s recent executive actions on the compensation practices of federal contractors. As we reported last month, President Obama took two executive actions to further his pay equity agenda: (1) he signed Executive Order 13665 prohibiting federal contractors from discriminating and retaliating against employees or applicants for discussing their compensation with one another; and (2) he issued a memorandum (“Memorandum”) directing OFCCP to publish regulations requiring federal contractors and subcontractors to submit pay data by race and gender for their employees.

According to the Department of Labor’s spring 2014 regulatory agenda, OFCCP intends to publish its proposed rules on the Memorandum in August 2014 and the proposed rules under EO 13665 in September 2014. OFCCP also revealed that it was pushing back dates for two key regulatory changes, presumably to accommodate the presidential mandate for OFCCP to publish rules on EO 13665 and the Memorandum. In its 2014 regulatory agenda for the year, OFCCP indicated that it would be issuing proposed rules on its regulations for construction contractors in April 2014 and on its Sex Discrimination Guidelines in May 2014. Now, OFCCP has announced that it will not be issuing the proposed updates to the Sex Discrimination Guidelines until September 2014 and moved the date for the proposed overhaul of its regulations for construction contractors until January 2015.

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President Obama Takes Executive Action Reinforcing the Regulatory Agenda on Investigating Federal Contractors’ Compensation Practices

In recognition of National Pay Equity Day, President Obama took two executive actions on April 8, 2014 to continue his pay equity agenda: (1) President Obama signed Executive Order on Non-Retaliation for Disclosure of Compensation Information (“Executive Order”) amending Executive Order 11246 to prohibit federal contractors from discriminating or retaliating against employees or applicants for discussing their compensation with one another; and (2) President Obama issued a memorandum directing the Department of Labor (“DOL”) to publish regulations requiring federal contractors and subcontractors to submit pay data, by race and gender, for their employees (“Compensation Memorandum”). These executive actions, along with President Obama’s Executive Order to increase the minimum wage for employees working on federal contracts, mark another significant step in this Administration’s push for increasing enforcement and oversight over federal contractors’ compensation practices.

Executive Order

The Executive Order mandates that federal contractors cannot “discharge or in any manner discriminate against” employees and applicants who have “inquired about, discussed, or disclosed” their own or another employee’s or applicant’s compensation information. The Executive Order explains that the reason for this change is that it will “enhance the ability of Federal contractors and their employees to detect and remediate unlawful discriminatory practices, which will contribute to a more efficient market in Federal contracting.”

The Executive Order excludes from this protection unauthorized disclosures by employees who learn of the compensation information as part of their essential job functions (e.g., HR and compensation managers) unless (1) they are disclosing compensation information to someone who already has access to that information; or (2) they are disclosing that in response to a formal complaint or charge in furtherance of an investigation. DOL will be required to issue regulations implementing this requirement by September 15, 2014.

Compensation Memorandum

The Compensation Memorandum is premised on a claim that the pay gap between men and women is a direct result of a “lack of sufficiently robust and reliable data on employee compensation.” It directs DOL to propose regulations requiring federal contractors and subcontractors to submit data on the compensation paid to their employees, including data by sex and race.

When creating the proposed regulations, the Executive Order instructs DOL to consider:

  • “maximiz[ing] efficiency and effectiveness” by focusing efforts on contractors where the reported data shows pay violations;
  • using the data to “encourage greater voluntary compliance” with compensation laws by federal contractors and “analyz[ing] industry trends”;
  • minimizing the burden on federal contractors, particularly small businesses; and
  • “avoid[ing] new record-keeping requirements” by relying on “existing reporting frameworks to collect the summary data.”

Despite DOL’s announcement in its current regulatory agenda that OFCCP planned to publish a Notice of Proposed Rulemaking (“NPRM”) on the compensation data collection tool in January 2014, no proposal has yet been published. The Presidential Memorandum will expedite the publication of NPRM because it directs the DOL to propose regulations by August 6, 2014.

Impact on Federal Contractors

The Executive Order prohibiting discrimination and retaliation against employees and applicants does not change much for federal contractors. Sections 7 and 8 of the National Labor Relations Act already provide employees and applicants the right to discuss their compensation information.

The effect of the Compensation Memorandum’s requirement that contractors to disclose their compensation information could be significant, but the precise impact will depend on the details of the regulations. As of now, it is unclear whether OFCCP will develop new or additional compensation reporting requirements and how OFCCP will use the compensation tool to store and analyze compensation data.

We expect OFCCP to continue to ratchet-up its investigation of contractors’ compensation information during audits. This means that contractors should be vigilant about reviewing their compensation practices now and proactively addressing pay disparities before an audit. Now is the time for contractors to consider undertaking pay equity studies and reviews of their compensation policies and practices under the protection of the attorney-client privilege.

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OFCCP Unveils Its 2014 Regulatory Agenda

On November 26, 2013, the Office of Federal Contract Compliance Programs (“OFCCP”) released its semiannual regulatory agenda revealing that it plans to introduce several new regulatory initiatives in 2014.  Among those initiatives are:

Updating Affirmative Action Requirements for Construction Contractors: OFCCP intends to issue a proposed rule by April 2014 overhauling the affirmative action regulations for construction contractors.  The last revision of these regulations was in 1980.  OFCCP indicated that the dated rules for construction contractors “have proven ineffective at making meaningful progress in the employment of women and certain minorities in the construction industry.”  OFCCP intends for the new rules to implement a “new method for establishing affirmative action goals” and implement new requirements that “reflect the realities of the labor market and employment practices in the construction industry today.”

• Developing a New Compensation Tool: Over the last several years, OFCCP has expressed its intent to develop a new tool that it could use to analyze contractors’ compensation practices.  OFCCP released an Advanced Notice of Public Rulemaking in August 2011 asking for contractors to provide input on a potential compensation tool.  In the 2014 regulatory agenda, OFCCP indicated that it would be developing the new compensation tool to “identify contractors likely to violate” OFCCP’s laws and for OFCCP’s “establishment-specific, contractor-wide, and industry-wide analyses.”

• Overhauling the Sex Discrimination Guidelines: OFCCP plans to issue a proposed rule revising its sex discrimination guidelines in May 2014.  These guidelines have not been revised in more than 30 years.  OFCCP indicated that, because the current guidelines are outdated, they warrant a “regulatory lookback” so that OFCCP can “create sex discrimination regulations that reflect the current state of the law in this area.”

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Filed under Affirmative Action Plan (AAP), OFCCP

OFCCP Significantly Overhauls Its Compensation Standards

On February 26, 2013, the Office of Federal Contract Compliance Programs (“OFCCP”) announced a significant shift in its approach to analyzing contractors’ compensation decisions during audits.  In the press release, OFCCP stated that it was rescinding its “Voluntary Guidelines” and “Compensation Standards” from 2006 because they “limited OFCCP’s ability to conduct full investigations and use every enforcement tool at its disposal to combat pay discrimination.”  In its place, OFCCP issued Directive 307, which establishes many new practices and procedures OFCCP will follow when investigating contractors’ compensation practices during audits. The new procedures took effect on February 28, 2013.

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OFCCP Seeks Input from Federal Government Contractors on a Proposed New Compensation Tool

On August 10, 2011, the Office of Federal Contract Compliance Programs (“OFCCP”) issued its advance notice of proposed rulemaking (“ANPRM”) requesting comments on a new compensation data collection tool it plans to create.  The OFCCP indicated that this new tool could potentially be used to identify compensation discrimination at contractor establishments and identify and analyze “industry trends, Federal contractors’ compensation practices, and potential equal employment-related issues.” Continue reading

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Filed under Compensation, Discrimination, EEO, OFCCP