Hunton Employment & Labor Perspectives

In response to a presidential memorandum directing the Department of Labor (“DOL”) to collect summary compensation data from federal contractors and subcontractors to combat pay discrimination, the DOL’s Office of Federal Contract Compliance Programs (“OFCCP”) recently proposed a rule calling on certain federal contractors to submit reports on employee compensation.  The rule, published in the Federal Register on August 8, requires covered contractors to annually submit an “Equal Pay Report.” Covered federal contractors and subcontractors are those who:

• File EEO-1 reports;
• Have more than 100 employees; and
• Hold federal contracts or subcontracts worth $50,000 or more for at least 30 days.

The report requires compensation-related information on three data points:

• The total number of workers within a specific EEO-1 job category by race, ethnicity and sex;
• 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
• Total hours worked, defined as the number of hours worked by all employees in the job category by race, ethnicity and sex.

The stated goal of the new reports is to allow the OFCCP to direct its enforcement resources to those federal contractors whose compensation data points toward potential pay violations.  The OFCCP also intends to release aggregate summary data on the race and gender pay gap by industry and EEO-1 category to allow contractors to review their pay data using the OFCCP metrics and take voluntary compliance measures.  In addition to the increased compliance burdens the rule would impose on covered contractors, if the proposed rule is adopted in its current form, federal contractors and subcontractors reporting compensation figures that are significantly lower for women and minorities may attract greater attention from the OFCCP.  Furthermore, the fact that the rule requires employers to submit compensation information gleaned from their employees’ W-2 forms will likely draw criticism as this method fails to take into account individualized factors that may affect compensation such as education, experience, and seniority.  However, given the DOL’s renewed focus on enforcement of the Equal Pay Act and related laws, covered contractors would be wise to evaluate their own compensation and demographic data.  The DOL has invited comments on the proposed rule through November 6, 2014.