New Compensation Disclosures Proposed for Federal Contractors

On Friday August 8, 2014, the Office of Federal Contract Compliance Programs (OFCCP) published a Notice of Proposed Rulemaking (NPRM) on compulsory disclosure of compensation data by federal contractors. The OFCCP proposes requiring federal contractors employing 100 or more employees with a federal contract, subcontract, or purchasing order of $50,000 or more to file annually an “Equal Pay Report” with the OFCCP.

The NPRM comes after a Presidential Memorandum issued April 8, 2014, directing the agency to develop a compensation data collection proposal to maximize the agency’s ability to focus audits on more likely violators and encourage more voluntary compliance. Targeting enforcement efforts on companies likely engaging in compensation discrimination, the OFCCP reasons, will help eradicate the pay gap between males and females.

The proposed rule would require federal contractors to file Equal Pay Reports annually, which will include summary data on employee compensation by sex, race, ethnicity, specified job categories, hours worked, and number of employees. The data would be consistent with W-2 data and would be collected as part of the EEO-1 Report, which contractors must file annually.

The OFCCP will aggregate each contractor’s summary data from its Equal Pay Report with those of peer employers by industry. The OFCCP will then an create industry standard against which contractors’ compensation practices will be compared. The OFCCP is likely to prioritize contractors with pay gaps greater than the standard for compliance evaluations. The OFCCP argues this change is necessary because its current methods do not enable it to look closely at compensation practices until it audits the contractor. The OFCCP conducts approximately 4,000 audits per year, and there are 116,000 establishments subject to its jurisdiction.

Federal contractors are concerned about the agency’s ability to protect the confidentiality of this information. In addition, they question how useful aggregate compensation data will be to identify contractors engaging in compensation discrimination.

Comments on the proposal must be received by the OFCCP by November 6, 2014. Thereafter, a final rule will be published. For more information, please contact Melinda Sanders, Managing Attorney, Affirmative Action Planning Services at aaps@msec.org or 800.884.1328.