On August 8, 2014, the U.S. Department of Labor (the “DOL”) published a proposed rule requiring certain federal contractors and subcontractors to submit employee compensation data, broken down by job and demographic categories, to the Office of Federal Contract Compliance Programs (“OFCCP”). The DOL has invited comments on the proposed rule, and the deadline for submitting comments is November 6, 2014. To review and comment on the proposed rule, please use the following link:http://www.dol.gov/ofccp/EPR

Key Provisions of the Proposed Rule

Under the terms of the proposed rule, companies that (1) file EEO-1 reports, (2) have more than 100 employees, and (3) have a federal contract, subcontract, or purchase order worth $50,000 or more that covers a period of at least 30 days will be required to submit an annual Equal Pay Report on employee compensation to the OFCCP. The OFCCP is also considering covering postsecondary academic institutions that file the Integrated Postsecondary Education Data System (“IPEDS”) report with the Department of Education.

The Equal Pay Report will set forth the total number of workers in each EEO-1 job category by race, ethnicity, and sex and for each job and demographic category will set forth the total W-2 wages of and the total hours worked by the workers in that category. The report will not contain information about factors such as education, experience, and seniority that may affect compensation. The DOL has openly stated that the purpose of the proposed rule is to enable the OFCCP to collect data that will allow the 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. Thus, contractors and subcontractors that report significantly lower compensation figures for women and minorities than for men and nonminority workers may attract greater attention from the OFCCP. The OFCCP intends to release aggregate summary data on the race and gender pay gap by industry and EEO-1 category to enable contractors to review their pay data using the same metrics as the OFCCP and take voluntary compliance measures.

Practical Implications

If the proposed rule is adopted in its current form, it is expected that compensation data submitted under the rule would be used by the OFCCP to prioritize contractors for compliance evaluations, but it is unclear whether the OFCCP would use the data in its audits. Employers subject to this rule would have additional compliance burdens and would have to navigate additional confidentiality concerns given that the OFCCP has not meaningfully addressed how it would safeguard produced data. Because the proposed rule contemplates using the data collected to set “objective industry standards” to highlight potentially discriminatory pay practices, employers paying women and minorities less than most other employers in their industry should expect to be audited more frequently. The estimated costs associated with the implementation of the proposed rule are $684 per contractor establishment or $2,176 per contractor company. However, we are of the opinion that this figure significantly underestimates the actual burden that employers will face in gathering and computing the data required to be disclosed pursuant to the proposed rule.