On August 6, 2014, the Office of Federal Contract Compliance Programs (OFCCP) announced a proposed rule that should be of real concern to covered affirmative action federal contractors. The OFCCP is the agency that enforces federal affirmative action laws. If the proposed rule is adopted, it will add compensation data to the information that covered employers must submit with their annual EEO-1 reports. Keep in mind the “web” of coverage under affirmative action laws reaches far. Coverage is triggered not just by direct federal contracts but also by contracts to provide goods or services to any private sector entity, as long as those goods or services are used in connection with fulfilling some federal contract that your customer or their customers may have. Coverage of financial institutions is triggered by being a depository for federal funds or by being an issuing or paying agent for U.S. Savings Bonds or Notes. Coverage issues and obligations can vary with the dollar volume of the covered work.
Currently, the annual EEO-1 report contains race, ethnicity, and gender information about your workplace, sorted by nine EEO job-type categories. The proposed rule would expand the report to include the following information for each of the EEO categories by race, ethnicity, and gender: total number of employees; total W-2 income; total hours worked.
The obligation to provide compensation information on EEO-1 reports would apply to covered affirmative action employers with more than 100 employees and a covered federal contract or subcontract for $50,000 or more covering a period of at least 30 days, including modifications.
The employer community which is subject to affirmative action obligations has very legitimate concerns about this new reporting obligation. OFCCP will use the data as part of its method for identifying contractors for compliance reviews. An OFCCP compliance review can involve not just review of the Company’s written affirmative action plan, but, also, a detailed review of its employment practices including compensation, hiring, and terminations. Employers have a legitimate question whether this broad-based compensation data is a legitimate basis for identifying a contractor for compliance review based on alleged concern about equal pay. A second, very real concern for the covered employer community is confidentiality of compensation information. OFCCP assures that the information can be submitted on a web-based data tool conforming with government IT security standards. But, EEO-1 reports are subject to Freedom of Information Act requests from the public. Even though OFCCP assures companies they will be given notice of any FOIA requests for their data and an opportunity to object, there is no assurance that the objections would be successful. Therefore, this proposed rule opens the door for confidential compensation information to be made available to competitors and the general public.
OFCCP intends to release aggregate summary compensation data by race and gender annually to the public. OFCCP believes that public dissemination of the aggregate data will give employers an opportunity to evaluate their own compensation structure against that of others in their industry.
Public comment on the proposed rule can be submitted through November 6, 2014.