OFCCP PROPOSES RULE REQUIRING FEDERAL CONTRACTORS TO SUBMIT EQUAL PAY  REPORT

The U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) issued a  news release on August 6, 2014 regarding a Notice of Proposed Rulemaking that requires covered  federal contractors and subcontractors to submit an annual Equal Pay Report summarizing employee  compensation in the first quarter of each year. If finalized, this proposed rule would create an additional  reporting requirement for covered entities (those companies with more than 100 employees who hold  federal contracts or subcontracts worth $50,000 or more for at least 30 days) already subject to  numerous reporting and record keeping obligations.

Using the Equal Pay Report, the OFCCP proposes to collect the following information for each group of  workers within each of the EEO-1 job categories:

  • total number of workers by race, ethnicity, and sex
  • total W-2 earnings (defined as the total individual W-2 earnings for all workers in the job  category by race, ethnicity, and sex)
  • total hours worked (defined as the total number of hours worked for all workers in the job  category by race, ethnicity, and sex)

This proposed rule has far-reaching consequences and highlights the OFCCP’s focus on enforcement  regarding systematic pay discrimination. Whereas the EEO-1 Report does not collect summary or  individual employee compensation (instead using a “snapshot” approach that requires data from one pay  period between the months of July and September of the survey year), the proposed Equal Pay Report  covers a full calendar year from January 1 through December 31, resulting in significantly more  information being made available to the OFCCP prior to the commencement of any compliance review.  Moreover, the OFCCP has proposed that the Equal Pay Report be used for purposes of selecting  contractors for compliance evaluations, with a focus primarily on a strategy that ranks contractors  according to the objective data and then prioritizes compliance evaluations of those contractors and  subcontractors who have larger race or gender pay gaps than typically reported in the industry. Those  contractors and subcontractors who report patterns with the greatest deviation from the applicable  industry standard would have the highest likelihood of selection for further investigation under the  proposed rule. In accordance with its usual compliance evaluation procedures, the OFCCP would then  examine the contractor’s compensation data and practices in detail to make a determination about the  contractor’s compliance status.

The proposed rule fulfills the directive issued by President Obama’s April 8, 2014, Presidential  Memorandum, Advancing Pay Equality Through Compensation Data Collection, which requires the  secretary of labor to develop a rule collecting compensation data by sex and race from federal contractors and subcontractors, which, in turn, will enable the OFCCP to focus its enforcement efforts on  federal contractors with summary data that suggests potential equal pay violations. Under the proposed  rule, the OFCCP would also release reports on the race and gender pay gap by industry, based on the  aggregate summary data, to enable employers to review their own data using the same metrics as the  OFCCP. The potential for the Equal Pay Report and/or any related industry summary data to be used  and/or referenced in employment discrimination matters (initiated by individuals, proposed class actions,  and/or government agencies) exists, although the proposed rule is not transparent on this issue.

The proposed rule was published in the Federal Register on Friday, August 8, 2014. Public comments on  the proposal may be submitted until November 6, 2014. Additional information regarding the proposed  rule, including information from the OFCCP on how to provide comments, can be found here.

PRESIDENT’S EXECUTIVE ORDER PROHIBITS FEDERAL CONTRACTORS FROM  DISCRIMINATING ON THE BASIS OF SEXUAL ORIENTATION AND GENDER IDENTITY, AND  OFCCP ISSUES RELATED DIRECTIVE

On July 21, 2014, President Obama signed an Executive Order prohibiting federal employers and  contractors from discriminating against applicants and employees on the basis of their sexual orientation  or gender identity. The July 21 Order amends Executive Order 11246, which prohibits federal  government contractors and subcontractors from discriminating against an employee or applicant for  employment because of that person’s race, color, religion, sex, or national origin, by adding sexual  orientation and gender identity to the list of protected classes. The order does not apply to private  employers who do not hold a federal government contract or subcontract, although those employers may  nevertheless be covered by state or local laws that prohibit discrimination on these grounds.

The President’s Executive Order requires the Department of Labor to prepare regulations to implement  its requirements within 90 days. In anticipation of these new requirements taking effect, federal  contractors and subcontractors may wish to review their policies and affirmative action plans as well as  any related employment communications or personnel documents, especially those concerning equal  employment opportunity, to ensure they are in line with the President’s July 21 Executive Order.

Additionally, effective August 19, 2014, the OFCCP has issued Directive 2014-02, Gender Identity and  Sex Discrimination. Directive 2014-02 clarifies that existing agency guidance on discrimination on the  basis of sex under Executive Order 11246, as amended, includes discrimination based on gender identity  and transgender status. The OFCCP continues to seek to remedy any findings of sex discrimination  against employees based on their gender identity or transgender status that are discovered by OFCCP  compliance officers during compliance evaluations.