by Federal Employment Law Insider

The U.S. Department of Labor (DOL) has announced the issuance of the long-awaited proposed rule requiring federal contractors and subcontractors to submit an annual Equal Pay Report on employee compensation to the Office of Federal Contract Compliance Programs (OFCCP). The rule is scheduled to be published in the Federal Register August 8, and all comments must be received within 90 days after the date of publication.

This notice of proposed rulemaking (NPRM) would amend the current regulations by adding a requirement that certain federal contractors and subcontractors supplement their EEO-1 Report with summary information on compensation paid to employees, as contained in the W-2 forms, by sex, race, ethnicity, and specified job categories as well as other relevant data points such as hours worked and the number of employees.

The major provisions of the proposed rule include:

• Covered contractors and subcontractors that file EEO-1 Reports, have more than 100 employees, and have a contract, subcontract, or purchase order amounting to $50,000 or more that covers a period of at least 30 days must submit an Equal Pay Report with summary data on employee compensation by sex, race, ethnicity, specified job categories, and other relevant data points such as hours worked and the number of employees.
• The OFCCP will compile and publish aggregate industry compensation data and standards based on the over 100,000 reports that would be filed.
• The OFCCP will select contractors for audits based on compensation differences outside of an “acceptable range,” compared to industry standards.

Although the NPRM states that it incorporates extensive stakeholder input, many controversial elements of the OFCCP’s widely criticized initial data collection tool have been retained and many problems persist, according to attorneys with Fortney & Scott, LLC, in Washington, D.C. They say a preeminent concern remains the confidentiality of the new Equal Pay Reports, which will reveal contractors’ compensation practices. In the past, the Freedom of Information Act (FOIA) has not always been a reliable means of providing confidentiality protections.

In addition, Fortney & Scott attorneys maintain the use of W-2 information will inevitably yield data skewed by occasional, individual aberrations that aren’t reflective of a general compensation system. They believe this flawed data will then become part of the published “industry standard.” Nonetheless, the agency makes clear that the industry standard is to be used by employees and others to make employment decisions and create an incentive for contractors to reach the standard.

Of equal concern, the attorneys say, is the elimination of the OFCCP’s current random audit selection process. The NPRM creates a targeted selection process, which raises the prospect that the audit will be converted from a neutral investigation to a prosecution of an already identified malefactor.

Fortney & Scott attorneys write and edit the monthly Federal Employment Law Insider newsletter and maintain an HR consultancy at www.workplaceHR.com. Stay tuned for additional developments.