Tuesday, August 12, 2014

Proposal to Require Contractors to Report Compensation by Sex, Race, Ethnicity, and Job Categories

CORRECTED: Aug 12, 2014

Here's a proposed rule that should get a lot of contractors excited, not only because of the onerous nature of the data collection, but also for the time and effort required to comply.

The Office of Federal Contract Compliance Programs (OFCCP) is proposing to amend one of its regulations (based on Executive Order 11246), by adding a requirement that certain Federal contractors and subcontractors supplement their EEO reports with summary information on compensation paid to employees by sex, race, ethnicity, and specified job categories, as well as other relevant data points such as hours worked and the number of employees.

This information according to the OFCCP will become a critical tool for eradicating compensation discrimination. It would enable OFCCP to direct its enforcement resources toward entities for which reported data suggest potential pay violations, and not toward entities for which there is no evidence of potential pay violations. It would also enhance two enforcement objectives: greater voluntary compliance and greater deterrence of noncompliant behaviors by contractors and subcontractors.

This proposed reporting requirement will apply to contractors and subcontractors with (i) more than 100 employees (ii) a contract or subcontract in excess of $50 thousand, and (iii) a period of performance of at least 30 days. The OFCCP estimates that somewhere between 21 thousand and 68 thousand contractors and subcontractors will be subject to these reporting requirements and will collectively cost contractors $34 million to implement and $12 million per year thereafter to update. Most likely, this burden is understated.

Under the proposed rule, Federal contractors will have the opportunity to conduct meaningful self-assessments of their compensation practices and policies, and make any necessary pay adjustments or other compensation modifications prior to an OFCCP compliance evaluation.

According to the OFCCP, data collection and analysis of data are likely to serve as a disincentive for noncompliance, and are therefore, effective deterrents. One recent report found that deterring violations before they occur is one part of an overall enforcement policy.

This notice of proposed rule making is lengthy and should be studied by contractors affected by it. You can read the entire notice here.

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