Administration to Expand Labor Data-Collection Requirements

Last Friday, the President announced several new policies to "further advance equal pay for all workers and to further empower working families". The announcement contained four different initiatives including:

• The Equal Employment Opportunity Commission (EEOC) published a proposal to annually collect summary pay data by gender, race and ethnicity from businesses with 100 or more employees. This proposal would cover 63 million employees. This expands and replaces an earlier plan by the Department of Labor to collect similar information from federal contractors. See our earlier posting on that proposal: New Nondiscrimination and Affirmative Action Requirements for Contractors.
• Second, the President requested Congress to take up and pass the Paycheck Fairness Act that would give women additional tools to fight pay discrimination.
• Third, the Council of Economic Advisers is releasing a report that highlights that the U.S. gender wage gap is now 2.5 percent higher than the average for industrialized countries and points to progress made since 2000 by the United Kingdom to reduce their gap by almost nine percent and by other industrialized countries by around seven percent.
• Finally, the White House announced a summit coming in May to "create an opportunity to mark the progress made on behalf of women and girls domestically and internationally over the course of the last seven years and to discuss solutions to the challenges they still face.

Perhaps the most impactful one of these initiatives is the expansion of pay data collection. The EEOC is proposing revisions to its EEO-1 form to require all employers with 100 or more employees - and Federal contractors with a $100,000 contract - to submit additional summary data on wages paid to their employees including gender, race, and ethnicity.

What will the EEOC (and Labor Department) do with this data? They're going to mine the data and look for employers that are shortchanging workers based on gender, race, or ethnicity. In their words:

This new policy lays important groundwork for progress toward achieving equal pay, as it will encourage and facilitate greater voluntary compliance by employers with existing federal pay laws - such as by evaluating how they are currently paying their employees. It will also assist the EEoC, and in the case of contractors the Department of Labor's Office of Federal Contract Compliance Programs (OFCCP), in better focusing investigations on employers that are unlawfully shortchanging workers based on their gender, race, or ethnicity. 

Or, as one commentator put it, the expanded data will be used to "shame" non-Federal contractors and for law enforcement purposes on Federal contractors.

The effective date of the expanded reporting requirement is September 30, 2017. You can read more about these pending initiatives on the Whitehouse website.

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.

Complying with EEO Requirements

For the past few days, we have been discussing the basic EEO requirements for small Government contractors.  It is important for contractors to be aware of the requirements and to implement policies, procedures, and practices that will reduce the risk of noncompliance. There are a number of actions a contractor might take to ensure that its employment practices are not limiting the employment opportunities of the members of any gender, race, or ethnic group. Here are two such practices.

Recruit to Attract Qualified Candidates. Government contractors must ensure that its recruiting efforts reach all qualified applicants. To do this, companies need to identify as many "recruitment sources" as possible, especially those for women and minorities. After identifying these sources, call or send letters telling them about job openings and invite them to send qualified applicants your way. Then, monitor those sources to determine whether they, in fact, sent any applicants for your job opening(s).

Audit your Employment Practices to Prevent Discrimination. Employers that periodically perform self-audits of their employment practices are much better able to avoid employment barriers and ensure that they are providing equal opportunity for applicants and employees. There are three kinds of self-audits that small Government contractors can perform:

1. Self-audit before or shortly after you make an employment decision, such as a firing or promotion decision. This audit focuses on employment qualifications or standards used in making various employment decisions and how women and minorities fared in those decisions. This generally involves a comparison of applicants or employees who are competing for a particular job or promotion or to retain a particular job.
2. Self-audit where female and minority workers are or are not within your organization. Review where the female and minority employees work within your organizational structure. A helpful way to do this is to identify the gender, race, and ethnicity of each employee for each job within each department on an organizational chart. Look for concentrations of female or minority employees, especially in lower-paying jobs. Similarly, look for areas where female and minority employees seem to be absent or poorly represented, especially in higher-paying jobs. Also, look at the ways employees are promoted from lower ranking jobs to the higher-ranking jobs.
3. Self-audit the way your personnel decisions, like hiring, have affected women and minorities over a longer period of time (e.g., a quarter or year). This audit uses statistics and works well when you are reviewing a number of employment decisions made over a period of time.

Basic EEO Requirements for Small Businesses with Federal Contracts - Part IV

According to the OFCCP (Office of Federal Compliance Programs) and based on the requirements of Executive Order 11246 (as amended), there are six basic EEO requirements for small businesses with Government contracts. In the first three parts of this series, we discussed five of them - do not discriminate, post EEO posters, add tag lines to employment advertising, keep records, and permit OFCCP access to your books and records, when requested. The sixth item is a requirement to file an annual EEO report.

The Standard Form 100, Employer Identification Report (EEO-1 Report) requires that employers report on the number of employees by race, ethnicity and gender for each of ten job categories. These categories include:

• Executive/Senior level officials and managers
• First/mid-level officials and managers
• Professionals
• Technicians
• Sales workers
• Administrative support workers
• Craft workers
• Operatives
• Laborers and helpers
• Service workers

It is sometimes challenging to figure out which employees go to which category. Most companies now have HR (Human Resources) software that includes fields to collect and report on this information.

The EEO-1 report is filed annually, not later than September 30th.

This report must be files by all private employers that have more than 100 employees. However, for Government contractors, the number of employees drops to 50 employees and a $50 thousand contract.

Basic EEO Requirements for Small Businesses with Federal Contracts - Part III

We're continuing our series on EEO requirements for Small Businesses. These requirements originate from Executive Order (EO) 11246. This EO has been around since 1965 but has also been amended several times. The full EO as amended can be viewed here.

The fourth basic EEO provision for small Government contractors is a requirement to maintain records. These are primarily HR (Human Resources) records and would typically include:

• Job descriptions
• Job postings and advertisements
• Records of job offers
• Applications and resumes
• Interview notes
• Tests and test results
• Written employment policies and procedures
• Personnel files

These records must be maintained for a period of two years after the creation of the record or the personnel action, whichever comes later. Contractors with fewer than 150 employees or a contract of less than $150 thousand have a one-year record retention period.

The fifth basic requirement is perhaps the most obtrusive. Small businesses with Government contracts must permit OFCCP (Office of Federal Compliance Programs) access to books and records during a compliant investigation or compliance evaluation.

Although compliant investigations and compliance evaluations are infrequent, there is always the possibility that your firm could be selected. When a complaint is filed against a Federal contractor, or when a Federal contractor is selected to undergo a compliance evaluation, the contractor is obligated to allow OFCCP access to its premises for the purpose of conducting an on-site investigation. The contractor must permit OFCCP to inspect and copy the books and records that may be relevant to the matter under investigation and pertinent to compliance with the requirements of Executive Order 11246.

Basic EEO Requirements for Small Businesses with Federal Contracts - Part II

Last week we began this short series on EEO for small Government contractors. We listed he six basic EEO requirements and then expanded on the first of those, don't discriminate. Now the discrimination prohibition might seem intuitively obvious to most but its sometimes possible to discriminate without realizing its happening as we discussed in Part I.

The second basic requirement involves the EEO poster. Federal contractors are required to post OFCCP's (Office of Federal Compliance Programs) Equal Employment Opportunity Poster in a conspicuous place. A good place to post it is in a locker room, lunch room, or an area where employees take breaks. Its a simple thing to do and doesn't cost the company anything. We know of one case (and there are probably many) where a disgruntled employee reported his employer for failing to display an EEO poster.

You can obtain the EEO poster by contacting your OFCCP office or download one directly at http://www.dol.gov/ofccp/regs/compliance/posters/ofccpost.htm.

The third basic EEO requirement for Government contractors involves employment advertising. Federal contractors are required to state in all solicitations or advertisements for employment that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex, or national origin.

Tomorrow we will continue this series with the record keeping requirement.

Basic EEO Requirements for Small Businesses with Federal Contracts

Executive Order (EO) 11246 prohibits employment discrimination by Federal contractors and subcontractors and federally-assisted construction contractors and subcontractors. It also requires them to take affirmative action to ensure that all individuals have an equal opportunity for employment without regard to race, color, religion, sex, or national origin. Generally, EO 11246 applies to contractors with 50 or more employees and a Government contract or subcontract greater than $50 thousand. The Department of Labor, Office of Federal Contract Compliance Programs (OFCCP) has been tasked to administers and enforce the Executive Order.

The basic EEO requirements of a Federal contractor are these:

• Don't discriminate
• Post EEO posters
• Include EEO tag line in employment advertising
• Keep records
• Permit OFCCP access to books and records during a compliance evaluation or a compliance investigation.
• File an annual EEO-1 report. 

We will look at each of these requirements in more detail over the next few days.

Don't Discriminate: Employment discrimination takes different forms. Employment discrimination is illegal and generally results when a person is treated differently (usually less favorably) because of his or her race, color, religion, sex, or national origin. In addition, employment discrimination can result when a neutral policy or practice has an adverse impact on the members of any race, sex, or ethnic group and the policy or practice is not job related or required by business necessity.

Here's an example where a "neutral policy" resulted in discrimination. Company A needed to hire entry-level laborers. The jobs required heavy lifting and physical exertion, but did not require any technical skill. The company however had a policy that required all employees to have a high school diploma so it automatically excluded applicants who had not finished high school.

The high school diploma requirement however disqualified a greater number of Hispanic candidates for the labor jobs than Non-Hispanic White candidates. According to census data for that particular location, 94 percent of the white population had high school diplomas while only 47 percent of the Hispanic population had completed high school. When Company A could not provide a business justification for using the high school diploma requirement, OFCCP ruled that they had engaged in prohibited discrimination.