What impact will the OFCCP’s proposed rule on wage data collection have?

2 Oct

The OFCCP is asking government contractors to supply wage data.

The Office of Federal Contract Compliance Programs may not be a household name, but it assumes an important role for those who do business with the federal government.

Out of the ashes of the Employment Standards Administration came the OFCCP, as well as three other independent entities that report to the Secretary of Labor. In 2009, the agency assumed responsibility for enforcing contractual agreements relating to affirmative action and equal opportunity among federal contractors.

Specifically, the OFCCP provides guidance to businesses working with the federal government to understand regulations and perform compliance evaluations and investigations to ensure contractors are complying with government policies.

However, recent proposed changes to OFCCP guidelines will likely have a significant impact on human resource planning and will require federal contractors to adjust their internal processes to comply with the new rules.

What's expected under the new Equal Pay Report requirement?
The Department of Labor's recent proposal will likely change the way many federal contractors and subcontractors operate to some extent. It requires them to submit compensation-related information to the OFCCP. However, the proposal doesn't impact everyone, Inside Counsel explained. The change would affect federal contractors and subcontractors that:

  • File Employer Information report EEO-1
  • Have more than 100 employees
  • Are under contract with the government for at least $50,000
  • Have held the contract for a duration lasting more than 30 days

The OFCCP asks for companies that meet these requirements to supply an Equal Pay Report containing three specific pieces of information. First, contractors and subcontractors need to provide the total number of employees who fall under EEO-1 job categories by race, ethnicity and sex. Second, employers need to supply total W-2 wages following the same EEO-1 standards. Finally, companies have to supply the total number of hours worked for these employees.

What are EEO-1 job categories? The Equal Employment Opportunity Commission developed a very thorough list of these job groups. While there are nine distinct categories, each one has an extensive listing of defined roles that qualify. Included in the classifications are officials and managers, professionals, technicians, sales, office and clerical, craft workers, operatives, laborers and service. For further clarification, it's worth the time to look at the more specific job titles.

What's the logic behind the proposal?
According to the OFCCP, the agency will use the data for enforcement purposes. In essence, the information will provide evidence and support for allegations of pay violations and other noncompliance issues.

It's also using the opportunity to develop public reports – keeping employees' personal data confidential – that will summarize aggregate data for each industry in hopes of clarifying any pay gaps based on race and gender. From these reports, employers can review the broad metrics and proactively address any disparities in their own organizations.

What if the data gets into the wrong hands?
One of the biggest question marks for the proposed rule change is how the information will be transmitted between contractors and the OFCCP. The agency is hoping to leverage many of the existing electronic submission processes in place. For instance, human resource software that keeps track of payroll records and W-2 earnings. The OFCCP also indicated it will develop a Web portal that employers can use to communicate with the agency.

However, data security is a high priority. Contractors and subcontractors are often competitive when seeking out agreements with the government. According to the DOL, all information will be kept private to the extent that it can under the Freedom of Information Act. In addition, the OFCCP said it wouldn't publicly release any information that may have negative influence on contractors that are currently active. This could be a big factor for many employers. What happens when a competitor submits a FOIA request about pay and gender disparities? If made public, this information can do a lot of damage.

As with many government projects, details will likely emerge as time passes. However, data security will likely be a key factor for many companies looking to do business with the federal government. Given the rise in cybercrime, it remains to be seen whether or not the government agencies can keep information transmitted over the Internet secure.

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