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Put 77% of Your Money Where Your Mouth Is: Big Fed Contractors to Be Required to File Equal Pay Reports

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The Office of Federal Contract Compliance Programs (OFCCP) has published a Notice of Proposed Rulemaking (NPRM) which will require certain federal contractors to submit an annual Equal Pay Report concerning employee compensation.  The move is in response to an April directive from President Obama ordering the Department of Labor (DOL) to develop a data collection tool to advance the cause of pay equity.  The proposed rule entered the federal register on August 8th.

According to the employer law firm of Constangy, Brooks, and Smith, the purpose of the Equal Pay Report is:

The OFCCP states that the main purpose of the Equal Pay Report is to provide a mechanism for identifying potential discrimination in compensation. The agency intends to create an “industry standard” by aggregating the submitted data by industry. Then it will compare contractors’ individual data with this “industry standard.” Contractors whose differences depart the most from the industry standard are most likely to be subject to a compliance review.

It is not entirely clear whether the OFCCP will be focusing on differences in total compensation from the industry standard, or differences between members of different racial, ethnic, and gender groups from the average industry standard differences, or both. It does appear, however, that contractors that pay less than the industry standard may be more likely to be selected for a compliance review. If that is the case, such a system would neither target those most likely to be discriminating nor encourage non-discrimination. It would simply provide an incentive for contractors to raise compensation to meet or exceed the industry standard in order to avoid being targeted by the OFCCP.

The OFCCP says that the Equal Pay Report is also intended to create greater voluntary compliance by contractors and to deter “noncompliant behaviors.” The OFCCP states that it will publicize summarized compensation data from contractors’ reports on an annual basis to allow contractors to self-assess their pay practices and “provide useful data to current and potential employees.”

Federal contractors will be required to file the report if they a) have to file an EEO-1 Report, b) have more than 100 employees and, c) have a contract, subcontract, or purchase order worth $50,000 or more that covers a time period of at least 30 days.

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