The Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) recently proposed a rule that would require covered federal contractors and subcontractors to provide compensation-related information in an “Equal Pay Report.” Only government contractors and subcontractors who file EEO-1 reports, have more than 100 employees, and hold federal contracts or subcontracts worth $50,000 or more for at least 30 days will be required to submit the proposed Equal Pay Report. But all employers should pay attention, because the proposed rule will likely increase the cost of defending against equal pay cases for all employers, not just government contractors and subcontractors.

The commentary published with the proposed rule says the OFCCP will require covered contractors to complete an Equal Pay Report providing:

  • The total number of workers within a specific EEO-1 job category by race, ethnicity and sex
  • Total W-2 wages for all workers in the EEO-1 job category by race, ethnicity and sex
  • Total hours worked by all employees in the EEO-1 job category by race, ethnicity and sex

But, the language in the proposed rule is much broader than the commentary suggests. In fact, the rule does not mention W-2 wages or hours worked. Instead, the proposed rule allows the OFCCP to publish the report and to collect “other relevant data points.” Given the breadth of the proposed rule, the OFCCP could arguably change the report to require more onerous reporting and request information other than W-2 wages, total employees and hours worked, without comment from the public.

The data proposed to be collected in the Equal Pay Report is meaningless. It is simply aggregate data based on EEO-1 job categories. Because each EEO-1 job category includes a large number of very different jobs, the proposed report does not, and cannot, identify pay discrimination. Indeed, there are several reasons why one employee may be paid more than another — for instance, type of job, level of responsibility, tenure, qualifications and experience. The aggregate data cannot and does not take this information into account. To analyze whether there is a discriminatory animus in pay differences, one needs to look at the reasons employees are paid what they are paid, not at aggregate data.

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Even though the information requested is meaningless for its cited purpose, the proposed report could cause problems for employers. The OFCCP says it will use the data from the Equal Pay Report to select contractors for audit. The OFCCP claims, rather astoundingly, that it can tell which contractors are likely to be violating equal pay laws based on the contractor’s reported data compared to that of other contractors in the same industry. The difference in pay among contractors is not evidence of pay discrimination. Rather, it is simply evidence that one contractor may pay its employees more or less than another for a variety of reasons. Because the OFCCP is going to compare the wage data for contractors in the same industry, it seems that the government is really trying to use this tool to pressure contractors to raise wages across the board.

Additionally, it is likely that the Equal Pay Report will increase the cost of defense in equal pay lawsuits for all employers, not just those covered by the proposed rule. Litigants will likely ask employers for this meaningless report or the data required by the report. If this happens, employers will have to challenge these requests in court, which is time-consuming and expensive. And, employers may be ordered to produce this information at great cost even though it is not evidence of pay discrimination. This not only increases the cost of discovery, but will increase the cost of defense, because employers will have to expend significant resources to explain the meaningless data. Though companies and defense counsel would certainly oppose any production, on grounds that the information is not relevant, useful or probative, this should concern employers.

In summary, the report is unnecessary and meaningless. Both the OFCCP and the Equal Employment Opportunity Commission can and do investigate complaints of unequal pay without the summary information on the proposed report. The OFCCP’s resources would be better used addressing actual complaints and resolving open audits instead of analyzing summary data that has no practical usefulness. Another key takeaway from employers is that, because the OFCCP will require some form of Equal Pay Report once the rule becomes final, companies should audit — in a privileged manner — their compensation programs.

 

This article presents the views of the authors and do not necessarily reflect those of Hunton & Williams or its clients, or InsideCounsel. The information presented is for general information and education purposes. No legal advice is intended to be conveyed; readers should consult with legal counsel with respect to any legal advice they require related to the subject matter of the article.