There's a new Notice of Proposed Rulemaking issued by the Office of Federal Contract Compliance Programs that federal contractors might want to keep an eye on.
If approved as it now stands, the rule "requiring covered federal contractors and subcontractors with more than 100 employees to submit an annual Equal Pay Report on employee compensation," as the OFCCP describes it, could unfairly burden many federal contractors.
That's the gist of an analysis of the rule by the Society for Human Resource Management. SHRM's Allen Smith took a look at the proposal, which is designed to identify certain types of gaps in the compensation paid to employees by federal contractors and help narrow those discrepancies.
Recommended For You
Among the largest gaps are those by race and gender. But myriad others exist; for instance, seasonal workers tend to earn less on a per hour basis than nonseasonal workers.
The approach the new rule uses would base much of the analysis and follow-up interviews with employers on information gleaned from employees' W-2 forms. This could lead to serious flaws in the process, Washington, D.C., lawyer Alissa Horvitz told Smith.
Horvitz said the proposed rule would require employers to electronically file considerable W-2 data on number of workers, number of hours worked and wages by race, ethnicity and gender. She told Smith the system doesn't lead to accurate comparisons among workers that could effectively address the issue.
She strongly recommended that federal contractors visit the Department of Labor comment site and spell out the many ways they already gather and sort data, to demonstrate that most contractors are already well beyond this basic data collection and analysis stage the OFCCP is proposing.
Just last week, Horvitz and fellow Littler attorney Joshua Roffman predicted the proposal would "generate some controversy."
In an article for Washingtondiversity.com, they wrote: "The OFCCP has not been transparent about the purpose for which it wants to collect the data. Hopefully, the OFCCP will be clear in the NPRM in that regard. [Horvitz says the OFCCP failed this test.]
"Using the data to decide who to choose to audit is a completely different use of the data than reaching an analytical conclusion about fair pay from a snapshot of compensation data taken one day in time, but both purposes are fraught with legal concern. If OFCCP uses the data to select companies to audit, it seems to be inconsistent with the constitutional Fourth Amendment requirement of the randomness of the audit selection list the OFCCP generates each year under the existing Federal Contractor Selection System (FCSS).
"Right now, when the compliance officer sends out a scheduling letter using the FCSS list, the compliance officer has no access to any pre-submitted data. There is no presumption of guilt or innocence, just neutrality as the process begins. If OFCCP uses the collected compensation data to target companies for an audit, the compliance officer's mindset is going to shift away from neutrality to one that presumes noncompliance.
"Using it as the legal basis to request burdensome additional data further puts government contractors at a competitive disadvantage in the market when compared to their non-government contractor counterparts who don't have nearly the regulatory overhead."
Horvitz told Smith using W-2 information as a basis for attacking the pay gap among contractors "makes no sense" and contractors need to be heard on the issue.
Employers have 90 days to comment.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
