Government Contractors, Requirement To Report Summary Data on Employee Compensation

Federal RegisterAug 8, 2014

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DEPARTMENT OF LABOR

Office of Federal Contract Compliance Programs

41 CFR Part 60-1

RIN 1250-AA03

Government Contractors, Requirement To Report Summary Data on Employee Compensation

AGENCY:

Office of Federal Contract Compliance Programs, Labor.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Office of Federal Contract Compliance Programs (OFCCP) proposes to amend one of its implementing regulations for Executive Order 11246, Equal Employment Opportunity, which sets forth the reporting obligations of Federal contractors and subcontractors. This notice of proposed rulemaking (NPRM) would amend the regulation by adding a requirement that certain Federal contractors and subcontractors supplement their Employer Information Report (EEO-1 Report) with summary information on compensation paid to employees, as contained in the Form W-2 Wage and Tax Statement (W-2) forms, 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 summary compensation data collection from Federal contractors and subcontractors by OFCCP is 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. OFCCP seeks to achieve these dual and complementary objectives while minimizing, to the extent feasible, the compliance burden borne by Federal contractors and subcontractors.

DATES:

To be assured of consideration, comments must be received on or before November 6, 2014.

ADDRESSES:

You may submit comments, identified by RIN number 1250-AA03, by any of the following methods:

•

Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.

•

Fax:

(202) 693-1313 (for comments of six pages or less).

•

Mail:

Debra A. Carr, Director, Division of Policy and Program Development, Office of Federal Contract Compliance Programs, Room C-3325, 200 Constitution Avenue NW., Washington, DC 20210.

Instructions:

Please submit your comments by only one method. Receipt of submissions will not be acknowledged; however, the sender may request confirmation that a submission was received by telephoning OFCCP at (202) 693-0103 (voice) or (202) 693-1337 (TTY) (these are not toll-free numbers). All comments received by OFCCP, including any personal information provided, will be available for public inspection during normal business hours at Room C-3325, 200 Constitution Avenue NW., Washington, DC 20210, or via the Internet at

www.regulations.gov.

Upon request, individuals who require assistance viewing comments are provided appropriate aids such as readers or print magnifiers. Copies of this NPRM are available in the following formats: Large print, electronic file on computer disk, and audiotape. To schedule an appointment to review the comments and/or to obtain this NPRM in an alternate format, please contact OFCCP at the telephone numbers or address listed above.

FOR FURTHER INFORMATION CONTACT:

Debra A. Carr, Director, Division of Policy and Program Development, Office of Federal Contract Compliance Programs, 200 Constitution Avenue NW., Room C-3325, Washington, DC 20210. Telephone: (202) 693-0103 (voice) or (202) 693-1337 (TTY).

SUPPLEMENTARY INFORMATION:

Executive Summary

Purpose

The OFCCP proposes to amend the regulation found at 41 CFR 60-1.7 by adding a requirement that certain Federal contractors and subcontractors (hereinafter “contractors”) submit additional, readily available data in a new “Equal Pay Report.” This report would require the submission of summary data on employee compensation by sex, race, ethnicity, specified job categories, and other relevant data points such as hours worked, and the number of employees. The OFCCP believes that collecting and strategically using this summary data would have a significant deterrent effect and impact on OFCCP's enforcement program. Voluntary compliance and self-assessments by Federal contractors are critical components of this NPRM given the vast number of establishments subject to OFCCP's jurisdiction in comparison to the agency's modest personnel and other resources. The agency estimates that, based solely on 2012 EEO-1 Report data, more than 116,000 establishments are subject to its jurisdiction because they have at least 50 employees and a contract or subcontract in the amount of $50,000 or more. However, this NPRM proposes to cover a subset of these establishments. Informed by the aggregate industry-based data that OFCCP will make available to them, 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. Specifically, this NPRM will enhance the quality and quantity of data OFCCP collects. This data, in addition to data collected from publicly available sources, such as the Bureau of Labor Statistics (BLS), are critical to developing a data-driven approach for identifying and focusing OFCCP's evaluations and resources on Federal contractors that have potentially discriminatory compensation differences when compared to an objective industry standard.

This NPRM reflects extensive stakeholder input collected prior to and during a 2011 Advance Notice of Proposed Rulemaking, specific criteria stated in a Presidential Memorandum issued on April 8, 2014, and additional stakeholder input collected during listening sessions held following the release of the Presidential Memorandum (the Memorandum).

In the Memorandum, President Barack Obama directed the U.S. Department of Labor (DOL) to develop a compensation data collection proposal that would: (1) Maximize the efficiency and effectiveness of the agency's enforcement and its ability to focus on more likely violators; (2) minimize, to the extent feasible, the burden on Federal contractors and subcontractors, especially small businesses and small nonprofit organizations; and (3) use the data collected to encourage greater voluntary compliance and to identify and analyze industry trends. The Memorandum also encouraged the Department to develop a proposal that relies on existing reporting requirements and frameworks to the extent feasible, and to consider available independent

studies regarding the collection of compensation data.

Presidential Documents, Memorandum of April 8, 2014, “Advancing Pay Equality Through Compensation Data Collection,” Memorandum for the Secretary of Labor, April 11, 2014 (79 FR 20751).

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.”

However, deterrence is not often “incorporated as a central component of how investigations are targeted, conducted, and followed up on, or in the way that penalties are assessed and levied.”

Similarly, researchers have described deterrence as the “second foundation of traditional enforcement” with the potential to protect vulnerable workers and influence employers' behavior related to the broad goal of improving workplace compliance.

Research in this area has found that deterrence can effectively inform how enforcement agencies select and conduct investigations.

David Weil,

Improving Workplace Conditions Through Strategic Enforcement,

May 2010, at 2,

available at http://www.dol.gov/whd/resources/strategicEnforcement.pdf

(last accessed July 4, 2014).

Id.

at 13.

Id.

The disclosure of compensation data summarized at the industry level enables contractors and subcontractors to assess their compensation structure along with those of others in the same industry, and provide useful data to current and potential employees. Some of these employers will not want to be identified as having pay standards that are significantly lower or different from those of their industry peers, since this may encourage valuable employees to consider moving to other employers, or discourage applicants who see that higher paying jobs may be available elsewhere. Employers do not want to be known as one of the lowest paying members of their industry, and may voluntarily change their pay structure.

OFCCP, through this NPRM, seeks to imbed deterrence into its existing three-prong enforcement framework which consists of: (1) Conducting compliance evaluations and complaint investigations, and obtaining remedies for victims of discrimination; (2) Issuing policy, technical assistance, and subregulatory guidance that is legally sound and effective; and (3) Strategically developing relationships and sharing information with contractors and workers about their respective rights and legal obligations.

In order to integrate deterrence into the first of the three prongs, that is, its compliance evaluations process, OFCCP will collect and analyze contractor summary compensation data to establish objective industry standards for identifying potential discrimination in employee compensation.

OFCCP will use these standards to determine which contractors it will prioritize and schedule for compliance evaluations. This prioritization will be based on the amount of difference or variance between a contractor's pay standards when compared to the appropriate industry standards. By requiring contractors and subcontractors to report the data, OFCCP believes that some of these employers will voluntarily change their employment policies and practices. When coupling this collection of data with its proposed use, that is, using it to establish and make public objective industry standards that can indicate whether a contractor or subcontractor is at higher risk for possible compensation violations, OFCCP believes that more contractors will voluntarily change their policies and practices.

These contractors will rightfully assume that OFCCP is strengthening its enforcement in the area of compensation discrimination; therefore, they will likely take voluntary measures to ensure that they are in compliance should they be scheduled for an OFCCP compliance evaluation.

A contractor's compensation practices, standing, or position relative to the “objective industry standards” do not constitute a violation of OFCCP's laws or regulations, and no violation, sanction or penalty is imposed based on a contractor's ability to meet or exceed the standard. This standard is a tool OFCCP may use to inform and refine its scheduling process for compliance evaluations.

Mark A. Cohen,

Empirical Research on the Deterrent Effect of Environmental Monitoring and Enforcement,

30 ELR 10245, 10247-10250 (2000) (finding that empirical studies demonstrate the effectiveness of government activities such as enforcement and compliance monitoring have a deterrent effect; a general deterrent effect exists when the regulated believe that they have a higher probability of being monitored; monitoring the behavior of regulated entities based on assessed noncompliance risk level has a deterrent effect); Executive Office of the President, Office of Drug Control Policy,

Measuring the Deterrent Effect of Enforcement Operations on Drug Smuggling, 1991-1999,

(August 2001),

available at https://www.ncjrs.gov/ondcppubs/publications/pdf/measure_deter_effct.pdf

(last accessed June 23, 2014) (a deterrent effect exists with increased penalties and targeted enforcement operations); Diane Del Guercio, Elizabeth R. Odders-White & Mark J. Ready,

The Deterrence Effect of SEC Enforcement Intensity on Illegal Insider Trading,

(Sept. 2013) (providing direct evidence that aggressive enforcement deters illegal activity).

Integration of deterrence into the second prong of OFCCP's enforcement policy comes through not only the proposals in this NPRM but also through OFCCP's ongoing commitment to providing the contractors' human resources (HR) and compliance officials with access to technical assistance materials and training that supports compliance with OFCCP's regulations. It has been OFCCP's experience that HR and compliance officials often drive compliance within an organization, as they are often the sponsor or champion for compliance within the company. As such, training them and supporting their compliance work is critically important to greater deterrence and voluntary compliance.

Finally, as to the third prong of OFCCP's enforcement framework, routinely sharing aggregate compensation data at the industry and/or labor market level with contractors should drive some additional portion of the contractor community to engage in voluntary self-assessments of their compensation practices and make needed corrections.

OFCCP plans to share summary industry standards information with the public annually, as soon as practicable. Moreover, OFCCP plans to provide training and technical assistance to contractors that explain the standards and how contractors could use them to conduct self-assessments of their compensation practices and differences.

Mark A. Cohen,

Empirical Research on the Deterrent Effect of Environmental Monitoring and Enforcement,

30 ELR 10245, 10250 (2000) (sharing information is an important enforcement tool because it can change firm behavior; information disclosure has an important deterrent effect).

These voluntary assessments should not be confused with and do not take the place of the assessments required of contractors' affirmative action programs under OFCCP's regulations.

Consistent with this overall view of transparency, a 2010 study found that the Wage and Hour Division (WHD) of the U.S. Department of Labor could potentially increase its deterrence effects by being more transparent about its enforcement activities.

More specifically, the report concludes that greater transparency about investigation activities underway or the targeting of certain geographic areas by WHD, and information about closed investigations “potentially increase deterrence effects not only among employer networks, but also through spreading the word to workers in a local area.”

Consequently, OFCCP anticipates that by making publicly available the industry standards used to prioritize contractors for enforcement actions, and its overall emphasis on compensation

discrimination enforcement, the agency will also see positive deterrence effects.

David Weil,

Improving Workplace Conditions Through Strategic Enforcement,

May 2010, at 83,

available at http://www.dol.gov/whd/resources/strategicEnforcement.pdf

(last accessed July 4, 2014) (among the study recommendations were making investigation activities in a geographic area more transparent, and increasing public access to data on closed case investigations or industry initiatives to create a deterrent effect).

Id.

Yet another possible deterrence effect exists when OFCCP generally exercises its enforcement authority. When OFCCP finds and remedies violations during a scheduled compliance evaluation, because the contractor has not voluntarily changed its behavior, a preventive deterrent effect is the result. When OFCCP finds and remedies violations by contractors, they may be prohibited from, and thus prevented from, continuing their discriminatory practices. This enforcement approach is tantamount to “preventive” deterrence because the expectation is that at least some of these violators are prevented from continuing their unlawful conduct for some period.

Deterrence, unlike enforcement actions, is proactive in nature. As such, it can prevent jobs from being denied or lost, prevent workers from being unfairly compensated, and prevent individuals and their families from being placed in financial jeopardy due to employment discrimination. This NPRM is one means of enabling OFCCP to collect the data it needs to strategically prioritize compliance evaluations, and share that data, as appropriate, to support voluntary changes in contractor employment behaviors.

Collecting this readily available compensation information will permit OFCCP to identify and prioritize contractors and subcontractors that are likely to have possible compensation violations, and strategically deploy its enforcement resources to investigate those contractors. In an era of increased demand for productivity with dwindling resources, this enhanced data collection will inure to the benefit of both OFCCP and compliant Federal contractors and subcontractors.

Archon Fung, Mary Graham & David Weil,

Full Disclosure: The Perils and Promise of Transparency,

Cambridge University Press (2007).

Legal Authority

Originally issued in 1965, and amended several times in the intervening years, the purpose of Executive Order 11246 is twofold. First, the Executive Order prohibits employment discrimination on the basis of race, color, religion, sex, sexual orientation, and gender identity and national origin against employees and applicants by covered Federal contractors and subcontractors.

Second, it requires that each covered Federal contractor and subcontractor take affirmative action to ensure equal opportunity in employment. The nondiscrimination and affirmative action obligations of Federal contractors cover all aspects of employment, including rates of pay and other compensation.

On July 21, 2014, the President signed Executive Order 13672 amending Executive Order 11246 to include nondiscrimination based on sexual orientation and gender identity. This Order requires that a regulation be prepared within 90 days of the date of the Order. Though the new Executive Order is effective immediately, the protections apply to contracts entered into on or after the effective date of the new DOL regulation.

The requirements in Executive Order 11246 generally apply to any business or organization that: (1) Holds a single Federal contract, subcontract, or Federally assisted construction contract in excess of $10,000; (2) has Federal contracts or subcontracts with a combined total exceeding $10,000 in any 12-month period; or (3) holds Government bills of lading, serves as a depository of Federal funds, or is an issuing and paying agency for U.S. savings bonds and notes in any amount. Pursuant to the Executive Order, the award of a Federal contract comes with a number of responsibilities. Section 202 of the Executive Order requires every contractor to agree to: (1) Comply with all provisions of the Executive Order and the rules, regulations, and relevant orders of the Secretary of Labor; (2) provide all information and reports required by the Executive Order and implementing rules, regulations, and orders; and (3) provide access to its books, records, and accounts to the Secretary of Labor for the purpose of investigation to ascertain compliance with such rules, regulations, and orders. Under Section 203 of the Executive Order, the Secretary of Labor has broad authority to require compliance reports from contractors that contain such information regarding their practices, employment policies, programs, and employment statistics, in such form as the Secretary of Labor may prescribe. Likewise, the implementing regulations at 41 CFR 60-1.12(a) provide that the Director of OFCCP may require a contractor to keep employment or other records, including records on compensation and other rates of pay by race and gender, and must supply this information to OFCCP upon request. A contractor in violation of the Executive Order may have its contracts canceled, suspended, terminated, or may be subject to debarment.

Major Proposed Provisions in the NPRM

The regulation at 41 CFR 60-1.7 sets forth the existing requirement that certain Federal contractors and subcontractors submit an annual Employer Information Report EEO-1 (EEO-1 Report), a standard Federal report on workforce demographics that is jointly promulgated by OFCCP and the Equal Employment Opportunity Commission (EEOC). The NPRM proposes the following major provisions:

• Amending the regulation at 41 CFR 60-1.7 by adding a requirement that employers who file EEO-1 Reports, have more than 100 employees, and a contract, subcontract, or purchase order amounting to $50,000 or more that covers a period of at least 30 days, including modifications, submit two columns of additional information to the EEO-1 Report in a new Equal Pay Report to OFCCP.

The report requires the submission of summary data on employee compensation by sex, race, ethnicity, specified job categories, and other relevant data points such as hours worked, and the number of employees.

Any reference to contractor obligations under the proposed rule described in this NPRM also apply to first tier nonconstruction subcontractors and construction subcontractors that satisfy the employee and contract size coverage criteria in the proposed rule.

• Requiring that covered Federal contractors and subcontractors electronically submit the proposed Equal Pay Report using a web-based data tool. OFCCP will establish a process for requesting an exemption to the electronic filing requirement.

• Requiring contract bidders to make a representation related to whether they currently hold a Federal contract or subcontract that requires them to file the proposed Equal Pay Report and, if so, whether they filed the report for the most recent reporting period.

• Extending existing agency sanctions to Federal contractors and subcontractors for the failure to file timely, complete, and accurate Equal Pay Reports, and the representation of compliance.

OFCCP is also interested in amending the regulation to 41 CFR 60-1.7 by adding a requirement that employers who file the Department of Education's Integrated Postsecondary Education Data System (IPEDS) report, have more than 100 employees, and have a contract, subcontract, or purchase order amounting to $50,000 or more that covers a period of at least 30 days, including modifications, also file OFCCP's proposed Equal Pay Report. OFCCP is particularly interested in comments related to the need to collect additional compensation data from postsecondary academic institutions in light of the scope of their existing reporting obligations with the U.S. Department of Education. Consequently, information relevant to the feasibility of

using IPEDS data to satisfy the objectives of this NPRM is particularly helpful on the issue of the scope of coverage.

OFCCP proposes sharing summary industry standards information with the public annually, as soon as practicable. Moreover, OFCCP plans to provide training and technical assistance to contractors that explain the standards and how contractors could use them to conduct their self-assessments. This information could reflect the industry and/or labor market, or some other relevant aggregate grouping of the data received by OFCCP.

The published data will be made available to support and encourage genuine, in-depth, contractor self-assessments of their compensation policies and practices. OFCCP believes that the publication of data for contractors to use would significantly promote deterrence and voluntary compliance with their obligations under Executive Order 11246. The advancement of the societal goals of nondiscrimination in the workplace, and closing the pay gap, are the by-products of deterrence and compliance. Therefore, OFCCP is interested in comments on the cost to contractors of conducting these self-assessments of the data provided pursuant to the Equal Pay Report against published industry standards. These voluntary compensation difference assessments are not substitutions for mandatory assessments required by other provisions in Part 60.

The data could be made available at industry, labor market or other grouping levels based on OFCCP's assessment of the actual data it receives, and whether or not external data sources are used.

Costs, Benefits and Transfers

The table below displays the estimated costs associated with the implementation of this NPRM. OFCCP estimates that the proposed cost of the NPRM is $684 per contractor establishment or $2,176 per contractor company.

Table 1—Cost of the Proposed Rule

Frequency

Description

Estimated cost

One-Time Burden

Regulatory familiarization, modifications to contractor personnel tracking systems, and changes to the contractor's bidder representation process

$33,591,233

Annual Recurring Burden

Contractors completing the proposed report and contractors requesting exemption from electronic filing

12,654,414

Annual Operations and Maintenance Costs

The cost of filing the exemption request

4,542

Cost to the Government

The cost of additional staffing and updating information systems

3,759,696

Total Cost of the Proposed Rule

50,009,885

Note that the first-year cost of the proposed rule is $46,250,189, which includes the one-time burden, annual recurring, and annual operations and maintenance costs.The goals of the proposed rule are:

• Increasing contractor self-assessment of compensation policies and practices, and expanding voluntary compliance with OFCCP's regulations, to advance OFCCP's mission of ensuring nondiscrimination in employment and decreasing the pay gap between males and females and between people on the basis of race.

• Providing probative compliance information, including data on industry and/or labor market standards, to promote industry-wide deterrence within the Federal contractor community and lead to modified compliance behavior in the compensation arena.

• Making data-driven enforcement decisions that support the efficient use of limited enforcement resources. OFCCP will strategically deploy its resources to focus on conducting compliance evaluations of contractors that are more likely to have compensation discrimination violations.

• Shifting, to the maximum extent possible, compliance evaluation costs from contractors that are likely to be in compliance with OFCCP's existing regulations prohibiting pay discrimination to contractors that are more likely not to be in compliance.

• Contributing to the stability of working Americans by helping minimize the pay gap and promoting broad societal policy objectives of nondiscrimination and equal pay. Providing workers victimized by discrimination the opportunity to obtain the best possible remedies and relief. OFCCP anticipates increasing its capacity to identify more violations and obtain prompt remedies through a better-informed scheduling process for the estimated 4,000 compliance evaluations it conducts annually.

Social science research also suggests that anti-discrimination law has broad social benefits. Workers who are capable of successfully enforcing their rights and obtaining redress experience these benefits, as do the workforce and the country's economy as a whole. In general, discrimination is incompatible with an efficient labor market. Discrimination interferes with the ability of workers to find jobs that match their skills and abilities and to secure wages that are consistent with a well-functioning marketplace.

Discrimination also harms employers, by artificially restricting the pool of available talent, by diluting the critical reward structure that relates compensation to actual job performance, and by adding unnecessary costs. For example, employers may prefer to select certain categories of workers based on bias and end up with less qualified or able employees.

Discriminatory decisions are thought to be the result of functioning with limited information. This lack of information may drive employers to use group-based characteristics as shortcuts in making decisions, or as statistical proxies for other qualifications. Both can lead to inefficient outcomes.

Favoritism or limited information can result in pay disparities when it causes employers to reward certain categories of employees based on bias rather than merit. Discrimination may reflect market

failure, where collusion or other anti-discriminatory practices allow majority group members to shift the costs of discrimination to minority group members.

Shelley J. Lundberg & Richard Starz,

Private Discrimination and Social Intervention in Competitive Labor Markets,

73 Am. Econ. Rev. 340 (1983); Dennis J. Aigner & Glen G. Cain,

Statistical Theories of Discrimination in Labor Markets,

30 Indus. and Labor Relations Rev. 175 (1977).

Gary Becker, “The Economics of Discrimination” (1957).

Marianne Bertrand & Sendhil Mullainathan,

Are Emily and Brendan More Employable Than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination,

94 Am. Econ. Rev. 991 (2004); Ian Ayres & Peter Siegelman,

Race and Gender Discrimination in Bargaining for a New Car,

85(3) Am. Econ. Rev. (1995); Stewart Schwab,

Statistical Discrimination,

76 Am. Econ. Rev. 228 (1986).

Kenneth J. Arrow,

What Has Economics to Say about Racial Discrimination

? 12 The Journal of Economic J. Econ. Perspectives 91 (1998).

Consequently, effective anti-discrimination enforcement can promote economic efficiency and growth. For example, a number of scholars have documented the benefits of the civil rights movement and the adoption of Title VII of the Civil Rights Act of 1964 on the economic prospects of workers and the larger economy.

One recent study estimated that improved workforce participation by women and minorities, including through adoption of civil rights laws and changing social norms, accounts for 15-20 percent of aggregate wage growth between 1960 and 2008.

J. Hoult Verkerke, “

Free to Search,

” 105 Harvard Law Review Harv. L. Rev. 2080 (1992); James J. Heckman & Brook S. Payner, “

Determining the Impact of Federal Anti-Discrimination Policy on the Economic Status of Blacks: A Study of South Carolina,

” 79 American Economic Review Am. Econ. Rev. 138 (1989).

C. Hsieh et. al.,

The Allocation of Talent and U.S. Economic Growth,

NBER Working Paper (2013).

Background

The OFCCP is a civil rights and worker protection agency that enforces one Executive Order and two laws that prohibit employment discrimination and require affirmative action by companies doing business with the Federal Government.

Specifically, Federal contractors must engage in affirmative action and provide equal employment opportunity without regard to race, color, religion, sex, national origin, disability, or status as a protected veteran. The Vietnam Era Veterans' Readjustment Assistance Act of 1974 (VEVRAA), as amended, prohibits employment discrimination against certain protected veterans. Section 503 of the Rehabilitation Act of 1973 (section 503), as amended, prohibits employment discrimination against individuals with disabilities. Executive Order 11246, as amended, prohibits employment discrimination on the basis of race, religion, color, national origin, sex, sexual orientation, and gender identity.

Compensation discrimination is one form of discrimination prohibited by the Executive Order.

Executive Order 11246, Sept. 24, 1965, 30 FR 12319, 12935, 3 CFR, 1964-1965, as amended; Section 503 of the Rehabilitation Act of 1973, as amended, 29 U.S.C. 793, (section 503); and the Vietnam Era Veterans' Readjustment Assistance Act of 1974, as amended, 38 U.S.C. 4212 (VEVRAA).

Although laws protecting workers from pay discrimination have been in effect for more than 50 years, pay discrimination still exists. Pay discrimination is a real problem that continues to plague American working families. For example, looking at annual earnings reveals large gaps, where women working full-time earn approximately 77 cents on the dollar compared with men.

According to the latest BLS data, the weekly median earnings of women are about 82 percent of that for men.

While research has found that many factors contribute to the wage gap, such as occupational preferences, pay discrimination remains a significant problem for the working poor and the middle class.

U.S. Bureau of the Census, Income, Poverty and Health Insurance Coverage in the United States, Current Population Reports 2012 (Sept. 2013),

available at http://www.census.gov/prod/2013pubs/p60-245.pdf.

Bureau of Labor Statistics, U.S. Department of Labor, Current Population Survey, Labor Force Statistics from Current Population Survey,

available at http://www.bls.gov/cps/earnings.htm#demographics;

Updated quarterly CPS earnings figures by demographics by quarter for sex through the end of 2013

available at http://www.bls.gov/news.release/wkyeng.t01.htm.

Based on Current Population Survey data, in 2012, among married women who worked full-time, median weekly earnings were $751. Among married men who worked full time, median weekly earnings were $981. Among married men and women in 2012, weekly earnings for fathers and mothers with children under age 6 were $935 and $765, respectively. Weekly earnings for married men with no children under age 18 were $973, compared with $748 for married women with no children under age 18. Bureau of Labor Statistics, U.S. Department of Labor, The Editor's Desk, Median weekly earnings by sex, marital status, and presence and age of own children under 18 in 2012,

available at http://www.bls.gov/opub/ted/2013/ted_20131203.htm

(last accessed March 28, 2014).

Research also reveals a wage gap amongst various racial groups. At the end of 2013, median weekly earnings for African-American men working at full-time jobs were $646 per week, only 72.1 percent of the median for white men ($896).

Further, a study based on the hiring pattern of workers in the state of New Jersey found that African Americans, when re-entering the job market after periods of unemployment, are offered lower wages when compared to their white counterparts.

The study showed that the pay gap between these groups is typically 30 percent.

Controlling for various factors such as skills and previous earnings, the study found that up to a third of this pay gap could be attributed to racial discrimination in the labor market.

Similarly, a study based on National Longitudinal Survey data, found that the pay gap between African Americans and whites continues to exist, even after controlling for abilities and schooling choices.

Bureau of Labor Statistics,

Usual Weekly Earnings of Wage and Salary Workers,

Fourth Quarter 2013,

available at http://www.bls.gov/news.release/pdf/wkyeng.pdf,

January 22, 2014 (last accessed March 28, 2014).

Roland G. Fryer Jr. et al.,

Racial Disparities in Job Finding and Offered Wages

(2013), at 27,

available at, http://scholar.harvard.edu/files/fryer/files/racial_disparities_in_job_finding_and_offered_wages.pdf

(last accessed April 29, 2014).

Id.

at 29.

Id.

Sergio Urzua,

Racial Labor Market Gaps: The Role of Abilities and Schooling Choices,

43.4 J. Hum. Resources, 919, 919-971.

For Hispanic men, the wage gap is approximately 67 cents when compared to non-Hispanic white men.

Many of the studies analyzing pay disparities for the Hispanic populations focus on differences in education and age as compared to white workers.

However, even after analyzing the effect of these factors, these studies showed that these factors do not entirely account for the pay gap for Hispanics.

Additional calculations by race and sex based on 2012 Person Income Table PINC-10. Wage and Salary Workers—People 15 Years Old and Over, by Total Wage and Salary Income in 2012, Work Experience in 2012, Race, Hispanic Origin, and Sex,

available at https://www.census.gov/hhes/www/cpstables/032013/perinc/pinc10_000.htm

(comparison of median wage for workers working 50 or more weeks); Bureau of Labor Statistics 2012 CPS data, available at

http://www.bls.gov/cps/earnings.htm#demographics (last accessed on March 28, 2014).

Richard Fry & B. Lindsay Lowell, The

Wage Structure of Latino-Origin Groups across Generations,

45 Indus. Relations 2 (2006); Abelardo Rodriguez & Stephen Devadoss,

Wage Gap between White Non-Latinos and Latinos by Nativity and Gender in the Pacific Northwest, U.S.A.,

4 Journal of Management and Sustainability 1 (2014).

Id.

The wage gap is significantly greater for many women of color. BLS data reveals that African-American women make approximately 68 cents, Latinas make approximately 59 cents, and Asian-American women make approximately 87 cents for every dollar earned by a non-Hispanic white man.

Comparable figures, based on Census data, are 64 cents for African-American women, 56 cents for Latinas, and 86 cents for Asian-American women.

Women of color also earn less than men within their racial and ethnic groups.

Current Population Survey, Earnings by Demographics 2012,

available at http://www.bls.gov/cps/earnings.htm#demographics

(last accessed March 28, 2014

https://www.census.gov/hhes/www/

cpstables/032013/perinc/pinc10_000.htm

(comparison of median wage for workers working 50 or more weeks); Bureau of Labor Statistics 2012 CPS data, available at

http://www.bls.gov/cps/earnings.htm#demographics

(last accessed on March 28, 2014).

According to 2013 CPS usual weekly earnings data, African-American women earn 88 cents on the dollar compared with African-American men, Hispanic women earn 80 cents on the dollar compared with Hispanic men, AAPI women earn 75 cents on the dollar compared with AAPI men, and white women earn 74 cents on the dollar compared with white men. Calculated by the DOL Chief Economist Office from CPS ORG Annual Averages.

Regardless of how it is measured, over time, the significance of the differences in compensation for women and men becomes increasingly evident. According to one analysis by the Department of Labor, a typical 25-year-old woman working full-time would have already earned $5,000 less over the course of her working career than a typical 25-year old man.

If that earnings gap is not corrected, by age 65, she will have lost hundreds of thousands of dollars over her working years.

Decades of research shows this wage gap remains even after accounting for factors like the type of work people do, and qualifications such as education and experience.

Moreover, while some women may work fewer hours or take time out of the workforce because of family responsibilities, there is research suggesting that discrimination and not just choices can lead to women with children earning less.

At the current rate of progress, researchers estimate it will take until 2057 to close the gender pay gap.

Calculated by the Department of Labor based on CPS usual weekly earnings of wage and salary workers by sex. The cumulative lost earnings compare the difference in median earnings for full time workers who worked 52 weeks out of the year.

White House Council on Women and Girls,

The Key to an Economy Built to Last

(April 2012),

available at http://www.whitehouse.gov/sites/default/files/email-files/womens_report_final_for_print.pdf.

A March 2011 White House report entitled Women in America: Indicators of Social and Economic Well-Being, found that while earnings for women and men typically increase with higher levels of education, male-female pay gap persists at all levels of education for full-time workers (35 or more hours per week), according to 2009 BLS wage data. Potentially nondiscriminatory factors can explain some of the gender wage differences. See, e.g., June Elliot O'Neill, The Gender Gap in Wages, Circa 2000, Am. Econ. Rev. (May 2003). Even so, after controlling for differences in skills and job characteristics, women still earn less than men. Explaining Trends in the Gender Wage Gap, A Report by the Council of Economic Advisers (June 1998). Ultimately, the research literature still finds an unexplained gap exists even after accounting for potential explanations, and finds that the narrowing of the pay gap for women has slowed since the 1980s. Joyce P. Jacobsen,

The Economics of Gender

44 (2007); Francine D. Blau & Lawrence M. Kahn,

The U.S. gender pay gap in the 1990s: Slowing convergence,

60 Industrial and Labor Relations Review 45 (2006).

Shelley J. Correll, Stephen Benard, & In Paik, “Getting a Job: Is There a Motherhood Penalty?,” 112

American Journal of Sociology

1297 (2007).

Institute for Women's Policy Research,

At Current Pace of Progress, Wage Gap for Women Expected to Close in 2057

(April 2013),

available at http://www.iwpr.org/publications/pubs/at-current-pace-of-progress-wage-gap-for-women-expected-to-close-in-2057.

Although occupational segregation is an important contributing factor to the gender pay gap,

women earn less than men even within occupations. In a recent study of newly trained doctors, after considering the effects of specialty, practice setting, work hours and other factors, the gender pay gap was nearly $17,000 in 2008.

Catalyst, a nonprofit organization working for more gender-inclusive workplaces, reviewed 2011 government data showing a gender pay gap for women lawyers,

and that data confirms that the gap exists for a range of professional and technical occupations.

A study by the Institute for Women's Policy Research, based on information from BLS, found that women frequently earn less than men within the same occupation.

Despite differences in the types of jobs women and men typically perform, women earn less than men in occupations commonly filled by men such as managers, software developers, and CEOs. Women even earn less than men in those occupations commonly filled by women such as teachers, nurses, and receptionists. In a recent review of 2010 Census data, Bloomberg identified a particularly large pay gap in the financial sector.

White House Equal Pay Task Force,

Fifty Years After the Equal Pay Act

(June 2013),

available at http://www.whitehouse.gov/sites/default/files/equalpay/equal_pay_task_force_progress_report_june_2013_new.pdf.

Anthony T. LoSasso, et al, The

$16,819 Pay Gap For Newly Trained Physicians: The Unexplained Trend of Men Earning More Than Women,

30 Health Affairs 193 (2011),

available at http://content.healthaffairs.org/content/30/2/193.abstract.

Catalyst Inc., Women in Law in the U.S. (March 2013),

available at http://www.catalyst.org/knowledge/women-law-us

(last accessed on April 24, 2014).

Bureau of Labor Statistics, Median weekly earnings of full-time wage and salary workers by detailed occupation and sex (2013),

available at http://www.bls.gov/cps/cpsaat39.pdf.

Ariane Hegewisch, Claudia Williams, & Vanessa Harbin,

The Gender Wage Gap by Occupation

(2012),

available at http://www.iwpr.org/publications/pubs/the-gender-wage-gap-by-occupation-1/.

Bloomberg L.P.,

Wall Street Jobs Show Largest Gender Gap in Pay

(2014),

available at http://www.bloomberg.com/video/88496286-wall-street-jobs-show-largest-gender-gap-in-pay.html

(last accessed on April 24, 2014).

While occupational differences explain some of the gender wage gap, discrimination and other barriers play a role.

The significant underrepresentation of women in the highly compensated science, technology, engineering, and mathematics fields is one of many factors that can explain the overall average gender pay gap. However, a Department of Commerce study found that, after using statistical methods to account for workers' age, educational attainment, and region of residence, women who successfully enter these fields still earn less than their male counterparts.

Further, research has identified perceived hostility and fewer promotional opportunities for women as important reasons for female underrepresentation.

As the Council of Economic Advisors explained in a 2013 report issued by the White House Equal Pay Task Force: “While occupational segregation is sometimes described as a simple matter of women's choices, historical patterns of exclusion and discrimination paint a more complex picture . . . occupational segregation may be due [in part] to discrimination that can take several forms, including outright refusal to hire, severe harassment of women in non-traditional jobs, or policies and practices that screen qualified women out of positions but are not job-related.”

Francine D. Blau & Lawrence M. Kahn,

The U.S. gender pay gap in the 1990s: Slowing convergence,

60 Industrial and Labor Relations Review 45 (2006) (estimate occupational differences may account for about half of the gender wage gap; the extent to which occupational differences reflect choice or potential discrimination is not addressed by this analysis).

U.S. Department of Commerce, Economics and Statistics Administration. Women in STEM: A Gender Gap to Innovation (August 2011).

Weinberger, Catherine J. An Economist's Perspective on Women in the IT Workforce. Encyclopedia of Gender and Information Technology (2006); Hunt, J., Why do Women Leave Science and Engineering? NBER Working Paper (2010).

White House Equal Pay Task Force,

Fifty Years After the Equal Pay Act

(June 2013),

available at http://www.whitehouse.gov/sites/default/files/equalpay/equal_pay_task_force_progress_report_june_2013_new.pdf.

Fewer dollars for workers and their families means a real loss of economic security, at a time when no family can afford to be earning less. Historically, data show that women are generally poorer than men. The poverty rates for unmarried female head of households with children are significantly higher than most poverty rates. Looking as far back as 1966, poverty rates for unmarried female head of households with children have been consistently two to three times higher than the

overall male and female poverty rates.

In 2009, 28 percent of unmarried working women with children had incomes below the poverty threshold compared to 6 percent for male workers.

According to one report, average annual earnings for women between 2009 and 2011 could have increased from $36,129 to $42,380 (or by 17 percent) annually if the wage gap had been closed.

This increase, in turn, could have reduced the poverty rate for working women by almost 50 percent.

Examining mean annual earnings, mean family income, and poverty rates from 2009 through 2011, the data on poverty rates for working single mothers, working single women living alone, and working married women demonstrate that closing the pay gap for these groups could also reduce their poverty rates. After pay adjustments, working single mother poverty rates would have decreased by 13.7 percent, the rate for the working single women living alone group would have dropped by 6.4 percent, and working married women poverty rates would have decreased by 1.3 percent.

It is, therefore, very likely that eliminating or significantly reducing the wage gap will have an overall positive impact on the poverty rates and financial stability of these groups of women and their families.

U.S. Department of Commerce, Economic and Statistics Administration, and the Executive Office of the President, Office of Management and Budget, for the White House Council on Women and Girls,

Women in American: Indicators of Social and Economic Well-Being,

March 2011

available at http://www.whitehouse.gov/administration/eop/cwg/data-on-women

(last accessed on March 28, 2014).

Id.

at 14.

Heidi Hartman, Ph.D., Jeffrey Hayes, Ph.D., & Jennifer Clark,

How Equal Pay for Working Women Would Reduce Poverty and Grow the American Economy, Briefing Paper IWPR #C411,

Institute for Women's Policy Research, January 2014. The calculations are based on Current Population Survey Annual Social and Economic supplements, 2010-2012, for calendar years 2009-2011. The dollar valuations are in 2012 dollars.

Id.

As research suggests, because discrimination is one of the factors contributing to the pay gap, improving the ability of Federal civil rights enforcement agencies such as OFCCP to identify and remedy pay discrimination is a critical element of a broader strategy for closing that gap—particularly in light of its substantial social cost. To advance that goal, in 2010, President Obama convened the National Equal Pay Task Force (the Task Force), which includes the Department of Labor, Department of Justice, the EEOC and the Office of Personnel Management, to provide a coordinated Federal response to pay discrimination. In its “Recommendations and Action Plan,” the Task Force developed a number of recommendations to address the persistent challenges to enforcement of Federal laws prohibiting compensation discrimination.

See

National Equal Pay Enforcement Task Force Report,

available at http://www.whitehouse.gov/sites/default/files/rss_viewer/equal_pay_task_force.pdf

(last visited March 25, 2014).

In addition to deterring unlawful behavior and incentivizing the adoption of compensation policies and procedures, better and more comprehensive compensation data can substantially improve enforcement of anti-pay discrimination laws. Indeed, a key Task Force recommendation is that the Federal Government collect data on the private workforce to better understand the scope of the pay gap, and focus enforcement resources on employers that are more likely to be out of compliance with Federal laws prohibiting wage discrimination. The Task Force noted that the “lack of data makes identifying wage discrimination difficult and undercuts enforcement efforts.”

The Task Force recommendations urge OFCCP to devise a strategy to collect compensation data from Federal contractors and subcontractors, where feasible, in a manner that minimizes the burden on employers.

Id.

Identifying and remedying compensation discrimination has been integral to OFCCP's mission for many years. OFCCP primarily enforces contractors' compliance with Executive Order 11246, including its prohibition on compensation discrimination, by conducting compliance evaluations of Federal contractors and subcontractors each year. These compliance evaluations analyze workforce data, employment practices, and records that OFCCP requires contractors and subcontractors to keep and produce upon request. These recordkeeping requirements specifically include information on compensation such as wages, salaries, commissions, and bonuses.

As part of a compliance evaluation, OFCCP may request and review compensation data from specific contractor establishments, including, as appropriate, detailed compensation data on individual employees, and investigate contractor pay practices, even without a specific discrimination complaint.

41 CFR 60-1.12. In addition, OFCCP uses a Scheduling Letter and Itemized Listing to request records and information for the desk audit portion of its compliance evaluations. Authorization of a revised Scheduling Letter and Itemized Listing is pending with the Office of Budget and Management (OMB) as an information collection request under OMB Control Number 1250-0003.

In searching for pay discrimination violations, OFCCP is limited to the data provided by the nearly 4,000 contractors and subcontractors it evaluates annually. This cohort is a small fraction of the more than 116,000 establishments that are estimated to fall under OFCCP's jurisdiction.

In the absence of a comprehensive, accurate database that captures all Federal contractors and subcontractors, the agency must develop its own list of contractors and subcontractors for compliance evaluations, using a neutral selection process. OFCCP develops this list by using multiple sources of information such as Federal acquisition and procurement databases, EEO-1 reports, Dun & Bradstreet (D&B) data, and the U.S. Census Bureau tabulations. Statistical thresholds such as industry type and employee counts of Federal contractor establishments are also used. The list may be further refined by applying a number of neutral factors such as contract expiration date and contract value on the number of establishments per contractor that will be scheduled in any one cycle.

The estimate of 116,000 establishments is based on the number of “Yes” answers to Question 3 on the 2012 EEO-1 Report to whether they have at least 50 employees and a contract or subcontract in the amount of $50,000 or more. OFCCP's proposed new reporting requirement will only effect a subset of this 116,000 establishment population; Specifically, those with more than 100 employees and contractor or subcontracts in the amount of $50,000 or more. In other rulemakings, OFCCP is using an estimate of 500,000 establishments because those proposed rules apply to all covered establishments and not just those filing EEO-1 reports with more than 100 employees as proposed in this NPRM. This 500,000 estimate is used elsewhere is based on the General Services Administration's (GSA) System for Acquisition Management (SAM) database that includes grants as well as contracts that would not be covered by OFCCP because they do not meet the minimum contract value of $10,000 for OFCCP jurisdiction.

Despite the labor-intensive development of the scheduling list, OFCCP is currently unable to determine the true likelihood of compliance with OFCCP's regulations, including the prohibition against compensation discrimination found in Executive Order 11246. The Equal Pay Report data will allow OFCCP to assess a broad array of compensation-related employment practices, such as differences in promotion, initial placement or job assignment, and pay. The pay practices would not just include salary but incentives or other earnings opportunities. OFCCP can use the representation data in EEO-1 reports to identify potential hiring or

affirmative action violations, but cannot provide insight into potential compensation violations.

There are voluntary compliance and enforcement benefits associated with collecting more data. For example, contractors could benefit from the potential cost savings. OFCCP currently estimates that a significant proportion of the establishments it evaluates annually are compliant with the nondiscrimination requirements of Executive Order 11246. Thus, some contractors and subcontractors may incur less burden hours and costs in preparing for and undergoing evaluations. If a contractor's compensation differences are within an acceptable range, when compared to the industry standard, OFCCP would not likely prioritize it for a compliance evaluation. Developing a data-driven scheduling process for compliance evaluations is more efficient and will likely reduce compliance costs for some contractors.

The collection of the data will allow OFCCP to conduct analysis and establish objective industry standards that it will make available to contractors and others. Contractors are encouraged to use this information to conduct self-assessments by comparing their pay to the industry standards, identifying indicators of potential issues, examining their pay practices to determine if problems or potential violations actually exists, and taking voluntarily steps to make needed corrections. Moreover, OFCCP will offer training and other assistance on the use of the standards for self-assessments.

Who Must File the Equal Pay Report

Contractors that are required to file EEO-1 reports, have more than 100 employees, have a contract, subcontract, or purchase order amounting to $50,000 or more that covers a period of at least 30 days, including modifications, would file the Equal Pay Report. This generally includes:

• Private employers that:

○ Are prime contractors or first tier subcontractors, and have a contract, subcontract, or purchase order amounting to $50,000 or more;

A construction subcontractor at any tier must file the EEO-1 Report annually if it has a contract or subcontract of $50,000 or more.

○ serve as a depository of Government funds in any amount, or

○ is a financial institution that is an issuing and paying agent for U.S. Savings Bonds and Notes.

• Private employers that are not covered by the exemption under 41 CFR 60-1.5.

Single establishment employers file one EEO-1 Report for their single location. Multi-establishment employers with several locations file additional EEO-1 reports; one for the headquarters location, a report for each establishment with more than 50 employees, and a report for each establishment with fewer than 50 employees or an Establishment List providing the name and locations of each of these locations with fewer than 50 employees. However, EEO-1 filers with 100 or fewer employees are exempt from the OFCCP filing requirement. Multi-establishment employers must also file a Consolidated Report that consolidates all of the employment data submitted for their various establishments and their headquarters. OFCCP evaluates contractors by establishment. This NPRM would require that each establishment, including the headquarters location, file a single Equal Pay Report. Unlike in EEO-1 reporting, no headquarters Consolidated Report is required.

OFCCP is considering requiring institutions of higher education to file the Equal Pay Report if they are required to file IPEDS reports with the Department of Education, have a contract, subcontract, or purchase order amounting to $50,000 or more that covers a period of at least 30 days, including modifications, and have more than 100 employees.

The IPEDS reports collect data on faculty and staff by race and ethnicity using eight designations and by gender.

However, the IPEDS system collects limited data on compensation by demographics. IPEDS requires reporting of base pay for faculty positions, excluding medical school faculty, only by sex.

Requiring institutions of higher education to file the Equal Pay Report would expand compensation data collection to staff and all faculty positions, significantly increasing the number of workers covered by the report. In addition, using the Equal Pay Report framework would allow cross tabulation by race, and would go beyond reporting base pay. Key considerations for applying the data collection requirement to institutions of higher education include whether to use the IPEDS occupational categories, which differ from the EEO-1 job categories, and how to account for work hours.

National Center for Education Statistics, U.S. Department of Education, Institute of Education Sciences,

https://surveys.nces.ed.gov/ipeds/

(last accessed June 19, 2014).

The designations for race and ethnicity are Hispanic/Latino, American Indian or Alaska Native, Asian, Black or African American, White, Two or More Races. Race/ethnicity and gender data are collected on students and completers of covered institutions; OFCCP is not seeking student and completers data.

National Center for Education Statistics, U.S. Department of Education, Institute of Education Sciences,

https://surveys.nces.ed.gov/IPEDS/VisInstructions.aspx?survey=1&id=30043&show=all#chunk_1612

(last accessed July 24, 2014).

IPEDS uses categories aligned with the 2010 Standard Occupation Codes,

https://surveys.nces.ed.gov/IPEDS/VisInstructions.aspx?survey=1&id=30043&show=all#chunk_1596

(last accessed July 24, 2014), and limits reporting on salary to full time workers, based on contract length (9, 10, 11 or 12 months),

https://surveys.nces.ed.gov/IPEDS/VisInstructions.aspx?survey=1&id=30043&show=all#chunk_1612

(last accessed July 24, 2014).

OFCCP's proposed report harmonizes in many ways with the format of the EEO-1 Report. It also proposes to rely on existing IRS compensation reporting by using W-2 earnings as the source of compensation data. OFCCP believes that the Federal contractors and subcontractors that are required to submit the IPEDS reports are still highly likely to have the W-2 earnings information, business processes and information technology (IT) systems in place that could store and generate the specific information OFCCP is proposing to obtain through the Equal Pay Report. Accordingly, OFCCP is interested in comments on the following issues concerning a potential reporting requirement for postsecondary academic institutions:

• The proposal in the NPRM and any alternatives, including the feasibility of using a single Equal Pay Report format for all covered Federal contractors and how that could be implemented should postsecondary academic institutions (i.e., IPEDS filers meeting the proposed Equal Pay Report thresholds) be covered by the Equal Pay Report requirements,

• the cost and benefits, both qualitative and quantitative, of covering postsecondary academic institutions but deferring their reporting obligation for some period of time, and the estimated cost to these institutions for reporting their data using EEO-1 job categories, and

• the estimated number of IPEDS filers that could be covered by the proposed Equal Pay Report.

The OFCCP notes that it has not found a reliable source for the number of IPEDS filers that meet the more than 100 employee threshold covered by the Equal Pay Report.

What, When and How To File the Equal Pay Report

Using the Equal Pay Report, OFCCP proposes to collect three pieces of information related to calculating aggregate W-2 earnings for each group of workers within the EEO-1 job categories:

• The total number of workers within a specific EEO-1 job category by race, ethnicity and sex;

• total W-2 earnings defined as the total individual W-2 earnings for all workers in the job category by race, ethnicity, and sex; and

• total hours worked defined as the total number of hours worked for all workers in the job category by race, ethnicity and sex.

This Equal Pay Report itself would annually require the submission of summary employee compensation data, by sex, race, ethnicity, and specified job categories from Federal contractors, as well as other relevant data points that would include hours worked and number of employees. In an effort to harmonize the Equal Pay Report with the existing EEO-1 reporting requirement, the Equal Pay Report includes the same workforce demographic data (e.g., the identical seven race and ethnicity categories, sex, and company identification information),

the same ten EEO-1 job categories,

the same exemptions, and the same definition of “employee.”

As with the EEO-1 Report, both full-time and part-time employees would be included in the Equal Pay Report, and Federal contractors and subcontractors would have to represent that they are in compliance with their reporting obligation.

Electronic submission of the report is being required, and OFCCP is proposing to create a hardship exemption for contractors unable to perform electronic submission. Similar provisions exist for EEO-1 reporting.

The seven race and ethnicity designations in the EEO-1 Report are Hispanic/Latino, White (non-Hispanic), Black or African American, Native Hawaiian or Other Pacific Islander, Asian, American Indian or Alaska Native, and Two or More Races.

See

Equal Employment Opportunity, Employer Information Report EEO-1, Section D: Employment Data.

Id.

The ten job categories are: 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, and Service Workers.

The term “employee” on the EEO-1 report is defined as “any individual on the payroll of an employer who is an employee for purposes of the employers withholding of Social Security taxes except insurance sales agents who are considered to be employees for such purposes solely because of the provisions of 26 U.S.C. 3121(d)(3)(B) (the Internal Revenue Service Code). Leased employees are included in this definition. Leased Employee means a permanent employee provided by an employment agency for a fee to an outside company for which the employment agency handles all personnel tasks including payroll, staffing, benefit payments and compliance reporting. The employment agency shall, therefore, include leased employees in its EEO-1 report. The term employee SHALL NOT include persons who are hired on a casual basis for a specified time, or for the duration of a specified job (for example, persons at a construction site whose employment relationship is expected to terminate with the end of the employees work at the site); persons temporarily employed in any industry other than construction, such as temporary office workers, mariners, stevedores, lumber yard workers, etc., who are hired through a hiring hall or other referral arrangement, through an employee contractor or agent, or by some individual hiring arrangement, or persons (EXCEPT leased employees) on the payroll of an employment agency who are referred by such agency for work to be performed on the premises of another employer under that employers direction and control. Equal Employment Opportunity Commission, Equal Employment Opportunity, Standard Form 100, Employer Information Report EEO-1, Instruction Booklet.

Id.

There are, however, some differences between the EEO-1 and the proposed Equal Pay Report. The EEO-1 uses a “snapshot” approach that requires employers to include in their report only those employees from one pay period between the months of July and September of the current survey year. The proposed Equal Pay Report, however, covers a full calendar year from January 1 through December 31. The Equal Pay Report includes summary compensation data using total W-2 earnings paid as of the end of each calendar year for each worker who was included in the contractor's EEO-1 report for that year. The use of summary W-2 earnings data for the calendar year aligns with the period covered under a contractor's W-2 filings. Workers no longer employed as of December 31 would still be included in the report. The EEO-1 Report does not collect summary or individual employee compensation data. While OFCCP proposes a report filing window of January 1 to March 31 of the following year in order to obtain W-2 compensation data for the full year, the EEO-1 Report requires filing and certification by September 30.

OFCCP seeks public comment on this proposal, including:

The proposed reporting period and report filing window discussed here for the Equal Pay Report are not specified in the text of the proposed regulation. Instead, these details will be in the ICR authorizing the collection and reporting of data using the report.

• The January 1 through December 31 reporting period, the March 31 filing deadline, and any additional cost resulting from these dates not aligning with the EEO-1 reporting dates, and

• the amount of additional cost contractors could incur from the proposed requirement for contractors to include on their Equal Pay Report the employees reported on their EEO-1 Report.

Collecting summary data from contractors as described here should contribute to minimizing the burden and cost of reporting incurred by Federal contractors and subcontractors. OFCCP is also seeking to reduce the burden associated with retrieving that data by using the same definition of compensation that is used to reportW-2 earnings to the Internal Revenue Service (IRS). Thus, the expectation is that Federal contractors will not incur burden and cost related to collecting and producing new or different compensation data.

Contractors would be required to keep their Equal Pay Reports for a period of not less than two years from the date of the making of the report. However, if the contractor has fewer than 150 employees or does not have a contract of at least $150,000, this retention period is one year.

They would also have to make a representation related to whether they are currently a Federal contractor or subcontractor, and whether that they filed the report with OFCCP from the most recent reporting period when bidding on a Federal contract or subcontract. OFCCP proposes to apply sanctions in 60-1.4(a) and (b) and 60-1.27 to a failure to file a timely, complete and accurate Equal Pay Report and make the appropriate representations.

Confidentiality of the Equal Pay Report Data

The Freedom of Information Act, to the maximum extent that the information is exempt, would protect the information reported by contractors, including the summary compensation data. It is the practice of OFCCP not to release contractor data where (1) The contractor is still in business, and (2) the contractor indicates, and through the Department of Labor's review process it is determined, that the data are confidential and sensitive and that the release of data would subject the contractor to commercial harm. In the NPRM, OFCCP proposes creating the authority to publish aggregate information based on compensation data collected from the Equal Pay Report, such as ranges or averages by industry, labor market, or other groupings, but only in such a way as not to reveal any particular establishment's or individual employee's data. OFCCP proposes that it would analyze the information collected on the Equal Pay Reports and, along with other available data, develop objective industry-based standards for compensation differences, and prioritize contractors and subcontractors for evaluation whose summary data show discrepancies that indicate possible compensation violations.

Additional Information

Bidders on Federal contracts and subcontracts will be required to state whether they currently have a Federal

contract or subcontract that requires them to create affirmative action programs, and file EEO-1 and Equal Pay Reports. If so, the contractor or subcontractor must state whether it has prepared the affirmative action programs; filed the EEO-1 Report(s) for the most recent reporting period with the Joint Reporting Committee; and whether it filed an Equal Pay Report for the most recent reporting period with OFCCP.

The NPRM also proposes making technical amendments to § 60-1.7, as explained in the Section-by-Section Analysis. Those amendments would conform other related recordkeeping provisions in § 60-1.7 to the proposed new reporting requirement, as well as update them to reflect current agency practice.

In addition, to ensure that the costs and burdens of this rule are minimized to the extent feasible, OFCCP requests public comment on an alternative reporting framework. This alternative would utilize a single report that would fulfill contractors' reporting obligations under this rule and the EEO-1. This single report would collect all the information currently included on the EEO-1, as well as summary compensation information and other appropriate data elements for the purposes of meeting the objectives of this rule. OFCCP would coordinate with EEOC on how the single report could be collected, which agency would collect the single report, and the timing of the collection. OFCCP invites public comment on:

• The feasibility of this alternative framework,

• the possible content and design of the single report, and how the report could meet the needs of both OFCCP and EEOC,

• the degree to which using a single report could both minimize burden and effectively meet the objectives of this rule, and

• the possible administrative, procurement and other modifications needed to implement a single report alternative.

Calculation of Objective and Reliable Standards for Assessing Contractor Pay Gaps

OFCCP proposes using the data it collects in the Equal Pay Report, in conjunction with other information available through existing resources such as labor market survey data, to generate reliable and objective industry standards for assessing individual contractor compensation data and conducting contractor self-assessments. After receiving the Equal Pay Reports from covered contractors, OFCCP proposes to aggregate each contractor's summary data with those of peer employers by industry to construct the objective industry standards. Labor market data would also be used to create the objective industry standard. As proposed, these standards would include the total number of employees in each EEO-1 occupational category from all the Equal Pay Reports submitted by contractors in a particular industry group, as well as the industry group's total W-2 pay and total hours worked, and the mean hourly wage calculated as total W-2 pay divided by total hours worked. This information would be determined separately by race and gender. OFCCP proposes to compare each contractor's summary statistics to the relevant objective industry standard. OFCCP is more likely to prioritize contractors for compliance evaluations with pay gaps that are greater than the standard.

Because OFCCP anticipates that Equal Pay Report data may have fewer observations in certain industries or job categories, and because it is self-reported data on contractors only, considering information available in these other data sources may inform and improve the analysis of reported contractor compensation data by providing a larger economic context. OFCCP is interested in related comments such as:

• The use objective industry standards and using contractor pay gaps that are greater than the standards to focus or prioritize contractors for compliance evaluations,

• the feasibility of using external data along with the Equal Pay Report data to develop the objective industry standards,

The actual Equal Pay Report and instructions will be published in an Information Collection Request (ICR). OFCCP encourages comments on the proposed report.

• the potential benefits and limitations of using supplementary external data sets for this purpose, and

• the existence of other potentially useful supplemental data sources, in addition to ACS and BLS data.

Using just Equal Pay Report data alone has the benefit of focusing specifically on the pay gap among Federal contractors, which may or may not be different from employers generally. It is simpler to use Equal Pay Report data alone and the calculations would be easier to understand. However, contractors operate in a larger labor market and industry environment, and using supplemental data sources allows consideration of these broader trends. The potential benefits of using supplemental general labor market data is that they are typically based on well-understood samples from large populations of firms and are developed in a general survey context. This makes the data less prone to non-response bias that may occur when collecting pay data to enforce an anti-discrimination legal mandate. In addition, by using this data, OFCCP can likely determine the extent to which the pay practices of Federal contractors demonstrate important differences when compared to the pay practices of all employers generally. OFCCP cannot glean this information when only looking at Equal Pay Report data.

Incorporating supplemental data sources supports OFCCP's ability to refine its contractor pay gap standards to use for comparison purposes.

For example, the agency could develop better standards for specific industries using North American Industry Classification System (NAICS) codes and the Equal Pay Report's job, sex, race and ethnicity categories.

Where feasible and appropriate, OFCCP could also refine the standards by geographic locations such as state, Metropolitan Statistical Area (MSA),

and by contractor size.

OFCCP would use these standards to prioritize contractors for scheduling compliance evaluations; these standards would also be made publicly available to support contractor voluntary compliance.

The regulations enforcing VEVRAA also use a related but distinct concept of developing a benchmark linked to external labor market data, a different approach to measurement and calculation than the one discussed here.

In some cases, sample size considerations and data limitations may require aggregating race categories for calculating metrics or for making selections. Where possible, the agency proposes to maintain separate measures for each race/ethnicity grouping in the Equal Pay Report.

Because the pay gap is a ratio, and because some industries are also correlated to specific geographic areas, it may be less necessary to have location-specific metrics. Sample size considerations, as explained below, may also affect the ability to calculate metrics at all possible levels of analysis. However, to the extent local labor market characteristics, such as the race/ethnicity distributions in different parts of the country, may affect the pay gap, it may be important to assess the role of geographic location when constructing measures and/or making selections or conducting voluntary compliance.

OFCCP would review the data submitted by contractors to determine whether there are enough actual differences in the reported pay gap by contactor size, after accounting for industry and job category, to justify separate measures.

OFCCP anticipates that the Equal Pay Reports for some contractors will contain sparse cells because certain combinations of job category and demographics will have only a few workers. Certain EEO-1 job category

groupings summarized by race or ethnicity and gender may be much smaller than others, especially when further subdivided by industry or other variables. Small cell sizes may arise on the current EEO-1 Report, or the proposed Equal Pay Report for a variety of reasons: Sales workers or craft workers may be less prevalent in certain industries, some geographic regions may have fewer members of specific racial or ethnic groups than others, and smaller contractors will generally report summary data on behalf of fewer workers in each group. This is an unavoidable reality when studying aggregate wage data of the kind OFCCP intends to collect.

OFCCP plans to address these potential issues when calculating measures. For example, OFCCP may calculate and report national metrics for some industries, or metrics by region instead of MSA or state. In addition to aggregating where appropriate and necessary, OFCCP would likely exclude extremely sparse cells from the metric calculation altogether due to reliability and validity concerns. As a result, for certain job categories in certain industry groups, the agency may not report a metric where the data are insufficient.

Use of the Equal Pay Report Data and the Metrics To Select Contractors for Evaluation

For purposes of selecting contractors for compliance evaluations using the Equal Pay Report data, OFCCP proposes to focus primarily on a strategy that ranks contractors against the objective standards, and then prioritizes compliance evaluations of those contractors and subcontractors who have larger race or gender pay gaps than what is typically reported in the industry as measured by the objective industry standard described in the section above. Those contractors and subcontractors who report patterns with the greatest deviation from the applicable standard would have the highest likelihood of selection for further investigation under this approach. Under its usual compliance evaluation procedures, the agency would then examine their detailed compensation data and practices to make a determination about the contractors' actual compliance. OFCCP specifically proposes comparing average pay differences across contractors who are in the same industry within EEO-1 job categories. While EEO-1 categories are far too broad to identify pay discrimination at the individual employer level with precision, they are practical and useful for setting enforcement priorities by comparing across employers based on summary data. As explained further in this section, the agency also plans to consider how other data sources may provide information on firm or employee characteristics that would help refine and improve OFCCP's ability to use Equal Pay Report data to rank contractors and prioritize compliance evaluations.

Under the approach proposed by OFCCP, using an objective industry standard, the goal is not simply to identify absolute differences in pay, which may be explained in any particular case by a variety of legitimate factors. Rather, it is to identify contractors with pay differences that substantially depart from the objective industry standard, reducing the likelihood that legitimate factors explain all of the difference. The most straightforward approach to analyzing earnings data would be to simply compare the earnings of, for example, female and male professional employees within a reporting establishment and select those with the largest differences in average compensation for compliance evaluations. Thus, an establishment where female professionals earn on average 75 percent of what male professionals earn may be reviewed, and those where women earned 90 percent of what men earned may not. This procedure might be labeled a “simple ratio” analysis. In contrast, setting an industry standard using the kind of metrics described above compares the wage ratios for men and women in each establishment to the typical ratio within an industry group or other peer establishments. Under this approach, an establishment where the average female professional earns 75 percent as much as her male co-worker might not be selected for an OFCCP compliance evaluation if the ratios for women in similar firms average 60 percent. These basic principles also would apply when analyzing race or ethnicity-based differences.

By using an objective industry standard as the measure against which a contractor's pay gap is assessed, OFCCP should be able to account for some of the potential effects of employee qualifications and other potentially nondiscriminatory explanations for observed wage gaps. For example, if female professionals as a group are favoring particular types of jobs, or coming to particular jobs with more education or less full-time work experience on average than similar men, those differences should be reasonably similar among peer employers within the same industry and/or labor market. They might result in an overall average gender-based pay difference within the EEO-1 category of “professionals” for all employers in that peer group.

Although EEO-1 categories involve a mix of jobs and workers, the average differences in pay by race and sex across employers are still valuable because the Equal Pay Report will generate similar and comparable data by peer employers. With rare exceptions, OFCCP anticipates that systematic gender- or race-based differences will merit further investigation. Using a contractor's Equal Pay Report data against the objective industry standard further focuses these differences to contractors most worthy of further investigation and will inform the development of OFCCP's scheduling list.

For the group of contractors scheduled for a compliance evaluation, OFCCP would then conduct a desk audit of the contractor's data and records, and may make a request for more detailed data to evaluate the precise mix of jobs, workers and pay practices and draw an accurate conclusion about potential violations. That a contractor departs from the metric or has an absolute pay gap of a particular size is not sufficient evidence to find a pay discrimination violation. Equal Pay Report data would only be a basis to select contractors for a deeper assessment of potential discrimination in their compensation systems and practices based on the pay disparities observed in their reported data.

The agency also considered collecting information that would allow for calculation of variance. Variance is useful because it takes into account cell size (i.e., how many individuals are used in the calculation of the mean for a group) as well as the spread or differences in salary data among the persons in the group. However, providing enough information to calculate a variance would go beyond the total number of employees and total W-2 earnings and hours worked by group, and would increase the burden by requiring contractors and subcontractors to calculate and report additional metrics from their individual level data. The public is welcome to comment on these issues and approaches.

OFCCP plans to share information on industry standards publicly annually, as soon as practicable. OFCCP would post the standards on the agency's Web site. Training courses and technical assistance materials will be available in the form of technical assistance guides, web-based training courses, frequently asked questions (FAQs), directives and other policy statements, and through OFCCP's Customer Service Unit

responding to telephone and email questions and general inquiries. These courses and materials would explain the industry standards and how contractors could use them for self-assessment purposes. By providing access to this policy and technical assistance information, OFCCP is educating contractors and, thereby, likely deterring future violations. These tools should allow contractors to determine if a “deeper dive” is needed into their pay practices, and if problems are identified, to voluntarily correct them.

OFCCP seeks comment on this approach, including comments on:

• How contractors would use the objective industry standards that are based on aggregate compensation data to assess their compensation practices and/or disparities; and

• data challenges contractors could face.

In using Equal Pay Report data as part of its process for selecting contractors for review, OFCCP must address a number of important practical and operational considerations such as resource constraints, data limitations, and enforcing contractor compliance with a broad range of employment practices and affirmative action requirements related to sex, race, ethnicity, disability, and status as a protected veteran. In requesting comment on the potential application and use of Equal Pay Report data to its overall scheduling practice, the agency retains the discretion to consider these comments in light of the agency's operational and enforcement priorities.

Consistent with the Fourth Amendment standard of neutrality, OFCCP will continue to apply a variety of criteria to its decisions to select contractors for review that go beyond the scope of the Equal Pay Report data.

Pre-Rulemaking Process—ANPRM

Prior to developing this proposed rule, OFCCP solicited significant stakeholder input on the design and operation of a potential compensation data collection tool in an Advance Notice of Proposed Rulemaking (ANPRM) published on August 10, 2011 (76 FR 49398). The ANPRM stated OFCCP was considering requesting contractor compensation data, and asked for responses to fifteen specific questions about categories of data or potential applications of a data collection tool. The ANPRM also invited general comments on the design or approach of such a tool.

OFCCP received a substantial response to the ANPRM. Over 7,800 organizations and individuals submitted comments, highlighting the significance of the issue and the strong public interest in a potential compensation report. More than 7,000 comments were form letters organized by women's rights groups advocating generally for a broad data collection tool, and several hundred more were statements of general support for taking greater steps to address equal pay issues. In addition, a broad range of stakeholders submitted substantive comments on both OFCCP's overall concept of collecting contractor compensation data and on the specific issues raised in the ANPRM.

The comments submitted in response to the ANPRM raised significant issues. These include a set of overarching issues regarding the scope and purpose of data collection, the potential benefits to workers and contractors, potential burden and cost, and legal questions about OFCCP's authority to collect and use compensation data. In addition, the comments discussed specific points regarding who should provide data, what types of compensation data OFCCP should collect, what workers should be included and how to group them, what kinds of factors might be collected, and analytic techniques. Comments also addressed specific implementation issues, such as the agency's experience using the Equal Opportunity (EO) Survey, coordination with the EEOC and its research into compensation data collection, OFCCP's technical capacity to manage and analyze data, and IT and electronic filing requirements. OFCCP considered the ANPRM comments in developing this proposed rule. General comments about the proposal to collect compensation data are discussed below, while comments that address specific aspects of the proposed rule and the proposed Equal Pay Report are discussed in the Section-by-Section Analysis.

OFCCP is aware that the EEOC is still considering the collection of compensation data, and that EEOC previously convened an expert panel of the National Research Council (NRC) of the National Academies (NAS) to advise on its data collection from all covered employers. The NRC report made several recommendations, including that EEOC prepare a comprehensive plan for using earnings data and that an independent contractor conduct a pilot of the proposed data collection plan.

Recently, EEOC prepared a Statement of Work (SOW) for its pilot study on how compensation earnings data could be collected from employers on EEOC's survey collection systems (e.g., EEO-1, EEO-4, and EEO-5 survey reports). The pilot study, among other things, seeks to identify and make recommendations on the definition of pay, the best summary measure of central tendency and dispersion for annual earnings, and the best statistical tests for analyzing annual earnings data using existing EEOC survey reports. It will also assess the cost for the data collection. This timing of the pilot study is incompatible with direction provided to DOL in the Presidential Memorandum issued in April 2014 directing proposed rulemaking within 120 days.

National Research Council of the National Academies, Committee on National Statistics,

Collecting Compensation Data from Employers

(2013), at 2-3,

available at http://www.nap.edu/openbook.php?record_id=13496

(“Collecting Compensation Data”). The EEOC invited the panel to make recommendations to assist it with formulating its regulations on methods for measuring and collecting pay information.

However, OFCCP looks forward to continuing to work with EEOC on pay data collection, including sharing information resulting from this proposed rule and engaging with EEOC on the results of its pilot project once it is completed. Informed in part by its examination of the NRC report, OFCCP studied its data collection process and identified a collection tool that it believes is suitable for its investigations and related policies and procedures. Indeed, OFCCP has addressed certain specific recommendations of that panel in its proposal and invited comments on other recommendations.

Finally, OFCCP intends to coordinate with EEOC on this data collection proposal. OFCCP has also consulted with the Department of Labor Agency Task Force members, including the Women's Bureau and the Wage and Hour Division, as well as the other Federal agencies on the Task Force.

General Comments

Contractors and contractor organizations, human resource information systems vendors, and law firms and consultants who assist Federal contractors with compliance, provided a diverse set of perspectives on the issues in the ANPRM. Many raised concerns about the potential burden of OFCCP's efforts to collect certain types of compensation data and asked for more clarity about the purpose of the compensation data collection tool. They were also interested in how the tool supported OFCCP's mission. While some were adamantly opposed to a data collection of any type or scale, even stating that OFCCP should withdraw or abandon the proposal, others requested a more specific proposal in order to determine whether

OFCCP's proposal was appropriate. Still others favored certain specific elements or strategies discussed in the ANPRM or recommended ways to design the tool that matched existing contractor practices and IT systems.

Women's rights, civil rights and worker protection organizations strongly supported a compensation data collection tool. They generally encouraged the agency to collect data in as specific a form as possible. Many also encouraged OFCCP to go beyond the confines of compensation practices and collect data on hiring, promotion and termination such as OFCCP's former Equal Opportunity (EO) Survey. These commenters repeatedly highlighted the importance of closing the pay gap, and reiterated their concern that OFCCP has sufficient tools and data to support its worker protection mission. Noting the barriers that workers face in trying to obtain compensation in their workplace, OFCCP's role in identifying and addressing compensation discrimination is critical.

Scope and Purpose of the Data Collection

Many of the ANPRM comments focused on the scope of the data collection, and expressing several concerns. These included concerns that OFCCP would collect too much data, and that it would be too difficult, costly or time consuming to comply with the new reporting requirement, or that OFCCP would only collect minimal data that would not be useful or relevant to its goal of addressing pay discrimination. In general, most of these comments assumed that the purpose of a data collection effort was directed at identifying specific evidence of a pay discrimination violation—which would in fact require reporting at a highly detailed level. Instead, OFCCP proposes to use the information from the Equal Pay Report primarily as neutral criteria to prioritize how it selects contractors and subcontractors for a compliance evaluation. Under these circumstances, OFCCP can rely on summary data without needing more detailed reporting. After OFCCP selects contractors and subcontractors and schedules them for regular compliance evaluations, the agency would then request the additional more detailed data and information necessary to make a complete assessment of whether a violation exists.

Many contractors and their representatives raised specific concerns about the burden of collecting different categories of data. They noted that certain types of information, like factors that can explain compensation for individual workers, are not consistently maintained in human resources databases or even in electronic form at all. Some raised similar objections to providing data on certain elements of compensation. Many also expressed substantial concerns about the collection of individual employee pay records, in terms of both burden, and privacy and confidentiality issues. The agency has carefully considered all of these concerns in developing this proposal to minimize burden, focus on the most readily available information, and ensure the maximum potential confidentiality protection would apply to the information.

While some objections concerned OFCCP collecting too much data, others expressed alarm that OFCCP might collect too little data. Almost all of the commenters who addressed substantive issues stated that, for a compensation data collection tool to have any utility, it must collect information at a sufficiently detailed level. A large number of these commenters argued that comparing contractors was not a one-size-fits-all exercise, or that an apples-to-apples comparison could not be used given the many employee-level and firm level differences in practices and factors that affect compensation. Commenters raised concerns about aggregating elements of compensation, aggregating workers with different job titles, aggregating across locations, and many other efforts to compare compensation differences that might incorporate different potential causal mechanisms. Several commenters suggested that contractors be afforded discretion to determine what type of compensation information they would submit. Similarly, contractors wanted discretion to determine how they would aggregate or disaggregate information. Both comments aimed to reduce burden or to compensate for factors that may affect compensation data.

Notably, although contractors, their representatives, and the civil and workers' rights commenters often disagreed about aspects of this endeavor, they largely agreed on this point. Most commenters questioned whether OFCCP could get an accurate picture of pay discrimination without gathering information at a substantial level of detail. Nevertheless, while contractors and employer organizations viewed this problem as fatal to the endeavor, pointing out the complexity and burden of detailed data collection, advocates for workers viewed it as both necessary and feasible. OFCCP agrees that establishing pay discrimination can be complex and nuanced, and would potentially require substantial data and other information. That is why the agency is not seeking to establish pay discrimination violations through a general reporting requirement. Determinations as to whether a contractor has violated the Executive Order may depend not only on data analysis, including individual compensation records, but also on the specific facts of the case. In order for the proposed report on compensation to be an effective tool, the data collected must be uniform and easy to compare. Allowing contractors to choose the type of data to submit, or having contractors submit a large number of unique job groupings or compensation types or explanatory factors, would prevent the tool from serving its intended purpose.

Indeed, data collected under the proposed Equal Pay Report would not be the only data that OFCCP uses to evaluate contractor pay practices. If OFCCP selects a contractor for a compliance evaluation, or is investigating a complaint, that review would cover compensation data beyond what is in the contractor's Equal Pay Report and would involve a more specific and detailed data request. To assess individual contractor pay practices, OFCCP can request significant detail during compliance evaluations about types of compensation, detailed job groupings, factors affecting pay, and other specific information—including analyzing individual employee—level compensation records. OFCCP compensation investigations address a broad range of practices and categories of compensation, and generally cover a broad set of workers. Specific investigations may rely on more detailed job category information, and consider potential explanatory factors like experience or education. In general, OFCCP will conduct an analysis relevant to the contractor's specific industry, workforce and practices, based on the available facts and data. OFCCP will also investigate hiring, promotion and other employment practices. Any final determination of a violation will be based on a factually sound, analytically rigorous, and legally appropriate assessment. Summary data provides a preliminary look at potential compensation disparities, allowing OFCCP to conduct more detailed compliance evaluations much more efficiently.

Notably, one commenter who focused on OFCCP's goal of using the data collection to prioritize contractors for further evaluation also proposed that OFCCP collect data in a manner very similar to the Equal Pay Report framework proposed in this NPRM. This commenter, a law firm with substantial

experience representing contractors in OFCCP compliance evaluations, stated that OFCCP should only collect a simple level of data sufficient to identify disparities and not attempt to collect enough information to draw conclusions about discrimination—because of burden and cost. OFCCP's proposal is consistent with this approach, as it is limited to summary data, and will be used for prioritizing contractors and subcontractors for evaluation, rather than making ultimate determinations of compliance.

A final set of issues regarding the overall scope and design of a compensation data collection tool concerned other ways OFCCP might use these data. For example, in the ANPRM, OFCCP discussed industry trend analysis and research. Some commenters suggested that such activities were outside of OFCCP's mission or authority. OFCCP does not intend to collect this data in order to conduct general compensation analysis unrelated to potential scheduling and enforcement, or simply to conduct its own independent peer-reviewed research. For example, OFCCP intends to analyze compensation data at an industry level in order to compare peer employers, and may use it to conduct research and analysis regarding how well certain aspects of the data used for scheduling ultimately predict the likelihood of violation. In addition, OFCCP intends to disclose certain aggregate data in order to assist contractors and subcontractors seeking to compare their own pay practices against others using the kind of industry-based standards described below. OFCCP does not contemplate any other specific use or release of this data.

Potential Benefits to Workers

A number of the commenters discussed how the collection and use of compensation data could confer broad benefits on workers and contractors. Many addressed the significant social problem of the pay gap, highlighting the importance that OFCCP have adequate enforcement tools to ensure that Federal contractors and subcontractors do not discriminate in pay.

In particular, women's and civil rights organizations noted that the prevalence of pay secrecy policies makes OFCCP's ability to obtain and review compensation data even more important. Workers find it extremely difficult to get information on pay practices or determine if they are being paid less because of pay discrimination. On April 8, 2014, President Obama issued Executive Order 13665, prohibiting discrimination by Federal contractors against employees and job applicants who inquire about, discuss, or disclose wages.

This Executive Order complements the proposed data collections by improving the overall transparency of contractor pay practices.

Executive Order 13665, Non-Retaliation for Disclosure of Compensation Information, 79 FR 20749 (April 11, 2014).

First, OFCCP agrees that collecting compensation data from Federal contractors can improve OFCCP's ability to enforce laws that prohibit contractor pay discrimination. This includes protecting contractor employees and their families from experiencing the negative effects of pay discrimination that can significantly reduce lifetime earnings, and improving OFCCP's ability to identify employees who were victims of discrimination and ensure they receive the remedies they deserve.

Second, because workers often do not know about pay discrimination and therefore cannot act to address it on their own behalf, improving OFCCP enforcement is important. Almost half of all workers report that they are prohibited from or strongly discouraged from discussing their own compensation with workplace colleagues.

In a compliance evaluation, OFCCP can request and review workforce data directly, and the agency may find problems of which workers are unaware.

Institute for Women's Policy Research,

Pay Secrecy and Wage Discrimination,

(June 2011),

available at http://www.iwpr.org/publications/pubs/pay-secrecy-and-wage-discrimination.

A single OFCCP systemic investigation can resolve claims on behalf of a large group of workers. This benefits workers in the class directly, through back pay and reforms to pay practices that can improve pay equity over the long term. By collecting compensation data, OFCCP expects to increase both the number of pay discrimination cases it pursues and the proportion of systemic investigations. This would increase the credible deterrent effect of OFCCP enforcement—conferring benefits on workers at many other establishments by encouraging greater voluntary compliance.

Indeed, OFCCP expects that contractors and subcontractors are more likely to conduct the required self-analysis and correct existing problems if they regularly report their compensation data to OFCCP, and if they have access to the compliance assistance mechanisms OFCCP seeks to provide through Equal Pay Report data. In other words, OFCCP's impact is broader than only the establishments it investigates, but includes establishments it does not evaluate, ultimately further reducing the number of workers underpaid due to discrimination.

Equal Opportunity Survey

In 2000, OFCCP sought to collect data on compensation and other employment practices from Federal contractors through a mechanism known as the Equal Opportunity Survey.

Field tests of the survey instrument supported the conclusion that general survey data collection on employment practices from Federal contractors was feasible and that there would not be substantial non-response issues. In 2006, OFCCP rescinded the Equal Opportunity Survey in light of conflicting data on its effectiveness.

A number of commenters suggested that aspects of the Equal Opportunity Survey should serve as a model for OFCCP, like collecting data on a broad range of employment practices. Others stated that the Equal Opportunity Survey demonstrates OFCCP cannot and should not attempt to collect regular summary data from contractors, questioning the Equal Opportunity Survey's ultimate predictive power. OFCCP extensively reviewed the agency's experience with the Equal Opportunity Survey and identified some areas that might be considered in the development and design of the proposed Equal Pay Report. Notably, OFCCP never fully implemented the survey and never deployed a clear strategy or sufficient resources to analyze and apply the data for enforcement purposes.

65 FR 68022, 68046 (November 13, 2000).

See

76 FR 49398, 49399 (August 10, 2011).

OFCCP applied the lessons learned from the Equal Opportunity Survey, developed a plan for analyzing the data, and its compensation enforcement initiative will benefit from infrastructure improvements. In particular, OFCCP developed a careful plan for analyzing the data and using it to schedule compliance evaluations as described in this NPRM and related ICR. OFCCP also envisions periodically assessing its use of Equal Pay Report data to select contractors and subcontractors that are likely violators. Moreover, OFCCP is simplifying its approach by focusing on compensation data, unlike the Equal Opportunity Survey, which attempted to collect, track and use data on a variety of employment practices.

EEOC and the National Research Council Report

The EEOC is also exploring compensation data collection, through a

different, complementary process to OFCCP's NPRM. EEOC commissioned an expert panel of the NRC of the National Academies to review options for collecting compensation data from employers. A number of commenters expressed concern that OFCCP and EEOC were not coordinating and intended to propose conflicting or overlapping reporting requirements. Over the past five years OFCCP and EEOC, both member agencies of the National Equal Pay Task Force, have discussed the importance of pay data collection and the approaches both agencies might take. OFCCP and EEOC will continue to coordinate on both this NPRM and the results of the EEOC's pilot study in order to minimize unnecessary burden, duplication, and inconsistency.

OFCCP provided information to EEOC's panel, and reviewed and analyzed the final report submitted to the EEOC.

As explained below, in a number of places the NPRM incorporates or discusses certain elements of the NRC report about the EEOC. The NPRM also reflects serious consideration of the panel's recommendations that might be applicable to the proposed OFCCP data collection.

National Research Council of the National Academies, Committee on National Statistics,

Collecting Compensation Data from Employers

(2013),

available at http://www.nap.edu/openbook.php?record_id=13496

(“Collecting Compensation Data”).

First, this NPRM addresses the recommendation that Federal agencies state a clear plan for collection and use of pay data. Indeed, this document explains OFCCP's plan in detail, both in terms of the proposed scope of the data collection and the proposed use of data to engender greater voluntary compliance and to support improved efficiency in enforcement. The agency seeks comments on both of these points. This NPRM specifically tracks the panel's summary data option, which proposes collecting compensation data summarized by the EEO-1 job categories and demographic categories.

The NPRM also details how OFCCP intends to protect the confidentiality of information submitted by contractors in light of the report's discussion about confidentiality.

Id.

at 60.

OFCCP's approach to data collection as described in this NPRM may be contrasted to the NRC's recommendations in two ways: (1) Defining the appropriate measure of compensation, and (2) the necessity of conducting an external formal pilot study of the data collection proposal prior to engaging in rulemaking. The NRC recommended using the definition of compensation found in the Occupational Employment Statistics Survey (OES) by BLS. The panel stated that this would be the easiest measure for employers to generate data out of current recordkeeping systems.

As set forth in the Section-by-Section analysis below, OFCCP believes that the OES definition of wages is not an appropriate measure of compensation for our data collection because it is narrower in scope than W-2 earnings and is likely to be more burdensome to provide.

Id.

at 58.

W-2 earnings account for a broad range of pay elements such as bonuses, overtime, awards, allowances and reimbursements, and commissions.

By contrast, the OES definition excludes common pay elements such as overtime and other forms of premium pay.

Using the OES definition would limit OFCCP's ability to analyze pay disparities with respect to these common pay elements. In addition, employers generally report OES wages in terms of the number of employees they have within specified hourly or annual wage bands or ranges, rather than the actual wages paid to each employee. This means that the OES approach is untested in the context of reporting actual wage rates. Thus, OFCCP has concluded that the OES approach is less favorable than using W-2 earnings, with or without hours worked. OFCCP requests comments on which approach could impose the least burden on contractors given the capacity of existing electronic payroll records and other HRIS systems. OFCCP welcomes comments on:

Internal Revenue Service, “Wages, Salaries, and Other Earnings,”

http://www.irs.gov/publications/p17/ch05.html

(last accessed May 30, 2014).

The measure of compensation used in the OES includes factors such as the base rate of pay, cost of living allowances, commissions, production bonuses, and tips. The W-2 earnings include these factors, but accounts for additional forms of compensation such as overtime, shift differential pay, and other bonuses.

Compare

Bureau of Labor Statistics, “Occupational Employment and Wages—May 2013,” at 7,

available at http://www.bls.gov/news.release/pdf/ocwage.pdf, with

Internal Revenue Service, “Employee Compensation,”

http://www.irs.gov/publications/p525/ar02.html#en_US_2013_publink1000229086

• The cost of providing W-2 earnings data, and

• the cost of providing compensation data using the OES definition.

The NRC report also recommends conducting an independent external pilot study on the Equal Pay Report to test the collection instrument and the use of the data.

The Presidential Memorandum envisions that OFCCP will propose a rule in August 2014 on a compensation data tool. It is a reality, however, that EEOC's pilot study is following a different timeline. This does not prevent the two agencies from coordinating and collaborating on the compensation tool in the future. With respect to the NRC's recommendation that OFCCP conduct its own pilot project, OFCCP considered this recommendation and determined that the agency has already engaged in such a process with its Equal Opportunity Survey. The OFCCP studied that survey closely, identified and addressed many of the issues a pilot would uncover. While conducting a pilot would provide information regarding the Equal Pay Report's effectiveness, and identify ways to improve the collection, the cost and burden of conducting a pilot may well outweigh any potential benefit. All of the categories of information are already in use, well understood, and are relatively simple to collect. The field-testing of the Equal Opportunity Survey points to the general feasibility of compensation data collection, and the report calls for data that most covered Federal contractors and subcontractors should already maintain.

National Research Council of the National Academies, Committee on National Statistics,

Collecting Compensation Data from Employers

(2013), at 87,

available at http://www.nap.edu/openbook.php?record_id=13496

(“Collecting Compensation Data”).

The OFCCP notes that its prior experiences with the Equal Opportunity Survey have informed this NRPM. As a result of the 2000 Equal Opportunity Survey and recent stakeholder listening sessions, OFCCP is aware that requesting a broad array of information related to multiple contractor employment practices, as the Equal Opportunity Survey did, creates challenges for contractors and the agency. Consequently, the proposed Equal Pay Report is much narrower in scope. OFCCP requests public comment on:

• The advantages and disadvantages of piloting the Equal Pay Report,

• the extent its prior work with the Equal Opportunity Survey satisfies the purposes of a pilot, and,

• the design of a pilot of the Equal Pay Report.

The OFCCP, mindful of the NRC's recommendations directed to the EEOC on protecting the confidentiality of contractor pay data,

believes these concerns are addressed in the NPRM.

Id.

at 5, 77. Recommendation number five in the report was for the agencies to “

consider

whether the protections, now insured through the mechanism of interagency memoranda-of-understanding, should be incorporated in legislation.” (emphasis added). Recommendation

number six is expressly directed to EEOC and states: “The U.S. Equal Employment Opportunity Commission should seek legislation that would increase the ability of the agency to protect confidential data. The legislation should specifically authorize data-sharing agreements with other agencies with legislative authority to enforce antidiscrimination laws and should extend Title VII penalties to nonagency employees.”

Finally, OFCCP addresses ANPRM comments on its coordination with the EEOC's process for considering compensation data collection. The OFCCP concluded that developing a general data collection requirement for Federal contractors only, as in the proposed rule, is unlikely to conflict with any specific data collection requirement that EEOC may decide to propose in the future from a broader group of employers, especially if EEOC is proposing using its existing EEO-1 Report format to collect its compensation data. Further, the Presidential Memorandum directed the proposal of a rule by DOL in August 2014 while the EEOC process is likely to take 18 to 24 months to complete once a contract is awarded for its pilot study. To the extent the EEOC ultimately determines it will collect compensation data from employers, the flexibility built into the proposed rule would allow OFCCP to modify its data collection as needed to harmonize it with any EEOC approach. Indeed, OFCCP's proposed Equal Pay Report and collection of compensation data from contractors is also likely to assist the EEOC in its determination of whether and how to collect compensation data from a broader set of employers in the future.

OFCCP's Legal Authority To Collect and Use Compensation Data

A few questions arose in the comments to the ANPRM regarding legal issues, mostly involving whether OFCCP may collect data and use it for analysis by industry, across multiple facilities, and/or to develop a subset of contractors and subcontractors to prioritize for compliance evaluations. These commenters assert, incorrectly, that the Fourth Amendment of the U.S. Constitution requires that OFCCP use a “random” selection procedure to identify the contractors and subcontractors that will undergo a compliance evaluation. While selection procedures are outside the scope of the proposed rule, they are part of the purpose for developing the proposed Equal Pay Report. For this reason, OFCCP would like to address in this preamble several comments that incorrectly state the requirements of the Fourth Amendment.

First, when OFCCP requests that a contractor submit data for OFCCP to review off-site during the desk audit stage of a compliance evaluation, the Fourth Amendment only requires that the disclosure sought be reasonable.

A request is reasonable if it is “sufficiently limited in scope, relevant in purpose, and specific in directive so that compliance will not be unreasonably burdensome.”

United Space Alliance, LLC v. Solis,

824 F. Supp. 2d 68, 91 (D.D.C. 2011) (citing

United States

Morton Salt Co.,

338 U.S. 632, 652-53 (1950)).

United Space Alliance,

824 F. Supp. 2d at 91 (quoting

Oklahoma Press Publishing Co.

Walling,

327 U.S. 186 (1946));

Bank of America

Solis,

Case 1:09-CV-02009-EGS-DAR, 2011 WL 7394512 (D.D.C. Dec. 13, 2011).

When OFCCP selects contractors and subcontractors for on-site compliance reviews, which are administrative searches for purposes of the Fourth Amendment, it need not do so “at random.” Rather, to satisfy the requirements of the Fourth Amendment, contractors and subcontractors may be selected for on-site compliance evaluation based on: (1) Specific evidence of an existing violation; (2) reasonable legislative or administrative standards that have been met with respect to that particular contractor; or (3) an administrative plan containing specific neutral criteria.

Examples of acceptable neutral criteria include, among other factors, a contractor's geographical location, history of violations, number of employees, and work in a specific industry. The requirement that selection be based on specific neutral criteria is simply meant to ensure that selections are not “the product of the unreviewed discretion of the enforcement officer.”

If OFCCP were to include in its administrative contractor selection plan for on-site compliance reviews criteria that are based on information obtained from the proposed Equal Pay Report, then the agency would do so in a manner that comports with the requirements of the Fourth Amendment.

United States

Mississippi Power & Light Co.,

638 F.2d 899, 907 (5th Cir. 1981);

Beverly Enterprises, Inc.

Herman,

130 F. Supp. 2d 1, 14-15 (D.D.C. 2000);

Marshall

Barlow's, Inc.,

436 U.S. 307, 320-21 (1978).

Mississippi Power & Light Co.,

638 F.2d at 907-8.

Finally, it is worth observing that identification as a potential violator based on data from the proposed Equal Pay Report would not itself result in any sanction or adverse action against the contractor; the contractor would be prioritized for a compliance evaluation, a procedure which any Federal contractor is already subject to under the Executive Order.

Section-By-Section Analysis

§ 60-1.7 Reports and other required information

§ 60-1.7(a)(1) EEO-1 Report

Existing § 60-1.7(a)(1) identifies contractors that are required to file the EEO-1 Report jointly promulgated by EEOC and OFCCP. Generally, § 60-1.7(a) requires a contractor to annually file an EEO-1 Report if the contractor has 50 employees and is either: (1) A prime contractor or first tier subcontractor with a contract or subcontract of $50,000 or more; or (2) serves as a fund depositor

or issuing and paying agent of U.S. savings bonds in any amount. Existing § 60-1.7(a)(1) also provides that a construction subcontractor at any tier must file the EEO-1 Report annually if it has a contract or subcontract of $50,000 or more. OFCCP proposes changing the title of existing § 60-1.7(a) from “Requirements for Contractors and Subcontractors” to “EEO-1 Report.” Since the current language of § 60-1.7(a)(1) addresses EEO-1 Report filing, the proposed new title is more precise. In addition, OFCCP proposes eliminating the reference in § 60-1.7(a)(1) to “Plans for Progress” because the program no longer exists. The proposed § 60-1.7(a) also includes technical changes to subparagraph numbers to add a new § 60-1.7(a)(2) and additional subheadings for clarity.

Currently, § 60-1.7(a)(2) addresses the EEO-1 reporting obligations of a new contractor. Section 60-1.7(a)(2) provides that each “person” required to file an EEO-1 Report under § 60-1.7(a)(1) must do so within 30 days after receiving a contract or subcontract, unless the “person” submitted an EEO-1 Report within the previous 12 months. The report is filed with the contracting agency or administering agency. After the initial filing, the new contractor will file annually as required under § 60-1.7(a)(1). In addition, § 60-1.7(a)(2) identifies the Deputy Assistant Secretary as having the authority to change or extend the time for filing the report. OFCCP also proposes renumbering this paragraph to § 60-1.7(a)(3), deleting the references to “person” and replacing them with “prime contractor and subcontractor.” Consistent with this change, OFCCP is proposing deleting the words “to him” in relation to who is awarded a contract or subcontract. OFCCP is also proposing deleting the provision in § 60-1.7(a)(2) which states that subsequent reports shall be submitted at such intervals as the Deputy Assistant Secretary may require, in order to conform the

regulatory provision to the longstanding agency practice of requiring only the annual filings. Finally, OFCCP proposes deleting the language in the existing regulation regarding extension requests. The instructions for making extension requests, which are currently set forth on EEOC's Web site, direct EEO-1 Report filers to send an email request for an extension to EEOC before the filing deadline.

§ 60-1.7(b) Equal Pay Report

Existing § 60-1.7(b) addresses the certification requirements for bidders or prospective contractors. Each “bidder or prospective prime contractor and proposed subcontractor” must state, either in the bid or in writing at contract negotiations, whether it has an affirmative action program for each of its establishments, whether it held a contract or subcontract covered by the equal opportunity clause, and whether it filed all required reports, including the EEO-1 Report. The proposed rule would renumber § 60-1.7(b), making it a new § 60-1.7(d) and renaming the paragraph to “Requirements for bidders or prospective contractors—(1) Certification and representation of compliance with the requirements of Executive Order 11246 and its implementing regulations.” OFCCP proposes a new § 60-1.7(b) establishing a requirement that contractors and subcontractors complete and submit a report on employee compensation. The report proposed in § 60-1.7(b)(1), called the Equal Pay Report, requires contractors to provide summary data on the compensation paid employees by sex, race, ethnicity, specified job categories, and other relevant data points such as hours worked, and the number of employees. Contractors and subcontractors must submit this report in the format and manner required by OFCCP, and must retain a copy of the submitted report in accordance with the record retention provisions in § 60-1.12.

As proposed, contractors and subcontractors must report summary compensation data; no individual employee data is required. Reporting summary data limits the amount of information contractors and subcontractors must collect and report to the agency on a regular basis. While OFCCP will still consider individual employee compensation data during compliance evaluations or complaint investigations related to a contractor's pay practices, aggregate data is adequate for the purpose of establishing objective industry compensation standards against which individual contractors can be measured. While micro data, rather than aggregate data collected from all contractors, could arguably improve the identification of potential violators, collecting this data would likely create considerable cost and burden for contractors. Collecting aggregate data should also address concerns about the possible release of individual compensation data. OFCCP's decision to collect aggregate data reduces the likelihood that an individual employee's information would be inadvertently disclosed, and data reported in the aggregate makes it more difficult to identify the amount paid to any particular individual. Moreover, OFCCP does not intend to publicly release the underlying data contractors and subcontractors submit on their Equal Pay Reports. The agency will protect the confidentiality of data submitted through the Equal Pay Report to the maximum extent permitted by law, and plans to design a web-based portal for reporting and maintaining compensation information that conforms with applicable government IT security standards. Finally, on the issues of confidentiality and security, the information will be accessible to a small group of agency employees who need to know the information, and the data will not be widely circulated. These measures should reasonably ensure the security and confidentiality of the aggregate data.

The proposed rule collects only information on compensation, and not any other employment practices. This distinguishes it from the former Equal Opportunity Survey. In the agency's view, information on other employment practices adds complexity without necessarily conferring sufficient benefit. To the extent differences in promotions, hiring into higher paying jobs, or other practices contribute to race or gender-based pay disparities, examining average pay differences can help identify those effects. One common way to identify discriminatory promotion patterns is by first observing underlying compensation differences across jobs, then testing to see if discrimination in promotion rates explains the lower earnings. Further, while OFCCP has identified categories of widely available and comparable data sources relevant to analyzing compensation, the agency has not identified analogous data sources that contractors and subcontractors generally maintain on other employment practices in simple, comparable, externally verifiable formats. OFCCP will continue its careful review of information on hiring, promotion, termination and other employment practices through its existing compliance evaluation procedures.

Definition and Measure of Employee Compensation

Elements of compensation can vary substantially depending on the types of workers and industries. Consequently, the earlier ANPRM asked several questions designed to elicit feedback on how to measure compensation. In general, responses addressed three strategies: (1) Base pay, (2) total compensation disaggregated into separate elements like base pay, bonuses, overtime or commissions, and (3) total compensation aggregated into a single amount. Contractors and representatives of the business community stated a preference for base pay as a measure. These commenters noted that base pay is the most common and comparable element of compensation across employees. They were concerned that aggregating multiple forms of compensation would not allow for the consideration of the different factors that go into explaining base pay. These factors may or may not be the same for explaining bonuses, overtime or other compensation elements.

On the other hand, employee groups, civil rights and worker advocacy organizations generally favored total compensation disaggregated into separate pay elements. These commenters believed that this strategy is best for addressing discrimination in compensation that does not result from base pay but from other earnings sources such as bonuses, overtime, and commissions. There were few comments on the third strategy, total compensation aggregated into a single amount.

After considering the comments submitted in response to the ANPRM regarding the best way to measure compensation for purposes of a compensation data collection tool, a definition of compensation is set forth in the proposed Equal Pay Report. In the Equal Pay Report, OFCCP proposes using aggregate compensation based on W-2 earnings along with one or more other relevant data points. One relevant data element is the number of hours worked. OFCCP proposes calculating hours worked as follows:

• For salaried workers, contractors should provide actual hours of work if the contractor records actual hours. This is required for nonexempt employees but is not required for exempt employees. If contractors do not have actual hours worked data, they may default to 2080 for full-time and 1040 for part-time.

• For hourly workers, actual hours of work.

• Reported hours may also be adjusted for part year work using date of hire or dates of leave as well, but this is not specifically required.

OFCCP proposes collecting aggregate measures of hours worked so that the aggregate measures of W-2 earnings can better account for potential differences in work hours over the reporting period. Total compensation data, that is, total W-2 earnings and hours worked, provides some insight into the effect that all contractor pay practices may be having on compensation by gender, race and ethnicity. OFCCP is also proposing to collect the total number of workers and the total aggregate compensation for each group of workers as defined by EEO-1 job category, sex, race and ethnicity.

OFCCP, by using this strategy, is striking an appropriate balance between minimizing contractor reporting burden and ensuring that the proposed report includes information on non-base pay elements. By limiting compensation reporting to W-2 earnings, and using existing EEO-1 job categories, contractors are not required to develop or significantly alter payroll and human resources systems. This is the case because existing contractor systems currently gather and report W-2 earnings data, and use EEO-1 job categories for required EEO-1 reporting. OFCCP similarly believes that existing contractor systems record the number of hours worked by employees or maintain sufficient information to report the requested data.

Though we are proposing the use of aggregate compensation based on W-2 earnings, and one or more relevant data points, we did examine the usefulness of the Occupational Employment Statistics Survey (OES) definition as a measure of employee compensation. The OES is a semiannual mail survey and participation is not compulsory, and it does not collect data by gender, race, and ethnicity.

It uses 800 detailed occupations based on the Office of Management and Budget's Standard Occupational Classification (SOC) system, and collects wage data from private-sector employers and reports it using 12 intervals or pay bands. The number of employees in each pay band is reported. The definition for wages includes a base rate of pay, cost-of-living allowances, guaranteed pay, hazardous-duty pay, incentive pay including commissions and production bonuses, and tips. The definition excludes overtime pay, severance pay, shift differentials, nonproduction bonuses, employer costs for supplementary benefits, and tuition reimbursements. The agency believes that the W-2 earnings are most appropriate for setting objective industry standards because all contractors must annually report W-2 earnings to the IRS. This compulsory reporting by all contractors provides a form of external validity and accountability that may improve the accuracy of the Equal Pay Report measures. Because the current OES survey relies on pay 12 intervals or bands, the survey sheds little light on the validity of requiring employers to report specific wage rates using that definition or the potential burden. To simply report the number of workers in a range, the employer may not need to calculate each worker's hourly rate with precision. Indeed, following the strict definition of how to calculate the rate—which involves selecting certain individual compensation elements but not others, compiling them and then incorporating hours—appears more burdensome than simply reporting W-2 earnings. In the absence of any reference to specific evidence or data in the report, it is not clear how and why the NRC determined that using the OES pay definition is the least burdensome measure.

National Research Council of the National Academies, Committee on National Statistics,

Collecting Compensation Data from Employers

(2013),

available at http://www.nap.edu/openbook.php?record_id=13496

(“Collecting Compensation Data”). The survey estimates are based on a sample of about 1.2 million establishments grouped into six semiannual panels over a 3-year period. Each year, forms are mailed to two panels of approximately 200,000 establishments, one panel in May and the other in November.

OES samples about 400,000 establishments a year (out of a total of 6.8 million),

http://www.bls.gov/oes/2013/may/oes_tec.htm.

This means an establishment may only participate in the survey once over the course of several years. One would not necessarily expect employers to have regularly established systems to generate this specific measure if it is only requested once every five to ten years.

A concern regarding aggregate W-2 earnings is the potential inaccuracies when comparing part-time and full-time employees, and employees who have worked only part of the year. OFCCP proposes to address this issue by also collecting total hours worked for each group of employees whose compensation is being summarized. The Fair Labor Standards Act (FLSA) requires employers to keep records of actual hours worked for all non-exempt employees, whether hourly or salaried.

Department of Labor,

Fact Sheet #21: Recordkeeping Requirements under the Fair Labor Standards Act (FLSA), http://www.dol.gov/whd/regs/compliance/whdfs21.htm.

New IRS reporting requirements for the Affordable Care Act (ACA) mandate that employers report the number of employees working at least 30 hours per week making it necessary that employers track hours,

although the ACA does allow employers to use certain default assumptions for salaried workers.

This new requirement covers employers who are close, though not identical, in size to the proposed Equal Pay Report coverage standard.

For this reason, OFCCP believes many contractors will be able to provide actual hours worked even for exempt employees. However, OFCCP also proposes to allow contractors to report either actual hours worked or to apply default assumptions about work hours for those employees who are exempt from the FLSA. Comments on the following are particularly useful:

This refers to the general requirement in the statute that certain employers covered by the mandate report the number of full-time employees defined as 30 or more hours per week elsewhere in the ACA.

See

26 U.S.C. 6056(a) and (b)(2); Cornell University Law School, Law Information Institute,

http://www.law.cornell.edu/uscode/text/26/6056

(last accessed July 28, 2014).

This refers to the U.S. Department of the Treasury's regulation on how to determine hours of service and status as a full-time employee for purposes of section 4980H, which includes the ability to use default assumptions. See 26 CFR 54.4980H-3;

http://www.ecfr.gov/cgi-bin/text-idx?SID=03889366cda34926fa90ba8c324777e4&node=26:17.0.1.1.5.0.1.43&rgn=div8.

The employer shared responsibility provisions apply to employers that employed (for at least 121 days of the preceding calendar year) at least 50 full-time, nonseasonal employees or a combination of full-time and part-time, nonseasonal employees that equals at least 50. 26 U.S.C. 4980H(c)(2). A full-time employee is an individual employed on average for at least 30 hours per week, 26 U.S.C. 4980H(c)(4)(A), or 130 hours per calendar month, 26 CFR 54.4980H-1(a)(21)(ii).

• The definition of compensation and what data sources are available;

• the advantages and disadvantages of using the OES to define compensation;

• the statistical and analytical value associated with collecting hours worked, and the cost of collecting hours worked;

• the number of employees for the purpose of creating an objective industry standard against which contractors would be measured and prioritized for review; and

• the usefulness of applying existing standards for calculating worker hours and full-time or part-time status found in the FLSA, the ACA, or other existing Federal regulations.

OFCCP is not proposing that contractors provide data on “factors” that affect compensation. Such factors are elements that might explain differences in compensation. In analyzing compensation for potential discrimination, it is common to include

information about factors such as experience, education, or other differences among workers that might affect their compensation. Commenters to the ANPRM strongly agreed that factors are significant and important to explaining differences in compensation. Generally, commenters from the business community stated that analyzing compensation without accounting for highly detailed factors yielded inaccurate results. They also acknowledged that collecting data on these factors would be too burdensome and complex. In particular, they stated that many employers do not keep all relevant factors in electronic form or in the same database. Other commenters, most employee groups and civil rights organizations, stated that collecting data on factors was both extremely important and quite feasible. OFCCP determined that the potential burden of collecting and analyzing factors generally outweighs any potential benefit.

Employers, including Federal contractors, vary widely in both the factors they use to determine compensation, and in how and whether they maintain that data in electronic form. Collecting information on factors would be much more expensive and time-consuming for both contractors and the agency. Finally, data at this level of detail would be extremely difficult for OFCCP to analyze meaningfully without extensive and time-consuming work devoted to deciphering and understanding the coding choices of each contractor, and cleaning and recoding many potentially inconsistent data fields. OFCCP's proposed methodology, to some extent, takes into account the particular compensation factors that may explain some or all of an overall pay gap reported by a particular contractor. This is so because the information reported by contractors within an industry, using the Equal Pay Report, will be used to develop the objective industry standard. It is assumed that the compensation factors within an industry may not vary widely, though some differences are still likely to exist. Individual contractors in an industry will be compared to the objective industry standard and the amount of difference between the two will help prioritize contractors for compliance evaluations. It is during the scheduled compliance evaluation, however, that OFCCP can meaningfully analyze a contractor's particular compensation practice, scheme, and philosophy, including the particular factors used to set compensation levels.

Job Categories for Reporting Compensation Information

Many substantive comments addressed how to group workers for purposes of reporting compensation information. Generally, commenters addressed four possible approaches: (1) Grouping by job title, (2) grouping by AAP job group, (3) grouping by EEO-1 job category, and (4) deferring to the contractor's choice of grouping among multiple options. There was no clear consensus from the comments.

Proposed § 60-1.7(b)(1) provides that data must be provided by “specified job categories” without identifying those categories; the Equal Pay Report will specify the job categories, as well as several other data points relevant to developing the objective industry standard. In the report, OFCCP is proposing to use the existing ten EEO-1 job categories and subcategories for contractors who already report using the EEO-1 form. The EEO-1 job categories have been used for many years and are clearly defined. Any contractor that is or was previously covered by the EEO-1 reporting requirement is already required to categorize their employees into these categories on an annual basis. Therefore, using the EEO-1 job categories will remove the step of categorizing employees for purposes of completing the Equal Pay Report. The EEO-1 categories are, therefore, the least burdensome and least confusing means of categorizing employees.

Unlike job titles and AAP job groups, which are defined by each contractor and not standardized across all contractors, contractors must consistently maintain their EEO-1 job categories. This creates clear comparability across contractors. A job grouping system is necessary for the Equal Pay Report to fulfill its intended purpose; without compensation data defined by uniform job groupings, contractor compensation practices towards similar groups of employees could not be easily compared to identify anomalies. These comparisons will not be used to determine violations, and any distortion caused by nuances not recognized by the grouping system can be clarified during a compliance evaluation.

A substantial number of ANPRM commenters argued against the use of EEO-1 job categories because they fail to reflect elements such as differences in skill, experience, education, and other factors potentially affecting pay. Comparing employers in similar industries will help minimize these differences. However, any job grouping system used will necessarily involve creating groups containing non-identical positions, with unique factors that may affect pay. In addition, comparing workers only within narrowly defined job groupings can obscure patterns of pay disparity that transcend jobs, and that may be caused by discrimination in promotion, job assignment or other glass ceiling or channeling practices. Broader groupings allow OFCCP to consider larger patterns of pay disparity that may transcend specific positions, levels or units. Notably, the National Academies panel recommended EEO-1 job categories for reporting of summary data, because of their broad applicability, the experience of enforcement agencies with their use, and their clarity and simplicity.

100

“Collecting Compensation Data” at 60.

However, as the comments to the ANPRM demonstrate, there is a variety of potential approaches to grouping data. For the reasons stated, OFCCP is proposing the use of the EEO-1 job categories for the Equal Pay Report but is interested in comments on the extent to which other possible job or occupation groupings are sufficiently universal that they could be used when developing objective industry compensation standards.

§ 60-1.7(b)(2) Who Must File the Equal Pay Report

The ANPRM asked a series of questions related to the issue of which contractors should be required to provide compensation data via a data collection instrument. In response, some commenters made additional suggestions regarding who should be included or excluded. In general, these comments addressed applying the data collection requirement to all contractors, to prior violators only, to supply and service contractors only versus including construction contractors, to small businesses, to bidders or new contractors, and addressed whether and how multi-establishment contractors would report.

Proposed § 60-1.7(b)(2) identifies the contractors and subcontractors that must submit the Equal Pay Report. Proposed § 60-1.7(b)(2) states that the contractors and subcontractors that are required under § 60-1.7(a)(1) to file EEO-1 Reports with the Joint Reporting Committee must complete and file the proposed Equal Pay Report if they also more than 100 employees and their contract or subcontract covers a period of at least 30 days, including modifications. Generally, this covers prime contractors and first tier subcontractors that are private employers and are large enough to be

subject to the requirement to prepare an affirmative action program.

Some commenters suggested that the reporting requirement should be applied exclusively to contractors and subcontractors previously identified as violators by the OFCCP. This limitation, they assert, would avoid imposing an additional burden on contractors and subcontractors who have not previously committed violations. The primary purpose of the proposed Equal Pay Report is to refine the agency's neutral selection of contractors and subcontractors by focusing on those that are most likely to be in violation of OFCCP's regulations. In particular, the Equal Pay Report provides OFCCP with a reasonable and practical means of prioritizing likely violators for compliance evaluations. For the report to perform its primary function, it must collect data from a large pool of contractors and subcontractors without regard to violation history. Additionally, to the extent that OFCCP seeks to use this data to make predictions about the likelihood of finding a violation, it is important to collect data from compliant contractors and subcontractors to provide comparisons. Therefore, collection of data regardless of prior violation history is essential to the benefits that this tool will confer.

Construction contractors and subcontractors are not specifically identified in the proposed rule, but they would be required to complete and file the proposed Equal Pay Report if they are required under § 60-1.7(a)(1) to file EEO-1 Reports, and meet the contract value and employee thresholds proposed in this NPRM. Many construction contractors and subcontractors do not meet the standards for filing EEO-1 Reports, either because of the number of employees or the short duration of employment.

101

OFCCP seeks comments on:

101

2011 Census data suggests that over 90% of companies in the construction sector have less than 50 employees. United States Census Bureau,

Statistics of U.S. Businesses—NAICS Sectors (2011), available at http://www.census.gov/econ/susb/

• The potential burdens for construction contractors and subcontractors, including comments on the feasibility of data collection,

• the sophistication of current payroll and HR systems, and

• the potential concerns regarding communication between prime and subcontractors about the proposed reporting requirements.

102

Note that there are some construction contractors also covered by this proposal (those who fall within the requirements for filing an EEO-1 Report). This would not, however, include Federally assisted construction contractors. OFCCP intends to analyze Equal Pay Report data by industry; therefore, construction contractors will only be compared with other construction contractors. Selection of construction contractors for compliance evaluations uses a different process than scheduling of Supply and Service contractors.

Numerous commenters expressed concern that the reporting requirement would impose an undue burden on smaller contractors and subcontractors, damage their ability to compete, or serve as a disincentive to becoming a Federal contractor. A small number requested an exemption from the requirement by means of raising the jurisdictional threshold. A few others argued that it would be better to design two sets of questions, one for smaller contractors and subcontractors and one for larger contractors and subcontractors. OFCCP used a two-tiered approach for addressing these concerns.

First, the existing EEO-1 reporting requirements apply to contractors who are private employers with 50 or more employees and satisfy other specified jurisdictional thresholds.

103

Existing Federal regulations already require that these contractors create affirmative action programs, which include requirements to analyze compensation and provide compensation data to OFCCP upon request, as well as to file EEO-1 Reports using the employee classifications and job categories that would apply under this proposed rule. With the Equal Pay Report, OFCCP will continue to exempt contractors with fewer than 50 employees and will have similar jurisdictional thresholds as the EEO-1.

104

Further, by eliminating many of the most burdensome categories of data, OFCCP has made it easier for small businesses to comply.

103

This includes being prime or first tier subcontractors with 50 or more employees who hold a Federal contract that is valued in excess of $50,000 or a company that serves as a depository of Government funds in any amount.

104

OFCCP welcomes comment on the appropriate jurisdictional thresholds applicable to contractors covered by the proposed rule who are not private employers.

Second, after examining small contractor considerations created in existing regulations and the rationale behind them, OFCCP is proposing to exempt even more small contractors. Contractors with 100 or fewer employees are excluded from this new reporting obligation. For example, in the regulations on equal employment opportunities and affirmative action for individuals with disabilities, OFCCP allows contractors with 100 or fewer employees to apply the aspirational utilization goal to their entire workforce rather the their job groups. By excluding contractors with 100 or fewer employees, OFCCP is further reducing the cost and burden on Federal contractors.

§ 60-1.7(b)(3) How, When, and Where To File the Equal Pay Report

Proposed § 60-1.7(b)(3) addresses the procedures for complying with the requirement to report on summary compensation data. The proposal would not specify a particular deadline for filing the proposed report; proposed § 60-1.7(b)(3)(i) states that the report must be filed by the date specified in the report. As noted earlier, OFCCP is proposing a January 1 through December 31 reporting period, and a report filing window of January 1 to March 31 of the following year. This window gives contractors one full quarter to compile the year-end earnings information in the format necessary for the Equal Pay Report. The December 31 date makes it easier to calculate summary W-2 earnings, as they are being simultaneously compiled for tax reporting purposes on an annual basis.

OFCCP considered other alternatives as well, including adopting the EEO-1 reporting period and filing dates. OFCCP determined that the EEO-1 dates do not give the agency a full calendar year's data, and contractors use different snapshots or payroll periods for EEO-1 reporting. Since OFCCP is proposing to collect annual W-2 earnings, contractors would be required to submit that information separately after having already filed the EEO-1 report and an interim Equal Pay Report in September. In lieu of an interim September filing date, which would possibly create additional burden, OFCCP considered delaying the report submission date until the following January. Under both approaches, OFCCP saw potential data issues and a likely increase in contractor burden.

Finally, OFCCP considered requiring contractors to report less frequently than annually. Requiring less frequent reporting would result in cost savings to contractors related to preparing and submitting an Equal Pay Report, and the amount of savings would depend on how frequently the contractor would be required to report. However, OFCCP determined that this could result in it setting objective industry standards that are based on stale or outdated data. This would compromise the integrity of OFCCP's enforcement program. For example, if there are long time lags, possibly delays of two or more years, between when a contractor submits data to OFCCP and when OFCCP uses the data to select contractors for review, important changes in the underlying data could have occurred. Since these data changes would not be reflected in

the data used by OFCCP to set the industry standard, it is possible that some contractors would be prioritized for compliance evaluations that might not have been otherwise scheduled. Currently, based on the proposed annual reporting, data reported in 2015 is for 2014. By the time the 2014 data are reviewed, edited, cleaned and verified, it could be another 10 months older before it can be used for the purpose for which it was intended. Less frequent reporting could also undermine the robustness of the data available for analysis by OFCCP. OFCCP requests public comment on how less frequent reporting could be done in a manner to address OFCCP's concern that it could be relying on stale or outdated data by collecting data in alternating years.

The proposed rule would require contractors to file the reports electronically. Proposed § 60-1.7(b)(3)(ii) provides that contractors and subcontractors must submit the Equal Pay Report electronically through OFCCP's web-based filing system by the specified filing deadline, unless a hardship exemption has been granted under subparagraph (3)(iii). Proposed § 60-1.7(b)(3)(iii) would provide that the Director may grant a hardship exemption from the electronic filing requirement where he or she concludes that electronic filing would impose an undue hardship on the contractor or subcontractor. Proposed § 60-1.7(b)(3)(iii) would require contractors and subcontractors to submit a written request for a hardship exemption and indicates that the eligibility criteria and application procedures will be available on the OFCCP Web site. Based on the number of electronic filings of EEO-1 reports, OFCCP expects that hardship exemptions would be granted only in exceptional circumstances. Examples include unexpected technical difficulties that prevent a contractor or subcontractor from electronically submitting the Equal Pay Report by the filing deadline and, in the very rare instances, when a contractor's payroll and human resources systems or other necessary systems are not automated. Contractors granted a hardship exemption would be required to submit the Equal Pay Report in the format specified in the notification granting the exemption, which, in some cases, could be a paper version of the report.

Several commenters addressed certain technical issues regarding how OFCCP might receive and maintain the data. Some contractor representatives requested the ability to upload their data directly to the agency; others expressed concern about OFCCP's capacity to safeguard confidential compensation data and its IT capacity. OFCCP will receive and maintain the compensation data using a secure IT system that fully complies with all applicable Federal Government security requirements and specifications. This will minimize the possibility of a security breach or hacking. The web portal will be password protected and information will be encrypted. Contractors will use the portal to key in their data directly or upload their own spreadsheets using standard formats. To make filing as easy as possible, OFCCP also proposes to provide a tool similar to that used by the state of New Mexico that would automate the few simple calculations necessary to file the report.

105

The New Mexico tool is an XML template that users can download, populate with their individual employee data and then generate the required summary information. A second template allows users to upload only the summary data back to the state agency, leaving the individual data in the possession of the user. New Mexico's experience using this approach has been very positive.

106

105

New Mexico General Services Department,

New Mexico Pay Equity Initiative, available at http://www.generalservices.state.nm.us/statepurchasing/Pay_Equity.aspx

(last accessed April 24, 2014).

106

Institute for Women's Policy Research,

The New Mexico Pay Equity Initiative in State Contracting,

(May 2011),

available at http://www.iwpr.org/publications/pubs/the-new-mexico-pay-equity-initiative-in-state-contracting

(last visited April 24, 2014).

The agency anticipates that some contractors will choose to modify their existing HRIS or payroll databases to generate the report on a regular basis. OFCCP is particularly interested in comments on:

• The important IT changes to existing HRIS or payroll systems, OFCCP system security concerns, system compatibility issues; contractor IT implementation timeframes; and

• the criteria for exemp

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