Proposed New Equal Pay Report Would Target Enforcement on Many Contractors Who Do Not Discriminate

October 03, 2014

Our analysis in a new CHRO Guide shows how the Office of Federal Contract Compliance Programs' proposed compensation data collection rule would result in the collection of a considerable amount of misleading data that will be used to produce industry standards to help target enforcement, even though a similar tool used previously by the agency was found to have incorrectly targeted audits 93 percent of the time.  The so-called Equal Pay Report, proposed by OFCCP on August 8, will require prime and first-tier subcontractors with more than 100 employees to annually submit a new report containing the total number of employees; total W-2 earnings; and total hours worked for each EEO-1 job category by race, gender and ethnicity.  OFCCP proposes to use the data to generate industry standards for assessing individual contractor compensation data and to compare each contractor establishment's Equal Pay Report to the relevant industry standard to prioritize contractors for compliance evaluations.  However, as stated in our analysis:

Raw aggregate pay data is meaningless, misleading and dangerous when it lacks any explanation of the reasons for variances based on education, length of service, performance, and other objective factors. . . . For example, if female professionals have less full-time work experience than their male counterparts, according to OFCCP that distinction should be similar across peer employers in the same industry.  However, this approach does not account for significant differences in job requirements from contractor to contractor.  Moreover, including accounting or HR employees in the same professional EEO-1 job category as IT professionals, who create products and provide services, bears no discernible relationship to any statistical method recognized as reliable and relevant proof of pay discrimination under Title VII.

Bolstering this concern is an OFCCP-sponsored study by Abt Associates in 2005 of the agency's prior Equal Opportunity Survey that collected data similar to the proposed Equal Pay Report.  The study found the compensation data collected did not provide a meaningful basis for selecting contractors for compliance audits and would result in OFCCP incorrectly targeting contractors for compensation audits 93 percent of the time; an outcome that is likely to be replicated by the proposed Equal Pay Report.  HR Policy will file comments on the proposed report before the November 6 deadline.