OFCCP's Pay Data Collection Tool Proposal Draws More Than Two Thousand Comments

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By Jay-Anne B. Casuga

The Labor Department's Office of Federal Contract Compliance Programs received approximately 2,400 comments in response to an advance notice of proposed rulemaking regarding the potential development of a compensation data collection tool for federal supply and service contractors.

OFCCP issued the ANPRM in August and sought stakeholder input on the “scope, content, and format of the data collection tool, as well as suggestions for ensuring that the tool will be an effective and efficient means of identifying contractors” for OFCCP compliance evaluations under Executive Order 11246 (29 HRR 876, 8/15/11).

The majority of comments submitted by Oct. 11 to the federal government's e-rulemaking portal at http://www.regulations.gov supported OFCCP's proposal and generally spoke against sex and race discrimination in pay, but a large number of those submissions were near identical form letters.

Supporters included unions, national civil rights groups, and employee and women's organizations that said a compensation data collection tool would allow OFCCP to more effectively combat discrimination in pay. Some urged the agency to expand the tool to request contractor data on hiring, promotions, and terminations, as well as information on pay secrecy policies.

Meanwhile, several national employer groups, consulting firms, and law firms questioned the need for a new collection tool and argued that a “generic one size fits all” approach for collecting pay data would be of little utility to OFCCP given the many factors that determine compensation at each individual contractor establishment. These critics also contended that OFCCP's proposal would unduly burden both contractors and the agency and would raise confidentiality concerns.

A DOL spokeswoman told BNA Oct. 18 that OFCCP cannot “respond specifically to these comments outside the formal rulemaking process.” However, she pointed out that “no device has yet been developed—or even formally proposed.”

“One of the purposes of the [ANPRM] was to gather information on how such a tool could be beneficial both to the agency and to employers, and to get feedback on what data we should collect, how we should design a tool, and the benefits and burdens of different approaches,” she said. “We will be carefully reviewing the extensive comments before taking the next step.”

According to the Labor Department's spring 2011 regulatory agenda, OFCCP is scheduled to issue a formal NPRM for the pay data tool in June 2012 (29 HRR 761, 7/18/11).

Employer Groups Question Need for Tool.

Several employer groups, consulting firms, and law firms questioned the need for a compensation data collection tool.

For example, the U.S. Chamber of Commerce contended that OFCCP's own enforcement data show that pay discrimination among federal contractors is “exceedingly rare.” OFCCP, the chamber said, has conducted more than 25,000 compliance evaluations since 2006 and has found alleged systemic compensation discrimination in only seven instances and individual pay bias in approximately 58 cases. This amounts to “only one-quarter of one percent of audited contractors,” the chamber said.

“To impose on all contractors a significant cost burden to collect and report detailed compensation data in the face of evidence that the probability of finding discrimination is so very small, raises serious doubts that the benefits of new regulation would match the costs,” the chamber said.

The chamber and other commenters also observed that while OFCCP in the ANPRM cited several studies that identified alleged unexplained pay gaps between men and women, the agency failed to mention a 2009 study that the agency commissioned from CONSAD Research Corp.

That study, which was briefly posted on OFCCP's website and then removed after President Obama took office, concluded that numerous factors other than sex discrimination account for much of the wage gap between male and female workers (27 HRR 135, 2/9/09). Then-OFCCP Director Charles James wrote a foreword to the report stating that “the raw wage gap continues to be used in misleading ways to advance public policy agendas without fully explaining the reasons behind the gap.”

Additionally, commenters such as the Society for Human Resource Management and the HR Policy Association argued that a pay data collection tool is not necessary because the agency already collects a “wealth” of compensation data from contractors. For instance, the HR Policy Association estimated that OFCCP over the past three years has collected pay data from more than 12,000 contractor establishments from which the agency can analyze contractor compensation practices and industry trends or conduct other research.

Further, the association and other commenters, including the Center for Corporate Equality, noted that OFCCP's revised scheduling letter and itemized listing, if finalized, would request at the beginning of compliance reviews similar pay data sought by the proposed tool, causing potential redundancy.

Other organizations that were critical of OFCCP's pay data tool proposal included Applied Economic Strategies Inc., Associated Builders and Contractors, Associated General Contractors of America, Berkshire Associates Inc., the College and University Professional Association of Human Resources, the Equal Employment Advisory Council, the National Association of Manufacturers, Littler Mendelson, Mercer, Morgan, Lewis & Bockius, the National Industry Liaison Group (NILG), the Southwest Research Institute, TechAmerica, Vigilant, and various regional industry liaison groups.

Supporters Say Tool Is Needed to Combat Pay Bias.

Several commenters in support of OFCCP's proposals, including the American Civil Liberties Union, the NAACP Legal Defense & Educational Fund Inc., and the National Women's Law Center, said a pay data collection tool would “play an important role” in combating persistent wage gaps based on race and sex.

These commenters and others said U.S. Census Bureau statistics show that a white female working full-time earns approximately 77.6 cents to each dollar earned by the average white male. That earnings figure, they said, drops to 62.3 cents for black women and 54 cents for Hispanic women.

They also pointed to race- and ethnicity-based wage inequality, citing statistics that state, for example, that full-time black and Hispanic workers earned median weekly pay of $611 and $535 in 2010, respectively, compared to $765 for white workers.

“A strong response to employment discrimination is imperative, and so we applaud OFCCP's proposal to systematically survey contractors' pay practices in order to better target the agency's [Executive Order] 11246 enforcement efforts,” ACLU said.

Other organizations that wrote in support of OFCCP's proposal included the American Association of University Women, the AFL-CIO, the American Federation of State, County and Municipal Employees, the BlueGreen Alliance, the Center for American Progress Action Fund, the Lawyers' Committee for Civil Rights Under Law, the Leadership Conference on Civil and Human Rights, the National Partnership for Women & Families, the National Women's Law Center, OMB Watch, the Paycheck Fairness Coalition, the Project on Government Oversight, and the Professional Engineers in California Government.

Potential Data OFCCP Should Collect.

In the ANPRM, OFCCP posed 15 specific, multipart questions for commenters to address. Among those questions were what information should be collected by the pay data tool, what set of job categories or titles should be used to organize the information, and what elements of compensation should be collected.

The civil rights, employee, and women's groups generally encouraged OFCCP to collect comprehensive compensation data beyond base salaries and hourly wages.

For example, the Leadership Conference, which describes itself as a coalition of “more than 200 national organizations to promote and protect the rights of all persons in the United States,” called on OFCCP to define compensation broadly to include “W-2 earnings, base salary, holiday pay, hourly wage, shift differential, overtime pay, hazard pay, cost-of-living allowances, commissions, stock options, paid leave, health and retirement benefits, disability and life insurance, and fringe benefits such as tuition assistance and child-care subsidies.”

The supporters said collecting comprehensive pay data will offer OFCCP a “more complete and accurate picture of how—and how much—employees are paid.” They added that OFCCP should also request information for all employees, including full-time, part-time, and temporary workers, as well as factors that could legitimately explain pay disparities, such as average tenure and average number of hours worked.

In addition, supporters such as the Paycheck Fairness Coalition, which includes approximately three dozen different organizations, said OFCCP should include in the data tool requests for contractors' applicant, hire, promotion, and termination data, like the former Equal Opportunity (EO) Survey that the agency discontinued in 2006. The Leadership Conference, the National Partnership for Women & Families, and others also urged the agency to include in the tool an inquiry on whether a contractor has pay secrecy policies.

“Each piece of the employment picture is relevant to understanding company culture and the causes of disparate pay, and ultimately, OFCCP has responsibility for addressing not only wages, but other aspects of employment discrimination,” the Paycheck Fairness Coalition said.

Meanwhile, employer groups, law firms, and employment consultants contended that a “one size fits all” pay data tool requesting generic compensation data would not capture useful information.

Commenters like NILG and SHRM, for instance, explained that base annual salary would be the “most meaningful piece of information” for OFCCP to collect, in addition to time in position. However, NILG continued, “[b]ecause of the multitude of factors that necessarily are part of the compensation equation, a [t]ool collecting this information would likely result in an extraordinary number of ‘false positives' and provide a meaningless [t]ool for OFCCP review purposes.”

The group said the “only way to solve that dilemma would be to collect data specifically relevant to each establishment, which the [t]ool, as proposed, cannot accomplish.”

NILG and others further argued that OFCCP should not collect compensation information beyond base salary because other pay elements, such as commissions, fall outside a contractor's control.

NILG additionally said OFCCP should collect data based on job title and not by EEO-1 job category or affirmative action program job groups because those would be “too broad or artificial for meaningful analysis.”

Industry-Focused, Multi-Establishment Reviews.

OFCCP in the ANPRM also sought comment on the potential for using tool data to conduct “industry-wide compensation trend analyses” and to identify “contractors in specific industries for industry focused compensation reviews.”

Groups such as the National Partnership pushed for industry-focused compensation reviews and encouraged OFCCP to use its limited resources to combat pay bias “in those industries where pay gaps are particularly large, such as the financial activities industry, and those industries where low-wage workers are concentrated, as in the agriculture industry and the leisure and hospitality industry.”

“An in-depth analysis of those industries with the largest pay gaps will foster a better understanding of, and help address, the root causes of compensation discrimination,” the partnership said.

In contrast, other commenters, including law firm Littler Mendelson, said identifying contractors in specific industries for industry-focused pay reviews could potentially “contravene the neutral administrative selection process that OFCCP is required to adhere to under Fourth Amendment search and seizure principles” when selecting contractors for evaluation.

Additionally, the ANPRM mentioned that OFCCP is “exploring the possibility” of using collected data to “identify opportunities” for conducting compensation reviews of a contractor's various establishments nationwide.

Supporters like the Leadership Conference noted that such multi-establishment compensation reviews would be valuable “where a central office dictates compensation policies and practices, and where the data reveal common patterns or disparities in compensation across a contractor's various establishments.”

However, law firm Morgan, Lewis & Bockius pointed out in its comments that the U.S. Supreme Court in Wal-Mart Stores Inc. v. Dukes (131 S.Ct. 2541, 112 FEP Cases 769 (2011); 29 HRR 677, 6/27/11) “conclusively rejected aggregated statistical analysis as a method to establish a broad pattern of pay discrimination across a company.”

Further, other commenters, including human resources consulting firm Berkshire Associates, said that compensation analyses should be conducted on a single establishment-basis because “one of the largest drivers in pay differentials is geography,” based in part on varied costs of living.

Comments on the Former EO Survey.

The ANPRM also invited comments addressing the strengths and weaknesses of the compensation section of the former EO Survey. That tool was implemented during the Clinton administration but rescinded in 2006 after an OFCCP-commissioned report during the Bush administration concluded that the survey “had little predictive value for indicating discrimination or non-compliance” by federal contractors.

Supporters of the EO Survey, including the National Women's Law Center, generally described it as a “strong and useful tool” for identifying discrimination and said that “any weaknesses … stemmed not from its design, but from its implementation.”

These commenters contended that OFCCP during the Bush administration sent the survey to only one-tenth of contractors, did not send it out in 2001 and 2005, and “never used the survey responses to make the best use of limited resources in selecting contractors for compliance reviews.”

Other commenters pointed out what they believed to be several weaknesses of the EO Survey. For example, nonprofit research organization CCE said the report not only was burdensome, but collected pay data by EEO-1 category and AAP job group, which were too broad for meaningful evaluation of potential compensation bias among similarly situated employees in a contractor's workforce.

Potential Burdens of OFCCP Proposal.

On the topic of burdens, most of the employer groups, consulting organizations, and law firms argued that maintaining, compiling, and analyzing pay data for the proposed tool, in addition to meeting other compliance requirements, would be financially burdensome and time consuming for all contractors, large and small.

Indeed, they said OFCCP's proposal could violate President Obama's Executive Order 13563, which requires federal agencies to implement the “least burdensome tools for achieving regulatory ends” (29 HRR 66, 1/24/11).

As such, some commenters, including Littler Mendelson, suggested that OFCCP exclude companies with federal contracts worth less than $1 million from a pay data tool requirement.

Several groups also raised privacy concerns related to providing highly sensitive pay data for the tool. The groups' burden and confidentiality arguments were similar to those submitted in response to other recent OFCCP proposals concerning veterans affirmative action (29 HRR 950, 9/5/11) and a revised scheduling letter and itemized listing.

Other commenters, such as the Lawyers' Committee for Civil Rights Under Law, said they believe a compensation data tool will not be overly burdensome because contractors “are already required to collect and maintain much of the information that OFCCP would require under this tool.”

Proposal to Review Pay Data of Bidders.

Another question OFCCP posed to stakeholders in the ANPRM was whether the agency should require companies bidding on future federal contracts to submit their pay data as part of the request for proposal process.

OFCCP received several comments that strongly supported this proposal. “Contracting with the federal government is a privilege, not a right, and American taxpayer dollars should not be used to subsidize pay discrimination,” the National Partnership said. “Therefore, any business seeking a contract with the federal government should be obligated to demonstrate compliance with pay equity requirements.”

Other commenters contended that OFCCP lacks legal authority to require pay data from bidders. “Section 203(b) of [EO] 11246 does not permit OFCCP to request compensation data from companies that are only in the process of bidding for work that has not yet been awarded,” Littler Mendelson said.

Commenters such as SHRM also argued that some companies may not have adequate systems in place to easily provide pay data, and thus may be deterred from bidding on federal contracting opportunities.

Other Suggestions for OFCCP.

Mercer and the Chamber of Commerce recommended that OFCCP consider conducting various pilot studies that could potentially determine the utility of the data the agency believes it should collect, as well as the time and financial costs that would be incurred by contractors that comply with a pay data tool.

Other commenters, like the HR Policy Association and Morgan Lewis, urged OFCCP to first finalize how it intends to analyze contractors' compensation data before proceeding with a new data collection tool. The agency in January issued a proposal to rescind its 2006 interpretative standards for systemic compensation discrimination and voluntary guidelines for self-evaluation of pay practices (29 HRR 7, 1/10/11).

By Jay-Anne B. Casuga

Copies of the public comments may be accessed from the federal e-rulemaking portal at http://www.regulations.gov, under a search for RIN No. 1250-AA03.

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