The OFCCP Week in Review (WIR) is a simple, fast and direct summary of relevant happenings in the OFCCP regulatory environment, authored by experts John C. Fox and Candee Chambers. Alexa Morgan, a founder and Partner of Fox, Wang & Morgan P.C., joins today’s edition as we cover:
- Democrats fight over budget amendment exempting defense contractors from the Fair Pay and Safe Workplaces Executive Order
- EEOC issues a revised EEO-1 pay data collection proposal
July 12, 2016: Democrats Fight Budget Amendment Exempting Defense Contractors from the Fair Pay and Safe Workplaces Executive Order
Last Tuesday, Senate Democrats submitted a letter to the Armed Services Committee leadership seeking to remove what they termed was “harmful language” in House and Senate versions of the National Defense Authorization Act (NDAA) for Fiscal Year 2017, which exempts most defense contractors from the Fair Pay and Safe Workplaces Executive Order (“Fair Pay Order”). Democratic House representatives are in the process of submitting a similar letter. (The Fair Pay Order requires federal contractors seeking federal contracts worth more than $500,000 to disclose violations of federal and state labor laws. For information on the Fair Pay Order, click here.)
The NDAA is a federal law that, among other things, specifies the fiscal year budget and expenditures for the Department of Defense. The authorization bill determines the agencies responsible for defense, establishes funding levels, and sets the policies under which money will be spent. As a result of Republican concerns that the Fair Pay Order is unnecessarily burdensome and tantamount to “blacklisting,” the House version of the NDAA for FY2017, states the provisions of the Fair Pay Order “and any implementing rules or regulations shall not apply to the acquisition, contracting, contract administration, source selection, or any other activities of the Department of Defense or National Nuclear Security Administration.” In addition, the House version of the FY2017 NDAA budget prohibits the Secretary of Defense, and other administrators, from requiring compliance with or implementing the Fair Pay Order or its regulations. The Senate version of the NDAA similarly exempts federal contractors from the Fair Pay Order, although in a different manner. The Senate version of the NDAA FY2017 budget bill would require defense contractors to report pursuant to the Fair Pay Order if debarred or suspended as a result of previous labor law violations.
Democratic Senate and House representatives believe both versions of the NDAA “fail to recognize the importance of the Fair Pay EO and attempt to undermine it by preventing it from applying to the DoD,” particularly since the Department of Defense accounts for approximately two-thirds of all federal contracts.
This significant political battle, as well as differences between the Senate and House bills (most of which are unrelated to the Fair Pay Order), are expected to be resolved through a conference process, which is likely to continue for at least the next two months. Meanwhile, the Office of Management & Budget is reviewing the final draft Rules to implement the Fair Pay Order and is ripe to clear them for publication in the coming months. Also, in preparation for the Fair Pay Order, the National Labor Relations Board issued a memorandum on July 1, 2016 describing its plan to report to federal contracting agencies NLRB “determinations” of violations of the National Labor Relations Act.
July 14, 2016: The EEOC Issues a Revised EEO-1 Pay Data Collection Proposal
On Wednesday, the EEOC published a revised proposal to collect pay data through an amended EEO-1 report. As you may recall, in late January, the EEOC announced a proposed revision to the EEO-1 report to include pay data and hours worked for all employers with over 100 employees to assist the EEOC and the OFCCP in “identifying possible pay discrimination and assist employers in promoting equal pay in their workplaces.” Although the initial proposal received support from civil and women’s rights groups, as well as some labor organizations, the proposal also drew substantial criticism from employers and employer associations–including DE and its Members. Many employers said the EEOC should withdraw or substantially revise its proposal because the data collection tool would be costly and burdensome to employers, and ineffective to identify unlawful pay discrimination. According to the EEOC, the revised proposal was meant to address some of these criticisms; however, the substance of the revised proposal remains largely unchanged.
The EEOC, for example, dismissed employer concerns regarding the employee headcount threshold to report pay data, the use of W-2 income as a measure of pay (instead of base pay), the reporting of hours worked, the use of pay bands, confidentiality, and data security. The EEOC did, however, make the following proposed revisions should its Proposal go to Final form (as we predict) and become legally effective:
- As of 2017, the EEO-1 filing deadline would move to March 31st of the year that follows the reporting year. As such, employers would not have to submit a 2017 EEO-1 report until March 31, 2018. (Note: per the revised Proposal, the EEO-1 final reporting date for 2016 race, sex, and ethnicity reporting will remain September 31, 2016). The EEOC changed the pay data reporting date due to employer concerns regarding the burden of reporting non-calendar year W-2 data. The EEOC believes this change will not only align the EEO-1 reporting period with federal obligations to calculate and report calendar year W-2 earnings by February 1st of each year, but that it will also give employers additional time to prepare their recordkeeping systems for the 2017 report.
- The “workforce snapshot” reporting date would change from a pay period between July 1st and September 30th to a pay period between October 1st and December 31st to reduce the opportunity for unreported changes to pay after the snapshot date.
- The EEOC clarified the definition of “W-2 income” by stating that employers will report on income provided in Box 1 of the W-2 form.
- Employers would be given options as to how to report the hours worked of exempt employees. Specifically, employers would be given the option to: (1) report a proxy of 40 hours per week for full-time exempt employees and 20 hours per week for part-time exempt employees, multiplied by the number of weeks the individuals were employed, or (2) provide actual hours of work by exempt employees during the EEO-1 reporting year if the employer already maintains accurate records of this information.
- Despite EEOC’s assertions that the above revisions reduce work for employers as compared to the initial proposal, the EEOC increased the estimate of the burden on employers to reflect employer feedback. Specifically, the EEOC adjusted the burden calculation in two respects: “First, the EEOC accounted for establishment-level reporting costs, because it concluded that more employers will continue doing data entry at the establishment level in the next few years, as opposed to providing data from corporate headquarters. Second, the EEOC decided to account for a broader range of professionals who may be involved preparing the EEO-1 report. The adjusted burden calculation accounts for time spent by a Chief Executive Officer, who may certify the report for some companies, the attorney who may review it, the senior and junior human resources staff and the software programmer who may oversee and run the reporting system, and finally, administrative staff. This change in approach added highly-paid professionals to the cost calculations.” Despite these modifications, the EEOC estimates that it will take only a total of eight hours for employees to prepare and submit the required data. EEOC estimates that the addition of pay data to the EEO-1 Report will increase the annual cost of time spent completing the EEO-1 report each year by about $25 million nationwide, or about $416 per EEO-1 filer. The final proposal also includes one-time implementation costs, which represents the time and expense to employers of changing their EEO-1 reporting systems. The EEOC estimated that the one-time implementation cost for all filers to be approximately $27 million, or about $446 per EEO-1 filer.
While these modifications address some employer concerns, the cost and burden estimates are still far from accurate and the revisions fail to resolve numerous valid concerns employers have raised. The proposed revisions likely will not provide much comfort to employers who will continue to face substantial increased burdens and costs if forced to gather, review, and submit the requisite pay data. Also, most employers still view (despite the EEOC’s continued assertions to the contrary) the EEOC’s proposed pay data collection to be largely irrelevant and not useful to detect potential unlawful pay discrimination.
Members of the public will have until August 15, 2016 to submit written comments regarding the revised proposal to the Office of Management and Budget, which approves federal information collections. Commenters are also encouraged to send comments to the EEOC online at http://www.regulations.gov (the Federal eRulemaking Portal).
THIS COLUMN IS MEANT TO ASSIST IN A GENERAL UNDERSTANDING OF THE CURRENT LAW AND PRACTICE RELATING TO OFCCP. IT IS NOT TO BE REGARDED AS LEGAL ADVICE. COMPANIES OR INDIVIDUALS WITH PARTICULAR QUESTIONS SHOULD SEEK ADVICE OF COUNSEL.
Reminder: If you have specific OFCCP compliance questions and/or concerns or wish to offer suggestions about future topics for the OFCCP Week In Review, please contact your membership representative at 866-268-6206 (for DirectEmployers Association Members), or email Candee at firstname.lastname@example.org with your ideas.