Georgia Tech Procurement Assistance Center

What do contractors do now? Interpreting OFCCP’s compensation discrimination directive

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For the third time in the last 10 years, the Office of Federal Contract Compliance Programs (OFCCP) has revamped its guidance on compensation investigation and enforcement by issuing Directive 2018-05 and publishing frequently asked questions (FAQs) on the new directive.

This internal agency directive, while not having the force of law that a court holding or regulation would have, does provide federal contractors with some information on how OFCCP may evaluate their compensation in OFCCP audits. This directive will apply to compliance evaluations scheduled on or after August 24, 2018, and may be used by OFCCP in earlier, open cases to the extent it doesn’t conflict with prior guidance or procedure.

On Which Pay Cases Will OFCCP Focus?

In the directive, OFCCP offers general guidance on the legal theories under which it will pursue compensation discrimination and how those align with program priorities. Stating that compensation disparities can be created through inequities in monetary compensation, inequitable training or advancement opportunities, and assignment/placement differences, OFCCP reiterated its reliance on statistical analyses reflecting a statistically significant difference of two standard deviations or more as well as non-statistical (or anecdotal) evidence of discrimination. (Anecdotal evidence could be testimony regarding biased statements or remarks, examples of differential treatment, testimony about individuals who were given misleading or contradictory information about employment or compensation practices, etc.)

Signaling a potential shift in agency practice, however, the directive notes that “OFCCP will be less likely to pursue a matter where the statistical data are not corroborated by non-statistical evidence of discrimination unless the statistical evidence is exceptionally strong.” (OFCCP does not define the phrase “exceptionally strong.”) Moreover, a footnote explains that OFCCP may pursue a case without anecdotal evidence if the agency detects patterns of discrimination over several years or at multiple contractor establishments. Finally, OFCCP may conduct comparative analyses of small groups of similarly-situated employees to determine if pay differences due to discrimination exist.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=733422

EEOC releases updates to proposed EEO-1 reporting revisions

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EEOCAs anticipated, the EEOC has released updates to its proposed rule obligating certain employers and federal contractors who file annual EEO-1 reports to include employee pay data information in addition to already-required employee demographic data.

While the updated proposed rule would require the collection and reporting of the same general pay data information as initially proposed, the updated rule:

  • extends the due date for the first EEO-1 report to require this additional data from September 30, 2017 to March 31, 2018;
  • aims to simplify data collection by establishing a calendar year wage calculation period and moving the “workforce snapshot” period for purposes of counting employees to a pay period of the employer’s choice between October 1 and December 31 of the reporting year; and
  • provides guidance on reporting hours worked for exempt employees.

The updated proposed rule is subject to a 30-day comment period ending on August 15, 2016.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=509982

Comments invited on proposal to require government contractors to report on employee compensation

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On August 8, 2014, the Office of Federal Contract Compliance Programs (OFCCP) of the Department of Labor released a proposed rule to require certain contractors to submit reports on employee compensation.

The rule would apply to employers who file Employer Information Reports (EEO-1 Report), have more than 100 employees, and a contract, subcontract or purchase orders amounting to $50,000 or more.

The rule requires them to submit a new Equal Pay report.  This report would include 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.

Submit comments here by November 6, 2014.

Proposed rule prohibits federal contractors from firing employees who discuss pay

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Federal contractors would have to inform their employees of their right to openly discuss pay in the workplace without fear of retaliation under new proposed rules from the Labor Department.

Firms that do business with the federal government would have to incorporate the new non-discrimination language in their existing employee handbooks and disseminate the information, either electronically or by publicly posting a copy of the requirement, according to draft rules published in the Federal Register. They also would have to include the provision in the existing equal opportunity clause in their contracts. The proposed regulations implement an executive order signed by President Obama in April that protects employees of federal contractors who disclose their pay, or the compensation of other workers, from being fired or otherwise retaliated against by employers.

The proposed rule would apply to all federal contractors that do more than $10,000 worth of business with the government. Approximately 500,000 contractors are registered with the General Services Administration.

Keep reading this article at: http://www.govexec.com/contracting/2014/09/proposed-rule-prohibits-federal-contractors-firing-employees-who-discuss-pay/94115/

DOL proposes rule to collect compensation data from federal contractors

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On August 6, 2014, the U.S. Department of Labor (DOL) announced a proposed rule that would require most federal contractors and subcontractors annually to submit Equal Pay Reports on employee compensation to the Office of Federal Contract Compliance Programs (OFCCP). The aim of the proposed rule is to collect summary data on how federal contractors and subcontractors pay their employees, with an eye toward identifying potential gender-based and race-based pay disparities. This marks a significant change in compliance requirements for the federal contractor community because until now, federal contractors were required to disclose compensation data only in OFCCP compliance reviews.

The Equal Pay Report rule comes after President Obama issued a presidential memorandum on April 8, 2014, instructing the Secretary of Labor to propose a rule to collect summary compensation data from federal contractors and subcontractors. The proposed rule would require contractors to provide compensation information for their workforce broken down by sex, race, ethnicity and specified job categories. The rule was published in the Federal Register on August 8, 2014, and all comments must be received by November 6, 2014. After consideration of public comments, the DOL is anticipated to issue a final rule in the first half of 2015.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=334810

Don’t get burned by this summer’s OFCCP enforcement

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While federal contractors may have been looking forward to having a summer break from new affirmative action regulations and related enforcement activities, President Obama and the U.S. Department of Labor’s Office of Federal Contractor Compliance Programs (OFCCP) have had other ideas.

Indeed, President Obama and the OFCCP have turned up the heat on federal contractors this summer by: (1) issuing a slew of new executive orders and other regulations that exponentially increase their compliance obligations, and (2) sending out a second wave of corporate scheduling announcement letters advising of future compliance audits.

Keep reading this article at: http://californiaemploymentlaw.foxrothschild.com/wp-content/uploads/sites/9/2014/08/OFCCP_article.pdf

Contractor pay cap will apply to all employees under new rule

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A new rule would limit the amount contractors could charge the government for any of their employees’ salaries under cost-reimbursement contracts.

Currently contractors can charge back $487,000 for employee salaries, but the ceiling only applies to top senior executives. With the new Federal Acquisition Regulation rule, that limit would be expanded to all employees including scientists and engineers.

The final rule, issued May 30, would only affect the Defense Department, NASA and the Coast Guard, and applies retroactively to compensation costs on government contracts signed after Dec. 31, 2011.

Keep reading this article at: http://www.fiercegovernment.com/story/contractor-pay-cap-will-apply-all-employees-under-new-rule/2014-06-03

Executive order: Contractors must allow employees to discuss pay with each other

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President Obama’s mandate that federal contractors must let their employees discuss compensation might be minor for most businesses, but the heavy lifting is yet to come.

By itself, the order has a “pretty small impact” on most businesses, said Alan Chvotkin, executive vice president of contractors’ trade group Professional Services Council — especially since it simply prohibits contractors from retaliating against discussions about pay, but doesn’t yet require them to report compensation data.

“Very, very few companies have an affirmative policy that prohibits conversation about pay,” he said, noting that smaller companies are more likely to feel the effects of the order “because of the often close working environment of their employees, whereas larger companies have a larger and often more distributed workforce, even if located in the same building or complex.”

In an attempt to discourage pay discrimination, Obama last week signed an executive order requiring federal contractors to allow employees to discuss their compensation with each other, known as “Non-Retaliation for Disclosure of Compensation Information.” He also signed a memorandum instructing the Labor Department to draw up regulations under which federal contractors would be required to submit compensation data by race and sex.

Once the Labor Department creates those rules — which would be used to ensure compliance with equal pay laws — Chvotkin says he expects contractors to push back. New reporting requirements could force contractors to spend money on new payroll processing systems or on new employees to collect and analyze the data. “Most company payroll systems don’t capture data that way [by sex and race],” he said.

Keep reading this article at: http://www.washingtonpost.com/business/capitalbusiness/executive-order-contractors-must-allow-employees-to-discuss-pay-with-each-other/2014/04/11/04c40e78-bf48-11e3-bcec-b71ee10e9bc3_story.html

Five provisions in the new defense policy legislation for contractors to watch

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[Note: Contractor compensation, the acquisition process, personnel security, cloud computing, and cyber security are five issues recently identified by The Washington Post as especially significant to government contractors.  The following article provides details.]

With the military policy legislation known as the National Defense Authorization Act signed by the president over the holidays, contractors are looking for the changes that matter to them. We’ve singled out five measures that will be of interest to companies that work with the federal government.

Keep reading this article at: http://www.washingtonpost.com/business/capitalbusiness/five-provisions-in-the-new-defense-policy-legislation-for-contractors-to-watch/2014/01/03/f6dd00ec-6c10-11e3-a523-fe73f0ff6b8d_story.html 

Defense department contractors may see new hiring regulations

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A proposed Defense Department regulation, if implemented, will substantially change how contractors hire, oversee and track certain former civilian and military personnel. As proposed, it will also establish a new suspension and debarment risk for contractors that hire former personnel.

On June 6, the department issued a proposed rule — DFARS Case 2010-D020 “Representation Relating to Compensation of Former DoD Officials” — to require all offerors to submit a representation, upon submission of the offer, that all employees who are former Defense Department “covered officials”
(defined in DFARS Clause 252.203-7000), to the best of the offeror’s knowledge and belief, comply with:

  • Defense Federal Acquisition Regulation Supplement (DFARS) 203.171-3 that
    states that covered Defense Department officials must have received or requested
    an ethics opinion on post-government employment restrictions;
  • 18 U.S.C. 207 and 5 C.F.R. Part 2641, which is the statute and regulations
    affecting post-government employment of ex-government civilian personnel and
    military officers; and
  • Federal Acquisition Regulation (FAR) 3.104-2, which implements the
    Procurement Integrity Act.

This proposed rule would likely have the several effects.  For example, it will share responsibility for compliance with post-government employment laws and regulations between ex-government personnel to defense contractors. Current post-government employment laws impose criminal and civil liability on ex-government personnel violations.

It will also require defense contractors to implement new compliance measures. To ensure compliance, defense contractors must establish systems and processes to identify, track, educate, and obtain periodic certifications from all employees, consultants, and others who receive compensation and who are former “covered officials.”

The new requirement will burden both smaller contractors that must establish a new compliance program to meet this requirement, as well as larger defense contractors that must levy the requirement on subsidiaries, joint ventures and affiliates, even those entities that are non-government contractors. Any new compliance system obviously will increase contractor overhead costs, which often are passed on to the government.

It will also impose on defense contractors a new liability over which they have no control.  Because the proposed regulation does not limit the certification to the activities of the former “covered employees” on a Defense Department contract or even related to employment by the contractor, the contractor will be required to certify compliance of its employees even as to their personal, off-duty activities.

Consultants and part-time employees working for other companies or organizations may violate their restriction in pursuit of other activities wholly unconnected to the certifying contractor. For example, an ex-military officer employed by a contractor may violate her representational restrictions under 18 U.S.C. 207 by contacting the government on behalf of another company for which she is consulting, or even as a volunteer for a civic,
charitable or scouting organization.

The proposed regulation may also deter smaller companies from bidding on Defense Department contracts. Smaller commercial contractors with less sophisticated employee screening and tracking systems may view this requirement as too costly to introduce across their enterprise in order to seek new defense business.

Another result may be that contractors will be deterred from hiring ex-military and Defense Department personnel. The proposed rule imposes both a new risk of non-compliance, which could lead to suspension and debarment or liability under the False Claims Act, as well as a new requirement for a compliance system to mitigate the risk. Thus, defense contractors likely will be deterred from hiring ex-military and department personnel. Ironically, this proposed rule red flags former department personnel — including Title 10 reserves and National Guard personnel — as potential burdens for Defense contractors.

The proposed regulation applies only to “covered officials,” but the difficulty in identifying who qualifies as a “covered official,” may cause defense contractors, especially smaller contractors, to simply close the door to all former department personnel.

Another potential consequence is that it may deter civilian federal employees from working in the Defense Department. Since the restrictions apply only to former department personnel, civilian employees, especially procurement and senior program managers who qualify as “covered employees,” may choose to serve in other federal agencies instead of Defense, if they envision post-government employment in the commercial sector. This obviously would frustrate Defense Department efforts to build a world-class acquisition work force.

The bottom line is that the proposed regulation offers several dysfunctional, expensive, and possibly unintended consequences that the Defense Department hopefully will address as it considers whether it should be implemented.

— by Steve Epstein, chief counsel for ethics and compliance at The Boeing Company. The views expressed are solely those of the author. Published by National Defense magazine, October 2011 at http://www.nationaldefensemagazine.org/archive/2011/October/Pages/DefenseDepartmentContractorsMaySeeNewHiringRegulations.aspx

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