On the heels of a new executive order mandating disclosure of labor violations, earlier this month the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) released proposed rules requiring federal contractors to report aggregate salary information broken down by gender and race. The new regulations are intended to address persistent wage gaps between men and women and among minorities.

Contractors with over 100 employees and $50,000 in federal contracts would be required to submit an annual electronic filing of aggregate W-2 wages paid based on current Form EEO-1 categories. OFCCP will then compile this information by industry. If an individual contractor appears to have pay discrepancies that are abnormal for their industry, this could trigger further compliance action by OFCCP.

While the additional reporting burden does not appear to be onerous, using this information for enforcement purposes may involve application of a blunt instrument. The proposed industry groups are broad, and an individual employer’s variation from industry standards may not be an accurate reflection of its pay practices or labor market conditions.

The pay information does not require or permit contractors to explain the reasons for apparent gaps by gender or race.  Existing rules already require federal contractors to conduct annual pay reviews. As a result of OFCCP tying this pay information to possible enforcement action, contractors should carefully review their own internal pay information. Unexplainable discrepancies should be addressed, and the contractor should be prepared to explain business reasons why other gaps exist. OFCCP is accepting comments on the proposed rules through November 6, with final regulations expected in early 2015.