On September 1, 2021, the Office of Federal Contract Compliance Programs (OFCCP) announced that it would “evaluate” using compensation data reported by federal contractors in annual EEO-1 filings to guide its enforcement efforts in the area of pay equity.  This decision reverses a Trump-era decision that OFCCP would not request, accept, or use the data, and is a step towards the agency’s expected heightened enforcement activity in the area of pay equity.

OFCCP’s reversal appears to be the next chapter in the protracted history of the Obama-era EEOC’s effort to collect compensation data from federal contractors and other employers through a new “Component 2” of the annual Employer Information Report, more commonly known as the EEO-1, submission. In September 2016, EEOC obtained approval from the Office of Management and Budget (OMB) to collect pay data for calendar years 2017 and 2018, but the Trump administration OMB later attempted to revoke the authorization.  The Trump OMB’s revocation was invalidated by the U.S. District Court for the District of Columbia, which ordered the EEOC to conduct the previously approved pay data collection.  However, in September 2019 the EEOC announced it would not seek renewal of OMB’s authorization for later years.  OFCCP followed with its own announcement on November 25, 2019 that it would not “request, accept, or use Component 2 data, as it does not expect to find significant utility in the data,” because the Component 2 data was not collected at a level of detail sufficient to make comparisons of similarly-situated employees.

Now, OFCCP has reversed its position and announced that it will “evaluate the data’s utility because the joint collection and analysis of compensation data could improve OFCCP’s ability to efficiently and effectively investigate potential pay discrimination.”  OFCCP’s announcement also indicates that the agency may consider the Component 2 data “in conjunction with other available information, such as labor market survey data” in selecting contractors for compliance evaluations.

OFCCP’s EEO-1 announcement appears to set the table for enhanced enforcement in the area of pay equity and compensation discrimination, as OFCCP is signaling it will use the EEO-1 pay data to select contractors for compliance evaluations.  Given the agency’s discontinuance of disability- and veteran-oriented focused reviews in favor of full compliance evaluations, OFCCP will be collecting employee-level compensation information in all of its compliance evaluations.  The announcement may also signal that OFCCP is coordinating with the EEOC on reinstating the Component 2 requirement, as the 2017 and 2018 data collected by EEOC would appear to have limited utility on a going forward basis.