Federal contractors will soon be facing new pay equity disclosure requirements under a directive issued by the Office of Federal Contracts Compliance Programs (OFCCP). The OFCCP announced that it will require contractors to conduct pay equity analyses of their workforce and share those results with the OFCCP, even if attorney-client privilege would otherwise protect the analyses. The OFCCP’s initiative signals an aggressive new focus on pay equity and a willingness to press the bounds of the government’s regulatory authority. Contractors should carefully evaluate the OFCCP’s directive and prepare accordingly.

New Requirement: Conduct Pay Equity Audits

Current OFCCP regulations require a contractor to provide the OFCCP with compensation information at the time of an OFCCP compliance evaluation. The new requirement states that contractors must provide the OFCCP with pay equity audit analyses during the OFCCP’s audit process—effectively requiring contractors to conduct a pay equity audit of their workforce.

New Requirement: Share Audit Information

Most pay equity audit analyses are protected by the attorney-client privilege and thus exempt from disclosure to government entities. The OFCCP is now taking the position that because the audit in question is statutorily required, the contractor may not assert the attorney-client privilege and must turn that audit over to the OFCCP. To say the least, this is an aggressive interpretation of the OFCCP’s power to force contractors to disclose potentially privileged information.

What’s Next?

The OFCCP’s new regulations will likely be subject to challenge. Federal courts have enjoined most of the new regulatory requirements of the Biden Administration, and the OFCCP’s new regulations are likely to be challenged, as well. In the meantime, however, federal contractors would be well advised to prepare for potential OFCCP audits by:

• conducting a pay equity audit that is protected by the attorney-client privilege and that the contractor does not plan to share with the OFCCP;
• remediating any pay inequities discovered by that audit; and
• conducting a second pay equity audit that the contactor would feel comfortable sharing with the OFCCP.

A challenge to the OFCCP requirements may make these steps unnecessary, but contractors should be prepared.