Minnesota Contractors’ Workforce Compliance Requirements, Part II: Equal Pay Certificates

Quick Hits

• Employers with contracts exceeding $500,000 with Minnesota state agencies and that have forty or more full-time employees in Minnesota or in the state of their primary place of business must obtain an equal pay certificate.
• To apply for an equal pay certificate, contractors must hold a current MDHR workforce certificate, complete an online application, and pay a $250 fee.
• The MDHR conducts compliance reviews of contractors holding equal pay certificates to ensure adherence to equal pay laws, with potential penalties for noncompliance including fines and revocation of the certificate.

Who Must Obtain an Equal Pay Certificate?

Employers with contracts for goods and services exceeding $500,000 with the State of Minnesota (including its departments, agencies, colleges, and universities), and various metropolitan agencies, with forty or more full-time employees in Minnesota or in the state of their primary place of business, must obtain an equal pay certificate.

In addition, employers (wherever located) with contracts exceeding $500,000 with the University of Minnesota for a capital project funded by a general obligations bond must likewise obtain an equal pay certificate, as must employers with contracts with Minnesota cities, counties, and other political subdivisions for a capital project funded by a general obligations bond exceeding $1 million.

Some businesses are exempt by statute based on the type of contract. For example, certain contracts for healthcare services, health insurance, investment options with the State Board of Investments, and others are exempt.

Minnesota vendors must hold a current equal pay certificate to bid on or obtain Minnesota state contracts exceeding $500,000. Equal pay certificates are tied to a company, not a contract, and are valid for four years.

How to Obtain an Equal Pay Certificate

Employers seeking an equal pay certificate must first register with the Office of the Minnesota Secretary of State and must already hold a current Minnesota Department of Human Rights (MDHR) workforce certificate.

To apply for or renew an equal pay certificate, Minnesota contractors must complete an online application and pay a $250 application fee. The application must be signed by the company’s highest-ranking official (e.g., president, CEO, or board chair).

The application must include basic company information, provide a company contact name and contact information, a description of the goods and/or services provided to the Minnesota government agency or agencies, and a list of facility addresses covered by the equal pay certificate.

The application contains an equal pay compliance statement wherein the highest-ranking company official must affirm the following:

• compliance with Title VII of the Civil Rights Act of 1964, the Equal Pay Act of 1963, the Minnesota Human Rights Act, the Minnesota Fair Labor Standards Act, and the Minnesota Equal Pay for Equal Work Law;
• the average compensation for women is not consistently below the average compensation for men, considering mitigating factors, as reported in each major EEO-1 report job category (i.e., Officials and Managers, Professionals, Technicians, Sales, Office/Clerical, Skilled Crafts, Operatives, Laborers, and Service Workers). Mitigating factors include, for example: length of service, requirements of specific jobs, experience, skill, effort, responsibility, and working conditions of the job;
• how often the company evaluates wages and benefits for compliance with federal and state law;
• the methodology used by the company to determine compensation: market pricing, internal pricing, performance pay system, state prevailing wage, union contract requirement, and/or other. If “other,” the contractor must provide a description of the methodology used; and
• retention and promotion decisions are made without regard to gender and do not limit employees based on gender to certain job classifications.

The highest-ranking company official must also affirm that the employer will:

• furnish pertinent compensation data, analyses, records, and audit responses to MDHR upon request;
• promptly correct wage, benefits, and other compensation disparities; and
• retain records of employees’ names, daily hours worked, and rate(s) of pay for at least three years.

The MDHR will issue an equal pay certificate or a letter explaining why the application was rejected within fifteen days of the MDHR receiving the contractor’s application.

MDHR Compliance Reviews

Minnesota contractors holding an equal pay certificate are subject to compliance reviews by the MDHR to evaluate compliance with equal pay laws. The MDHR has broad discretion to request documents to determine compliance. In an equal pay audit, the MDHR typically requests the following information for each major EEO-1 report job category:

• Number of male employees
• Number of female employees
• Average annualized salaries paid to male employees and to female employees
• Information on performance payments, benefits, and other elements of compensation
• Average length of service for male and for female employees

If the MDHR determines that a contractor is not in compliance with the equal pay laws, the MDHR may issue a variety of remedial actions, such as:

• requiring the contractor to revise its policies;
• obtaining wages and benefits due to employees;
• issuing fines of up to $5,000 per calendar year for each contract;
• revoking or suspending the equal pay certificate; and/or
• seeking modification or termination of the contract.

Refusal to provide data and information requested in a compliance review may also result in suspension or revocation of the equal pay certificate and the inability to bid for or obtain Minnesota state government contracts.

Contractors may challenge an action undertaken by the MDHR by filing an appeal with the Office of Administrative Hearings.

Data Privacy

Data and information submitted as part of the application and compliance review process are kept privileged and confidential. However, the MDHR commissioner’s decision to issue, not issue, revoke, or suspend an equal pay certificate is public data. The list of equal pay certificate holders is published on the MDHR’s website. The MDHR may share information with other government agencies such as the Minnesota Attorney General’s Office, the Minnesota Department of Labor and Industry, U.S. Department of Labor, U.S. Equal Employment Opportunity Commission, and Minnesota state and local government agencies to assist in compliance investigations.

Conclusion

To make the affirmations required in the equal pay certificate application, Minnesota government contractors may want to analyze the wages of their employees expected to perform work on Minnesota contracts by EEO-1 report job category for disparities based on sex. If they identify pay disparities based on sex that are not explained by mitigating factors, then they may want to take prompt corrective action. Contractors may want to conduct these analyses regularly throughout the four-year equal pay certificate certification period. Per the MDHR’s website, contractors holding an equal pay certificate should expect to be audited by the MDHR sometime during their four-year certification period.

Ogletree Deakins’ Minneapolis office, Government Contracting and Reporting Practice Group, and Workforce Analytics and Compliance Practice Group will continue to monitor developments and provide updates on the Government Contracting and Reporting, Minnesota, Pay Equity, and Workforce Analytics and Compliance blogs as additional information becomes available. The final article[JI1]  in the series addresses what Minnesota goods and services contractors can expect in an MDHR workforce certificate audit.

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