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Legal Alert: OFCCP Issues New Directive for Analyzing Pay Discrimination Claims

Date   Feb 28, 2013

The Office of Federal Contract Compliance Programs (OFCCP) announced that it is rescinding its "Voluntary Guidelines" and "Compensation Standards," which the agency adopted in 2006 to evaluate pay discrimination claims against federal contractors.

 

The Office of Federal Contract Compliance Programs (OFCCP) announced that it is rescinding its "Voluntary Guidelines" and "Compensation Standards," which the agency adopted in 2006 to evaluate pay discrimination claims against federal contractors.  In their place, OFCCP has issued Policy Directive 307, which sets out the procedures OFCCP investigators will use to review the systems and practices by which government contractors pay their workers.  The Directive is available on OFCCP's web site at:  http://www.dol.gov/ofccp/regs/compliance/CompGuidance/index.htm.

OFCCP stated that the 2006 guidance documents imposed arbitrary restrictions that kept the agency from doing its job and "effectively protecting workers from illegal pay discrimination."  OFCCP will now follow Title VII principles in investigating and addressing compensation discrimination, using the same standards courts use in evaluating pay discrimination claims brought by individual workers, classes of workers, or federal agencies. 

The new Directive describes the procedures and protocols the OFCCP will follow in conducting compensation investigations.  While the OFCCP states that one of its goals is to provide transparency, the Directive also outlines the fact that compensation analyses will be tailored in each compliance review on a "case by case" basis depending on the facts of that particular review or contractor.  The Directive continues to outline all types of investigative techniques available to compliance officers (COs).  While this increases the tools available to the OFCCP, it does little to provide guidance for what contractors can expect in a compliance evaluation.

Highlights of the procedures and protocols outlined in the Directive include:

Preliminary Analysis and Assessment of Quantitative and Qualitative Factors

Generally, OFCCP will conduct some form of preliminary analysis at the desk-audit stage but the specific analysis will be influenced by whether the agency received summary data or individual data.  OFCCP will use the preliminary analysis to determine whether to continue the compliance evaluation, but will not limit or define the scope of further review based solely on the results of the preliminary analysis.

The preliminary analysis usually will assess both quantitative and qualitative factors. 

Quantitative factors may include:

  • The size of the overall average pay difference based on race and gender;
  • The size of the largest average pay difference within AAP job groups, or the contactor's existing salary band or pay grade system;
  • The number of job groups or grades where average pay differences based on race or gender exceed a certain threshold; or
  • The number of employees affected by race- or gender-based average pay differences within job groups or grades.

Qualitative factors may include:

  • compliance history, OFCCP or EEOC complaints;
  • anecdotal evidence;
  • potential violations involving other employment practices; or
  • data integrity issues.

Use of a Wide Range of Investigative and Analytical Tools

The Directive states that a variety of tools are available for investigating and analyzing compensation issues and that there is no single tool that must be used in every case.  The particular analytical tool that will be used depends on the facts of the case.  These tools may include:

  • statistical analysis, including pooled regression analysis for large pay analysis groups or non-pooled regression analysis for small pay analysis groups;
  • non-statistical analysis, including cohort analyses; and
  • anecdotal evidence collected as part of the investigation.

Examples of Employment Practices that May Lead to Compensation Disparities

The Directive provides examples of differences in employment practices that may lead to compensation disparities warranting review and investigation for potential discrimination:  These include:

Difference in Salary or Hourly Rates of Pay – e.g., Hispanic customer service agents are paid less than white employees in the same or similar positions.

Differences in Job Assignment or Placement – e.g., women hired into entry-level grocery store positions are disproportionately assigned to the bakery department. Men are assigned to the meat department where pay and promotion opportunities are better.

Differences in Training or Advancement Opportunities – e.g., employees participate in a management training program on a recommendation by a manager. Certain managers are referring only white males resulting in disproportionate participation and subsequent promotions of white males.

Differences in Earning Opportunities – African-American sales workers are disproportionately assigned to territories with less potential.

Differences in Access to Increases and Add-ons – Female lawyers who get exactly the same base pay as male counterparts earn less on annual bonuses.

Effective Date:

The investigation procedures established in the Directive apply to all OFCCP compliance evaluations scheduled on or after February 28, 2013.  Additionally, they apply to open reviews to the extent they do not conflict with OFCCP guidance or procedures existing prior to the effective date.   

Employers' Bottom Line:

The rescission of the 2006 guidance documents and implementation of the new Directive will result in greater uncertainty in compliance reviews.  By eliminating the safe harbor found in the Voluntary Guidelines and eliminating the analytical procedures set out in the Standards, the OFCCP has expanded the potential number of contractors who may be found to have engaged in compensation discrimination.

If you have questions regarding the new Directive and how your pay practices may be evaluated under the new policies and procedures, please contact the FordHarrison attorney with whom you usually work or Linda Cavanna-Wilk, lcavanna-wilk@fordharrison.com, who is a member of FordHarrison's Affirmative Action/Government Contracts practice group.