OFCCP Rescinds Compensation Guidelines, Revives EO Survey

Office of Federal Contract Compliance Programs (OFCCP) Director Patricia Shiu recently announced that OFCCP's Interpretive Standards for Systemic Compensation Discrimination will be rescinded. This action was taken pursuant to a July 2010 recommendation by the National Equal Pay Enforcement Task Force.

A Brief History

OFCCP's Standards, issued in 2006 under the Bush Administration, establish that OFCCP will focus solely on systemic pay discrimination and describe the methodology OFCCP uses in deciding to file an agency lawsuit against a contractor for pay discrimination. Four years later, OFCCP has moved from statistical analyses of compensation to conducting cohort analyses by job title or job group.

Unlike systemic compensation claims, OFCCP has been somewhat successful in litigating or conciliating individual pay claims, and individual pay discrimination - as opposed to systemic discrimination claims promoted by the Standards - appears to be the agency focus now. Consequently, the agency intends to rescind its current compensation discrimination "bible" in favor of a new tool to collect personnel and wage data and provide information to OFCCP on alleged "bad actor" contractors. Unfortunately, this leaves contractors with little guidance from OFCCP on how to identify and correct "problems" with pay.

EO Survey

OFCCP has announced that it will soon seek input from the contracting community on what Director Shiu calls a "new wage data collection instrument" - most likely, some form of the now-defunct EO Survey. OFCCP utilized the EO Survey from 2000-2005 to collect information on personnel data (e.g., applicants, promotions, hires, terminations, current employment), and compensation by EEO-1 category. The hope was that the EO Survey would identify non-compliant federal contractors and assist OFCCP in identifying contractors for further evaluation. The EO Survey was discontinued in 2006 after an independent consulting group found that it was not a valid tool and did not predict systemic discrimination.

The proposed Paycheck Fairness Act would require the reinstatement of the EO Survey and its completion by one half of approximately 200,000 federal contractors each year. Even if the Paycheck Fairness Act does not pass, however, we can anticipate OFCCP issuing an Advanced Notice of Proposed Rulemaking (ANPR) to solicit input from the federal contracting community on this issue.

Director Shiu recently said on Federal Radio that she is anticipating a new data collection tool that is "effective and strategic." An effective data collection instrument could assist OFCCP in selecting contractors for compliance reviews, or persuade OFCCP that an audit is unnecessary. We also anticipate that one purpose of the new data collection instrument will be to identify contractors for corporate-wide and industry-wide compliance reviews, as the Department of Labor is already moving in the direction of corporate-wide remedies to site-specific discrimination.

Steps To Take

To prepare for these anticipated changes, federal contractors should:

• Be proactive. Compensation equity is not just an OFCCP issue; challenges can come from the Equal Employment Opportunity Commission, wage and hour, and private litigants in individual lawsuits or class actions.
  
  
• Establish consistent and well-documented pay policies and update or discard old policies.
  
  
• Review pay systems for both OFCCP compliance and Ledbetter Fair Pay Act decisional analysis. A compensation self-audit conducted under the scope of attorney-client privilege and using reliable statistical methodology can be a great tool to assess OFCCP and Title VII compliance risks. Consult with your legal advisor about the merits and demerits of making pay adjustments if you detect unexplained differences in pay.
  
  
• Don't limit your focus to only systemic discrimination. Individual pay claims can be brought by private litigants under the Equal Pay Act or by federal agencies under Title VII.

By establishing a well-documented and consistent pay system, reviewing it periodically, and training managers involved in pay decisions on what the law requires, employers stand a much better chance of defending a claim of pay discrimination brought by OFCCP or any other litigant.

Note: This article was published in the September/October 2010 issue of The Employment Law Authority.