OFCCP Rescinds Prior Guidance on Compensation Discrimination Analysis In Favor of a Case-by-Case Approach

Effective February 28, 2013, the Office of Federal Contract Compliance Programs (“OFCCP”) rescinded two 2006 guidance documents concerning how the OFCCP and federal contractors analyze potential pay discrimination. This change came as a response to President Obama’s Equal Pay Task Force, which brought together the federal agencies charged with addressing pay discrimination.

The OFCCP, which is charged with ensuring federal contractors and subcontractors provide equal employment opportunity, concluded that the previous guidance was too rigid and undermining the agency’s efforts to combat discrimination. Several aspects of the now-rescinded guidance fell into disfavor with the OFCCP in its efforts to carry out President Obama’s mandate to step up investigation of systemic compensation discrimination. First, it was required to compare “similarly situated workers,” defined narrowly to include only employees with the same position. Second, it was required to use multiple regression analysis to test for pay disparities, failing to address situations where analysis of a smaller sample size might be more appropriate. Finally, it required anecdotal evidence to establish a systemic compensation violation in addition to statistical evidence. Reasoning that “employment discrimination comes in many forms,” OFCCP found that this specific method of analyzing compensation would not allow OFCCP to detect all forms of pay discrimination.

Instead, OFCCP and government contractors performing voluntary self-audits are now expected to consider on a case-by-case basis the appropriate statistical analysis, comparator or cohort analysis, and anecdotal evidence to determine if there is pay discrimination. OFCCP highlighted that, without the restrictive definition of similarly situated workers and the mandated multiple regression analysis. According to OFCCP, it will now be able to address situations where an employer discriminated by channeling workers of a particular race or sex into lower paying jobs, by a glass ceiling preventing advancement, or other promotion or job assignments.

What will the OFCCP look for now? It will have the flexibility to look at groups of employees by job or title, distinct units or categories of employees, or pooled regression analysis that combines employees from multiple job titles, units, categories and/or job groups, depending on the circumstances. OFCCP will consider the contractor’s policy or training documents, description of its compensation system or practices, compensation data, records and coding, job descriptions, whether workers rotate or transfer among different positions within a business unit, a common hiring or selection process, or a common performance review practice. OFCCP assures contractors that it will provide guidance to the contractor community through written materials, frequently asked questions, webinars, online chats and compliance assistance workshops, but, for now, contractors will have to wait for this direction.

This latest move is consistent with OFCCP’s aggressive focus on systemic pay and other perceived systemic discrimination issues. OFCCP’s new principles are extremely broad on how it actually will analyze and investigate compensation issues and leaves open many questions. The principles leave the federal government contractor community without a clear understanding of how the agency will evaluate potential systemic pay discrimination claims. For example, will OFCCP ignore its long-standing regulations at 41 CFR 60-20.5(c) requiring OFCCP to consult on any matter covered by both the Equal Pay Act and Executive Order 11246? How will OFCCP attempt to significantly expand cohort pay comparisons beyond those who perform the same work?