Expert: Think before disclosing self-analysis to OFCCP

By Allen Smith Jun 25, 2006
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The Office of Federal Contract Compliance Programs (OFCCP) has put its cards on the table and issued final standards on June 16 that spell out the multiple-regression analysis that the agency applies to claims of systemic pay discrimination. Now federal contractors face the choice of whether, should the OFCCP come knocking, they will lay all their cards on the table and share their multiple regression self-analyses with the agency, as it is encouraging them to do.

A contractor instead might opt to certify that it conducted compliance certification alternative analysis and not disclose, thereby preserving any attorney-client privilege over its compensation self-analysis, David Cohen, president of DCI Consulting Group Inc. in Washington, D.C., told HR News in a June 20 interview.

Heres what we do

Prior to the final interpretive standards for systemic pay discrimination under Executive Order 11246, the OFCCP had never formally opened its book and said heres what we do in analyzing claims of systemic compensation discrimination, Cohen explained.

Many federal contractors knew the agency was using multiple-regression analysis, though, he said. Multiple regression was used by the agency as far back as 1999 when it reached a $4.5 million settlement with Boeing, he added.

Nevertheless, the final standards embody the agencys formal adoption of multiple-regression analysis. Although patterned after a proposal issued by the agency in November 2004, the final standards contain some responses to employer concerns, he pointed out.

For example, the agency responded to employers call for the regression analysis to apply only to federal contractor establishments/locations with 500 or more employees, not 250 or more as originally proposed. In its comments on the proposal, the Society for Human Resource Management (SHRM) called for a contractor threshold size of greater than 250 for regression analysis, as did other organizations, including DCI.

In addition, under the final standards, 70 percent of a large federal contractors groupings in the self-analysis should be categorized in similarly situated employee groupings (SSEGs) large enough to conduct statistical analysis, not the 80 percent the agency originally recommended. However, the OFCCP did not adopt SHRMs recommendation that the agency wait to perform multiple regression until 2009 to give contractors time to collect the data required for statistical analysis. Instead, the final standards take effect immediately.

The standards make it plain that the pay grade method, or so-called DuBray method, of systemic compensation discrimination is a thing of the past, as the OFCCP instead will refer to SSEGs during investigations.

Contractors shouldnt junk their pay grades, but should create their own SSEGs to analyze compensation discrimination, Cohen noted. Some contractors already have created SSEGs, he said, but those that have not need to spend a significant amount of time to create SSEGs. We think its absolutely critical because its the backbone of analysis. If your groupings are wrong, your analysis will be wrong.

The OFCCP nevertheless still might refer to pay grades in a full-blown investigation if contractors havent created their own SSEGs, and it might create SSEGs itself. Contractors should not leave themselves in this position, Cohen cautioned.

Optional disclosure

Contractors have two main choices for conducting self-analyses and responding to OFCCP audits, he noted. They might opt to follow the agencys voluntary guidelines for self-evaluation, also issued June 16. If going this route, they would follow the agencys methodology in creating SSEGs and performing multiple-regression analysis annually, taking legitimate nondiscriminatory factors into account.

The benefit for contractors in applying this methodology would be that when the OFCCP conducts a desk audit, the contractors would not have to send the OFCCP compensation data, Cohen said. The agency would forego conducting its own analysis and rely on the contractors analysis. If everything looks squeaky clean, youre good to go, he remarked.

However, Cohen cautioned that some management attorneys are advising contractors never to turn over their analyses to the OFCCP, because they then would lose any attorney-client privilege over the data if contractors conduct their analyses under the privilege and end up being sued.

The alternative for a federal contractor is to certify in writing and under penalty of perjury that it is in compliance with the regulations, he noted. A contractor would not have to tell the OFCCP how it did the analysis, but the OFCCP would conduct its own analysis. However, Cohen said, it typically is easy to model out what the OFCCPs analysis will find.

Contractors should consider this choice and its implications beyond just one audited location, he recommended. Suppose a covered contractor faces two OFCCP audits. In location A, the analysis looks squeaky clean, so it discloses this analysis to the OFCCP. However, in location B, the data might look terrible for the contractor, and so it invokes the privilege. If the contractor is audited in both instances by the same OFCCP office, the agency might suspect something is not right at the second location, Cohen said.

The bigger picture for federal contractors in the wake of the final standards is the OFCCPs vigorous enforcement of systemic discrimination by federal contractors, he reflected. The agencys new regulations on Internet applicants should make it easier for the agency to identify systemic discrimination in the selection process, he noted. Cohen said the final standards on systemic pay discrimination indicate that systemic discrimination enforcement will be the future of the OFCCP.

Allen Smith, J.D., is senior legal editor for HR News.

Related articles:

OFCCP raises bar on affirmative action plans, HR News, Nov. 22, 2005.

Legal Privileges Against Compelled Disclosure: Safeguarding the Results of HR Compliance Audits, Legal Report, October 2003.

For the latest HR-related business and government news, go daily to www.shrm.org/hrnews

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