New DOL Rule Gives Agency Broader License to Sue for Pay Discrimination

Federal contractors may now be exposed to more liability

By Allen Smith, J.D. Jun 17, 2016
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Department of Labor (DOL) sex discrimination regulations for federal contractors—updated for the first time in 40 years on June 14—will increase pay discrimination claims, according to management attorneys. The new rule permits comparisons between men and women working in different jobs when determining whether there has been pay discrimination.

“Title VII [of the Civil Rights Act of 1964] limits comparisons to ‘similarly situated’ employees, meaning employees working in the same job, usually in the same facility,” said David Goldstein, an attorney with Littler in Minneapolis. “In the new rule, however, the OFCCP [Office of Federal Contract Compliance Programs] has defined ‘similarly situated’ in a way that would appear to contemplate the possibility of broader comparisons. Contractors will want to be alert to any efforts by the OFCCP to expand on Title VII standards for analyzing claims of pay discrimination.”

“The actual language in the sex discrimination regulations provides the OFCCP with such wide latitude in determining which employees should be considered ‘similarly situated’ that it will be easy for the OFCCP to compare employees who hold jobs that are very much dissimilar in nature,” said Bill Osterndorf, president of HR Analytical Services, a provider of affirmative action consulting services in Hales Corners, Wis.

Expect the OFCCP to rely heavily on its regulatory provisions dealing with compensation in future OFCCP compliance reviews, said Alissa Horvitz, an attorney with Roffman Horvitz in McLean, Va. Government contractors could conduct a self-analysis now, under the attorney-client privilege, to make sure they are complying “before an audit commences,” she said. The rule’s publication also “is an important reminder to all HR professionals, given the increased emphasis placed on pay equity enforcement during audits, of the role that good records play in explaining compensation decisions,” Horvitz added.

Relevant Factors

The DOL stated that the following factors are among those relevant to determining similarity between jobs:

  • Tasks performed.
  • Skills needed.
  • Effort required.
  • Level of responsibility.
  • Working conditions.
  • Job difficulty.
  • Minimum qualifications.

“The OFCCP makes it clear that it may deem employees to be ‘similarly situated’ where they are comparable on some of these factors, even if they are not similar on others,” said Gretchen Ewalt, an attorney with Ogletree Deakins in Raleigh, N.C.

DOL’s Response to Concerns

While one commenter on the proposed rule said that the OFCCP’s standard was inconsistent with Title VII, the DOL disagreed. The “OFCCP treats employees as similarly situated only if they are comparable for purposes of the contractor’s pay practices on factors relevant to the compensation issues presented,” the DOL stated in its analysis of the rule. The provision “is therefore consistent with Title VII’s flexible, fact-specific approach to proof.”

Several commenters expressed concern that the DOL’s definition of “similarly situated” was too broad and allowed the agency too much flexibility in determining which employees to compare. One commenter said that it permits the agency to compare employees “assigned to different jobs at different levels, in different units and at different geographic locations.”

The DOL responded, “Under the Title VII discrimination framework, comparing employees to determine whether discrimination has occurred is highly case-specific. When assessing compensation during a compliance evaluation, OFCCP inquires about the compensation systems and practices of the particular contractor under review and tailors its analyses and investigative approach to the facts of the case. This helps ensure that its compensation analyses compare employees who are in fact similarly situated.”

But the DOL promised it would not resort to a “comparable worth” approach—that is, a comparison between jobs with comparable worth even if they do not have similar duties or working conditions.

The OFCCP nevertheless said it may compare employees in similar, but not necessarily identical, jobs.

“A specific job or position may not be the only relevant consideration, particularly in a systemic case,” the DOL stated. “For example, a bonus pool or commission formula may apply to a group of individuals who hold multiple positions.”

One commenter suggested adding job title, seniority and education to the list of factors that may be relevant to the determination of which employees are similarly situated, but the OFCCP declined to add them, even though it said these factors may be relevant in particular cases. The OFCCP noted that its list of relevant factors is not exhaustive due to the highly case-specific nature of the similarly situated inquiry.

Gender Identity Issues

The final rule also addresses gender identity issues, said Annette Tyman, an attorney with Seyfarth Shaw in Chicago. For instance, contractors are prohibited from denying transgender employees access to restrooms, showers or similar facilities that are designated for use by the gender with which they identify. While consistent with previously issued OFCCP frequently asked questions, the final rule magnifies the challenges that contractors in states with contrary laws face.

Contractors are also required to provide “same-sex or single-user facilities” if the contractor provides restrooms, changing rooms, showers or similar facilities to its employees. ​The final rule encourages, but does not require, designating single user restrooms or similar facilities as gender neutral.

There can be no distinction in employee benefits based on gender identity and employment decisions cannot be made based on sex-stereotyping, which may implicate gender identity, cautioned Jennifer Seda, an attorney with Jackson Lewis in Denver. Where such distinctions in health care coverage exist, the OFCCP expects employers to make good-faith progress to change their benefits policies and practices, she said.

Tyman added that explicitly excluding health services for "gender dysphoria" or "gender transition" would also be unlawful under the final rule. As a result, contractors should review their leave, benefits and accommodations policies to ensure that individudals who are transitioning from one gender to another are not treated adversely.​

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