OFCCP’s Shift in Pay Equity Enforcement Is in Limbo

Allen Smith, J.D. By Allen Smith, J.D. May 11, 2018
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​A directive to make pay more equal among federal contractors' employees—controversial when it was issued five years ago—may be rescinded or changed soon, according to Mickey Silberman, an attorney with Fortney & Scott in Denver.

Just a few weeks ago, the Office of Federal Contract Compliance Programs (OFCCP) seemed poised to throw out Directive 307—which aimed to uncover compensation discrimination among federal contractors and subcontractors—and replace it with something more employer-friendly, Silberman said. But some officials at the OFCCP leaked this news to the press in April, and civil rights groups objected. The OFCCP, Department of Labor and other stakeholders, including employer representatives and civil rights groups, are discussing the proposed changes, he said.

Directive 307

The OFCCP issued Directive 307 on Feb. 28, 2013, to remove prior limitations on the agency's pay analyses, said Cheryl Behymer, an attorney with Fisher Phillips in Columbia, S.C.

Previously, the OFCCP used a tiered compensation analysis in which it did not examine pay disparities unless they exceeded either 2 percent or $2,000. Then it applied a "multiple regression analysis," which is a statistical method that can account for a variety of factors that influence pay.

[SHRM members-only toolkit: Managing Pay Equity]

The OFCCP also required anecdotal evidence that the differences were the result of discrimination, Behymer observed.

But Directive 307 said that the OFCCP would examine compensation disparities in any amount on a case-by-case basis, using any statistical models or comparator analyses, including or not including anecdotal evidence, all at the agency's discretion, she noted.

Behymer said that the OFCCP provided no method for employers to examine their own compensation with any certainty that its compensation would withstand an OFCCP audit unless compensation among all comparators was the same.

Job Groups

Under the Obama administration, the OFCCP evaluated average pay using job groups established to satisfy affirmative action plan requirements, even though these groups are not established for compensation purposes, noted Alissa Horvitz, an attorney with Roffman Horvitz in McLean, Va. Jobs often may be grouped for affirmative action purposes by taking into account a range of factors, such as similar duties, wages and opportunities for promotion, not just pay.

Employees might be at the same level in a job group, such as directors, but pay among everyone at this level might not be the same if one was, for example, an engineer while someone else was in marketing, she suggested.

Silberman said that Directive 307 did not direct compliance officers to use job groups, but it does say that compliance officers can develop groupings of employees who are not similarly situated, such as a CEO and a marketing coordinator.

He added that he has seen the OFCCP in recent audits use employers' job groups as the default units for pay comparisons, even though the job groupings aren't set up for comparable pay purposes.

Tainted Variables

Directive 307 provided that if a variable that explains pay differences—such as tenure, prior experience, performance evaluations or education—is "tainted," the OFCCP can disregard it, Silberman noted. This permits the agency to ignore often legitimate factors related to business reasons solely because of a statistical trend that the OFCCP deems unfavorable, he said. 

In determining whether a factor is tainted, the OFCCP compliance officer:

  1. Determines if the data are complete and accurate.

  2. Decides if the factor is relevant to compensation in terms of the contractor's policy and how it was applied.

  3. Considers whether the factor was consistently applied.

  4. Determines whether using the factor presents adverse impact issues.

A factor such as performance ratings that skew in favor of men and explain higher pay for men than for women might be ignored under the directive. Silberman described this part of the directive as "particularly troubling as management-side attorneys try to get to the bottom of whether legitimate job-related factors explain pay differences, or inexplicable differences may be the result of discrimination."

Another important characteristic of Directive 307 was its expansive definition of what constitutes compensation, Behymer said. "Compensation" now includes 401(k) opportunities and shift differentials.

Steering

The directive also identified the agency's efforts to end "steering," when women are directed into lower-paying jobs while men are directed into higher-paying ones, she noted.

The directive offered as an example when women applying to work at a grocery store are directed to the bakery jobs, while men are channeled to higher-paying positions in the butcher shop.

Silberman said he hopes to see a "more-balanced set of guidelines" that "provides effective guidance for compliance officers in investigation of pay." He said that any new guidance should permit employers to have greater influence on appropriate groupings and legitimate factors that explain pay differences.

 

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