OFCCP to Increase Scrutiny on Pay Practices, ‘Sub-Minorities’

By By Roy Maurer Mar 15, 2012

A senior official from the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) cautioned that federal contractors can expect their compensation practices and policies to be a focus of the agency in 2012.

Pamela Coukos, senior program advisor with the OFCCP, told participants March 6, 2012, at the Society for Human Resource Management’s Employment Law & Legislative Conference in Washington, D.C., that “we are shifting our focus on and allocating our resources toward compensation enforcement.”

Pay disparities based on sex and race remain a very serious problem that will not go away unless addressed, she said.

In January 2012, the OFCCP released a second notice of proposed rescission of its 2006 interpretive standards for systemic pay bias and voluntary guidelines for self-evaluation of pay practices for federal contractors under Executive Order 11246.

The agency in 2012 expects to issue new interpretive standards and guidelines for compensation discrimination, said Coukos. Additionally, OFCCP aims to issue a notice of proposed rulemaking for a compensation data collection tool, she added.

Lynn Clements, an attorney with Jackson Lewis based in Baltimore, Md., told attendees of another session at the conference that contractors should determine how they will collect and analyze the compensation data that will be requested by OFCCP if its proposed revisions to the scheduling letter and itemized listing it sends to initiate compliance reviews is approved by the Office of Management and Budget.

OFCCP is proposing to update language relating to compensation data, to require contractors to submit disaggregate data rather than aggregate data, which the agency said would allow it to perform more specific analyses and pinpoint possible discrimination based on race or sex.

OFCCP would require contractors for the first time to submit individualized, or disaggregate, compensation data for all employees as of the most recent Feb. 1 date, instead of in the summary, or aggregate, form requested currently. The proposal states that employees include, but are not limited to, “full-time, part-time, contract, per diem or day labor, and temporary workers.” It also defines compensation as not only “base salary, wage rate, and hours worked,” but also as “bonuses, incentives, commissions, merit increases, locality pay or overtime,” which must be identified separately for each employee.

It further provides that contractors should submit “documentation and policies related to compensation practices,” and “may provide any additional data on factors used to determine employee compensation, such as education, past experience, duty location, performance ratings, department or function, and salary level/band/range/grade.”

Clements said even small pay disparities between two employees potentially could trigger an on-site review.

“If you submit compensation data and there is a disparity between males and females, minorities and sub-minorities—even when you’re only talking about two people in the same job group—you will absolutely get asked about that disparity,” she said. “You will have to explain that disparity even when it’s small, even when it seems relatively insignificant to the contractor in terms of overall compensation.”

Clements suggested contractors analyze proactively their compensation data as of Feb. 1, and consider whether any adjustments may be needed to fix potential disparities.

Coukos urged federal contractors to routinely conduct compensation audits based on race and sex. “By doing the audits, federal contractors can figure out if there is a problem before we show up at their doorsteps,” she said.

In 2011, 20 percent of OFCCP compliance evaluations that resulted in conciliation agreements involved pay discrimination, compared with 14 percent in 2010 and 4 percent in 2009, Coukos noted. OFCCP obtained $1.6 million in back pay and salary adjustments for 435 workers in 2011, she said.

Compliance officers are using statistical tools in regression analyses, but also are looking at other factors that influence a contractor’s pay practices, she said.

“We want to really tailor these compensation reviews to what is going on in reality and on the ground at the workplaces. Each compensation audit is different, meaning that audits are conducted on a case-by-case basis.”

While some contractors might have a perfectly good explanation for compensation disparities, they should be able to explain the gaps to the compliance officer who shows up at their door, Coukos added.

Focus on ‘Sub-Minorities’

In addition to compensation, OFCCP continues to examine statistical disparities in hiring, but, Clements said, the agency is not only comparing minorities to nonminorities. The OFCCP is now also focusing on “sub-minority” discrimination, in which the agency analyzes whether a contractor is favoring one protected race or ethnicity group over other protected groups.

She recommended that contractors review how they collect and analyze this “sub-minority” data. Under OFCCP’s proposed itemized listing, contractors would have to analyze such data by job group and job title. “Think of how many analyses you can run with all of that data,” she said. “It’s huge. The combinations are somewhat endless and scary.”

Expect Final VEVRAA, Section 503 Rules in 2012

OFCCP will continue to advance its regulatory agenda, said Coukos, which includes issuing, perhaps by summer, a final rule under the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) that would require contractors for the first time to establish annual hiring “benchmarks” for protected veterans and to adhere to several new data collection, recordkeeping, job listing and outreach requirements.

Additionally, OFCCP is proposing to revise Section 503 rules proposing a 7 percent national utilization goal for individuals with disabilities.

Clements said that OFCCP will be “systematic” in auditing revised contractors’ nondiscrimination and affirmative action obligations toward veterans and individuals with disabilities under VEVRAA and Section 503 regulations. In anticipation of these potential final rules, she advised employers to “beef up” their outreach and recruitment efforts.

For example, she said OFCCP will ask a contractor to identify the linkage agreements it has to veterans and disabilities organizations and then will follow up with these sources to confirm that the employer actually has contacted them and has an ongoing relationship with them. The agency will verify that you are posting all external job openings with state and local workforce offices.

Additionally, contractors’ leave and reasonable accommodation policies will come under scrutiny and OFCCP will ask to interview employees who were provided or denied accommodations.

Roy Maurer is a staff writer for SHRM.

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