10 September 2018

Two Minute Update: Pay It Again, Uncle Sam – OFCCP Compensation Review Update

In past years, OFCCP has settled pay discrimination cases for several million dollars in back pay.  Recently, it rolled out another tool to uncover evidence of gender and race-related pay disparities.  For the third time in 10 years, OFCCP overhauled its standards about how it will analyze a contractor’s pay decisions.  The new comp directive doesn’t really establish any new or precise standard for a compensation review. The agency still has extreme discretion on how it chooses to analyze a contractor’s pay decisions.

However, there’s a few important takeaways:

  • OFCCP claims it will not typically pursue pay discrimination cases based only on statistical analysis of pay decisions.  Instead, it will ordinarily require other evidence of discrimination – things like Company documents, subjectivity in decision-making, statements by managers and employees.
  • The OFCCP will continue to organize employees into what are called “pay analysis groups.”  These groups lump similarly situated employees together by very generalized factors, such as skills required, effort, responsibility, working conditions, and job complexity.
  • OFCCP’s starting point will be established groups of employees such as EEO-1 categories or AAP job groups.  This can be especially risky because these groupings usually aggregate widely different jobs that are not similarly situated for pay purposes.  Therefore, developing customized job groups in an AAP is critical – a contractor shouldn’t just automatically copy EEO-1 categories.
  • A contractor can attempt to refute OFCCP’s finding of race or gender pay disparity by showing differences between employees or job titles.  This can involve factors such as unique skills or attributes, education, prior work experience, seniority, or performance evaluation ratings.

We’ll have to wait and see how OFCCP applies this new directive during an enforcement audit.  Never the less, documenting reasons for pay decisions is more critical than ever, especially for those exceptions that always occur.