OFCCP Official Says New Audit Standards Are Better Suited for Detecting Pay Bias

With an emphasis on practical strategies to improve productivity and performance, and limit potential liabilities, Bulletin to Management™ concisely analyzes new developments in employment and human resources management.

By Lydell C. Bridgeford  


Because the new procedures crafted by the Labor Department's Office of Federal Contract Compliance Programs for conducting compensation audits adhere to the principles of Title VII of the 1964 Civil Rights Act, the agency is now in a position to address the various pay practices found among federal contractors, Pamela Coukos, senior program advisor with the agency, told participants during a March 22 OFCCP-sponsored webinar.

“By deferring to existing law, OFCCP has the flexibility to deal with new legal developments and changes in the economy and workplace,” Coukos said. Equally important, the directive will align OFCCP enforcement with existing Title VII standards for pay discrimination, thus improving and expanding compensation investigation procedures and protocols, she added.

On Feb. 26, OFCCP rescinded its 2006 Voluntary Guidelines for Self-Evaluation of Compensation Practices and the Interpretative Standards for Systemic Compensation Discrimination and issued a directive establishing new enforcement guidance on how compensation audits for federal contractors should be carried out by OFCCP investigators (64 BTM 73, 3/5/13).

The directive procedures apply to supply and service compliance evaluations scheduled on or after Feb. 28. Any review scheduled, open or otherwise pending on the effective date of the rescission, should be conducted by compliance officers under the 2006 guidance document before a determination is made as to whether to issue a notice of violation, Coukos said.

Executive Order 11246 prohibits contractors from discriminating in “rates of pay or other forms of compensation.”

Directive Yields New Benefits

With the rescission of the earlier guidelines, some “arbitrary barriers to identifying discrimination” have been removed, Coukos said. OFCCP now can follow the same standards as the Equal Employment Opportunity Commission, other federal agencies, and the courts in assessing pay discrimination.

She further noted that the agency “did not see any benefits in having special rules for one kind of employment practice.” In all other areas, such as hiring and promotions, “we use Title VII principles to define the scope of an executive order violation.”

Under the new directive, pay discrimination enforcement will follow the same approach. “Pay discrimination is a real and persistent problem in the American workforce and an important policy issue. If our efforts are complemented by robust voluntary compliance by employers doing an in-depth analysis of their practices and how they apply in addressing issues, then that is going to make a real difference in people's lives,” Coukos noted.

A contractor who receives a scheduling letter from OFCCP must submit aggregated and summarized compensation data for groups of workers by race and gender.

Based on the results of a preliminary analysis of the compensation data, OFCCP may request employee-level compensation data listing the amounts paid to each individual worker covered by the contractor's affirmative action plan, Coukos said.

Some quantitative factors that the agency considers in the preliminary analysis are “the number of job groups or grades where average pay differences exceed a certain threshold, or the number of employees affected by race-or-gender-based average pay difference within job groups or grades.” Coukos added that compliance officers also will consider qualitative factors, such as prior compliance history with OFCCP and EEOC.

However, “there is no single specific numerical threshold that we are using to make a decision about requesting more compensation data,” Coukos explained. The question for contractors is what would constitute evidence of discrimination under “well established” legal rulings.

Anecdotal Evidence if Necessary

In considering anecdotal evidence, “we are not going to have special rules,” Coukos said, adding that compliance officers will consider such evidence if it relates to other information in the review. Coukos explained that OFCCP investigations are unique compared with those of other agencies because they do not require a complaint before an investigation may be commenced.

“We may identify issues that, individually, workers don't know about,” she said. “In many workplaces, people don't talk about pay and in some workplaces they cannot.”

If the agency only launched an investigation based on anecdotal evidence, then that would “essentially eliminate one of the things that our enforcement brings to the table,” she added. The agency does not require anecdotal evidence to pursue investigations of other employment practices, such as hiring issues. “It doesn't make sense to do it in this context and it is not legally required,” she noted.

Coukos described a three-stage investigation process for determining pay bias under the new directive. Stage one entails analyzing for potential systemic discrimination in a large group of employees, while stage two focuses on a smaller group or unit discrimination.

A compliance officer can proceed with a stage-two analysis whether he or she finds systemic discrimination or not. If a stage-two analysis yields no indicators of pay discrimination, then the officer may analyze for individual discrimination.

Standards Make More Sense

The 2006 standards and voluntary guidelines restricted pay audits by only addressing a single type of pay practice, according to Coukos. The guidance focused on pay differences between workers in narrowly defined job categories, she noted. Under the standards, auditors had access to limited evidence. “In contrast, the courts, in applying Title VII principles, have prohibited multiple forms of pay discrimination and have allowed for multiple types of evidence,” Coukos said.

Investigations under the 2006 guidance also had to rely on a highly specific analytic framework. It was “a cookie-cutter approach in that all the cookies look the same no matter what kind of workers, pay practices or industries are involved. Title VII doesn't have that formulaic approach,” she said. “Title VII considers a case-by-case analysis as the correct analysis and that is what OFCCP will be following.”

Compliance officers will also examine factors that affect access to salary increases, such as job assignment or placement and opportunities to receive training and promotions.

Multiple Analyses Will Continue

OFCCP will continue to conduct a statistical analysis on data involving large aggregated groups, “assuming that there is enough data and it is appropriate to the jobs,” Coukos said.

“We have not abandoned using multiple regression analyses. Quite the contrary, it's an important tool. We simply stopped applying special rules about it. Additionally, multiple regression analyses will not be based on 'similarly situated employee groups' (SSEGs). The agency will apply Title VII principles to determine the grouping,” she explained. The concept of SSEGs was developed for the 2006 standards.

Coukos said, “Although it's using those magic words 'similarly situated,' it defines similarly situated the same way in every single case regardless of pay practices and issues of evidence.” The new directive states, “Employees are similarly situated where they are comparable on the factors relevant to the investigation, even if they are not comparable on others.”

Rather than SSEGs, the new compensation audit procedures utilize the concept of “pay analysis groups,” which Coukos described as “a group of employees (potentially from multiple job titles, units, categories and/or job groups) who are comparable for purposes of the contractor's pay practices.”

By Lydell C. Bridgeford