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OFCCP Scraps Pay Bias Guidance In Favor of Expanded Investigations

Monday, March 4, 2013

By Chris Opfer  

The Labor Department's Office of Federal Contract Compliance Programs is rescinding two Bush-era pay discrimination guidance documents and replacing them with broader and more flexible investigation procedures, the department announced Feb. 26.

“Today, we are lifting arbitrary barriers that have prevented our investigators from finding and combating illegal pay discrimination,” OFCCP Director Patricia A. Shiu said in statement. “At the same time, we are providing clear guidance for contractors to facilitate their success when it comes to providing equal opportunity to all of their workers.”

The two guidance documents rescinded effective Feb. 28 include interpretive standards utilized by OFCCP in investigating potential pay discrimination cases and voluntary guidelines under which federal contractors could “self-evaluate” their pay practices.

The interpretive standards established an analytical framework for the agency to follow in issuing a notice of violation under Executive Order 11246 for systemic compensation discrimination, which includes a pattern or practice of discrimination or a specific employment practice adversely affecting a number of employees.

The voluntary guidelines were intended to provide a model for contractors to review their own pay systems, as required under 41 C.F.R. § 60-2.17(b)(3). The guidelines also provided a “safe harbor” in OFCCP compliance reviews to contractors who adopted them.

OFCCP issued a notice proposing to rescind the standards and guidelines and soliciting public comment. Contractors overwhelmingly supported the decision, according to Shiu.

“There was really a cry not just to rescind, but to put something in its place so that contractors would have some guidance,” Shiu told BNA last month.

While the rescinded standards and guidelines will govern scheduled, open, and pending OFCCP investigations, contractors may elect to waive application of the guidance.

Rejecting Cookie-Cutter Approach.

Both guidance documents established an overly narrow, “one-size-fits-all” definition of pay discrimination, OFCCP said.

“Attempting to impose a uniform test for pay discrimination without accounting for case-specific facts creates opportunities for error,” the office said in the rescission notice. “It means that some contractors who pay fairly will be wrongly identified as discriminating in pay, and that some workers who were underpaid due to discrimination will be left without a remedy.”

Specifically, the standards addressed only one type of compensation disparity--pay differences among pools of workers in the same job category.

They did not cover other forms of discrimination that are often more difficult to find and prove, such as those related to job assignments, promotional opportunities, and access to overtime, as well as commissions and bonuses.

The standards also provided rigid investigation procedures, including limits on the groups of workers that could be compared and a requirement that a notice of violation be supported by anecdotal evidence. These procedures, according to OFCCP, did not account for varying circumstances, such as the industry, types of jobs, and available data.

Meanwhile, the voluntary guidelines allowed contractors to review their own compensation systems--and be shielded from enforcement action--based on one particular statistical model.

“Even if another, equally 'reasonable' analytic approach would reveal systemic compensation discrimination against a protected class of workers, OFCCP would seemingly have to consider the contractor in compliance,” the office explained.

OFCCP additionally noted that contractors “rarely” utilized the guidelines to establish compliance.

New Directives Stress 'Case-by-Case.'

OFCCP also introduced new guidance in place of the rescinded standards and guidelines.

The directives are intended to align procedures with the office's investigation of other forms of discrimination--such as hiring, promotion, and termination--under EO 11246 as well as the standards used to enforce Title VII of the 1964 Civil Rights Act.

OFCCP is authorized to cast a wide net under the new framework, investigating various forms of potential pay discrimination, the agency said. That includes considering any limits on employees' equal access to earning opportunities, such as higher paying work assignments, job classifications, and training.

Debra L. Ness, president of the National Partnership for Women & Families, applauded the new guidance. “This is a significant step forward--one that gives federal contractors a clear sense of how OFCCP will investigate pay discrimination cases going forward,” Ness said in a statement.

Across industries, women workers earned about 19 percent less than their male counterparts on a weekly basis in 2010, according to OFCCP.

Investigations will be carried out on a “case-by-case” basis, OFCCP explained, to determine whether a measurable difference in compensation based on race, sex, or ethnicity exists and if there is a legitimate reason for any disparity.

An investigation may include review of a contractor's compensation policies and data, along with other statistical and nonstatistical analyses and consultation with labor economists and other experts. Investigators are encouraged to begin by testing large groups of comparable workers before analyzing differences at a discrete level.

OFCCP will no longer require anecdotal evidence and instead may seek a remedy for compensation discrimination regardless of whether individual workers realize they are being underpaid.

The office said it will provide further guidance resources and materials to ensure that contractors are well-informed of their obligations.

By Chris Opfer  

Text of the rescission notice is available at http://op.bna.com/dlrcases.nsf/r?Open=copr-95bshx.

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