OFCCP Issues New Directive Aimed At Detecting Pay Discrimination Based on Gender, Race and Ethnicity

On February 28, 2013, the Office of Federal Contract Compliance Programs (OFCCP) issued new procedures for assessing contractor and subcontractor disparate pay practices. OFCCP rescinded its 2006 Compensation Standards and Voluntary Guidelines because they were too limited. Now, as Directive 307 makes clear, OFCCP’s goal is to engage in a more fact-specific approach and align its enforcement methodology with Title VII of the Civil Rights Act of 1964. Directive 307 gives OFCCP compliance officers the following directions in assessing employer pay practices going forward:

1. Analyze summary data such as overall pay differences based on race and gender and the number of employees affected by race or gender-based pay differences within job groups;
2. Analyze individual employee-level data;
3. Refine the investigative approach using a range of analytical tools and determine whether (a) there is a measurable difference in compensation on the basis of sex, race or ethnicity; (b) the difference in compensation relates to employees who are comparable under the wage or salary system; and (c) there is a nondiscriminatory explanation for the difference;
4. Review all employment practices that may lead to compensation disparities, not just compensation policies. This development is a dramatic expansion of OFCCP’s compensation analysis, which formerly focused only on salary but now extends to overtime pay, shift differentials, commissions, bonuses, vacation and holiday pay, retirement and other benefits, stock options and awards and profit sharing;
5. Develop pay analysis groups to test for statistical significance on large groups of employees;
6. Inquire as to systemic, small group and individual discrimination to uncover possible systemic issues such as a pattern or practice of discrimination or a discrete employment practice with adverse impact;
7. Review and test factors used for compensation decisions and evaluate whether the factors are relevant and applied consistently; and
8. Perform an onsite investigation.

Directive 307 makes clear that OFCCP is taking a more sweeping approach to reviewing employers’ pay practices for unlawful discrimination as compared to traditional review guidelines that have been in place since 2006. Federal contractors and subcontractors should consider making a comprehensive review of their pay practices, policies and processes to determine the extent to which they will survive an OFCCP audit. A self-audit performed under the attorney-client privilege is a prudent and effective means to identify disparate pay practices, even if unintentional, and to address issues before they become the focus of an OFCCP audit. For more information on Directive 307 and our firm’s OFCCP audit and compliance services, contact Patrick W. McGovern, Esq., pmcgovern@genovaburns.com or Douglas J. Klein, Esq., dklein@genovaburns.com, in our Labor Law Practice Group.