Effective February 28, 2013, the Office of Federal Contract Compliance Programs (“OFCCP”) rescinded two President Bush-era pay discrimination guidance documents and replaced them with Directive 307, Procedures for Reviewing Contractor Compensation Systems and Practices. Directive 307 provides federal contractors with detailed guidance regarding the investigation procedures used by OFCCP during compliance reviews.
The investigation procedures can include the following steps. The OFCCP may request additional data at all steps of the procedures:
Preliminary Analysis of Summary Data (if necessary or appropriate) This step assesses quantitative (i.e., the size of the overall average pay difference based on race and gender and the size of the largest average pay difference within affirmative action plan job groups) and qualitative (i.e., contractor’s compliance history, OFCCP or EEOC complaints, anecdotal evidence, and potential violations involving other employment practices) factors. Although the preliminary analysis standing alone is not evidence of discrimination, the results of the preliminary analysis may indicate why further review of a contractor’s compensation data is warranted.
Analysis of Individual Employee-Level Data
If the requested individual employee data is not timely submitted in a “complete, readable and useable electronic form,” the OFCCP may issue a Show Cause Notice. If the Compliance Officer ("CO”) determines either that there is evidence of potential compensation discrimination or that more data or information is needed to make that determination, the OFCCP may proceed to an onsite investigation.
Determine the Approach from a Range of Investigative and Analytical Tools
During compliance investigations, COs seek to answer whether: (1) there is a measurable difference in compensation on the basis of sex, race, or ethnicity, (2) there is a difference in compensation between comparable employees under the contractor's wage or salary system, and (3) there is a legitimate (i.e. Analytical tools include workforce data, contractor compensation policies and practices, interviewing of employees, examination of payroll and HRIS and statisticaland non-statistical analyses.
Considerall Employment Practices that May Lead to Compensation Disparities
The CO will examine employee access to opportunities affecting compesation including higher paying positions, job classifications, work assignments, training, preferred or higher paid shift work, and other opportunities and policies and practices that unfairly limit a group’s opportunity to earn higher pay such as “glass ceiling” issues.
Develop Pay Analysis Groups
The CO will create pay analysis groups (i.e., 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) that are used to test for statistical significance on large groups of employees.
Investigate Systemic, Small Group, and Individual Discrimination
The OFCCP reviews small group, individual compensation discrimination, and systemic discrimination. In order to conduct comparative analyses of small groups or individuals to determine if pay disparities exist and whether there is sufficient evidence to support an inference that the pay differences are due to discrimination, the CO will obtain data and information specific to the individuals or small groups that are being compared.
Review and Test Factors before Accepting the Factors for Analysis
The CO reviews the factors the contractor has used in making compensation decisions and evaluates whether they are implemented fairly, consistently applied, and relevant to the contractor’s compensation practices before accepting them as appropriate for inclusion in the analytical model and/or comparative analysis.
Conduct Onsite Investigation, Offsite Analysis, and Refinement of the Model
At the completion of the first seven steps, the OFCCP decides on a preliminary analytical model. The contractor is given an opportunity to provide any additional relevant information it would like the OFCCP to consider. If the additional information adequately resolves or explains the disparities, the investigation is closed. If the CO determines an onsite investigation is needed, the contractor will be notified in writing. Because a compliance evaluation also includes the investigation of other types of possible discrimination (e.g., hiring, terminations, promotions), any findings of compensation discrimination will be addressed along with other findings. Action may include closure of the compensation issue if no violations are found or issuance of a Notice of Violation, as appropriate.
Mary-Frances Ryan collaborated in writing this article.