Wednesday, July 29, 2020: Whipped Cream on Beer? OFCCP Talks Compensation Analysis
The OFCCP made another virtual appearance in the 2020 NILG webinar series. See also:
- Wednesday, July 22, 2020: Federal Government Contractors Must Review Compensation Systems
- Wednesday, July 15, 2020: OFCCP Presents the Past, Present, and Future during its Policy Update Webinar
- Wednesday, July 15, 2020: OFCCP Ombuds Tells What Types of Issues He is Handling
- Monday, July 6, 2020: Director Leen Cajoled Contractors to Make Their Recruitment Websites Accessible (and several other headlines from his opening speech)
Compensation analysis continues to be an area of dispute between contractors and OFCCP, and knowing this, the NILG has championed an on-going dialogue (see slide 6) with the Agency to tackle this complex topic.
In this presentation, the NILG Board expressed its views in a session former NILG Board Chair Paul McGovern moderated (Tony Kaylin of the American Society of Employers (Detroit) last month became the new NILG Board Chair). OFCCP representatives included Director Leen, Bob LaJeunesse, Director of Enforcement, and David Garber, OFCCP Labor Economist. Director Leen took the lead to summarize and recap the NILGs interpretations of OFCCPs Principles for Compensation Analysis. From there, Members of a panel of speakers took a deeper dive into each principle, outlining the perceived positive steps from the Agency thus far and indicating areas for improvement, including specific action items in many cases.
- Adopt Clear Standards for Grouping Incumbents
NILG Theorem: The OFCCP has worked hard under Director Leen to promote transparency (See Directives 2018-05 “Analysis of Contractor Compensation Practices During a Compliance Evaluation” and 2018-08 “Transparency in OFCCP Compliance Activities”). However, the NILG stressed that there are still challenges, including inconsistent application across audits and a lack of adequate detail, clarity, and certainty from OFCCP. The NILG suggested that “The OFCCP should always provide adequate information so the contractor can replicate Agency calculations and analyses.” No black box!
- Group Similarly-Situated Incumbents
NILG Theorem: Per Director Leen, “OFCCP follows Title VII law.” However, the NILG thought the OFCCP was straying from Title VII law when identifying which employees were “similarly-situated.” This means reviewing ONLY similarly-situated employees and prohibiting the use of regression to align dissimilar employees for review, in the NILG’s view.
To put this plainly, “You can combine rum and coke and peanut butter and jelly, but whipped cream on beer???” Contractors must work to get employees into similar groups, allowing for meaningful analysis, the NILG urged.
- Similarly-Situated Employee Groups (SSEGs) Must be “Reasonable”
NILG Theorem: Director Leen stressed that the OFCCP will accept the company’s pay groups if they are “reasonable.” So what is considered “reasonable?”
Various industry representatives then joined the discussion to recommend that OFCCP should always:
- align groups for analysis the way the contractor organized its workforce,
- analyze only groups of employees with similar job functions (i.e., similarly situated in skills and work complexity), and
- analyze only those resulting groups numerically large enough to conduct meaningful statistical analyses.
While this is not a Title VII-driven rule of law, one of the panel members expressed the desire for the OFCCP to apply a practical rule-of-thumb to uncritically accept the contractor’s job groupings if they allow statistical analyses of at least 70% of the contractor’s workforce.
EDITOR’s NOTE: However, in many AAP establishments, there are no groups of similarly- situated employees large enough to make for meaningful statistical analyses. Title VII does not either require or permit aggregation of jobs to reach a minimum size threshold to allow for meaningful statistical analyses. If a data set is too small for meaningful statistical analyses, as most contractor groups of similarly-situated employees are, the OFCCP must simply stop its attempt to analyze the data statistically and revert to cohort analyses (“Harry vs. Sally” analyses).
- Hold Discussions When the OFCCP Creates its own Employee Groups
NILG Theorem: “We need to have a dialogue…as the goal is to get it right…” stated Director Leen.
The NILG suggests that the OFCCPs’ default should be the contractor’s “reasonable” pay systems to conduct statistical analyses. Also, the NILG Board would like:
- OFCCP to provide detailed reasoning when rejecting a contractors pay system
- OFCCP to respect the unique context and elements of the contractor’s compensation system
- Avoid Over-Aggregation
NILG Theorem: Leen summarized this point by saying that the Agency “is looking for patterns and practices, but needs to be compliant with Title VII.”
The NILG Board’s concern here is that to investigate systematic pay discrimination, the OFCCP wants 80% of employees in the establishment to be subject to statistical analyses. The reality is that the majority of the time, there are few if any, job groups of similarly-situated employees susceptible to statistical analyses.
- Always Evaluate “Interactions”
NILG Theorem: As Director Leen has pointed out, the term is, “don’t swamp the model.” The discussion here was around aggregation, specifically pay comparisons within a job or within a group of jobs.
- Warning…the more one attempts to compare dissimilar employees, the more complicated comparisons become.
EDITOR’S NOTE: Title VII does not permit comparisons of employees who are not similarly-situated. Aggregations of different job titles into a single statistical analysis are lawful only if the employees in question perform all the same essential functions of the job, regardless of what job title the company may have assigned. Lawful aggregations are thus very scarce.
- Aggregation is complicated, confusing, and messy – even for professionals, AND it may not even be beneficial.
- Control for All Variables the Contractor Uses
NILG Theorem: Director Leen stressed that we must “get the material variables that impact pay” for a useful analysis. Per Directive 2018-05, OFCCP must use the same variables as the contractor to reflect the contractor’s compensation practices. The NILG Board’s perception is that the OFCCP has strayed from this basic principle of compensation analyses.
- Ensure that Reviews are Fair
NILG Theorem: The consensus is that Directive 2018-05 is a significant improvement over Directive 307. However, there is always room for improvement, and per the NILG Board, the Contractor Community hopes the OFCCP will:
- adopt contractors’ PAGs (or clearly articulate its concerns about them),
- avoid aggregation, and
- view any preliminary indicators of pay disparities not as proof of discrimination, but as a call for further review.
In his closing remarks to this session, Director Leen committed that, “If we (the OFCCP) are going to substitute PAGS, we will clearly articulate this to the Contractor, before a PDN (Pre-Determination Notice) is issued.”
Review the full presentation on the NILG website.