OFCCP Week In Review Bonus: NILG & OFCCP Compensation Roundtable Recap

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The NILG/OFCCP Compensation Roundtable provided an interesting exchange between OFCCP Representatives, Robert LaJeunesse, Branch Chief for Expert Services, and David Garber, Labor Economist, and several well-known labor economists and industrial/occupational psychologists. NILG Chair Paul McGovern and Advisory Council member Valerie Hoffman, Partner with Seyfarth Shaw LLP, moderated the two+ hour exchange between the following panelists:

  • Paul White, Labor Economist, Resolution Economics
  • Rick Holt, Labor Economist, Resolution Economics
  • Valentín Estévez, Labor Economist, Welch Consulting
  • Jora Stixrud, Labor Economist, Welch Consulting
  • Mike DuMond, Labor Economist, Economists Inc.
  • Rob Speakman, Labor Economist, Economists Inc.
  • Dan Kuang, I/O Psychologist, Biddle
  • Christopher Haan, Labor Economist, Seyfarth Shaw
  • David Cohen, I/O Psychologist, DCI

OFCCP Director, Craig Leen, kicked off the event with gratitude for the large attendance. Director Leen shared his specific interest in the discussion related to compensation issues for Individuals with Disabilities, especially with the Section 503 Focused Reviews currently underway.

For years now, OFCCP has had a focus on compensation. The Agency currently operates under Directive 2018-05, Analysis of Contractor Compensation Practices During a Compliance Evaluation. Introduced on August 24, 2018, this new Directive rescinded the Obama-era compensation directive, commonly known as “Directive 307,” (later renamed Directive 2013-03).

As might be expected, the government contractor community still does not see the current Directive as being fair in evaluating contractor’s pay systems.  However, there were a few positives the OFCCP panelists highlighted:

  • OFCCP says it will follow Title VII law in compensation analyses,
  • The Directive supports the concept of transparency, one of Director Leen’s four “pillars” of operation,
  • OFCCP is aware that not all statistical indicators are “practically significant,”
  • OFCCP adopted linear regression as the standard approach for evaluating compensation differences, where appropriate, without combining dissimilar employees.

The private sector panelists also discussed several concerns.

  • Government contractor compensation analyses are complex and nuanced and certainly not a “one-size-fits-all” exercise. Context always matters when reviewing contractors’ compensation differences.
  • OFCCP’s sole focus on regression is not appropriate for all contractors; it should only be considered as “one tool in its toolbox.”
  • Dissimilar jobs should NOT be aggregated into OFCCP’s Pay Analysis Groups (PAG’s).
  • Selectivity choosing regression variables.
  • OFCCP’s creation of artificial groupings of variable pay levels (salary grade, division, etc.) that can be meaningless and without relation to contractor’s pay systems.
  • OFCCP’s failure to model tenure, education, job level, grade, and other factors in a manner consistent with contractors’ pay practices.
  • The definition of tainted variables is vague; OFCCP often assumes performance ratings are tainted.
  • Correlation is not enough to prove a tainted process, and statistical tests alone do not prove discrimination.

There were several recommendations provided by the panelists, including:

  • OFCCP should use contractors’ submitted Similarly Situated Employee Groups (SSEG’s),
  • Groupings used by the OFCCP must reflect the contractor’s pay system,
  • OFCCP should use a combination of tools to analyze a contractor’s compensation system (if necessary),
  • If there are no differences identified in the small group analysis, there should be no further review and no finding of discrimination,
  • OFCCP needs to understand that not all jobs have comparators,
  • OFCCP should abandon the prescription of a 10:1 ratio of observations per regression factor especially when it results in the elimination of major variables or the addition of arbitrary factors not relevant to the contractor’s pay system,
  • OFCCP should avoid combining structural variables, such as job function, job family, job level, and grade.

Bob LaJeunesse shared OFCCP’s concerns that even a 2% pay difference compounded over time affects an individual’s retirement, so the OFCCP will almost always continue their research into those seemingly small pay differences.  He did indicate, however, that contractors should feel comfortable asking for a meeting with someone from the Branch of Expert Services to discuss findings rather than having those conversations with the Compliance Officer who provides the information.

While OFCCP and the contractor community will continue their opposing thoughts on the best way to evaluate possible pay discrimination, the fact that this event took place is a huge step in the right direction.  Contractors have rarely seen the collaborative effort this OFCCP has put forth in many areas, including this event and the Town Halls, where OFCCP has adopted many suggestions introduced by the attendees.

One bit of humor in the meeting was when Deputy Secretary of Labor, Patrick Pizzella, welcomed participants and said a discussion about compensation was like “Open Mic at the Comedy Club!” That certainly garnered a huge breakout of laughter from all…which proves that “laughter is the best medicine.”

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