The EEOC And OFCCP Announce Anticipated Increase In Investigation Of Disparate Pay Claims

by Butler Snow LLP
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In the EEOC’s Strategic Enforcement Plan for 2013-2016, the Commission has prioritized and committed to enhanced enforcement of equal pay laws to eliminate compensation systems and practices that discriminate based on gender. On April 9, 2013, “Equal Pay Day”, the EEOC reported that in Fiscal Year 2012, the EEOC received over 4,100 charges of gender-based wage discrimination, and obtained over $24 million in relief for victims of gender-based wage discrimination through administrative enforcement efforts and litigation.  

Both the EEOC and the Office of Federal Contract Compliance Programs (OFCCP) serve on President Obama’s National Equal Pay Enforcement Task Force, a federal government initiative focused on ending the gender pay gap. The OFCCP monitors federal contractors and subcontractors to ensure their compliance with Title VII and other anti-discrimination provisions in federal contracts.

On February 28, the OFCCP issued a directive providing information regarding its practices for reviewing contractor compensation systems and practices during a compliance evaluation.  Directive 307 can be found here.   

Although the OFCCP’s authority is limited to federal contractors and subcontractors, the guidance provided is a good reminder to all employees of the need to conduct a self-audit to compare the wages of employees to ensure that the company’s compensation practices do not result in pay differentials based on race, gender or ethnicity.    

When the OFCCP audits a contractor, the employer is asked to provide annual compensation data by salary range, rate, grade or level, showing the total number of employees by race and gender, and the total compensation by race and gender.  The OFCCP then conducts a preliminary analysis of the size of the overall average pay difference based on race and gender; the size of the largest average pay difference within the job groups, or the contractor’s existing salary band or pay grade system; the number of job groups or grades where average pay differences based on race or gender exceed a certain threshold; or the number of employees affected by race-based or gender-based average pay differences within job groups or grades. The OFCCP may also consider other factors such as past compliance history, EEOC or OFCCP complaints, anecdotal evidence, and potential violations involving other employment practices.

If concerns exist following the preliminary analysis, the OFCCP may request additional information from the employer to conduct an assessment of individual employee-level data.  At this stage, the OFCCP will determine whether there is a measurable difference in compensation on the basis of race, sex or ethnicity between employees in comparable jobs, and, if so, whether there is a legitimate, non-discriminatory reason for the difference.  In addition to assessing pay rates, the OFCCP will investigate other variables that may have an impact on compensation such as the access to additional compensation through overtime, higher commissions, and better sales territories.  In some cases, a statistical analysis may also be used to assess the impact of wage practices on larger groups of employees. 

In light of this administration’s focus on pay discrimination, employers are encouraged to conduct self-audits to determine whether a disparity in pay associated with gender or race can be detected, and if so, the reason for the disparity. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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