eLABORate: OFCCP Issues New Procedures for Reviewing Contractor Compensation Systems and Practices

March 07, 2013

On February 26, 2013, the Office of Federal Contract Compliance Programs (OFCCP) announced that effective February 28, 2013, it rescinded its "Voluntary Guidelines" and "Compensation Standards," which the agency adopted in 2006 to evaluate pay discrimination claims against federal contractors. As readers will recall, the 2006 standards evaluated compensation based on the similarity of jobs, meaning that jobs were evaluated based on similarity of content, skill, qualifications, and level of responsibility.  These were the hallmarks of court decisions evaluating discrimination under Title VII, and which were used by the EEOC in its compliance manual on compensation discrimination. The standards also incorporated the use of multiple regression statistical analysis, a well-accepted principle of statistical analysis. In their place, OFCCP issued Policy Directive 307, which outlines the procedures OFCCP investigators now will use to review the systems and practices by which government contractors pay their workers.

The new Directive marks a significant change and expansion in OFCCP’s approach to evaluating compensation practices. Federal contractors should be prepared for much more intensive reviews of all systems and practices relating to compensation during OFCCP audits that commence on and after February 28. One of the stated goals of the new Directive is to provide transparency; however, the Directive makes clear that compensation analyses will be tailored in each compliance review on a "case by case" basis depending on the facts of that particular review. The Directive goes on to outline the various types of investigative techniques available to compliance officers (COs). While it increases the tools available to the OFCCP, the Directive provides little guidance as to what contractors now can expect in a compliance evaluation. Other than stating that the OFCCP will apply "Title VII principles" as the basis for determining whether a contractor has violated the Executive Order 11246's ban on pay discrimination, the Directive provides no clear details regarding what will replace the 2006 Standards.

While the OFCCP has been implementing many of these new procedures during audits over the last several years, following this Directive, contractors should expect significantly more attention to be paid to their compensation practices, even at the desk audit stage. Contractors should get ahead of the curve by analyzing their compensation systems and decisions now to ensure that, when the time comes, they can explain any statistically significant disparities in compensation.

The new Directive is available on OFCCP's web site at: http://www.dol.gov/ofccp/regs/compliance/CompGuidance/index.htm.