Office of Federal Contract Compliance Programs (OFCCP)
FREQUENTLY ASKED QUESTIONS:
OFCCP PROCEDURES FOR REVIEWING CONTRACTOR COMPENSATION SYSTEMS AND PRACTICES
This Frequently Asked Questions (FAQs) document provides additional information about actions announced by OFCCP on February 26, 2013, that address potential pay discrimination by federal contractors and subcontractors. These actions include rescinding two pay discrimination enforcement guidance documents, aligning OFCCP compensation enforcement with Title VII of the Civil Rights Act of 1964, and issuing a written compensation directive to improve compensation investigation procedures and protocols. Additional FAQs will be made available as needed.
RESCISSION OF THE 2006 OFCCP COMPENSATION STANDARDS AND VOLUNTARY GUIDELINES
- What is the Rescission and what does it mean?
- Why did OFCCP rescind the 2006 Compensation Standards and Voluntary Guidelines?
- What does it mean to say that the 2006 compensation guidance documents look at pay discrimination too narrowly?
- How did OFCCP make the decision to rescind?
- What standards will OFCCP use to determine whether contractors have violated the Executive Order’s ban on pay discrimination?
- What is Directive 307 and how does it relate to the rescission of the 2006 Compensation Standards and Voluntary Guidelines?
- What happens to compliance evaluations that are currently in progress?
ISSUANCE AND APPLICABILITY OF DIRECTIVE 307
- When did the OFCCP investigation procedures for reviewing contractor compensation systems and practices go into effect?
- How does Directive 307 relate to the Supply and Service Scheduling Letter that requests certain data from contractors at the beginning of a compliance evaluation?
- Will Directive 307 apply to a compliance evaluation if a contractor is already scheduled for review?
- Are contractors required to conduct a self-audit of their compensation system?
- Do the investigation procedures provided in Directive 307 also apply to investigating complaints alleging compensation discrimination?
- Does the Active Case Enforcement (ACE) directive also apply to compensation reviews?
DESK AUDIT ANALYSIS
- Will OFCCP conduct a preliminary analysis using a threshold measure to determine whether to proceed with its investigation?
- How will OFCCP use compensation data to make a compliance determination at the desk audit stage?
REQUESTS FOR AND SUBMISSION OF DATA
- What is the “snapshot” date that should be used when submitting compensation data?
- When will OFCCP request individual compensation data?
- Which factors will OFCCP consider when determining whether the results of the preliminary data analysis warrant a request of individual compensation data?
- Does OFCCP require that compensation data be submitted in a particular form or format?
- How does OFCCP address confidentiality concerns?
COMPENSATION INVESTIGATION PROCEDURES, INCLUDING ONSITE REVIEW AND OFFSITE ANALYSIS
- What approach will OFCCP take in its review of contractor compensation systems and practices?
- What are the different analytical methods OFCCP may use to review contractor compensation systems and practices?
- In what circumstances will an onsite visit to the contractor’s facility occur?
- Will OFCCP continue to address possible systemic and individual compensation discrimination?
- What is a “pay analysis group” and how is it used in the analysis?
- How will OFCCP analyze the compensation data for possible small group and individual pay discrimination?
- How will OFCCP use similarly situated employees for comparison purposes?
- What constitutes a “difference” in compensation that could result in a violation?
- Is anecdotal evidence necessary to support a violation?
- How will “factors” that the contractor asserts are relevant to compensation be considered and analyzed by OFCCP?
- Will the model used by OFCCP to analyze compensation data be refined if the contractor provides factors that may explain disparities in pay?
- What sorts of remedies will OFCCP seek in order to resolve cases with compensation discrimination findings?
RESCISSION OF THE 2006 OFCCP COMPENSATION
STANDARDS AND VOLUNTARY GUIDELINES
OFCCP is withdrawing two guidance documents from 2006 that address pay discrimination by federal contractors. The first is called Interpreting Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination ("Compensation Standards"), 71 FR 35124, and the second is called Voluntary Guidelines for Self-Evaluation of Compensation Practices for Compliance with Nondiscrimination Requirements of Executive Order 11246 ("Voluntary Guidelines"), 71 FR 35114. The Compensation Standards described the procedures OFCCP generally should follow when issuing a notice of violation for pay discrimination, while the Voluntary Guidelines contained a set of directions that contractors could choose to follow in order to show compliance with their obligation to evaluate their pay practices for fairness. With this Rescission, OFCCP will no longer be relying on these documents in evaluating how contractors comply with federal laws against pay discrimination, or in reviewing how contractors internally monitor their own pay practices.
These documents significantly constrained OFCCP’s ability to investigate pay discrimination to the full extent permitted by law and did not accomplish their stated goals of making OFCCP compensation enforcement activities more consistent with other federal laws and more focused on systemic discrimination.
The 2006 guidance documents narrowly define the types of evidence and issues OFCCP can consider when addressing unfair pay policies and practices that discriminate on the bases of gender, race and ethnicity. They conflict with how courts usually apply federal civil rights laws and evaluate discrimination - which is a flexible, fact-based approach that considers all available and relevant evidence and information. The guidance documents have resulted, since 2006, in severely limiting OFCCP's ability to enforce the ban of pay discrimination. Further, even though they were supposed to provide contractors with a clear, easy-to-use method to review their pay practices for discrimination, contractors rarely used them to demonstrate compliance. Finally, the guidance documents required OFCCP, when evaluating possible compensation discrimination, to deviate from its usual approach – i.e., relying on courts’ interpretation of the relevant laws to determine the legitimate scope of OFCCP’s inquiry – and instead use a highly restrictive protocol to determine contractor compliance.
Because the Compensation Standards and Voluntary Guidelines were both ineffective at addressing pay discrimination for workers, and underutilized by contractors for the purpose of compliance, OFCCP determined, after public notice and comment, that all stakeholders would be better off with a different approach.
OFCCP enforces Executive Order 11246, which requires nondiscrimination consistent with Title VII as well as affirmative action by federal contractors and subcontractors. Compensation discrimination can take many forms - from paying women less than men for doing the same job, to discriminating against minorities in access to high paying positions or opportunities to earn overtime. Even when base salaries and wages are fair, workers can still experience discrimination in other types of pay, like bonuses or commissions. For this reason, courts consistently state in judicial decisions applying Title VII that there is no single way to prove compensation discrimination, and no particular limits on the kinds of evidence or information that might be relevant to proving discrimination in a particular case.
However, both the Compensation Standards and Voluntary Guidelines require OFCCP to use the same kind of analysis, no matter what kind of industry, workers, evidence, data or pay practices the agency was reviewing. They apply cookie-cutter approaches designed only to look for a single kind of problem - pay differences between workers in narrowly designed job categories - and specifically avoid looking for pay differences based on discrimination in access to better paying jobs or opportunities. They require particular statistical tests for discrimination in most cases, even though the Supreme Court has said statistical evidence is not required to prove discrimination. They fragment the analysis as much as possible, making it harder for either the agency or contractors to identify broad patterns of discrimination that cut across individual jobs. Finally, they require OFCCP to have anecdotal evidence (such as specific workers who can testify about discrimination) in order to proceed in most cases, even though employers may have pay secrecy policies that make it very difficult for workers to know they are being underpaid - and even though courts do not require anecdotal evidence in systemic discrimination cases. After reviewing the 2006 Compensation Standards and Voluntary Guidelines, OFCCP concluded that they were inconsistent with many Title VII legal principles and case law about how to prove discrimination, and were limiting OFCCP's ability to enforce its mandate to prohibit pay discrimination.
On January 3, 2011, OFCCP published a Notice of Proposed Rescission, for public notice and comment. 76 FR 62. OFCCP received 22 comments from employer associations, employee and other women's and workers' rights organizations, specific employers including consultants and law firms, a comment from a group of 40 statisticians, economists, sociologists and psychologists, and one individual comment. OFCCP considered all of the comments carefully, and responded to all of the issues raised in the comments in the final Notice of Rescission.
OFCCP will use exactly the same standards that courts use to evaluate pay discrimination claims brought by individual workers or classes of workers, the U.S. Equal Employment Opportunity Commission and the Department of Justice - standards that already apply to federal contractors in all other contexts. OFCCP will align its enforcement activities with Title VII and related case law. This alignment will enable OFCCP to protect workers, monitor contractors’ compliance with their non-discrimination obligations, and avoid subjecting contractors to rules that differ from what courts say. Rescinding the narrow and highly limited Compensation Standards and Voluntary Guidelines will allow OFCCP's compensation enforcement to reflect existing Title VII law, just like in all other areas where OFCCP reviews contractor compliance with Executive Order 11246, such ashiring, promotion or termination. In the Rescission Notice, OFCCP explains in more detail how following Title VII law would be different from applying the Compensation Standards and Voluntary Guidelines.
Although the Compensation Standards and Voluntary Guidelines related to certain aspects of OFCCP's compensation enforcement, they did not address OFCCP investigation procedures. In the comments to OFCCP's Notice of Rescission, contractors requested that OFCCP provide greater clarity and consistency regarding how it intends to conduct investigations of pay practices. Directive 307, Procedures for Reviewing Contractor Compensation Systems and Practices, describes OFCCP's new investigation procedures, which are designed to ensure that the agency considers all practices that may lead to pay disparities in violation of Title VII and uses all available evidence to evaluate contractor compliance with Executive Order 11246. Directive 307 is available at http://www.dol.gov/ofccp/regs/compliance/directives/dir307.htm.
The 2006 guidance documents - the Compensation Standards and the Voluntary Guidelines -- will apply to OFCCP's determination of whether to issue a notice of violation in any OFCCP review scheduled, open, or otherwise pending on the effective date of the Rescission.
ISSUANCE AND APPLICABILITY OF DIRECTIVE 307
Directive 307, Procedures for Reviewing Contractor Compensation Systems and Practices is effective as of February 28, 2013. Directive 307 is available at http://www.dol.gov/ofccp/regs/compliance/directives/dir307.htm. The investigation procedures established in the Directive apply to all OFCCP compliance evaluations scheduled on or after February 28, 2013, and apply to ongoing reviews as explained in Question 10 below.
The Directive establishes procedures for reviewing compensation systems and practices. At the beginning of a review, OFCCP sends a Scheduling Letter requesting the contractor to provide compensation, as well as other data, to OFCCP to review during the initial desk audit phase of a review. The Directive addresses data received at the beginning of a desk audit pursuant to the Scheduling Letter as well as at subsequent stages of a compliance evaluation. It does not alter any existing recordkeeping or reporting requirements that already apply to contractors.
The procedures established in Directive 307 apply to all OFCCP reviews scheduled on or after February 28, 2013, and will apply to open reviews to the extent they do not conflict with OFCCP guidance or procedures existing prior to the effective date. Regardless, the 2006 guidance documents will apply to OFCCP's determination of whether to issue a notice of violation in any OFCCP review scheduled, open, or otherwise pending on the effective date of the Rescission.
Yes. Section 41 CFR 60-2.17(b)(3) currently requires contractors to perform in-depth analyses that include an analysis of their compensation system(s) to determine whether there are gender, race, or ethnicity-based disparities. OFCCP does not dictate a particular method of analysis for meeting this regulatory requirement; however, contractors may find the principles discussed in Directive 307 useful in developing self-audits. Regardless, the existing regulations already require that, at a minimum, all self-audits specifically assess whether race or gender-based compensation disparities exist, that self-audits occur periodically, and that results are reported internally to management.
Yes. Complaints of compensation discrimination are processed in accordance with OFCCP's Federal Contract Compliance Manual (FCCM), at http://www.dol.gov/ofccp/regs/compliance/fccm/fccmanul.htm, and its Memorandum of Understanding (MOU) with the Equal Employment Opportunity Commission (EEOC) at http://www.dol.gov/ofccp/pdf/EEOC-OFCCP_MOU_FR_Notice_11-10-11.pdf. When OFCCP proceeds with investigation of complaints alleging compensation discrimination, the investigation approach to the allegation(s) will follow the same general approach and principles set forth in the Directive, as applied to the facts of the case.
Yes. Since its execution on December 16, 2010, ACE Directive #295 has been applicable to all Supply and Service compliance evaluations scheduled on or after January 1, 2011. The ACE procedures are discussed at http://www.dol.gov/ofccp/regs/compliance/faqs/ACE_faqs.htm. ACE is OFCCP's enforcement protocol allowing OFCCP to employ all of its compliance evaluation methodologies including the compliance review, compliance check, focused review, and offsite review of records (41 CFR 60-1.20). A federal contractor may be evaluated under any one or a combination of these methods.
DESK AUDIT ANALYSIS
OFCCP will generally conduct some form of preliminary analysis at the desk audit stage. OFCCP may receive summary data, or may receive or request individual employee data as part of the desk audit. Where OFCCP begins a review with summary data, the Compliance Officer (CO) will conduct a preliminary analysis on the summary data that includes general pay comparisons. Where OFCCP begins a review with individual data, the CO may group the data into pay grades or job groups and conduct a similar summary analysis or may proceed directly to analysis of all of the individual data. The CO will assess quantitative factors such as: the size of any overall average pay differences based on race (minority vs. nonminority) and gender (female vs. male); the number of job groups where average pay differences exceed a certain threshold; or the number of employees negatively affected within job groups. OFCCP will also consider qualitative factors as explained below (See Question 18) in deciding whether to proceed further with a review. OFCCP periodically may adjust the size and weight of any factors used for these general quantitative comparisons based on the review of the results of investigations proceeding under different thresholds, the results of quality audits, or other factors such as agency resources and priorities.
A preliminary analysis of summary data has limited utility for making ultimate determinations of discrimination. However, OFCCP will use the analysis to determine whether to continue the compliance evaluation of a contractor's compensation practices. Because of its limited utility, OFCCP will not limit or define the scope of its review based solely on the results of the preliminary analysis. Any closure at the desk audit stage will be consistent with the ACE and FCCM procedures.
REQUESTS FOR AND SUBMISSION OF DATA
The "snapshot" date for compensation data submitted in response to OFCCP's current Scheduling Letter should be the same date used for the organizational profile and workforce analysis provided in the AAP. The Scheduling Letter is currently under administrative review and may be changed by OFCCP.
After a preliminary analysis is conducted as a part of the desk audit, OFCCP may request individual compensation data in order to make a compliance determination. Individual compensation data will allow OFCCP to comprehensively assess contractors' compliance with Executive Order 11246; as such, it may be advantageous for the contractor to submit individual compensation data initially since more comprehensive data collection and analysis will assist OFCCP in conducting a more complete review.
In addition to the quantitative factors explained in Question 14, OFCCP will also consider qualitative factors. Examples of issues that will be considered before issuing a request for individual employee level data after the completion of preliminary analysis include, but are not limited to:
- OFCCP found indicators or evidence of potential compensation discrimination during the desk audit;
- OFCCP found complaints filed with OFCCP or EEOC, prior Executive Order violations, and/or or anecdotal evidence suggesting potential pay discrimination;
- The summary compensation data provided by the contractor have missing, incomplete or inaccurate information; or
- OFCCP needs more data or information to make a compliance determination.
If contractors maintain compensation data in a readable and useable electronic format (MS Excel or similar), it must be provided to OFCCP in that format upon request. OFCCP encourages contractors to provide all data electronically via email or computer disc in MS Excel. This will expedite the review and analyses that are conducted by OFCCP. If the contractor maintains data in a spreadsheet or database the data must be submitted to OFCCP in that format upon request. If OFCCP requests data in a searchable format maintained by the contractor, the data should not be submitted as a Word document, pdf, hard copy or other format that requires data entry, conversion or manipulation to be used as a spreadsheet or database.
The regulation at 41 CFR 60-1.20(f) provides in part that if the contractor is concerned with the confidentiality of information such as lists of employee names, reasons for termination, or pay data, then alphabetic or numeric coding or the use of an index of pay and pay ranges, consistent with the ranges assigned to each job group, are acceptable for purposes of the compliance evaluation. The contractor must provide full access to all relevant data onsite as required by 41 CFR § 60-1.43.
COMPENSATION INVESTIGATION PROCEDURES, INCLUDING ONSITE REVIEW AND OFFSITE ANALYSIS
A variety of tools will be used for investigating and analyzing compensation issues as permitted under Title VII. There is no single tool that must be used in every case. The use of a particular tool, or combination of tools, depends on the facts of the case and the limits that courts attach to Title VII. COs will work with the Department of Labor's (DOL's) Regional Solicitor's Office, OFCCP statisticians, and other experts as needed to develop the approach and tools to be used in a given case. COs may use statistical and nonstatistical tools or conduct small group and individual comparisons to determine whether pay disparities exist. Additionally, the investigation may include analyses of workforce data and contractor compensation policies and practices; interviewing HR personnel and employees; examining payroll and Human Resource Information Systems (HRIS); examining other relevant information; and consulting other experts.
The analytical method to be used is case-specific. OFCCP will use any combination of the following or other appropriate analytical methods as permitted under Title VII: statistical analysis, including pooled regression analysis for large pay analysis groups or non-pooled regression analysis for small pay analysis groups; non-statistical analysis, including cohort analyses; and anecdotal evidence collected as part of the investigation. OFCCP will investigate and remedy instances of compensation discrimination regardless of whether individual workers have reported being underpaid. (See below for more discussion on pay analysis groups.)
An onsite visit may be scheduled for any compliance evaluation in order to ensure OFCCP obtains all relevant information regarding a contractor's compensation system and practices to conduct a thorough investigation. The field office will decide whether the results of the desk audit analysis of compensation data and other relevant information (e.g., pay discrimination complaints received by OFCCP and other agencies, contractor compliance history, or any other reason consistent with the ACE Directive and other OFCCP procedures) warrant an onsite visit. Additionally, if at the desk audit stage the CO finds that more information is needed to conduct or refine the analysis, the CO may proceed to an onsite investigation.
Yes, OFCCP will investigate possible systemic, small group and individual compensation discrimination. The Directive and these FAQs explain how OFCCP approaches each form of discrimination.
A pay analysis group is defined as a group of employees (potentially from multiple job titles, units, categories and/or job groups) who are comparable for purposes of analyzing a contractor's pay practices. A pay analysis group may be limited to a single job or title, and regression analysis may be performed separately on distinct units or categories of workers. Alternatively, a pay analysis group may combine employees from multiple job titles, units, categories and/or job groups in order to perform a pooled regression analysis, with statistical controls added as necessary to ensure workers are similarly situated. (Statistical testing for practices that impact pay such as job assignment may require a different analytic grouping than testing for pay differences within a single job.)
Generally, OFCCP will begin with a model that combines jobs into appropriate larger pay analysis groups, comparable for purposes of the contractor's compensation practices. After results from that analysis, OFCCP will consider statistically analyzing smaller units to confirm, refine or further develop the analysis. In cases where there is inappropriate or insufficient data for regression analysis, the CO will examine the data using other forms of analysis to address possible compensation discrimination involving specific job titles, particular units or locations.
After analyzing the compensation data for possible systemic discrimination, the CO may conduct comparative analyses of small groups and individuals to determine if there are pay differences due to discrimination. The CO may conduct comparative analyses, such as a cohort analysis, comparing individuals who are similarly situated.
The determination of who is similarly situated is case-specific. Criteria for determining whether the employees are similar may include tasks performed, skills, effort, level of responsibility, working conditions, job difficulty, minimum qualifications, and other objective factors. Employees are similarly situated where they are comparable with regard to the factors relevant to the investigation, even if they are not comparable with regard to all factors. Similarly situated employees identified for purposes of an individual analysis or review of a single specific employment decision may be based on different criteria than similarly situated employees for purposes of systemic discrimination analysis.
OFCCP may investigate any observed differences in pay, other earnings or benefits, job assignment/placement, training/advancement opportunities, differences in opportunities to increase compensation, or other unexplained differences. In situations where there are sufficient data to use regression analysis, a measurable difference generally means a statistically significant difference of two standard deviations or more, consistent with Title VII. When analyzing whether there are discriminatory compensation disparities among small groups or individuals, OFCCP will determine whether there is a measurable difference plus sufficient evidence that the difference is due to discrimination, according to Title VII law. Statistical evidence is not required in all compensation cases; other evidence may be used to evaluate potential discrimination in pay.
The 2006 Compensation Standards require OFCCP to have anecdotal evidence to establish a systemic compensation violation, "except in unusual cases." After the Rescission, OFCCP will continue to seek anecdotal evidence as a part of its investigation. However, anecdotal evidence will no longer be generally required to support a finding of discrimination. Further, individual complaints alleging pay disparities will not be necessary for OFCCP to proceed with its investigation.
A factor is an element that the contractor offers to explain differences in employee compensation. A factor may include: a particular skill or attribute; education; work experience; the position, level or function; tenure in a position; performance ratings; or other factors. When OFCCP conducts an analysis using pay analysis groups (see above), OFCCP will test the factors to make certain they are predictive of pay and that the factors are not tainted by discrimination, using statistical evidence in conjunction with other evidence of how the factors are applied in practice. When the CO conducts a comparative analysis (see above), the CO will evaluate how the factors are relevant to compensation and whether the factors were consistently applied. The statistical analysts and CO will work together to determine what factors will be included in the analytical model used by OFCCP.
OFCCP, in consultation with OFCCP statistical analysts and DOL's Regional Solicitor's Office, will decide on a preliminary analytical model based on all available information related to the contractor's compensation system and practices. The preliminary model may be developed before or after an onsite visit, depending on the information available to the team. The contractor will be given an opportunity to timely provide additional information to be considered. Based on the new information provided or obtained during the onsite visit, the model may be refined.
OFCCP will pursue any forms of relief necessary to make the victim(s) whole, stop the violation(s), and prevent the violation(s) from recurring. Depending on the facts of a case, appropriate remedies may include backpay and benefits, salary adjustments, and nonmonetary relief including modifying policies and practices, or providing training opportunities, work assignments, promotions or job placements. For those who refuse to comply and for the worst offenders, OFCCP will pursue legal action, including cancellation of current federal contracts and debarment from entering into future ones until all discriminatory activities have been corrected.
The Department provides compliance assistance materials for contractors. These materials cover a broad range of information and can be found at http://www.dol.gov/ofccp/regs/compliance/ofcpcomp.htm.