a. Definition. Formula relief is a mechanism by which the CO determines the compensation for the loss suffered by a particular class and then divides the financial compensation (usually, though not necessarily, pro rata) among all the members of that class. Under a formula, it is possible that some individuals will receive less than their total losses and some will receive more. This outcome is the consequence of approximating losses in a situation where it is unrealistic to precisely compute individual losses.
b. When to Use. OFCCP will pursue formula relief wherever it is impossible or impractical to determine individual relief; that is, when the number of actual victims of discrimination is large, their identities are unknown or the variables and information needed to calculate individual relief are not available. Sometimes the CO knows the identity of the victims, but it is so difficult to trace their losses and mitigation earnings that the CO can only estimate them. One common situation when the CO uses a formula to determine relief are when the number of class members exceeds the number of vacancies and when it is impossible to determine the class members who would have been selected absent discrimination because the minimum objective qualifications are easily met.
c. Measuring Losses. To determine the losses, the CO must take into consideration the components listed below.
1. Shortfall Method. When the number of class members exceeds the total number of opportunities, a “shortfall vacancies” approach is appropriate for computing the amount of back pay for the class. For example, assume a situation where there are 50 black and 50 white applicants, all of whom possess the required qualifications, seeking 20 jobs. Nineteen whites and one black were hired. The difference between the actual number of blacks hired (1) and the expected number of black hires (10) represents the shortfall (9). Shortfall vacancies do not limit the number of individuals entitled to relief. Instead, the contractor distributes the amount of money attributable to those vacancies to the whole class. In this example, the earnings attributable to the nine shortfall positions will be distributed to the 49 qualified black applicants. Shortfall vacancies are utilized as part of an approximation of class-wide loss.
2. Averaging Method. Not all formulas require the CO to look at shortfalls. There are other reasons to use a formula other than the fact that there are more victims than vacancies. For example, suppose there is a case in which the major claim is that the contractor placed the hired men and women into sex-segregated departments. In such a situation, the CO may want to compare the average salary earned by men with a given level of seniority to the average salary earned by women with the same seniority. The difference in average salary defines the measure of back pay to be awarded to each woman in that seniority group. The formula devised should be designed to address the particular violation found.
3. Computing Lost Earnings. Because the formula approach represents a compromise, it is extremely important to account fully for all the earnings attributable to a particular vacancy in computing losses such as interest, interim raises, promotion potential (i.e., the earnings associated with all of the promotions the persons would have received had they not been discriminated against in the first place), overtime and shift differential, and any other additions to wages or salary such as bonuses or benefits.
d. Contractor’s Response. The CO must inform the contractor of the name of each member of the class for whom the CO is seeking formula relief. All affected class members are entitled to relief unless the contractor provides a reason that the class member is not a victim. For example, the class member applied outside of the scope of the period at issue or occurs multiple times in the class list as a duplicate. Individuals who were not qualified should have been eliminated from the class at the liability phase. Each class member the contractor cannot eliminate from the class will receive his or her share of the formula relief. Even if the contractor cannot eliminate an individual from the group entitled to relief, it may raise defenses to reduce an individual’s claim to relief.
e. Distribution of Remedy. When using the formula approach, the agreed upon remedy is shared by all members of the class. The CO divides the amount of money that represents the group’s lost wages among the members of the class either on a pro rata basis or some other equitable basis. The CO may decide on a method of distribution based upon the facts of the case. For example, if the CO identified an incumbent class that was denied promotions or assigned to lower paying jobs, the contractor controlled their interim earnings. In that situation, a distribution based upon the number of months in the employer’s workforce might be most appropriate. With a rejected applicant class, the CO might decide that a simple per capita distribution makes more sense.