During the on-site review, the CO must obtain all available records necessary to secure a full understanding of the contractor’s employment practices and processes, particularly how they apply to any employment actions, practices or processes that the CO is examining. It is likely that the CO will need to review and analyze the information after the on-site review, during the off-site analysis part of the compliance review. For example, the CO may need to conduct analyses to determine whether disparate treatment and/or disparate impact have occurred using information gathered on-site on both favored and nonfavored groups being investigated. This off-site analysis must commence immediately after the on-site review is complete.
Generally, the review period begins two years before the contractor’s receipt of the Scheduling Letter and ends when the violations that were identified are corrected and remedied. This, of course, assumes that coverage is established for the full review period. The CO may need updated records and data for the period following the start of the review to update the information initially submitted by the contractor or to investigate issues first identified on-site. For example, the CO must request data relevant to the potential discrimination issues identified at the desk audit to determine how long any such violation extends. Such information is necessary for the CO to ensure that the contractor stops any identified discrimination and to determine what remedies victims need if they are to be made whole. The CO may also need to review information relating to periods more than two years before the contractor’s receipt of the Scheduling Letter where the potential for continuing violations exists.
The data collected should include, but not be limited to, applications for all applicants, test results, all interview notes, personnel files, policies and procedures, employment data and other contractor documentation relevant to the issues being examined by the CO during the on-site review. The CO must also request employment data that the contractor had not previously submitted. For example, if a review of information indicates that the contractor did not include its entire workforce in its AAP(s),100 the CO should request data and information regarding this determination. The CO will examine whether the contractor’s determination not to include these workers as employees was correct or whether that decision improperly omitted or misclassified workers. If the contractor misclassified the workers or otherwise should have included them in the contractor’s AAP(s), the CO must consider the employment data for these employees in the analyses.
To ensure the CO obtains all needed information, he or she makes a list, in advance, of the data and other information needed from the contractor, before departure from the on-site review. The CO must update this list, adding new items as the CO becomes aware of them, and recording when he or she received the requested or needed items.
100. For example, a contractor may have excluded temporary workers and independent contractors from its AAP. Temporary workers who were employees as of the contractor’s AAP date should be accounted for in the AAP. It is permissible for the contractor to exclude independent contractors from its AAP, as long as they are properly classified as independent contractors and not employees.
2E00 Types of Evidence
The CO will obtain, review and analyze employment data, documents, policies, procedures, interview statements and observations throughout the review. An example of an observation that might be significant is the absence of women working on the loading dock. The CO will examine all the information to assess whether sufficient evidence exists to determine whether prohibited discrimination or other violation occurred during the review period. If either did occur, the CO must determine whether the discrimination or other violation is ongoing.
There are two broad types of evidence: direct evidence and circumstantial evidence. Direct evidence is evidence that, if true, directly proves a fact. For example, an email from the contractor’s director instructing supervisors not to hire women into certain jobs or a statement by a manager that “we don’t hire women here” would constitute direct evidence of discrimination against women. In contrast, circumstantial evidence is evidence that relies on an inference to prove a fact. For example, three standard deviations in the selection rates for similarly situated blacks and whites within the laborer job group is circumstantial evidence of discrimination against blacks. The statistics do not directly prove discrimination but can raise an inference of discrimination.
The CO may use direct evidence and circumstantial evidence, either alone or in combination, to prove discrimination. The key question when determining if the contractor has engaged in discrimination is assessing whether the evidence, direct or circumstantial or both, satisfies the appropriate burden of proof of discrimination.
OFCCP performs statistical analyses during its compliance evaluations and also seeks a variety of other types of nonstatistical evidence. Anecdotal evidence, a type of nonstatistical evidence, often supports statistical evidence of discrimination in systemic cases. Anecdotal evidence, which may be either direct or circumstantial, may consist of first-hand accounts of personal experiences with discrimination by the contractor at issue that brings “the cold numbers convincingly to life.” International Brotherhood of Teamsters v. United States, 41 U.S. 324, 339 (1977). Documents the contractor submits may contain anecdotal evidence, or COs may obtain anecdotal evidence from interviews with managers, employees, or applicants. In determining which cases to pursue, OFCCP will be less likely to pursue a matter where the statistical data are not corroborated by nonstatistical evidence of discrimination unless the statistical evidence is exceptionally strong. In some cases, OFCCP may find systemic discrimination based only on anecdotal evidence that directly supports a pattern or practice of discrimination.
For example, the company president sends an email to managers stating his concern that women are unable to lift heavy objects and that, if women are hired for stockroom positions, there will be a higher risk of on the job injuries that will impact the company’s profitability. This anecdotal evidence could support a finding of discrimination against women applicants for stockroom positions at that establishment.
2E01 Personnel Activity and Selection Process
During the on-site review, it is imperative the CO must develop an understanding of the contractor’s employment procedures and practices. This activity includes obtaining copies of selection policies and procedures related to areas where the CO identified potential discrimination during the desk audit. The CO can also garner crucial information from interviews of human resources personnel, selecting officials, employees (e.g., hired, promoted or terminated during the review period) and other individuals identified as participating in or being affected by the selection process, such as those who were applicants or candidates for open positions but were not hired or promoted. The CO must also gather contact information for potentially knowledgeable individuals no longer employed by the contractor, if applicable.
The type of information the CO will gather depends on issues identified at the desk audit. Some examples are provided below.
- Hiring Data. This includes job group and/or job title identification, copies of personnel files, payroll records, job applications, job announcements, staffing requisitions, advertisements (internal and external postings), job descriptions, job status (e.g., permanent, temporary, full or part-time), minimum qualifications, preferences, applicant flow data, documentation created at each stage of the selection process (e.g., selecting officials’ interview notes or computerized screening of internet applicants), phone screen procedures and testing information.
- Promotions. This includes identification of lines of promotion, copies of personnel files, payroll records, promotion policies and procedures, internal advertisements and bid sheets, candidate flow data for eligible candidates, payroll data, documentation created at each stage of the promotion process (e.g., officials’ interview notes), phone screen procedures and testing information.
- Terminations. This includes job group and/or title identification, copies of personnel files, payroll records, information regarding voluntary and involuntary terminations, termination policies and procedures, documentation of the reason for termination, exit interview notes and documentation, termination letters and contact information for terminated employees.
2E02 Selection Procedures and Testing
As noted in subsection 2L05 below, the UGESP at 41 CFR 60-3.3A states that using any facially neutral selection procedure or criterion resulting in an adverse impact on hiring, promoting or other employment opportunities of members of any race, sex or ethnic group is discriminatory unless the contractor proves that its use is justified. Information that the CO will obtain to assess whether the contractor’s selection procedures or criteria have an adverse impact may include:
- A written description of the selection steps and criteria applied;
- A copy of the job description(s);
- A copy of all records the contractor created to implement the selection procedures or criteria during the review period. Examples of these records include test results, individual test scores, instruction manuals related to testing or selection procedures, interview forms and interview results. When the selection process includes a battery of tests, the CO must be sure to collect the scores for each part of the battery, as well as the composite or overall scores, and learn how the contractor determined them. If the contractor is administering a test at a specific location, it is often helpful to see the testing location;
- Signed interview statements from the contractor representatives who administered the selection procedure during the review period. The interviews need to include information about how the contractor administered the selection procedure, when they initiated the procedure, whether the contractor made any changes to the procedure, and when and why the changes were made. Additional information would include whether the contractor validated the selection procedure101 and whether there were any efforts to minimize the adverse impact. If efforts were made, COs must determine what those efforts were;
- A copy of all job analyses or job information describing how the contractor established job requirements; and
- Copies of any validation studies conducted by the contractor.
Example interview questions the CO will ask may include these areas of inquiry:
- What are the selection procedures and criteria?
- How does the contractor administer the selection procedures? Are interviews and tests conducted in similar settings? Are the interviews and tests conducted by multiple individuals? Who administers each procedure? Who is the decision maker for each procedure?
- How did the contractor score or rate each selection procedure or criterion, or both? Is there a passing score set for each one? Is the score weighted? How was it weighted and why? Does the contractor score or rate the candidates cumulatively? If so, how?
- How does the contractor select or “pass” candidates on the selection procedure (e.g., total test score, based on performance during an interview)?
- How did the contractor come to use the selection procedure? If the procedure was a test, did the contractor develop it internally or was it developed by an external contractor or vendor? Did the contractor purchase a pencil and paper test?
- If the CO has identified adverse impact at any stage of the selection process, is the use of the procedure or criterion responsible for that impact justified by business necessity? What has the contractor done to consider alternative procedures with less impact? What actions did the contractor take to validate the selection procedure or test? Are there any validation reports or studies? Did the contractor consider such reports or studies, or both?
101. Validation means demonstrating that using the selection procedure met the validation standards of the UGESP.
Investigation of potential compensation discrimination presents complex and nuanced issues. This subsection discusses approaches COs may take to analyze a contractor’s compensation policies and practices, as well as the pay transparency provision that contractors must follow to ensure that applicants and employees can freely inquire about, discuss and disclose their compensation.
a. Analyzing Compensation. The choice of the best approach for a case depends upon the underlying facts, the available data, and the contractor’s compensation system and practices. As such, OFCCP takes a case-by-case approach to analyze compensation issues. In every case, there are three key questions to be addressed and the on-site review may provide data or information necessary to answer them:
- Is there a measurable difference in compensation on the basis of sex, race or ethnicity?102
- Is the difference in compensation between employees who are comparable under the contractor’s wage or salary system?
- Is there a legitimate, nondiscriminatory explanation for the difference?
An on-site review may include analysis of workforce data and contractor compensation policies and practices; interviewing personnel and employees; examining payroll and HRIS data; and any other information necessary to understand or analyze compensation data or practices. In conducting the on-site review, COs examine all employment practices that have the potential to lead to compensation disparities. Prior desk audit results may assist the CO in identifying particular practices or issues to investigate.
Compensation means any payments made to, or on behalf of, an employee or offered to an applicant as remuneration for employment. Compensation may include, but is not limited to, salary, wages, overtime pay, shift differentials, bonuses, commissions, vacation and holiday pay, allowances, insurance and other benefits, stock options and awards, profit sharing and retirement. Compensation discrimination includes unexplained and unmerited differences in how employees earn, or contractors distribute, compensation in these areas based on sex, race or ethnicity. In examining compensation issues, COs must be mindful to include how the contractor treats fringe benefits. For example, if the contractor is not providing equal fringe benefits and/or not making equal contributions to insurance plans or pensions for men and women, this may constitute discrimination.
The compensation a group of employees or an individual employee receives may be negatively affected by the denial of equal access to certain earnings opportunities. COs must examine employee access to opportunities affecting compensation such as higher-paying positions, job classifications, work assignments, training, preferred or higher-paid shift work, and other such opportunities. COs should also examine policies and practices that unfairly limit a group’s opportunity to earn higher pay such as “glass ceiling” issues and access to overtime hours, pay increases, incentive compensation, and higher commission or desired sales territories. Differences may be observed in these and other areas including:
- Base salary;
- Job assignment or placement;
- Opportunities to receive training, promotions, and other opportunities for advancement;
- Earnings opportunities; and
- Access to salary increases or add-ons such as bonuses.
COs must focus the on-site review on the information and practices relevant to the employer, industry, and types of workers. For example, overtime issues are relevant to hourly and nonexempt workforces, while high-level salaried positions may involve substantial bonuses, stock options and other incentive compensation. For sales employees, both commission and account or territory assignment practices may be relevant.
In addition to reviewing potential evidence of systemic pay discrimination, COs may use on-site reviews to determine if there is sufficient evidence to support an inference that individual or cohort pay differences are due to discrimination. Absolute pay differences between comparators, without any other evidence of pretext or possible discrimination, generally are not sufficient to support an individual disparate treatment analysis.
For purposes of evaluating compensation differences, employees are similarly situated where it is reasonable to expect they should be receiving equivalent compensation absent discrimination. Relevant factors in determining similarity may include tasks performed, skills, effort, level of responsibility, working conditions, job difficulty, minimum qualifications and other objective factors. In some cases, employees are similarly situated where they are comparable on some of these factors, even if they are not similar on others. For example, when evaluating a job assignment issue, workers are similarly situated when their qualifications are comparable, even if they are assigned to jobs at different levels. Who are similarly situated for purposes of an individual analysis or review of a single specific employment decision may be determined based on different criteria than when conducting a systemic discrimination analysis. On-site reviews allow COs to make assessments of similarly situated employees or jobs by observing, by conducting interviews, and by reviewing documents.
OFCCP will evaluate, on a case-by-case basis, information from the contractor regarding the factors the contractor considered in making compensation decisions. A factor is an element that the contractor offers to explain differences in employee compensation under its compensation system and practices. Factors may include internal and external elements potentially affecting compensation. A factor may be a qualification or skill that the worker brings to the position such as education or experience. It may also be an employment element such as position, level or function, tenure in position or performance ratings.
COs will use information gathered at the on-site review to evaluate whether factors identified by the contractor actually explain compensation, whether they are implemented fairly and consistently, whether data regarding the factors are accurate and whether the factors should be incorporated into the CO’s compensation analysis.
The CO must also confirm that the amount of compensation offered to individuals with disabilities (including veterans with disabilities) is not reduced due to them receiving a reasonable accommodation or any disability income, pension or other benefit received from another source. To verify compliance with this requirement, the CO will request the files of identified individuals with disabilities and/or disabled veterans, along with those of people without disabilities in the same job titles, and compare their compensation.
b. Pay Transparency. During the on-site review, the CO must evaluate whether the contractor has any policies that forbid applicants or employees from inquiring about, discussing or disclosing their compensation.103 COs must verify that applicants and employees are not disciplined, discharged or in any way discriminated against for discussing their compensation by reviewing company policies and practices, and by interviewing employees and managers. COs must also determine whether the contractor has disseminated the Pay Transparency Nondiscrimination Provision either by electronic posting or by posting hard copies of the provision in conspicuous places available to employees and applicants.104
Even employees whose essential job functions include access to the compensation of other employees or applicants, such as payroll personnel, are protected from discharge or other forms of discrimination when discussing or disclosing their own compensation. However, contractors can restrict these employees from disclosing the compensation of other applicants or employees when they have a duty to protect that compensation information. Still, there are some circumstances when employees with such essential job functions may disclose the compensation of other employees or applicants. For example, they may disclose compensation data of other employees and applicants to a CO during an OFCCP compliance evaluation. They may also disclose the compensation of other employees or applicants in response to a formal complaint or charge, in furtherance of an investigation, proceeding, hearing or action, including an investigation conducted by the employer, or if the disclosure is consistent with the contractor’s legal duty to furnish information. Further, these employees may disclose the compensation of other applicants or employees based on information that they received through means other than essential job functions access. Similarly, these employees may pursue their own possible compensation discrimination claim or discuss possible disparities involving the compensation of other employees to a management official with the contractor or while using the contractor’s internal complaint process.
102. In situations where there are sufficient data and analytic power to use regression analysis, a measurable difference generally means a statistically significant difference, two standard deviations. In the situation of disparities in small groups and/or individual compensation, a measurable difference and sufficient evidence will be determined in conformance with Title VII principles.
103. See 41 CFR 60-1.4(a)(3).
104. For more on the Pay Transparency Nondiscrimination Provision posting requirements, see FCCM 2M00(b).