Office of Federal Contract Compliance Programs (OFCCP)
Frequently Asked Questions: Calculating Back Pay as a Part of Make-Whole Relief for Victims of Employment Discrimination
Back pay is a central part of make whole relief for victims of employment discrimination. This Frequently Asked Questions (FAQs) document discusses OFCCP´s approach to calculating back pay relief, and provides information on the impact of Directive 310 which provides guidance on calculating back pay and aligns OFCCP´s back pay procedures with Title VII of the Civil Rights Act of 1964.
Issuance and Applicability of Directive 310
- What is the purpose of Directive 310?
- When did Directive 310 go into effect?
- Does Directive 310 conflict with OFCCP´s prior directives or other written materials pertaining to back pay?
- What is "individual relief," and when does OFCCP use this model to calculate back pay?
- What is "formula relief," and when does OFCCP use this model to calculate back pay?
- What is included in the victims’ lost earnings in the back pay calculation?
- How does OFCCP determine the time period for calculating back pay?
- In hiring cases, will OFCCP limit the back pay period by the average tenure of the comparator group?
- Why should attrition be used to account for employee turnover in the back pay calculation?
- How does OFCCP account for uncertainties in the back pay calculation?
Directive 310 provides internal guidance on calculating back pay as a part of make whole relief for victims of employment discrimination. It indicates when it is appropriate to use a formula or individual relief model for calculating back pay, and describes the elements that should be considered in making this determination. It also identifies basic principles that should apply to back pay calculations, including addressing mitigation when raised as a defense by the contractor.
Directive 310 was issued on July 17, 2013, and is effective immediately.
No. Directive 310 formalizes the agency’s reliance on Title VII back pay principles. The principles and policies established in the Directive are consistent with existing prior directives, compliance assistance materials, and other written procedures pertaining to back pay relief.
As used in the Directive, individual relief is the assessment of make-whole relief for identified victim(s) of discrimination on an individualized basis. This method is generally used to calculate back pay in those individual or small group discrimination cases where the victims of discrimination, and the damages they incurred, can be determined with specificity.
As used in this Directive, formula relief refers to the method used in systemic discrimination cases for calculating a total amount of the back pay for an affected class of discrimination victims. The back pay award is then divided (pro rata or otherwise) among all the members of the class.
In general, the formula relief model is used in the following circumstances:
- When calculating individual back pay relief for numerous aggrieved individuals is difficult because complete information or documentation (i.e., timecards, payroll records, tax returns) is unavailable or missing;
- When using the individual relief model to calculate back pay for each class member will likely cause significant delay or create an undue burden on individual class members to provide documentation to support their compensation and/or interim earnings ;
- When the number of class members exceeds the number of employment opportunities that are available;
- When the reconstruction of the employment decision is speculative (e.g., in the instance when there are no lines of progression), which makes it difficult for the CO to determine at what specific stage in the employment process the adverse action actually occurred, or any other situation in which (especially for jobs with few minimum qualifications) it would be impossible to determine which class members would have been hired absent discrimination; and/or
- When the losses can be calculated on a class-wide basis from available data, as may be the case with compensation issues.
The back pay calculation should account for all of the earnings attributable to the lost employment opportunity. Lost earnings include but are not limited to: wages, salary or other compensation, overtime, premium pay, incentive pay, raises, bonuses, lost sales commissions, cost-of living increases, tips, medical and life insurance, any other fringe benefits, pensions and the value of stock awards or options. Any pay increases or promotions among the comparator class during the time period at issue should also be accounted for in the calculation.
Information about lost earnings may be found in payroll records, written policies, manuals, Internet information about the company, employee handbooks, collective bargaining agreements, and/or obtained during interviews with employees and managers.
Provided that the federal contract is in effect when the discrimination occurred, back pay generally can be obtained for a period up to two (2) years prior to the date of the scheduling letter (or for a timely filed complaint, up to two (2) years prior to the date the complaint is filed). Where the discriminatory act(s) took place less than two years before the Scheduling Letter or the filing of the complaint, back pay is due from the date of violation forward. Consistent with Title VII law and principles, back pay continues until the discriminatory action(s) are stopped by the contractor, or stopped by means of a Conciliation Agreement or other voluntary correction.
No. Consistent with Title VII case law in this area, workers are entitled to a presumption of continuous employment that runs through the end date of potential back pay liability. This presumption may be overcome if the contractor provides sufficient evidence that the victims of discrimination would not have worked for this entire period. When the contractor does provide such evidence, OFCCP will use the accepted practice in this area, and reduce the back pay award by the rate of attrition for the comparator group. (See below for more discussion on the use of attrition)
The accepted practice in Title VII systemic cases is to consider the projected effect of attrition on the total losses, without artificially limiting the total liability period. Consistent with this approach, the back pay award is reduced by the rate of attrition for the comparator group.
By periodically discounting for employee turnover, the calculation accurately reflects the working conditions that were present during the liability period. For example, the back pay award is reduced the most at points where the class members would likely be leaving the establishment (e.g. during a time when mass layoffs were occurring). This method also allows for a steady, incremental reduction in the back pay award, without limiting the back pay period. While the probability of employee turnover is accounted for, back pay and interest continue to accrue until the discrimination is remedied by judgment or settlement. This outcome is consistent with the equitable, make-whole purpose underlying the back pay remedy
The underlying principle in back pay calculations is that that the contractor has the burden of providing sufficient evidence to support its positions. Absent such evidence, uncertainties in determining what an employee would have earned but for the discrimination is resolved against the contractor.
For example, if there is conflicting information about the rate of pay or interim earnings for the class members, the back pay award will be based on the terms that are more favorable to the victims. The contractor can provide sufficient evidence to show that it is entitled to the more favorable terms. Similarly, if there are missing termination dates in the comparison group data, there is a presumption that these employees are still employed at the establishment (when determining rates of attrition in the back pay calculation). The contractor has the burden of providing sufficient evidence to rebut this presumption.