Benefits and Compensation

OFCCP Demands Detailed Compensation Analysis in Virtually

Remember, says Desmond, who is a partner in the New Orleans office of national employment law firm Jackson Lewis, OFCCP (Office of Federal Contract Compliance Programs) does not enforce a law but an executive order. So, if you don’t want to do business with the government, you don’t have to comply.

Desmond’s comments came at BLR’s Advanced Employment Issues Symposium, held recently in Las Vegas.

Farewell ACM, Hello ACE

OFCCP’s Active Case Management (ACM) procedures, which allowed for an abbreviated audit process if a contractor’s Affirmative Action Plan (AAP) submission revealed no statistically significant indicators of systemic discrimination, has been rescinded. OFCCP stated that ACM had narrowed the focus of the Agency’s enforcement efforts and eroded its enforcement authority.

So, OFCCP now embraces Active Case Enforcement (ACE). For one thing, says Desmond, this broadens the types of discrimination it will evaluate, which will now include everything from individual discrimination to systemic, class-based discrimination.

In addition, OFCCP will dig deeper during compliance reviews, evaluating contractors’ compliance history for 3 years prior to the review to assess whether there are patterns of non-compliance.

Compliance officers are directed to review information from:

  • OFCCP’s internal data base system
  • EEOC
  • State or local fair employment practice agencies
  • Other enforcement agencies such as Wage and Hour division

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What to Do

In staying ready for an audit, it’s particularly important to keep your records up, says Desmond. In particular, keep the applicant flow log current. Although we still don’t have a good definition of an applicant, she notes, the basic definition to follow states that an applicant is a person who applied for a particular job that was open, met the minimum qualifications, and expressed an interest throughout the time the job was open (that is, didn’t withdraw).

If an applicant meets those criteria, he or she should be added to the applicant flow, Desmond says.

Be careful what data you submit to OFCCP, says Desmond, especially if it shows discrimination. Is it accurate?

The final piece of ACE is that all compliance evaluations will include a full desk audit.

For quality control purposes, OFCCP will select every 25th compliance evaluation for an automatic full compliance review regardless of whether any problematic employment processes are identified.

What Does This Mean?

In addition to more in-depth review at the desk audit stage and greater likelihood of on-site reviews, expect a renewed focus on technical compliance with the regulations, such as:

  • Listing suitable positions with state job services (you cqan’t go back and fix this, Desmond says)
  • Conducting good faith outreach efforts in areas of underutilization. “No one applied” will not be good enough, Desmond says. OFCCP will want to know, What proactive steps have you taken?

Compensation Guidelines Rescinded

OFCCP officially submitted a notice of proposed rescission of the compensation guidelines on October 25, 2010. This effectively removes the restraints of interpretive standards for:

  • Identifying systemic compensation discrimination
  • Compliance coordination under voluntary guidelines for contractor self-evaluations

Desmond expects that the upshot of this will be a requirement to show objective factors when you are compensating someone in a protected class less than you do for someone not in the protected class.

 OCCP has not proposed replacement guidelines for compensation, but has proposed discretionary analysis with respect to compensation discrimination for all contractors.

Desmond’s tip: Create and maintain careful documentation—it’s hard to determine and prove the “value” of a position to the organization.

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No clear methodology is being used to analyze compensation, but OFCCP seems to be focusing on smaller differences in pay—as little as 2 percent!
In virtually every recent audit, OFCCP has requested detailed compensation information.

Typical is a 12 point or 14 point data request. They are certainly going to scrutinize pay disparities at the job group level, Desmond says. (OFCCP will accept your grouping of employees.) One tip, don’t mix top managers with lower managers, warns Desmond.

They won’t tell you how they evaluate, but they’re likely to do regression analysis and they are always going to find something at some level. They scrutinize pay disparities at the job group level and then conduct “regression” analyses.
Increasingly, says Desmond, OFCCP will engage in small group or one-on-one analysis also.

Recommendation from Desmond: Do some type of pay equity self-analysis each year, at least at the job title level.

In tomorrow’s Advisor, more of Desmond’s OFCCP tips, plus an introduction to the number one lawsuit preventer—regular FLSA audits.