At a recent meeting of the labor and employment law section of the American Bar Association (ABA), Patricia Shiu, director of the U.S. Department of Labor’s (DOL) Office of Federal Contract Compliance Programs (OFCCP), discussed the agency’s focus on pay disparity and highlighted that during the Obama administration, the OFCCP has obtained around $5 million in monetary relief and closed approximately 125 discrimination cases involving compensation. Joined by Jenny Yang, chair of the Equal Employment Opportunity Commission (EEOC), the two agency heads made clear that compensation or pay discrimination is an enforcement focus of both agencies and that the two offices share information on compensation issues. 
The OFCCP’s focus, Shiu noted, can be seen through the agency’s enforcement of steering cases in which an employer’s assignment of employees to certain duties is tied to pay. Specifically, Shiu pointed out the OFCCP’s settlement with G&K Services, a federal contractor that was alleged to have had a discriminatory practice of assigning laundry workers to different tasks and pay rates on the basis of their gender, leading to allegedly unlawful pay discrimination. She also recommended that federal contractors regulatory conduct self-audits of their pay practices so they can find any compensation problems before the agency does. When asked whether the OFCCP would support a safe harbor for federal contractors that take corrective action after a compensation self-audit, Shiu responded that federal contractors already have an ongoing duty to audit their pay systems, and they would need a safe harbor only if there was a big issue with their pay practices.
Yang highlighted the EEOC’s directed investigation power under the Equal Pay Act (EPA) and the agency’s staff training on identifying pay discrimination—specifically, the presence of systemic issues. While Yang appreciates that compensation issues aren’t easy, she pointed out that it’s important for employers to understand their own pay and compensation systems and to train managers and other decision makers to make informed decisions about starting salaries. She noted that relying on previous salary level to set starting pay carries on past discrimination by perpetuating preexisting male advantages.
It is clear that the Obama administration’s goal to uncover unlawful compensation disparities in the American workforce has taken root in the enforcement activities and priorities of these two government agencies. Employers, and particularly federal contractors, should take care to review their compensation practices with counsel to ensure compliance before an EEOC investigation or an OFCCP compliance evaluation finds an otherwise unknown compensation issue.
Subcontractor agrees to pay almost $2 million
One of the most common ways in which government contractors get into trouble is by paying the wrong rate to employees working on contracts covered by the Davis-Bacon Act (DBA). This pitfall has come to the fore in recent years since the federal government began funding or financing projects under the American Recovery and Reinvestment Act of 2009 (ARRA). Such projects are subject to the prevailing wage and fringe benefit requirements of the DBA.
The DOL recently announced it has recovered $1,914,681 in back wages and fringe benefits for 147 workers employed by Proimtu Mmi-Nv LLC, a subcontractor based in Henderson, Nevada. The company was providing construction services at the federally funded Crescent Dunes Solar Energy Project in Tonopah, Nevada. That project, which received a $737 million loan guarantee from the U.S. Department of Energy (DOE), is a 110 MW solar energy power plant that will provide energy to as many as 75,000 homes during peak electricity periods.
According to the DOL, Proimtu Mmi-Nv failed to pay workers the correct prevailing wage rates and fringe benefits for their particular job duties. The contractor paid “general laborer” rates to workers who routinely performed duties in skilled trades, such as ironwork, electrical work, painting, or bridge crane operation. Those skilled jobs required prevailing wages and fringe benefits that were as much as twice the amounts payable to general laborers.
As this settlement illustrates, construction contractors and subcontractors must pay careful attention to ensure they are properly classifying employees on projects subject to the DBA.
OFCCP issues guidance on new CSAL
The OFCCP recently sent out a first release of corporate scheduling announcement letters (CSALs) to 2,500 federal contractors on the fiscal year (FY) 2015 list for compliance evaluations. The CSAL is the initial notification to an establishment that it has been selected for a compliance evaluation; it does not officially schedule the evaluation. A compliance evaluation begins when a federal contractor receives the scheduling letter, which gives it only 30 days to prepare and turn over the initial data requested.
The 2,500 establishments to which CSALs were sent represent 25 separate industries and 993 distinct companies. The first release also includes 27 corporate management compliance evaluations. That means one federal contractor could receive a CSAL for multiple locations, including corporate headquarters, in the upcoming compliance evaluation cycle. Because this was only the first release for FY 2015, federal contractors should expect another round of CSALs to be released later in calendar year 2015.
The OFCCP does not send the CSAL to corporate headquarters or another localized office but mails the notice directly to the establishment it will be evaluating. Therefore, it is important that compliance officers are vigilant in looking out for a CSAL or any other correspondence from the OFCCP and notify the appropriate internal personnel when a CSAL arrives. If a federal contractor receives a CSAL, it should begin to ensure that it is ready for the pending audit.
To facilitate federal contractors’ understanding of the materials they must provide once an audit has begun, the OFCCP recently issued a number of FAQs addressing the newly revised scheduling letter’s request for compensation information. Because the compensation data request, also known as “Item 19,” refers to a federal contractor’s “workforce analysis,” the agency’s FAQs make clear that if a federal contractor chooses to use the alternative to the workforce analysis, an organizational display, the compensation data can be provided in that manner.
The Item 19 request refers to the five racial and ethnic categories in the OFCCP regulations, not the seven racial and ethnic categories in the EEO-1 Report. However, the OFCCP has clarified that the Item 19 data may be provided using either the five racial and ethnic categories or the seven categories in the EEO-1 Report. Finally, the OFCCP has warned contractors that if they fail to submit the compensation information on an individual employee basis, the compliance officer conducting the evaluation will consider the information incomplete.
Federal contractors should familiarize themselves with the OFCCP’s revised CSAL as well as any FAQs published by the agency that address the new data and information requested, and keep up with any new FAQs posted on the agency’s website in the future.
In addition, key internal establishment-based personnel should be alert for a CSAL and, if one is received, use the “heads-up” time to ensure audit readiness.
Emily L. Bristol is an attorney with Fortney & Scott, LLC, in Washington, D.C. You can reach her at ebristol@fortneyscott.com.