United States: OFCCP Formally Rescinds Two Compensation Discrimination Guidance Documents And Issues Related Directive On New Procedures For Reviewing Contractor Compensation Systems And Practices

The DOL's Office of Federal Contract Compliance Programs (OFCCP) recently issued a final Notice rescinding its 2006 Interpreting Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination (Standards) and Voluntary Guidelines for Self-Evaluation of Compensation Practices for Compliance with Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination (Guidelines) regarding compensation discrimination. As discussed in the Notice, the Standards established "analytical procedures to be followed generally by OFCCP when issuing a Notice of Violation (NOV) alleging systemic compensation discrimination," while the Guidelines provided a "methodology for contractors' self-evaluation of their pay practices" that if followed, could provide contractors with a "safe harbor" during compliance reviews. In rescinding this guidance, the agency explained that it will no longer limit itself to one single approach that focuses exclusively on systemic discrimination, requires the use of multiple regression analyses, and mandates that employees be grouped by a "similarly situated employee group." Other than stating that OFCCP will apply "Title VII principles" as the basis for determining whether a contractor has violated the Executive Order 11246's ban on pay discrimination, however, the Notice, by design, provides no clear details regarding what will replace the 2006 Standards.

New OFCCP Directive

In conjunction with its formal rescission of the 2006 Standards and Guidelines, OFCCP issued a Directive that describes the procedures its compliance officers will now use when reviewing contractor compensation systems and practices. The procedures provide significant flexibility in how compensation investigations are conducted and what analytical framework OFCCP can apply in an investigation. According to OFCCP, this Directive clarifies and improves the agency's procedures to align pay discrimination enforcement more fully with Title VII principles. The Directive explains that OFCCP will take a case-by-case approach consistent with Title VII when analyzing a contractor's compensation systems. While OFCCP will continue to use statistical analyses, such as multiple regression, and non-statistical analyses, such as the use of comparators, OFCCP will also investigate compensation disparities in non-systemic cases and even in some instances where no anecdotal evidence exists. OFCCP states in its Directive that this approach will allow the agency to better protect workers from compensation discrimination.

Impact of New Developments?

In reality, the formal rescission of the Standards and Guidelines and the issuance of the new Directive are non-developments. These documents simply formalize how OFCCP has been approaching its compensation investigations for the last several years under the Obama administration. The agency has focused decidedly less on statistical analysis and much more on identifying job titles with differences in pay by gender or race/ethnicity and making sure that contractors are able to provide non-discriminatory explanations for such differences. As was the case when OFCCP applied the 2006 Standards, OFCCP continues to have very limited success in finding discrimination in contractors' pay practices.

One particularly noteworthy item in OFCCP's rescission Notice and new Directive is the agency's insistence that it is following Title VII principles in determining whether pay discrimination has occurred. The Notice of rescission and new Directive are OFCCP's first formal pronouncements on pay discrimination since the 2007 U.S. Supreme Court's decision in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007), and the subsequent passage of the Lilly Ledbetter Fair Pay Act of 2009. The Lilly Ledbetter Fair Pay Act formally established that an "unlawful employment practice . . . with respect to discrimination in compensation" is something that results from a discriminatory decision or other practice. 42 U.S.C. § 2000e-5(e)(3)(A). Despite this statutory language, OFCCP's compensation investigations continue to focus on pay disparities and the employer's ability to explain the non-discriminatory reasons for such disparities, as OFCCP does not investigate whether any discriminatory decisions caused the disparity. The new guidance documents do not indicate that OFCCP intends to change this approach. As a result, it is unclear which Title VII principles OFCCP intends to apply-- those that pre-date the U.S. Supreme Court's 2007 decision, or the concepts reflected in the Lilly Ledbetter Fair Pay Act. Notably, the only reference to either the Ledbetter provisions of Title VII or the Ledbetter decision in OFCCP's Notice of rescission or its new Directive is a sentence from Justice Ginsburg's dissenting U.S. Supreme Court opinion.

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