Understanding OFCCP Compliance in 2011 – Part 2

Our second OFCCP Compliance 2011 update from the Office of Federal Contract Compliance Programs (“OFCCP”) looks at changes impacting desk audits and compensation analysis. Be Prepared for Compensation Analysis During Desk AuditsUnder a new directive for 2011, potential compensation discrimination indicators are flagged with the difference in average pay between men and women or minorities and non-minorities is $2,000 or more, or at least 2%.

• OFCCP will compare pay by job title or job classification rather than by similarly situated employee groupings (SSEGs) or job groups

• If the $2,000/2% test results in an unusual number of requests to contractors for additional compensation data, then a 5% difference may be used

• It is likely this new methodology will result in more indicators of disparity than prior methods, so contractors should expect more requests for additional compensation data during desk audits now and in the future

Contractors must analyze their compensation data using the new threshold test and if a significant number of job titles are flagged, there should be a thorough pay equity analysis including regression analysis and/or cohort analysis.

Note: Legal experts in labor issues strongly recommend these analyses be conducted under the attorney-client privilege to avoid having to produce these results to the OFCCP.

Understanding Compensation Analysis The OFCCP had indicated that moving forward it will take a “more flexible” approach to analyzing contractor compensation and may use any number of previously used and newly identified methods. According to the OFCCP it will “continue [adhering] to the principals of Title VII of the Civil Rights Act of 1964, as amended (Title VII) in investigating compensation discrimination.” The $2,000/2% screen will be the threshold test, and then regression analysis will be used to gain more depth. Cohort analysis will be used to determine disparities in small groups and contractors must be able to conduct these tests on their own to help recognize and address potential gaps.

Sources: – Seyfarth Shaw, LLP Attorneys Management Alert – Complying with OFCCP’s Internet Application Regulations: Overcoming Challenges While Recruiting for Government – Contractor Workspaces – Presented by Adler Group with Alissa Horvitz, Littler Mendelson, P.C. – US Department of Labor – www.dol.gov/ofccp  

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