Hunton Employment & Labor Perspectives

Effective February 28, 2013, the Office of Federal Contract Compliance Programs (“OFCCP” or “Office”) has rescinded two guidance documents implemented during the Bush administration that outlined methods for investigating and evaluating pay discrimination claims against federal contractors and replaced them with new guidelines emphasizing a case-by-case approach that provides investigators with authority to conduct more thorough investigations and identify a broader range of compensation-related discrimination.  The first document, Interpreting Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination (“Compensation Standards”), set forth the procedures OFCCP followed when issuing a notice of violation for pay discrimination; and the second document, Voluntary Guidelines for Self-Evaluation of Compensation Practices for Compliance with Nondiscrimination Requirements of Executive Order 11246 (“Voluntary Guidelines”), contained directions that federal contractors themselves could follow to preemptively show compliance with their obligation to evaluate their internal pay practices for fairness.

OFCCP criticized the former Compensation Standards as using an overly-narrow, “one-size-fits-all” definition of pay discrimination that only addressed differences in actual pay rates among pools of workers in the same job category but not less-obvious forms of compensation discrimination relating to job assignments, promotional opportunities, access to overtime, commissions and bonuses, and other things.  They also imposed rigid limits on the groups of workers that OFCCP could compare to evaluate discrimination and required that a notice of violation be supported by anecdotal evidence.  The Voluntary Guidelines likewise hindered OFCCP efforts to remedy pay discrimination by allowing contractors to self-audit their compensation systems based on a single statistical model, thereby shielding themselves from enforcement action, even if an alternate model evidenced systemic compensation discrimination against a protected class of workers.

The notice of final rescission withdrawing the Compensation Standards and Voluntary Guidelines includes new guidance for federal contractors setting forth the procedures, analysis, and protocols that OFCCP will utilize going forward when conducting compensation discrimination investigations.  The new guidelines bring OFCCP’s efforts to investigate pay discrimination into line with the standards used by courts to evaluate pay discrimination claims brought by individual workers, the EEOC, and the DOL under Title VII and stress investigations should be conducted on a “case-by-case” basis to assess whether a material difference in compensation based on a protected characteristic exists and if there is a legitimate explanation for any disparity.  Additionally, OFCCP will no longer require anecdotal evidence before issuing a notice of violation and instead may seek a remedy for compensation discrimination regardless of whether individual workers realize they are being underpaid.

A “frequently asked questions” guide concerning OFCCP’s new procedures for reviewing contractor compensation systems and practices is available on the Office’s website.  OFCCP plans to develop technical assistance, webinars, and other resources for federal contractors to ensure they have ample information about how to comply with the law.  Federal contractors are encouraged to review the new guidance to better understand their potential exposure under the expanded scope of future OFCCP compensation discrimination investigations, which may now include review of a contractor’s compensation policies and data, along with other statistical and non-statistical analyses and consultation with labor economists and experts.