When examining pay equity issues, the OFCCP and federal contractors historically took the approach of comparing Whites to an aggregate of all protected groups (total minorities). In the past few years, OFCCP has moved away from a White-Minority approach to a White-subgroup approach. Most recently, OFCCP has changed its approach to one that is consistent with the Uniform Guidelines on Employee Selection Procedures (UGESP) at 41 CFR 60-3. Although UGESP does not discuss compensation issues, nor has OFCCP referred to it regarding compensation, the guidance related to adverse impact analytics certainly seems applicable to compensation analyses. Specifically, a traditional minority vs. non-minority comparison is inconsistent with proscriptions from UGESP. According to UGESP, ‘a selection rate for any race, sex, or ethnic group, which is less than four-fifths…of the rate for the group with the highest rate will generally be regarded…as evidence of adverse impact.” In other words, the advantaged group is not necessarily fixed, and therefore, neither is the disadvantaged group. Adverse impact has been measured and enforced using this “compare to highest selected group” methodology in proactive and enforcement activities. DCI has trended that the highest selected approach is now being applied to compensation equity enforcement.

In light of the new compensation Directive 307 and recent compensation enforcement activities, many federal contractors are looking for answers on how to conduct a proactive compensation analysis. In an ideal world, a compensation analysis would mirror both the organization’s compensation practices as well as the theory of discrimination being alleged. Is the theory being tested one of favoritism? That is, is the organization favoring one group (e.g., Asians) at the expense of all other racial groups? Or, is the theory that the organization is disfavoring one group (e.g., African Americans/Blacks) compared to all other groups combined? Or, is the theory that one group (e.g., Hispanics) is favored over another group (e.g., African Americans/Blacks) but there is no differences involving the other groups? The theoretical answer to these questions will affect how the groups should be compared in analyses.

Let’s assume that the issue is a specific disadvantaged subgroup or subgroups, instead of a question of favoritism. For example, if the allegation is that Blacks are specifically targeted to be paid less than other groups, there are four potential comparisons:

  1. Traditional approach: Compare Whites to all minority groups combined.
  2. UGESP approach: Compare the highest paid group separately to each of the subgroups.
  3. Theoretical approach: Compare Blacks (the lowest paid) to all other subgroups combined (Hispanics, Whites, Asians, and American Indians in one group).
  4. Hybrid approach: Compare Blacks (the lowest paid) separately with each subgroup.

As mentioned previously, determining which of the four comparisons is most appropriate in a proactive analysis depends on the theory of whether a group is being favored or whether a group is being disfavored. Thus, proactive analyses must include some basic assumptions. Unfortunately, Directive 307 provides no useful information regarding OFCCP assumptions. In an audit, it is difficult to predict how OFCCP will look at the data given OFCCP’s lack of consistency and failure to communicate its process. To provide clarity about OFCCP’s process, The Center for Corporate Equality (CCE) and the Equal Employment Advisory Council (EEAC) sent a letter to OFCCP asking clarification on these issues. To date, the OFCCP has not yet responded to this request. Stay tuned.

by Joanna Colosimo, M.A., Consultant and Mike Aamodt, Ph.D., Principal Consultant, DCI Consulting Group

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