Register for DCI Teleconference On Final OFCCP Compensation Guidance

OFCCP released its long-awaited final guidance on evaluating systemic compensation discrimination, along with voluntary guidelines for federal contractors to self-evaluate their compensation systems.

 

DCI Teleconference Scheduled Today: DCI has scheduled a complementary teleconference for DCI clients and other interested federal contractors to review the new guidance. The one hour teleconference is scheduled for 2:00pm EST today (Friday, June 16th). David Cohen, President of DCI Consulting, will share his assessment of the final guidance and voluntary self-evaluation guidelines and their potential implications for the contractor community.

 

Space is limited and registrations for the teleconference will be confirmed for eligible participants on a first-come basis. If you are interested in participating in this teleconference, please send an email to register@dciconsult.com. The call-in number and presentation materials for the teleconference will be e-mailed to confirmed registrants prior to the teleconference.

 

Overview of the Final Compensation Guidance and Self-Evaluation Guidelines:
The final guidance closely follows the proposed standards and contractor guidance. OFCCP made some modifications and clarifications to the final interpretive standards in response to public comments. Some of the modifications OFCCP made to the final voluntary self-evaluation guidelines are quite significant.

 

The following is a preliminary overview and summary of key aspects of the guidance.

 

1. Final Interpretive Standards for Systemic Compensation: 71 Fed. Reg. 35124 (June 16, 2006)

Effective date: Despite contractor requests for a grace period before implementing the final interpretive standards, they are effective immediately.

Confidentiality: OFCCP added confidentiality language that it would treat compensation and other personnel information provided by the contractor during a systemic compensation discrimination investigation as confidential to the extent the information is exempt from public disclosure under the Freedom of Information Act.

Pay Grade Theory and Cluster Regressions: OFCCP agreed with comments that pay grade information has some value as an “indicator” of potential discrimination, although it rejected the view that it is consistent with Title VII standards or an efficient and effective method for OFCCP to accomplish its mission. The agency said that it did not desire to conduct a full-scale compensation investigation in every compliance review, and the interpretive standards did not restrict them from using pay grade information as an indicator. In fact, OFCCP said it now uses pay grade (or other aggregated compensation) information in response to Item 11 of the scheduling letter under its tiered-review approach. The interpretive standards foreclose the use of the pay grade theory against contractors, however, as the basis for systemic compensation discrimination.

 

OFCCP did clarify that it will not allege nor establish a case of systemic compensation discrimination in violation of Executive Order 11246 and OFCCP regulations under the “pay grade” theory.

 

OFCCP also said that it now conducts a “cluster regression” using the employee-specific information requested following the desk audit. If the cluster regression indicates significant disparities, OFCCP conducts a comprehensive evaluation of the compensation practices at which point these final interpretive standards govern their investigation and determinations.

 

2. Voluntary Self-Evaluation Guidelines: 71 Fed. Reg. 35114 (June 16, 2006)

Effective date: Despite contractor requests for a grace period before implementing the final self-evaluation guidelines, they are effective immediately.

Voluntary: OFCCP added a provision clarifying that the guidelines did not set out the only acceptable method for a self-analysis. If a contractor does not follow the voluntary guidelines, no adverse inference will be made.

Confidentiality: OFCCP added confidentiality language that it would treat compensation and other personnel information provided by the contractor during a systemic compensation discrimination investigation as confidential to the extent the information is exempt from public disclosure under the Freedom of Information Act.

Percentage of Employees Encompassed in a Statistical Analysis: OFCCP changed the threshold of employees that should be included in a statistical analysis from 80% of the employees in a particular affirmative action plan or establishment to 70%.

When Contractors Must Conduct a Multiple Regression Analysis: The proposed guideline stated a multiple regression must be conducted by contractors with 250 or more employees. OFCCP changed this requirement in the final voluntary guidance to establishments or AAPs of 500 employees or more.

Appropriate Remedies: The proposed guidelines do not specifically spell out the type of method contractors should use once they identify a statistically significance disparity in pay. However, OFCCP did indicate that contractors would be required to take appropriate remedial action to correct statistically significant disparities between employees within an SSEG. In addition, the OFCCP added that these remedies should include both back pay and other make whole relief. DCI is following up with DOL officials to receive further clarification on acceptable remedies.

Adverse Inference: Contractors may choose alternate strategies for conducting compensation analyses that are outside of these guidelines. OFCCP will make no adverse inference against contractors with respect to their compliance with the regulations if they choose alternate strategies.

Relationship With Item 11: OFCCP added a new provision in response to a question by DCI and another commenter regarding how the voluntary self-evaluation guidelines were coordinated with the compliance review process. Under the self-evaluation guidelines, a contractor that desires the compliance coordination incentive and, therefore, has attempted to develop and implement a self-evaluation program that reasonably comports with the voluntary guidelines, will not be required to submit compensation data in response to Item 11. Instead the contractor should respond to the Item 11 request by noting that the contractor “seeks compliance coordination under the OFCCP voluntary compensation self-evaluation guidelines.” OFCCP staff will then call the contractor to discuss the contractor’s self-evaluation program and, based on that initial discussion, OFCCP will determine what documents and information it will review in the particular case.

 

Contractors that do not wish to participate in the compliance coordination incentive can chose to certify compliance with the regulation under the Alternative Compliance Certification (ACC). The contractor must certify in writing, signed by a duly authorized officer of the contractor under penalty of perjury, and the certification must state that the contractor has performed a compensation self-evaluation. In addition, contractors must then send in Item 11 data with the desk audit material.

 

Summary:
The final standards and contractor guidance represent the OFCCP’s first interpretive guidance on systemic compensation discrimination. Now that these standards have become final, it is extremely important that federal contractors are prepared for them. DCI is presenting a comprehensive seminar in September covering the final standards and guidelines, including best practices and strategies for implementation.

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