by Art Gutman Ph.D., Professor, Florida Institute of Technology

In a lawsuit filed on April 19, 2011, United Space Alliance (USA) sued the DOL and OFCCP challenging a Final DOL Order for USA to produce documents or face suspension of current and future federal contracts. Yes, you read that correctly: OFCCP is being sued by a federal contractor in court (the district court for the District of Columbia).

DCI President David Cohen summarized the initial Administrative Law Judge (ALJ) ruling on this case at: http://dciconsult.com/alj-rules-on-ofccps-desk-audit-screen-of-item-11/. This is both an intriguing and important case. I will cover the major highlights.

For those that need a review: in August 2009 the OFCCP selected USA (and other companies) for compliance reviews. The OFCCP requested, among other things, USA’s affirmative action plan (AAP) and personnel activity and compensation data (hereafter called “Item 11”). The OFCCP then conducted a desk audit in which it analyzed the Item 11 data on the following three “threshold” criteria:

(1) Whether, for at least one pay division, there is a specified difference in average compensation between the groups being compared and, if so, whether at least one group appears to be adversely affected.

(2) After combining the pay divisions meeting the above condition, whether the number of employees in the nonfavored group is greater than a specified number and represents a specified percentage of the total employees in that group in the overall workforce.

(3) Whether the overall percentage of the group most adversely affected in the combined pay divisions is larger, by a specified amount, than the overall percentage of the other groups adversely affected. The specific thresholds used in each of the three criteria above

USA passed on all three criteria. Nevertheless, Miguel Rivera, Jr., District Director in the Orlando and Miami, Florida OFCCP offices did two additional “analyses”, and on that basis, requested additional data. Rivera conducted what he termed a “pattern analysis”, which included no thresholds, and a “30 and 5” test (30 or more employees in a given job with at least 5 males or 5 females) for what was termed a “refinement” analysis. Based on these analyses, Rivera then requested an additional 15 items, and ultimately three more items (for a total of 18 items). Interestingly, among the newer items were requests for AAP data relating to both Section 503 of the Rehabilitation Act and Vietnam-era Veterans’ Readjustment Assistance Act (VEVRAA).

USA refused to respond and the OFCCP brought an administrative complaint against USA that was heard by ALJ Daniel A. Sarno, Jr. (District Chief Administrative Law Judge) on February 28, 2011. During the hearing, Dr. Dr. Stephen G. Bronars, a labor economist, testified on behalf of USA to rebut the testimony of Rivera. Bronars testified that neither of Rivera’s analyses contained thresholds to eliminate minor pay differences, and that the threshold analysis was better than any analysis that did not use thresholds. However, he referred to both the threshold and non-threshold analysis as “rudimentary non-statistical” tests, and cited as the “gold standard”, regression analyses that compares “average pay, holding constant other factors that should influence pay and having the statistical methodology sort of adjust pay so that you’re not allowing factors to confound any comparisons that you would be making.” This gave Sarno the ammunition he needed to rule against USA. More specifically, he ruled:

[The] District Director was not using any rudimentary non-statistical test to charge Defendant with any violations. Rather, he was merely attempting to gather additional information to conduct a regression analysis before making any decision with regard to determining whether Defendant should be charged with any violations. I find his actions to be prudent and quite reasonable. Moreover, I find the additional 18 questions presented to Defendant to be quite limited in scope.

The rest is history. Sarno supported the OFCCP, including a ruling that there was no vindictive prosecution based on the request for Section 503 and VEVRAA data, even though he ruled that these latter requests were unreasonable. Sarno then recommended the following:

1. the Administrative Review Board (ARB) order United Space Alliance to comply with the OFCCP’s desk audit within thirty days of the ARB’s Final Decision;

2. should the ARB order United Space Alliance to comply with the on-site compliance review, the review be limited to gathering the data and/or documents related to the eighteen questions concerning possible violations of the Executive Order; and

3. should United Space Alliance fail to comply with the desk audit and/or on-site compliance review, it is recommended that the ARB cancel all of United Space Alliance’s present Federal Contracts and debar all future Federal Contracts until such time as the Federal Contractor is in compliance with the ARB’s order.

The Secretary of Labor then supported this ruling, freeing USA to sue the DOL and OFCCP in the Federal District Court of the District of Columbia.

The Secretary of Labor then supported this ruling, freeing USA to sue the DOL and OFCCP in the Federal District Court of the District of Columbia. What I find troubling is that in 2007 the OFCCP developed an internal compensation directive that spelled out the item 11 “trigger test”. Most of us referred to this as the 2-30-3 rule. The district director chose to ignore this internal protocol and instead exercised pure subjective discretion without any basis in evidence for believing there was “systemic pay discrimination”. The judge seemed to affirm OFCCP’s position that even though an internal “rule” was created for analyzing item 11, the OFCCP can essentially flip a coin when deciding on whether or not to ask for more detailed data. It will be interesting to see how this plays out in federal court.

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