WHAT CHANGED WITH DIRECTIVE 307?

OFCCP’s Directive 307 outlines policies for evaluating compensation data that depart in three primary ways from guidance presented in the rescinded Compensation Standards:

  • No requirement to construct and analyze compensation data by Similarly Situated Employee Groups (SSEGs)
    • Individuals in jobs with very different duties, qualification requirements, and levels of responsibility may be grouped for analysis purposes into what is now called “pay analysis groupings”.
  • No requirement to account for the complete influence of legitimate, non-discriminatory explanations for pay differences
    • Analyses on pay analysis groups that combine individuals from different SSEGs are not required to include interaction terms that account for differential influences of merit variables across SSEGs. (As a side note, this part of the Directive is quite interesting in that OFCCP assumes that the inclusion of an interaction term is an abstract that is only required under the standards. Meaning, OFCCP erroneously concludes that the issue of interaction terms is unique to the Interpretive Standards and did not exist prior to the standards. This is a complete misunderstanding of statistics and case law. The use of interaction terms is something that any analyst in any context must test to have a complete and accurate regression model. Anyone who has taken a basic statistics course in college was taught to investigate interaction terms when conducting a multiple regression analysis. )
  • No restriction to base pay
    • Directive 307 notes that compensation discrimination may come in different forms including hiring, slotting/placement, and other opportunity-based personnel decisions

It is unclear how the policies outlined in Directive 307 will manifest in practice; however, it is clear that without further guidance, contractors will have difficulty conducting proactive analyses that are consistent with that which OFCCP may conduct in an audit.

by Kayo Sady and Jana Garman, DCI Consulting Group

Authors:
Kayo Sady, Ph.D.

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