Contractors may have to provide OFCCP with a complete copy of their pay equity audits

On Equal Pay Day, March 15^th, the Office of Federal Contracts Compliance Programs released Directive 2022-01: Pay Equity Audits. The directive “explains how OFCCP reviews contractors’ compliance with their obligations to conduct in-depth compensation analysis under 41 CFR 60-2.17(b)(3).” 

Key Points

• During the desk audit, OFCCP will conduct an analysis of the contractor’s compensation practices as provided in Directive 2018-05: Analysis of Contractor Compensation Practices During a Compliance Evaluation.   “OFCCP will also look broadly at a contractor’s workforce (across job titles, levels, roles, positions, and functions) to identify patterns of segregation by race, ethnicity, and gender, which may result from the assignment, placement, or upgrading/promotion barriers that drive pay disparities. Where possible, OFCCP will use regression and other systemic analyses to look for disparities in patterns of assignment or in the salary paid across similar functions and positions.”
• If the desk audit reveals disparities, OFCCP may request additional data, including items not included on the Item 19 submission, follow-up interviews, additional records, and a copy of the pay equity audit. The directive provides examples where follow-up information may be needed.
• OFCCP will request a complete copy of the pay equity audit(s) showing “all pay groupings that were evaluated, any variables used, and the results of the analyses, including any disparities, found.” “For compensation regression or statistical analysis results, OFCCP may request the model statistics (such as b-coefficients, significance tests, R-squared, adjusted R-squared, F-tests, etc.) for all variables or comparisons in the model.”
• Contractors cannot withhold compensation compliance records by invoking attorney-client privilege or the attorney work-product doctrine. “The contractor may conduct a separate pay equity audit for the purpose of obtaining privileged legal advice, and not for demonstrating compliance with OFCCP regulations.” “Where the contractor has produced to OFCCP an acceptable pay equity audit sufficient to demonstrate compliance with 2.17(b)(3), OFCCP will not require the production of these separate pay equity audits, to the extent that the contractor can verify that they were conducted under privilege.”

The directive supersedes any previous agency guidance, including procedures outlined in the Federal Contractor Compliance Manual (FCCM).

OFCCP is “committed to removing barriers to opportunity, including pay discrimination and occupational segregation, which are key drivers of persistent pay disparities. In addition, hiring barriers, steering, assignment patterns, and occupational segregation all contribute to systemic pay disparities. Women are overrepresented in low-paid jobs that often lack critical benefits and are underrepresented in high-paying jobs.”

According to EEOC Chair Charlotte A. Burrows, Equal Pay Day “symbolizes how far into the year women must work to earn what men earned the year before. Women who work full-time in the United State make just 83 cents for every dollar paid to men. The pay gap is even wider for women of color, mothers of young children, and women with disabilities. Due to pay inequality, women stand to lose approximately $407,760 over the course of a 40-year career.”

In the fiscal year 2021, the EEOC advanced pay equity by resolving significant compensation discrimination cases during the administrative process, including:

• A systemic investigation alleging African Americans who were discriminated against in wages based on race for over $200,000, which included monetary relief for the charging party and a class, and targeted equitable relief designed to change the discriminatory wage practices and prevent future discrimination;
• Successfully resolving 10 pay discrimination lawsuits for approximately $1 million, benefiting 51 individuals;
• Filing five lawsuits involving compensation discrimination, four of which were based on sex, and one based on race; and
• Conducting 124 outreach sessions with 24,248 individuals involving issues related to equal pay.

OutSolve’s Take

On Equal Pay Day, we will continue to emphasize the importance of reviewing compensation systems to ensure pay equity. It is important to collect and maintain compensation-related data which is critical in producing a meaningful Pay Equity Analysis. Directive 2022-01 does not tell you how to conduct your pay equity audits but does inform us what we can expect on the compensation side during a compliance evaluation. Neither OFCCP nor EEOC are taking the issue of pay equity lightly and are vigorously enforcing the regulations to target employers who are unfairly paying employees.

Let OutSolve assist you by conducting a compensation risk analysis to identify pay problems before either of these agencies do. Contact your OutSolve Consultant or OutSolve directly at 888-414-2410 or by email at info@outsolve.com.