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OFCCP Issues Second Opinion Letter on Pay Analysis Groupings


OFCCP will provide advice in setting up a PAG structure but it is not guaranteed as being acceptable during a future audit

On July 22, 2019 OFCCP issued its second Opinion Letter addressing Pay Analysis Groups (PAGs). PAGs were first addressed in Directive 2013-03 Procedures for Reviewing Contractor Compensation Systems and Practices. The Directive defines a PAG as follows.

Pay Analysis Group – A group of employees (potentially from multiple job titles, units, categories and/or job groups) who are comparable for purposes of the contractor’s pay practices. Regression analysis may be performed on different types of pay analysis groups. A pay analysis group may be limited to a single job or title, or may include multiple distinct units or categories of workers. A pay analysis group may combine employees in different jobs or groups, with statistical controls to ensure that workers are similarly situated

The Opinion Letter responds to a request as to whether contractors can collaborate with OFCCP to develop valid and agreeable PAGs which would be acceptable in future compliance evaluations. Directive 2018-05 (Analysis of Contractor Compensation Practices during a Compliance Evaluation) states that contractors have the opportunity to submit their PAG structure to OFCCP for review and feedback, which will be taken into account during future compliance evaluations. However, the second Opinion Letter states that OFCCP “is unable to conclusively agree that it will rely upon specific, predetermined PAGs in all future compliance evaluations as there may have been material changes to factors considered by OFCCP in its initial evaluation of the contractor’s PAGs.”

It also states that “OFCCP must conduct its analyses based on the contractor’s pay systems, functions, and workforce organization as they exist or existed during the period under review, and thus if those have materially changed since OFCCP’s prior review, OFCCP will need to make a new determination as to whether the PAGs are appropriate.”

In essence, contractors may request OFCCP’s opinion on setting up a PAG structure but cannot guarantee that the same PAGs will be acceptable during a future compliance review.

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