On June 16, 2006, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) finally published a set of formal standards for evaluating systemic compensation discrimination and a set of “voluntary” guidelines for covered contractors to conduct a self-evaluation of compensation practices. Despite the care taken by the OFCCP in preparing the formal standards and guidelines, they may misinterpret the legal standards for evaluating systemic discrimination in pay and may have limited practical use. Ogletree Deakins will prepare a comprehensive written analysis of both the formal standards and the self-evaluation guidelines (which will be made available to clients).
New Interpretive Standards on Evaluating Pay Discrimination

The new rules focus on two primary components as part of the OFCCP’s assessment of compensation discrimination: (1) comparing salaries of employees who are “similarly situated” – that is, have similar work activities, exhibit similar skills and qualifications, and have similar responsibility levels; and (2) application of a “multiple regression” analysis to analyze the contractor’s pay system for potential discrimination.
OFCCP acknowledged serious flaws in its former policy which assumed that all employees in the same pay grade were similarly situated. The OFCCP claims that the new standards provide a more appropriate definition of “similarly situated.” Likewise, the statistical tool of multiple regression will allow for consideration of many factors affecting compensation.
Self-Evaluation Guidelines

In addition to the formal standards on evaluating systemic compensation discrimination, OFCCP has also published a set of general guidelines that contractors may use to evaluate their compensation practices. Pursuant to OFCCP regulations (41 CFR 60-2.17(b)(3)), covered contractors must evaluate their compensation systems to determine whether there are disparities based on gender, race or ethnicity.  The regulations, however, offer no hint on how contractors should conduct that evaluation. The new self-evaluation guidelines attempt to fill that void; they are purely voluntary, however. Superficially at least, OFCCP has given an incentive for contractors to adopt the general methods outlined in the Voluntary Guidelines.  Specifically, if a contractor implements the Voluntary Guidelines, OFCCP will consider the contractor’s compensation practices to be in compliance with Executive Order 11246.
Additional Information

If you have any questions about these new standards or guidelines or would like assistance in auditing your current pay practices, please contact the Ogletree Deakins attorney with whom you normally work or the Client Services Department via e-mail at clientservices@ogletreedeakins.com or by phone at 866-287-2576. In addition, stay tuned for an announcement of how to obtain a copy of our more detailed analysis.

Note: This article was published in the June 21, 2006 issue of the National eAuthority.

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