As all federal contractors and subcontractors know, the Office of Federal Contract Compliance Programs (OFCCP) has made investigation of compensation discrimination a priority. This emphasis aligns with the president’s pronouncements on the alleged “pay gap” between men and women. Therefore, it is interesting that the OFCCP’s recent settlement with medical products manufacturer Medtronic, Inc. and Medtronic Interventional Vascular, Inc. was not a finding of gender discrimination in compensation. Instead, the Medtronic settlement was predicated on allegations that the contractor paid Hispanic senior production associates “significantly less per year” than white senior production associates at the contractor’s facility in Danvers, Massachusetts.

In the settlement, which is memorialized in a consent decree between OFCCP and the contractor, Medtronic has agreed to pay a class of 78 Hispanic production associates $290,000 in back wages plus interest. In addition to this monetary relief, the contractor also must provide equal employment opportunity training to managers and employees.

The consent decree states that the salary disparity between Medtronic’s white and Hispanic senior production associates existed even “after adjusting for differences in legitimate, pay-determining factors.” In addition, the consent decree notes that the position of senior production associate is an entry-level position, that all of these positions are “characterized” as being in the same job group, and that “pay-deciding officials of Medtronic have exercised discretion when setting compensation amounts” for senior production associates.

This settlement was announced shortly after the OFCCP suffered a setback in the case of VF Jeanswear, where an administrative law judge ruled that the agency improperly aggregated a group of employees into a “non-Asian” category in order to compare their treatment to the class of Asian workers. In the Medtronics case, the OFCCP compared Hispanic compensation to the compensation paid to white employees. However, it is not clear whether the OFCCP’s compensation analysis in the Medtronics case merely focused on a comparison of current pay or whether the agency followed Title VII principles in comparing pay decisions (such as starting pay, promotional increases, or merit increases), as required by the Supreme Court of the United States in Ledbetter v. Goodyear Tire & Rubber Co.

Key “Take Aways” From the Medtronics Case:

  1. Employees who make compensation decisions should be trained on a regular basis on equal employment principles.
  2. Particularly in entry level positions where prior experience may not be required, contractors should consider setting uniform base salaries or rates and recognizing superior production or goal attainment through an annual lump sum bonus.
  3. To the extent a contractor determines that discretion in setting compensation is necessary given business pressures, then regular analysis of pay decisions should be done within the attorney-client privilege to ensure that any differences in pay are defensible based upon legitimate, non-discriminatory reasons.

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OFCCP Compliance, Government Contracting, and Reporting

The experienced attorneys in our OFCCP Compliance, Government Contracting, and Reporting Practice Group advise and defend federal contractors and subcontractors on jurisdictional, compliance, and enforcement issues relevant to government contracting, including those involving the Office of Federal Contract Compliance Programs (OFCCP).

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