OFCCP’s New Opinion Letter and FAQs Provide New Guidance to Contractors

In keeping with its commitment to promoting transparency, this week the Office of Federal Contract Compliance Programs (OFCCP) released an official opinion letter concerning pay analysis groupings (PAGs) and three sets of frequently asked questions (FAQs)—all of which are intended to provide additional compliance assistance to federal contractors.

New Opinion Letter

An opinion letter is an official, written opinion issued by an agency, such as OFCCP, that advises how the agency will apply its guidance and regulations to specific circumstances presented by the individual person or entity that has requested the letter.

On July 22, 2019, OFCCP published a written opinion on whether it will accept PAGs that have been prepared in collaboration with OFCCP for use in future audits. The short answer is probably not.

The opinion, in accordance with Directive 2018-05, says that contractors have the opportunity, and are encouraged, to “submit their PAG structure for review and to receive feedback from OFCCP, which OFCCP would take into account in future compliance evaluations.” However, OFCCP notes that “it 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.” OFCCP’s analysis of pay data is based on a contractor’s pay systems, functions, and workforce organization as it exists during the applicable review period. Accordingly, OFCCP reserves the right to make a new determination as to whether previously negotiated PAGs are still appropriate in future reviews.

FAQs

FAQs published by OFCCP are a compilation of actual questions received by the agency from members of the public along with the agency’s answers. They are not necessarily comprehensive and may be supplemented with new questions, while old FAQs may be deleted or revised when circumstances warrant. FAQs are intended to provide guidance to contractors regarding compliance with applicable regulations.

On July 23, 2019, the Department of Labor announced the release of three new FAQs covering the following topics:

Validation of Employee Selection Procedures: These FAQs provide specific information on what constitutes a “selection procedure” and “validation” under the Uniform Guidelines on Employee Selection Procedures. Additionally, they identify the statistical tests used by OFCCP to assess contractor compliance and the process that OFCCP follows to understand the cause of the alleged adverse impact.

Practical Significance in EEO Analysis: These FAQs supply insight into OFCCP’s review process of “observed” disparities and the role of “practical significance”—a concept that “focuses on the contextual impact or importance of the disparity rather than its likelihood of occurring by chance.” OFCCP considers practical significance along with statistical significance and all other evidence gathered in the course of the investigation.

Project-based or Freelance Workers and the AAP: These FAQs provide contractors with more guidance on the potential exclusion of nonemployees in Affirmative Action Programs (AAPs). Specifically, the FAQs refer to workers doing business on a project or freelance basis and state that such employees will typically be classified as independent contractors rather than employees and, therefore, should not be included as employees in AAPs. This same analysis may be helpful for contractors in determining whether temporary or other contractors provided by staffing agencies may be excluded from AAPs.