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February 27, 2013
OFCCP rescinds compensation guidance and issues new directive
By Susan Schoenfeld, JD, Senior Legal Editor

Federal contractors, take note—effective February 28, 2013, OFCCP is formally rescinding its own existing enforcement guidance on investigating pay discrimination and announcing new guidance for covered federal government contractors.

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Specifically, OFCCP is rescinding its document, Interpreting Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination (“Compensation Standards”), and its Voluntary Guidelines for Self-Evaluation of Compensation Practices for Compliance with Nondiscrimination Requirements of Executive Order 11246 (“Voluntary Guidelines”), because OFCCP reasoned, they limited the agency’s ability to conduct full investigations and “use every enforcement tool at its disposal to combat pay discrimination.”

OFCCP will use Title VII standard

In place of the two rescinded enforcement guidance documents, OFCCP announced that it will now analyze pay discrimination with the principles used under Title VII of the Civil Rights Act of 1964—just as it does in other areas where OFCCP reviews contractor compliance under Executive Order 11246 (such as hiring, promotion or termination), and just as other federal agencies do.

With this new approach, OFCCP states that it will focus on the case-by-case assessment of compensation discrimination investigation procedures, and provide clear and consistent guidance to its staff, contractors, and the public regarding its approach.

Compensation Directive 307

The use of the Title VII standard of review was announced in OFCCP’s new Directive 307, entitled Procedures for Reviewing Contractor Compensation Systems and Practices. Directive 307 describes OFCCP's new investigation procedures, which are designed to ensure that the agency considers all practices that may lead to pay disparities in violation of Title VII and uses all available evidence to evaluate contractor compliance with Executive Order 11246.

The procedures established in Directive 307 apply to all OFCCP reviews scheduled on or after February 28, 2013, and will apply to open reviews to the extent they do not conflict with OFCCP guidance or procedures existing prior to the effective date. Regardless, the 2006 guidance documents will apply to OFCCP's determination of whether to issue a notice of violation in any OFCCP review scheduled, open, or otherwise pending on February 28, 2013, the effective date of the rescission.

Key elements of the investigative procedures described in Compensation Directive 307 include the following:

  • Access to a variety of investigative and analytical tools: The Title VII’s case-by-case approach to compensation discrimination will require the use of what OFCCP calls “a range of investigative and analytical tools.” The right approach or combination of tools for a particular case depends upon the underlying facts, available data, and the contractor’s compensation system and practices. OFCCP investigators will work with statisticians and attorneys to determine the appropriate analytical methods to use in a particular investigation.
  • Investigation of systemic, smaller unit and individual discrimination: OFCCP will analyze the data for potential systemic discrimination in larger and smaller groups, and OFCCP may conduct comparative analyses of very small groups or individuals to determine if discrimination has occurred, and if there is evidence sufficient to support an inference that pay differences are due to discrimination. Pursuant to Title VII law, OFCCP may seek a remedy for compensation discrimination regardless of whether individual workers know they are being unfairly underpaid.
  • Review and testing of factors: OFCCP will evaluate, on a case-by-case basis, information from the contractor regarding the factors the contractor considered in making compensation decisions. A factor is an element that the contractor offers to explain differences in employee compensation under its compensation system and practices. A factor may be a qualification or skill that the worker brings to the position such as experience, or a job-related element such as tenure in position.

Training and Support

In order to ensure that the Title VII compensation principles are successfully and consistently implemented in OFCCP compliance evaluations, OFCCP has said it will develop and conduct:

  • New policy and enforcement tools that strengthen OFCCP’s ability to identify and remedy compensation discrimination, including the Compensation Directive and a comprehensive training program for field staff to ensure that the new procedures for investigating compensation practices are properly and consistently implemented in accordance with Title VII principles.
  • Technical assistance for contractors to encourage voluntary compliance and improve self-monitoring of pay practices by contractors for signs of potential discrimination. This will include written FAQs, webinars, and other support.

Additional Resources

For more information on Directive 307, desk audit analysis, requests for and submission of data compensation investigation procedures, including onsite review and offsite analysis see OFCCP's FAQs.

Directive 307 is available on the DOL website.

Susan Schoenfeld, J.D., is a Senior Legal Editor for BLR’s human resources and employment law publications. Ms. Schoenfeld has practiced in the area of employment litigation and counseling, covering topics such as disability discrimination, wrongful discharge, sexual harassment, and general employment discrimination. She has litigated numerous cases before the U.S. Court of Appeals, state court, and at the U.S. Department of Labor. In addition to litigating employment cases in state and federal court, she provided training and counseling to corporate clients regarding employment-related issues. Prior to entering private practice, Ms. Schoenfeld was an attorney with the Civil Rights Division at the U.S. Department of Labor in Washington, D.C., where she advised federal agencies, drafted regulations, conducted inspector training courses, and litigated cases for the Office of Federal Contract Compliance Programs, the Directorate of Civil Rights, and the Mine Safety and Health Administration. Ms. Schoenfeld received her undergraduate degree, cum laude, with honors, from Union College, and her law degree from the National Law Center at George Washington University.

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