[Federal Register Volume 71, Number 116 (Friday, June 16, 2006)]
[Notices]
[Pages 35114-35122]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-5457]



[[Page 35113]]

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Part V





Department of Labor





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Employment Standards Administration



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Office of Federal Contract Compliance Program; Voluntary Guidelines for 
Self-Evaluation of Compensation Practices for Compliance With 
Nondiscrimination Requirements of Executive Order 11246 With Respect to 
Systemic Compensation Discrimination; Notice

  Federal Register / Vol. 71, No. 116 / Friday, June 16, 2006 / 
Notices  

[[Page 35114]]


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DEPARTMENT OF LABOR

Employment Standards Administration


Office of Federal Contract Compliance Programs; Voluntary 
Guidelines for Self-Evaluation of Compensation Practices for Compliance 
With Nondiscrimination Requirements of Executive Order 11246 With 
Respect to Systemic Compensation Discrimination

AGENCY: Office of Federal Contract Compliance Programs, Employment 
Standards Administration, Department of Labor.

ACTION: Notice of final voluntary guidelines for self-evaluation of 
compensation practices for compliance with Executive Order 11246 with 
respect to systemic compensation discrimination.

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SUMMARY: The Office of Federal Contract Compliance Programs is 
publishing final voluntary guidelines for self-evaluation of 
compensation practices for compliance with Executive Order 11246, as 
amended, with respect to systemic compensation discrimination. This 
document sets forth the final voluntary guidelines and discusses 
comments that OFCCP received in response to proposed voluntary 
guidelines published in the Federal Register on November 16, 2004.

DATES: Effective Date: June 16, 2006.

FOR FURTHER INFORMATION CONTACT: Director, Division of Policy, 
Planning, and Program Development, Office of Federal Contract 
Compliance Programs, 200 Constitution Avenue, NW., Room N3422, 
Washington, DC 20210. Telephone: (202) 693-0102 (voice) or (202) 693-
1337 (TTY).

SUPPLEMENTARY INFORMATION: In this preamble, OFCCP summarizes the 
proposed voluntary self-evaluation guidelines, discusses the comments 
received in response to publication of the proposed voluntary 
guidelines, and provides a substantive discussion of the final 
voluntary self-evaluation guidelines. The substantive discussion of the 
final voluntary self-evaluation guidelines substantially restates the 
preamble of the proposed voluntary guidelines, except that 
modifications or clarifications were added in response to the comments.

I. Summary of the Proposed Voluntary Self-Evaluation Guidelines

    On November 16, 2004, OFCCP published a Notice in the Federal 
Register in which the agency proposed voluntary guidelines for self-
evaluation of compensation practices for compliance with Executive 
Order 11246 with respect to systemic compensation discrimination. 69 FR 
67252 (November 16, 2004). The proposed voluntary self-evaluation 
guidelines had four principal components, which are summarized below.
    First, the proposed voluntary self-evaluation guidelines proposed 
that contractors may continue to choose whatever form of self-
evaluation they deem appropriate in order to comply with OFCCP 
regulations requiring contractors to perform a self-evaluation of their 
compensation practices. 69 FR 67253.
    Second, the proposed voluntary self-evaluation guidelines provided 
that contractors have the option, at their discretion, of conducting a 
self-evaluation that conforms to the proposed voluntary guidelines. 69 
FR 67253. As an incentive for contractors to voluntarily choose this 
option, the proposed voluntary guidelines provided that OFCCP would 
conform its compliance monitoring activities with the contractor's 
self-evaluation program. Id. That is, if the contractor in good faith 
implemented a self-evaluation program that reasonably comports with the 
voluntary guidelines, OFCCP would not conduct an independent evaluation 
of the contractor's compensation practices during a compliance review. 
Id. The proposed voluntary guidelines made clear that contractors who 
choose this option must retain certain records so that OFCCP can 
determine whether the contractor in fact implemented a self-evaluation 
program that reasonably adhered to the voluntary guidelines. 69 FR 
67254. The proposed voluntary guidelines also permitted OFCCP to 
recommend in writing that the contractor make changes to its self-
evaluation program, if the program is only marginally reasonable under 
the voluntary guidelines. Id.
    Third, the proposed voluntary self-evaluation guidelines outlined 
general principles to which a self-evaluation system must reasonably 
adhere in order to comport with the proposed voluntary guidelines:
    (1) The self-evaluation must be based on ``similarly-situated 
employee groupings'' or ``SSEGs.'' SSEGs were defined as groupings of 
employees who perform similar work, and occupy positions with similar 
responsibility levels and involving similar skills and qualifications. 
69 FR 67253-67254. The SSEGs must contain at least 30 employees and at 
least 5 employees from each comparison group (i.e., females/males, 
minorities/non-minorities). 69 FR 67254. The proposed voluntary 
guidelines noted that there may be certain employees who occupy unique 
positions that are not similar to any other position. Id. The 
contractor must use non-statistical methods to evaluate the 
compensation of such unique employees. Id. However, OFCCP would 
carefully scrutinize the statistical and non-statistical analysis if 
the statistical analysis does not encompass at least 80% of the 
employees in the workplace or affirmative action program. Id. (2) The 
self-evaluation must use some form of statistical analysis that permits 
assessment of SSEGs, while accounting for the legitimate factors that 
influence compensation, such as experience, education, performance, 
productivity, location, etc. 69 FR 67254. The self-evaluation must also 
permit tests of statistical significance. Id. For contractors with 250 
or more employees, the statistical analysis must be multiple regression 
analyses. Id. (3) The self-evaluation must be conducted on an annual 
basis. 69 FR 67253. The contractor must investigate any statistically-
significant compensation disparities disclosed by the self-evaluation 
and provide appropriate remedies if the disparities cannot be explained 
by legitimate factors. Id.
    Fourth, the proposed voluntary self-evaluation guidelines provided 
a ``Compliance Certification Alternative,'' under which OFCCP would not 
seek a contractor's self-evaluation analysis if the contractor 
certified in writing that it believes that the self-evaluation is 
subject to protection from disclosure under the attorney-client 
privilege and/or the attorney work product doctrine. 69 FR 67255. The 
proposed voluntary guidelines made clear that a contractor that chooses 
this option would not receive the benefit of compliance coordination 
because OFCCP would be unable to assess whether the contractor's self-
evaluation program comported with the voluntary guidelines. Id.

II. Discussion of the Comments Received

    OFCCP received 26 comments on the Notice of proposed voluntary 
guidelines for self-evaluation of compensation practices for compliance 
with Executive Order 11246 with respect to systemic compensation 
discrimination. In response to the comments, OFCCP made several 
modifications to the proposed voluntary self-evaluation guidelines, 
discussed below. In addition, many of the commenters asked for 
clarification of OFCCP's intent with respect to various aspects of the 
voluntary self-evaluation guidelines, which OFCCP provides as 
appropriate below.

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    For the following discussion, OFCCP has grouped the comments around 
the following major subjects: (A) Similarly Situated Employee Groupings 
(SSEGs); (B) Statistical Analysis, Including Multiple Regression 
Analysis; (C) Factors included in the Statistical Analysis; (D) 
Appropriate Remedies; (E) Relationship with Item 11 of the Scheduling 
Letter; (F) Confidentiality of Compensation and Personnel Information; 
(G) Discoverability and the Alternative Compliance Certification; and 
(H) Adverse Inference.

A. Similarly Situated Employee Groupings (SSEGs)

    Several commenters, including HR Analytical Services and National 
Industry Liaison Group (NILG), requested that OFCCP provide more 
guidance on how contractors should develop SSEGs. OFCCP agrees that 
further clarification of this issue will be helpful to interested 
parties. Contractors must form SSEGs based on the facts about the jobs 
performed by the particular employees who will be encompassed in the 
self-evaluation program. Contractors should form SSEGs by determining 
which employees are similarly situated based on their job duties, 
responsibility levels, and skills and qualifications involved in the 
positions, and other pertinent factors (as discussed directly below). 
The most important aspect of this process is ensuring accurate 
information about employees' job duties, the responsibility level, 
skills, and qualifications involved in their positions, and the other 
pertinent factors. It may also be helpful for contractors to retain 
counsel for assessment of applicable caselaw as an aid to making such 
determinations. This review of caselaw typically will involve research 
for cases that discuss positions that are factually similar to the 
positions at issue in the contractor's workforce.\1\
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    \1\ In the preamble of the final interpretive standards, OFCCP 
has cited cases that discuss whether specific positions are 
similarly situated. There are hundreds of other Federal court cases 
that discuss whether other positions are similarly situated based on 
facts about the specific positions involved in each of those cases.
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    Several commenters, such as Equal Employment Advisory Council 
(EEAC), agreed that similarity in work performed, and in responsibility 
level, skills, and qualifications involved in the positions, is a 
necessary condition for employees to be similarly situated, but also 
argued that similarity in these factors is not a sufficient condition 
for employees to be similarly situated in all cases. These commenters 
argued that there may be other factors in particular cases that may 
make individuals dissimilar who would otherwise meet the proposed 
standard for similarly situated. For example, these commenters noted 
that otherwise similarly-situated employees may be paid differently for 
a variety of reasons: they work in different departments or other 
functional divisions of the organization with different budgets or 
different levels of importance to the business; they fall under 
different pay plans, such as team-based pay plans or incentive pay 
plans; they are paid on a different basis, such as hourly, salary or 
through sales commissions; some are covered by wage scales set through 
collective bargaining, while others are not; they have different 
employment statuses, such as full-time or part-time; etc. OFCCP agrees 
with these commenters that such factors may be important to whether 
employees are similarly situated. See, e.g., EEOC Compliance Manual on 
``Compensation Discrimination,'' EEOC Directive No. 915.003 (December 
5, 2000), at 10-6 (``the fact that employees work in different 
departments or other organizational units may be relevant, but is not 
controlling.''); see also Cooper v. Southern Co., 390 F.3d 695, 717 
(11th Cir. 2004)(noting that plaintiffs' expert ``did not tailor her 
analysis to the specific positions, job locations, or departmental or 
organizational structures in question; however, the wide-ranging and 
highly diversified nature of the defendants' operations requires that 
employee comparisons take these distinctions into account in order to 
ensure that the black and white employees being compared are similarly 
situated''); Goodwin v. General Motors Corp., 275 F.3d 1005, 1012 n.8 
(10th Cir. 2002)(holding employees similarly situated for compensation 
discrimination claim under Title VII because ``[a]ll four 
representatives had the same supervisor, performed identical job duties 
and were subject to the same company standards and policies''); Webb v. 
Merck & Co., Inc., 206 F.R.D. 399, 408 (E.D. Pa. 2002)(``We agree with 
defendant that [the plaintiffs'' expert's] analysis of hourly (union) 
workers is unreliable and irrelevant because it fails to control for 
the mandated wage rate set by collective bargaining agreements for an 
employee's position * * *''). OFCCP has added a provision in the final 
voluntary self-evaluation guidelines to make clear that contractors 
should consider the applicability of such factors in developing SSEGs, 
in addition to similarity in work performed and in responsibility 
level, skills, and qualifications involved in the positions.
    Several commenters were concerned that the proposed voluntary 
guidelines would force contractors to group employees who were not 
similarly situated or otherwise that many employers could not meet the 
SSEG standards.\2\ In particular, these commenters took issue with the 
provision that OFCCP would carefully scrutinize the self-evaluation 
analyses of a contractor that could not encompass 80% of the workforce 
or AAP within the statistical analyses. These commenters argued that 
80% was far too high of a percentage of the workforce or AAP for which 
appropriate grouping under the voluntary guidelines could be expected. 
Several commenters also believed that the 30/5 size requirements for 
SSEGs (SSEGs must include at least 30 employees, and five employees 
from each comparator group (females/males; minorities/non-minorities)) 
were also unrealistic in light of the diversity of occupations in many 
workplaces. Several commenters questioned whether OFCCP would permit 
contractors to develop self-evaluation programs that encompassed 
several AAPs or establishments, which would help address some of these 
concerns.
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    \2\ See, e.g. American Bankers Association, American Society of 
Employers, Association of Corporate Counsel, Equal Employment 
Advisory Council, Gayle B. Ashton, Glenn Barlett Consulting 
Services, HR Analytical Services, Maly Consulting LLP, National 
Industry Liaison Group, Northeast Region Corporate Industry Liaison 
Group, ORC Worldwide, Silicon Valley Industry Liaison Group, Society 
for Human Resource Management, Sonalysts, and TOC Management 
Services.
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    OFCCP agrees with these commenters that it may be expected that 
certain employees cannot be included in an SSEG because they are not 
similarly situated to any other employee in the organization, 
workplace, or AAP. Under no circumstances should a contractor attempt 
to group employees into an SSEG who do not meet the standards for 
similarly situated under these final voluntary self-evaluation 
guidelines.\3\ OFCCP added a provision to the final voluntary 
guidelines to clarify its intent on this issue.
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    \3\ This should not be read as a limitation or criticism of any 
type of self-evaluation technique or analysis that contractors 
choose to implement at their discretion. This limitation only 
applies to the self-evaluation methods outlined in the final 
voluntary self-evaluation guidelines.
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    OFCCP does not have any expectation that a certain proportion of 
employees in every workforce or AAP could be appropriately grouped into 
an SSEG. The proposed 80% threshold was simply a way to allocate agency 
resources based on OFCCP's judgment that exclusion of a small 
percentage of employees from the SSEGs did not warrant further OFCCP 
scrutiny. In

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response to the commenters' concerns that 80% is unrealistic because of 
the occupational diversity in many workplaces, OFCCP has slightly 
lowered this threshold to 70% in the final voluntary guidelines.
    OFCCP also agrees that some of these concerns may be addressed by 
self-evaluation programs that encompass a group of employees larger 
than a particular AAP or establishment.\4\ Therefore, in the final 
voluntary self-evaluation guidelines, OFCCP provides that the self-
evaluation program must at least encompass employees within an AAP or 
establishment. However, a self-evaluation program which encompasses 
larger groups of employees (e.g., by including several (or many) 
establishments or AAPs) will also comport with the voluntary self-
evaluation guidelines, if the other conditions of these voluntary 
guidelines are satisfied. Contractors have the discretion of selecting 
the grouping of employees to be included in each self-evaluation 
program, although no grouping can be smaller than the AAP or 
establishment level.
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    \4\ In this paragraph, OFCCP's use of the terms ``encompass,'' 
``groups,'' and ``groupings'' relates only to the employees included 
in the overall self-evaluation program, and should not be confused 
with SSEGs or units for conducting regression analyses (i.e., by 
SSEG, or by combining several SSEGs into a pooled regression that 
includes particular SSEG membership variables).
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    Several commenters, such as Berkshire Associates, Tyson Foods, 
Inc., and Maly Consulting LLC, requested clarification about the types 
of non-statistical analysis that should be used to evaluate 
compensation practices involving employees who cannot be combined into 
an SSEG. OFCCP affords the contractor discretion in determining the 
type of non-statistical analysis which would be reasonable to use in a 
particular case. This could include comparison of the employee's 
compensation to that of other employees who are similarly situated to 
the employee, if any, or assessment of the decisions which determined 
the employee's compensation, with a goal of assessing whether 
legitimate, nondiscriminatory reasons explain each decision. As later 
explained in part I, Voluntary Guidelines, section E, contractors are 
obligated to keep the data and documents resulting from these non-
statistical methods.

B. Statistical Analysis, Including Multiple Regression Analysis

    Several commenters, including Berkshire Associates and DCI 
Consulting, requested that OFCCP provide more guidance on the types of 
statistical analysis that the agency would find acceptable under the 
proposed voluntary guidelines, where a multiple regression analysis is 
not required. OFCCP affords contractors flexibility in determining the 
type of statistical analyses which would be reasonable to use in a 
particular case. However, the statistical analysis must compare 
compensation within SSEGs and it must take into account legitimate 
factors that affect compensation of employees in each SSEG. The 
statistical analysis must also permit tests of statistical significance 
that are generally accepted in the statistics profession.
    Many commenters expressed concern about the proposed voluntary 
guidelines' requirement that contractors with 250 or more employees 
must use multiple regression analysis as the method of self-
evaluation.\5\ These commenters noted that multiple regression analysis 
is complex and that the requirement would force contractors to hire 
costly experts to develop and maintain such self-evaluation programs. 
These commenters also noted that multiple regression analysis requires 
significant personnel information in electronic format, which 
contractors do not normally collect and include in their HRIS 
databases. In order to develop a self-evaluation program that comports 
with the proposed voluntary guidelines, these commenters argued, 
contractors would have to expend significant resources attempting to 
collect relevant personnel information and entering such information 
into a database. Many of the commenters who expressed these concerns 
argued that the burdens involved with multiple regression analysis were 
simply too great for many contractors and that the 250-employee 
threshold was far too low. In order to address these concerns, several 
commenters recommended increasing the threshold significantly. Other 
commenters recommended that OFCCP allow contractors to use a tiered 
approach in the self-evaluation, much as OFCCP does in its compliance 
review process. Under the tiered approach, the contractor would be 
required to conduct a multiple regression analysis only after a less-
sophisticated analysis indicated that there was a possible compensation 
disparity. Several commenters noted that the requirement to conduct the 
self-evaluation on an annual basis added to the burden of the multiple 
regression analysis and suggested that OFCCP could reduce this burden 
by requiring the self-evaluation be conducted less frequently.
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    \5\ See, e.g., American Bankers Association, American Society of 
Employers, Association of Corporate Counsel, Berkshire Associates, 
DCI Consulting, Equal Employment Advisory Council, Gayle B. Ashton, 
Glenn Barlett Consulting Services, HR Analytical Services, Maly 
Consulting LLC, National Industry Liaison Group, ORC Worldwide, 
Silicon Valley Industry Liaison Group, Society for Human Resource 
Management, Sonalysts, TOC Management Services, and Tyson Foods, 
Inc.
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    OFCCP is cognizant of the complexity involved in performing a 
multiple regression analysis, and the burden of gathering information 
entailed therein. In response to the comments, the final Voluntary 
Self-Evaluation Guidelines only require a multiple regression analysis 
for those establishments or AAPs that have 500 or more employees. 
Moreover, OFCCP emphasizes that a multiple regression analysis is not 
required under 41 CFR 60-2.17(b)(3); rather, a contractor can opt to 
perform a multiple regression if it desires to obtain the compliance 
coordination incentive provided by these Voluntary Guidelines. 
Specifically, if a contractor performs a multiple regression analysis, 
which reasonably meets the standards outlined in the voluntary 
guidelines and the analysis finds no discrimination, OFCCP will 
consider the contractor's compensation practices to be in compliance 
with Executive Order 11246; in other words, OFCCP will not further 
investigate the contractor's compensation practices. If a contractor 
decides that performing a multiple regression is too burdensome or 
otherwise undesirable, it can choose another self-evaluation technique 
without any adverse consequences from OFCCP. By choosing not to perform 
a multiple regression analysis, the contractor is merely choosing not 
to take advantage of the compliance coordination incentive.
    In the final voluntary guidelines OFCCP does not accept a tiered 
approach to self evaluation as suggested by several commenters. 
Although OFCCP will use the tiered approach in its analysis of a 
compensation system pursuant to the Final Interpretive Standards for 
Systemic Compensation Discrimination the use of a tiered approach in 
the Systemic Standards is for purposes of OFCCP's allocation of 
resources. OFCCP is unable to conduct a full-scale compensation review 
of all of the approximately 100,000 contractor establishments within 
its jurisdiction. Therefore, OFCCP unavoidably will fail to detect 
existing discrimination in those establishments that cannot be 
reviewed. However, OFCCP can maximize the number of establishments 
subject to some form of compensation review by using a tiered approach 
to target OFCCP investigations toward establishments with a higher 
likelihood of a potential discrimination problem.

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But in using a tiered approach, OFCCP inevitably will miss 
discrimination in certain cases. OFCCP accepts this risk of ``false 
negatives.'' However, a contractor is not required to perform a 
multiple regression for its self-evaluation. If a contractor chooses to 
do so, and performs a multiple regression that reasonably meets the 
general standards outlined in the voluntary guidelines, the contractor 
will be found in compliance on compensation. In OFCCP's view, because a 
contractor is incurring a substantial gain if it does a reasonable 
multiple regression analysis, a contractor should have to conduct a 
rigorous analysis. A less-sophisticated analysis may miss a potential 
discrimination problem that would be revealed by the more accurate 
multiple regression analysis, and a contractor who seeks to avoid OFCCP 
review should insure against potentially missing discrimination by 
performing a multiple regression analysis.
    OFCCP also believes that it is important for contractors to conduct 
the self-evaluation analysis on an annual basis. Annual self-evaluation 
will prevent patterns of discrimination from emerging and will allow 
the contractor to correct any potential discrimination problems in a 
timely manner.
    Several commenters argued that contractors should have the ability 
to investigate whether statistically-significant disparities revealed 
by the regression model were caused by legitimate factors or unique 
circumstances. OFCCP agrees with these comments. In the final voluntary 
self-evaluation guidelines, OFCCP retained the provision of the 
proposed voluntary guidelines that ``[t]he contractor must adequately 
determine whether such statistical disparities are explained by 
legitimate factors or otherwise are not the product of unlawful 
discrimination.'' Thus, contractors must investigate any statistically-
significant disparities, determine whether there are legitimate, non-
discriminatory explanations for the disparities, and correct the 
disparities where appropriate.
    Several commenters requested that OFCCP provide, post online, or 
otherwise make available to contractors, the statistical software that 
contractors can use to evaluate their compensation systems and to 
discern if discrimination exists. OFCCP uses SAS software to evaluate 
contractors' compensation systems, and such software was purchased 
through the normal procurement process. Other software may be available 
to perform these types of evaluations. This listing does not constitute 
any endorsement of SAS software, but rather is provided pursuant to 
several commenters' requests.
    Several commenters also requested that OFCCP provide a grace period 
or a pilot stage before full implementation of the final voluntary 
guidelines. As OFCCP has explained, the agency does not require the 
contractor to perform a multiple regression analysis. Rather, a 
contractor can opt to perform a multiple regression if it desires to 
obtain the compliance coordination incentive provided by the voluntary 
guidelines. If a contractor decides that performing a multiple 
regression is too burdensome or otherwise undesirable, it can choose 
another self-evaluation technique without any adverse consequences from 
OFCCP. Because OFCCP is not requiring contractors to engage in any 
activity to implement these final voluntary guidelines, OFCCP disagrees 
that a grace or pilot period are appropriate.

C. Factors Included in the Statistical Analysis (Including Multiple 
Regression Analysis)

    Several commenters, such as HR Analytical Services, requested that 
OFCCP provide more guidance on the factors that contractors should 
include in the statistical analysis in order to comport with the 
voluntary guidelines. OFCCP cannot provide additional guidance to 
contractors on the factors to include in the statistical analysis 
because those factors must be determined based on the facts of the 
particular case. Contractors should assess the factors that influence 
employees' compensation in their workforce. These factors may not be 
the same for all employees, and even where they are the same, their 
influence may be significantly different by class of employee. OFCCP 
listed several of the typical factors to provide some general idea of 
the types of factors that may be used, not to identify an exhaustive 
list that is presumed applicable in every case.
    Several commenters argued that OFCCP should defer to the 
contractor's choice of factors used in the multiple regression model 
and should not require contractors to include every conceivable factor 
that might have a bearing on compensation. These commenters also asked 
whether OFCCP would allow contractors to use proxies instead of actual 
information on a factor where that information is not readily available 
to the contractor. OFCCP will not simply defer to the contractor in its 
determination of the appropriate factors. However, if the contractor 
has made reasonable judgments about the appropriate factors to include 
in the statistical analyses, based on facts about the factors that 
influence compensation for the employees encompassed within the 
analyses, then OFCCP will find that the contractor's self-evaluation 
program comports with these voluntary guidelines, if the other 
conditions of the voluntary guidelines are reasonably satisfied. OFCCP 
does not expect contractors to include all conceivable factors in the 
analyses. Nor does OFCCP prohibit the use of proxies, but cautions 
contractors to use proxies with great care. In a particular case, 
proxies may be reasonable, in light of the availability of actual data, 
the burden involved with obtaining actual data, and the expected 
relationship between the proxy and the actual data (i.e., the proxy 
``tracks'' the actual data reasonably well). OFCCP suggests that 
contractors may test how closely a particular proxy ``tracks'' the 
actual data by comparing the proxy to a sample of the actual data. This 
test may reveal that the proxy tracks the data reasonably well or can 
be weighted or otherwise modified to reasonably track the actual data.

D. Appropriate Remedies

    Several commenters, such as Association of Corporate Counsel, 
Morgan, Lewis & Bockius, and ORC Worldwide, requested that OFCCP 
provide more guidance on the circumstances in which a remedy is 
required under the voluntary guidelines and how the remedy should be 
determined. OFCCP agrees that general guidance on these issues will be 
helpful to interested parties. Under the final voluntary self-
evaluation guidelines, the contractor must take appropriate remedial 
action to correct statistically-significant compensation disparities 
between employees in an SSEG where such disparities are not explained 
by legitimate, non-discriminatory factors.\6\ The remedial action that 
is appropriate will depend on the facts of the case but should include 
back pay and other make whole relief. See Franks v. Bowman 
Transportation Co., 424 U.S. 747 (1976). OFCCP recommends that 
contractors tailor the remedy for each employee as to whom compensation 
disparities cannot be explained by legitimate factors. See Rudebusch v. 
Hughes, 313 F.3d 506, 523-24 (9th Cir. 2002) (``Thus, the real question 
is not whether Rudebusch should have been brought up to the mean, but 
whether using the predicted salary of similarly situated white male 
faculty for the minority and

[[Page 35118]]

female adjustments somehow overcompensated these minority and women 
faculty members, i.e., whether the adjustments were more than 
remedial.''). As in all questions of whether the contractor's self-
evaluation program comports with the voluntary guidelines, OFCCP will 
assess whether the contractor's actions were reasonable in light of the 
particular facts.
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    \6\ Not all of the legitimate factors need be included in the 
statistical analyses, as analyses of individual disparities may 
reveal legitimate factors that are qualitative, unquantifiable, or 
unique to a particular employee.
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E. Relationship With Item 11 of the Scheduling Letter

    Several commenters, such as DCI Consulting and Glenn Barlett 
Consulting Services, requested that OFCCP explain how the voluntary 
self-evaluation guidelines will be coordinated with OFCCP's compliance 
review process. In particular, these commenters questioned how the 
proposed voluntary guidelines would be coordinated with Item 11 of the 
OFCCP Scheduling Letter. In response to these commenters, OFCCP added a 
provision in the final voluntary self-evaluation guidelines to clarify 
this issue. The first step of the compliance review process is that 
OFCCP sends a Scheduling Letter to the contractor. The Scheduling 
Letter contains an itemized listing of documents and information that 
the contractor must submit to OFCCP. Item 11 of the itemized listing 
requests ``annualized compensation data (wages, salaries, commissions, 
and bonuses) by either salary range, rate, grade, or level showing 
total number of employees by race and gender and total compensation by 
race and gender.'' Under the final voluntary self-evaluation 
guidelines, a contractor that desires the compliance coordination 
incentive--and, therefore, has attempted to develop and implement a 
self-evaluation program that reasonably comports with the voluntary 
guidelines--will not be required to submit compensation data in 
response to Item 11. Instead, the contractor should respond to the Item 
11 request by noting that the contractor ``seeks compliance 
coordination under the OFCCP voluntary compensation self-evaluation 
guidelines.'' OFCCP staff will then call the contractor to discuss the 
contractor's self-evaluation program and, based on that initial 
discussion, OFCCP will determine what documents and information it will 
review in the particular case.

F. Confidentiality of Compensation and Personnel Information

    Several commenters, such as Association of Corporate Counsel, NILG, 
and U.S. Chamber of Commerce, expressed concern about the 
confidentiality of compensation and personnel information that 
contractors must maintain and make available to OFCCP to take advantage 
of the compliance coordination offered in the proposed voluntary self-
evaluation guidelines. These commenters requested that OFCCP provide 
express assurances that the agency would not disclose such information 
to third-parties or other enforcement agencies. In response to these 
comments, OFCCP has added a provision to the final voluntary self-
evaluation guidelines under which ``OFCCP will treat compensation and 
other personnel information provided by the contractor to OFCCP under 
these voluntary guidelines as confidential to the maximum extent the 
information is exempt from public disclosure under the Freedom of 
Information Act, 5 U.S.C. 552.'' OFCCP borrowed this text from its 
regulations at 41 CFR 60-2.18(d).

G. Discoverability and the Alternative Compliance Certification

    The Alternative Compliance Certification (ACC) is a method by which 
a contractor is permitted under certain circumstances to certify its 
compliance with 41 CFR 60-2.17(b)(3) in lieu of producing the 
methodology or results of the compensation self-evaluation to OFCCP 
during a compliance review. Several commenters, such as EEAC and 
Berkshire Associates Inc. expressed confusion about the ACC provision 
in the proposed voluntary guidelines. For example, several commenters 
questioned whether the discussion of the ACC implied that contractors 
were afforded only two ways to comply with the compensation self-
evaluation requirement contained in OFCCP's regulations at 41 CFR 60-
2.17(b)(3), i.e., either (1) conduct a self-evaluation analysis that 
comports with the voluntary guidelines, or (2) certify compliance 
through the ACC. EEAC appeared to favor this interpretation and argued 
that contractors in reality have a third option: Conduct any form of 
self-evaluation they deem appropriate. Several commenters, such as Maly 
Consulting LLC, were concerned that the proposed voluntary guidelines' 
use of mandatory language in describing self-evaluation methods 
appeared to contradict provisions which indicated that the voluntary 
guidelines are indeed voluntary. In response to these comments, OFCCP 
has clarified this provision in the final voluntary guidelines to make 
clearer the agency's intent regarding the ACC. The ACC was designed to 
address only the issue of disclosure of the self-evaluation, not the 
methods of self-evaluation contractors might use to comply with the 
self-evaluation requirement in OFCCP's regulations. As to the latter 
issue, the first sentence of the proposed voluntary guidelines provided 
that ``OFCCP will continue to permit contractors to choose any form of 
compensation self-evaluation techniques to comply with 41 CFR 60-
2.17(b)(3).'' 69 FR 67253. The purpose of the ACC was to provide 
contractors with a way to comply with 41 CFR 60-2.17(b)(3) without 
engaging OFCCP's scrutiny of their self-evaluation method. However, if 
a contractor chooses to do an ACC, the contractor would not be eligible 
for the compliance coordination incentive under the voluntary 
guidelines. OFCCP has also clarified several other provisions in the 
final voluntary self-evaluation guidelines to reinforce OFCCP's intent 
that the voluntary guidelines are indeed strictly voluntary.
    Several commenters, such as Association of Corporate Counsel and 
Morgan, Lewis & Bockius LLP argued that contractors who opt for the ACC 
should still be eligible for the compliance coordination incentive if 
they certify that they have implemented a compensation self-evaluation 
program that complies with the voluntary guidelines. Recognizing that 
OFCCP would be unable to review the contractor's self-evaluation 
program if the contractor were permitted to certify, the Association of 
Corporate Counsel suggested that OFCCP could address this problem by 
conducting compensation evaluations of a random sample of the 
contractors that certified. OFCCP does not agree that this approach 
would be a reasonable enforcement policy. OFCCP expects that many 
contractors would opt to certify under the suggested approach, because 
they would obtain the benefit of the compliance coordination incentive 
without any direct scrutiny of their self-evaluation program. If large 
numbers of contractors certified, OFCCP would have to divert a rather 
sizeable portion of its investigation resources toward random 
compensation reviews. This would defeat the purpose of the voluntary 
self-evaluation guidelines, which was to afford contractors a 
compliance coordination incentive for conducting a self-evaluation that 
comports with the voluntary guidelines.
    Several commenters requested additional clarification as to the 
terms ``reasonably meet'' the general standards and ``marginally 
reasonable,'' as used in Section II. Procedure, Paragraph B. However, 
each self-evaluation involves a contractor's response to a variety of 
factual issues, such as the composition of SSEGs, the factors to 
include in a regression, and how to follow-up on

[[Page 35119]]

statistical disparities. The wide variety of possible responses to the 
myriad of possible fact patterns makes greater specificity in this 
terminology impossible.
    Morgan, Lewis & Bockius argued that the ACC should not require the 
contractor to certify that it conducted any self-evaluation 
``analysis,'' which implies that the contractor's chosen self-
evaluation technique involved a quantitative or statistical method. 
OFCCP agrees that the contractor need not have relied on quantitative 
or statistical techniques to comply with 41 CFR 60-2.17(b)(3), as OFCCP 
has repeatedly noted that the contractor has the discretion to comply 
by using any self-evaluation technique it deems appropriate. To ensure 
that the ACC does not appear to conflict with this intent, OFCCP has 
removed the term ``analyses'' in the ACC of the final voluntary 
guidelines.
    Several commenters were concerned that the ACC would not be 
effective in protecting compensation self-evaluation analyses from 
disclosure during third-party litigation. Some commenters argued that 
the ACC could even jeopardize the contractor's privilege claims in such 
litigation. The U.S. Chamber of Commerce, for example, argued that the 
existence of the self-evaluation voluntary guidelines might support an 
argument that the contractor conducted the self-evaluation for reasons 
other than for obtaining legal advice or in preparation for potential 
litigation. The fact that the self-evaluation at issue in such a case 
looked like the self-evaluation outlined in the voluntary guidelines 
might support the argument that the employer conducted the self-
evaluation to take advantage of the voluntary guidelines, not for 
reasons which would support a recognized protection from disclosure.
    OFCCP did not intend the voluntary guidelines to be a basis for 
employers to lose applicable protections from disclosure. OFCCP 
included the ACC in the voluntary guidelines to avoid protracted 
litigation with contractors over the applicability of claimed 
protections and as a clear statement to contractors that they would not 
obtain the benefit of the compliance coordination incentive offered 
under the voluntary guidelines if they did not disclose their self-
evaluation analyses to OFCCP. The voluntary guidelines provide only 
general parameters for a self-evaluation, involving a few high-level 
concepts, such as SSEGs and multiple regression analysis. Thus, the 
argument that a self-evaluation which conformed to these general 
principles must have been conducted under the OFCCP voluntary self-
evaluation guidelines is unreasonable. In addition, there are many 
alternative sources upon which an employer (or the employer's counsel) 
could draw to develop a self-evaluation method that looks similar to 
the methods outlined in the voluntary self-evaluation guidelines. After 
all, OFCCP looked to Title VII caselaw to define SSEGs and to determine 
that multiple regression analysis is an appropriate statistical method 
for assessing compensation.
    Several commenters requested that OFCCP return the compensation and 
personnel data after OFCCP concludes its evaluation. The Records 
Disposal Act, 44 U.S.C 3301 et seq. forbids us from doing so, as the 
Act provides the exclusive means for disposal of such records. 44 
U.S.C. 3314. Records received by an agency of the government under 
Federal Law constitute ``records'' for purposes of the Records Disposal 
Act, see Section 3301, and ``once a document achieves the status of a 
``record'' as defined by the Act, it may not be alienated or disposed 
of without the consent of the Administrator of General Services, who 
has delegated his authority in such matters to the Archivist of the 
United States.'' Kissinger v. Reporters Committee for Freedom of the 
Press, 445 U.S. 136, 147 (1980). See also, 36 CFR part 1220. Be 
assured, however, that the records will ultimately be disposed of, as 
provided by the Records Disposal Act.
    The Chamber requested that OFCCP recognize a ``self-critical 
privilege'' which would protect compensation self-evaluation analysis 
from disclosure during third-party litigation. OFCCP believes that 
employers are to be encouraged to implement robust compensation self-
evaluation programs, to prevent and timely correct potential 
compensation discrimination problems. Based on the comments OFCCP 
received, it is apparent that many employers perceive the possibility 
of disclosure of compensation self-evaluations in litigation as a 
compelling disincentive to conducting such analyses. However, OFCCP has 
no authority to establish privileges applicable in litigation in 
federal or state court.

H. Adverse Inference

    Several commenters, including Gaucher Associates and the Chamber, 
were concerned that the proposed voluntary self-evaluation guidelines 
would create a standard for conducting self-evaluations against which 
employers would be judged in third-party litigation or by OFCCP. These 
commenters acknowledged that OFCCP has made compliance with the 
voluntary guidelines entirely voluntary. Nonetheless, these commenters 
worried that a judge, jury, or OFCCP compliance officer may draw an 
adverse or negative inference if the employer chooses not to conduct a 
self-evaluation in the form outlined in the voluntary guidelines. These 
commenters asked that OFCCP provide in the final voluntary guidelines 
that the self-evaluation methods outlined in the voluntary guidelines 
are not the only acceptable methods that an employer could use to 
conduct a self-evaluation. OFCCP does not intend the voluntary self-
evaluation guidelines to provide the basis for any adverse or negative 
inference against a contractor who decides not to take advantage of the 
voluntary guidelines. OFCCP has added a provision in the final 
voluntary self-evaluation guidelines to make clear that the guidelines 
are entirely voluntary and to express OFCCP's formal policy that the 
contractor's declining to adopt the methods outlined in the voluntary 
guidelines will not be used as a basis for any negative or adverse 
inference about the contractor's compliance status. However, if a 
contractor fails to adopt any self-evaluation method, such failure will 
be the basis for a finding of noncompliance with 41 CFR 60-2.17(b)(3). 
OFCCP agrees with these commenters that there are many methods of 
conducting a compensation self-evaluation; that application of general 
self-evaluation methods, such as those outlined in the final voluntary 
self-evaluation guidelines, will entail significant variability based 
on the unique facts of each workplace and workforce; and that whether a 
particular method is more appropriate than another method must be based 
on a significant understanding of the facts of the particular case.

III. Substantive Discussion Regarding the Final Voluntary Self-
Evaluation Guidelines

    On May 4, 2000, OFCCP proposed substantial revisions to affirmative 
action program requirements. 65 FR 26089 (May 4, 2000). As OFCCP 
explained in the preamble to these May 4, 2000 proposed revisions:

    More recently, an additional objective of the proposed revision 
has been to advance the Department of Labor's goal of pay equity; 
that is, ensuring that employees are compensated equally for 
performing equal work* * * . This NPRM encourages contractors to 
analyze their own compensation packages to ensure that all their 
employees are being paid fairly.

65 FR 26089 (May 4, 2000).

[[Page 35120]]

    On November 13, 2000, OFCCP published a Final Rule revising the 
regulatory requirements for written affirmative action programs. 65 FR 
68022 (November 13, 2000). OFCCP adopted a requirement that covered 
contractors evaluate their ``[c]ompensation system(s) to determine 
whether there are gender-, race-or ethnicity-based disparities.'' 65 FR 
68046 (November 13, 2000) (referencing 41 CFR 60-2.17(b)(3).
    OFCCP received many comments in response to the Proposed Rule on 
this compensation self-evaluation requirement. As explained in the 
Preamble to the November 13, 2000 Final Rule:

    Many of the comments focused on the requirement to review 
compensation systems, with several commenters asserting that OFCCP 
does not have authority to enforce equal pay concerns, that analysis 
of compensation systems is not required by the current regulations, 
that compensation analyses impose an additional burden, or that 
OFCCP did not specify the types of analyses it would find 
acceptable. Commenters also expressed confusion about how the 
information gained from [the compensation analysis] should be used 
by contractors, and how the contractor's actions will be evaluated 
by OFCCP.

65 FR 68036 (November 13, 2000).
    OFCCP responded to these commenters in the Preamble to the November 
13, 2000 Final Rule: ``[C]ontractors have the ability to choose a type 
of compensation analyses that will determine whether there are gender-, 
race-, or ethnicity-based disparities.'' 65 FR 68036 (November 13, 
2000).
    OFCCP has not, however, provided guidance to contractors or to 
OFCCP personnel on suggested techniques for compliance with this 
compensation self-evaluation requirement. These voluntary guidelines 
are intended to provide suggested techniques for complying with the 
compensation self-evaluation requirement, although these voluntary 
guidelines are entirely voluntary. Thus, compliance with these 
voluntary guidelines is not required for compliance with section 60-
2.17(b)(3). OFCCP has included an incentive for contractors to adopt 
voluntarily the general methods outlined in these voluntary guidelines. 
Specifically, if a contractor, in good faith, reasonably implements the 
general methods outlined herein, OFCCP will coordinate its compliance 
monitoring activities with the contractor's self-evaluation approach. 
However, compliance with these voluntary guidelines is not the only way 
to comply with section 60-2.17(b)(3).
    While developing these voluntary guidelines for conducting 
compensation self-evaluations, OFCCP recognizes the risk of liability 
that an employer faces when making corrective compensation adjustments 
under a self-evaluation process. For example, female or minority 
employees may bring claims based on the theory that the employer's own 
self-evaluation study established that the employer engaged in 
discrimination or that the employer did not make sufficient 
compensation adjustments to remedy the discrimination. See, e.g., 
Cullen v. Indiana Univ., 338 F.3d 693, 701-04 (7th Cir. 2003)(female 
professor sued university alleging compensation discrimination and 
basing her claim, in part, on university's pay equity study). 
Similarly, male or non-minority employees may sue the employer alleging 
violation of Title VII because the employer gave salary adjustments to 
female or minority employees under the compensation self-evaluation. 
See, e.g., Rudebusch v. Hughes, 313 F.3d 506, 515-16 (9th Cir. 
2002)(employer's self-audit, regression analysis was not technically 
sufficient to foreclose male professor's discrimination claim against 
the employer); Maitland v. Univ. of Minn., 155 F.3d 1013, 1016-18 (8th 
Cir. 1998)(same); Smith v. Virginia Commonwealth Univ., 84 F.3d 672, 
676-77 (4th Cir. 1996)(same). OFCCP has attempted to provide voluntary 
guidelines that are technically sufficient to withstand judicial 
scrutiny, so that contractors do not face potential liability for 
implementing a robust and effective self-evaluation program. 
Accordingly, these voluntary guidelines are as follows:

Final Voluntary Guidelines--Voluntary Guidelines for Self-Evaluation of 
Compensation Practices for Compliance With Executive Order 11246 With 
Respect to Systemic Compensation Discrimination (``Voluntary 
Guidelines'')

    These Voluntary Guidelines consist of two sections: I. Voluntary 
Guidelines and II. Procedures.

I. Voluntary Guidelines

    OFCCP will continue to permit contractors to choose their own form 
of compensation self-evaluation techniques to comply with 41 CFR 60-
2.17(b)(3). However, as an incentive for contractors to implement a 
compensation self-evaluation system that conforms to these Voluntary 
Guidelines, OFCCP will deem a contractor in compliance with section 60-
2.17(b)(3) and will coordinate its compliance monitoring activities as 
explained in Section II of these Voluntary Guidelines, if the 
contractor's compensation self-evaluation program meets the standards 
outlined below. These guidelines are strictly voluntary. A contractor's 
decision not to implement a self-evaluation program that comports with 
these Voluntary Guidelines shall not be a consideration in OFCCP's 
assessment of a contractor's compliance with Executive Order 11246 or 
OFCCP's regulations. However, failure to adopt any self evaluation 
method will be a basis for a finding of non-compliance with 41 CFR 60-
2.17(b)(3). The mandatory language used to describe methods of 
compensation self-evaluation under these Voluntary Guidelines means 
that these methods are required if the contractor wishes to obtain the 
compliance coordination incentive offered under these Voluntary 
Guidelines. Use of such mandatory terms in these Voluntary Guidelines 
shall not be construed to imply that the methods outlined in these 
Voluntary Guidelines are mandatory or to imply any limit on a 
contractor's discretion to use any self-evaluation technique it deems 
appropriate to comply with 41 CFR 60-2.17(b)(3). However, OFCCP will 
deem a contractor in compliance with 41 CFR 60-2.17(b)(3), and will 
coordinate its compliance monitoring activities as explained in Section 
II of these Voluntary Guidelines, if the contractor's self-evaluation 
program meets the following general standards :
    A. The self-evaluation is performed by groupings of employees that 
are similarly situated, referenced hereinafter as ``Similarly Situated 
Employee Groupings,'' or ``SSEGs.'' Employees may be placed into the 
same SSEG if they are ``similarly situated'; that is, if they perform 
similar work and occupy positions which are similar in responsibility 
level, and similar in the skills and qualifications involved in the 
positions. Employees may not be grouped in an SSEG for purposes of 
these Voluntary Guidelines unless the work performed, responsibility 
level, and requisite skills and qualifications involved in their 
positions are actually similar, regardless of any employer-created 
designation, such as job title, job classification, pay grade or range, 
etc. The fact that an employer has grouped employees into a particular 
pay grade or range does not necessarily mean that these employees are 
similarly situated; the determining factors are whether the employees 
are performing similar work, have similar responsibility level, and 
occupy positions involving similar skills and qualifications. In 
addition to

[[Page 35121]]

work performed, responsibility level, and skills/qualifications 
involved in the positions, other factors may have a significant bearing 
on whether employees are similarly situated. Such additional factors 
may include, for example, department or other functional unit of the 
employer, employment status (e.g., full-time versus part-time), 
compensation status (e.g., union versus non-union, hourly versus 
salaried versus commissions), etc. Contractors should consider the 
applicability of such factors in developing SSEGs, in addition to 
similarity in work performed and in responsibility level, skills, and 
qualifications involved in the positions.
    B. The contractor must make a reasonable attempt to produce SSEGs 
that are large enough for meaningful statistical analysis. However, the 
SSEGs must in all events conform to Section IA of these Voluntary 
Guidelines. In general, SSEGs should contain at least 30 employees 
overall, and contain five or more incumbents who are members of either 
of the following pairs: male/female or minority/non-minority. Some 
employees will not be sufficiently similarly situated to other 
employees to permit them to be grouped in an SSEG. Such employees may 
be eliminated from the statistical evaluation process; however, the 
contractor is expected to conduct a self-evaluation of pay decisions 
related to such employees using non-statistical methods. Further, the 
contractor should attempt to develop statistical analyses that 
encompass a significant majority of the employees in the particular 
affirmative action program (AAP) or establishment. Where the 
statistical analyses do not encompass at least 70% of the employees in 
the AAP or establishment, OFCCP will carefully scrutinize the 
statistical analyses and associated non-statistical self-evaluations. 
Contractors are afforded discretion to develop self-evaluation programs 
that encompass various groupings of employees other than AAPs or 
establishments, subject to the requirements outlined in these Voluntary 
Guidelines.
    C. On an annual basis, the contractor must perform some type of 
statistical analysis that evaluates SSEGs (as defined in Section IA of 
these Voluntary Guidelines) and accounts for factors that legitimately 
affect the compensation of the members of the SSEGs under the 
contractor's compensation system, such as experience, education, 
performance, productivity, location, etc. For establishments or AAPs 
with 500 or more employees, the type of statistical analysis must be 
multiple regression analysis. The contractor must ensure that any 
factor within the contractor's control that is included in the analysis 
is not itself subject to discrimination, although such a factor may be 
included unless there is evidence that the factor actually was subject 
to discrimination. Correlation between such a factor and a protected 
characteristic does not automatically disqualify the factor, if the 
employer has implemented formal standards to constrain subjective 
decisionmaking. The analyses must include tests of statistical 
significance that are generally recognized as appropriate in the 
statistics profession.
    D. The contractor must investigate any statistically-significant 
compensation disparities identified by the self-evaluation analyses 
that it has developed. OFCCP considers an identified disparity to be 
statistically significant if the significance level of the disparity is 
two or more standard deviations from a zero disparity level.\7\ The 
contractor must adequately determine whether such statistical 
disparities are explained by legitimate factors or otherwise are not 
the product of unlawful discrimination. If the statistical disparities 
cannot be explained, the contractor must provide appropriate remedies. 
The remedies that are appropriate will depend on the time period in 
which the disparities emerged. For the initial implementation of the 
compensation self-evaluation program, the contractor may have to make 
adjustments based on both current disparities and prior disparities. 
OFCCP uses a two-year window for back pay corrections. For periodic 
iterations of the self-evaluation program after the initial 
implementation, the remedy would involve correcting current 
disparities. Through the sources of information available to OFCCP 
under Section IE of these Voluntary Guidelines, OFCCP will carefully 
evaluate whether the contractor has properly investigated such 
disparities and has adequately corrected any disparities that are not 
explained by legitimate factors.
---------------------------------------------------------------------------

    \7\ This significance level roughly translates to a measured 
absolute disparity that is more than two times the standard error of 
the estimated value. See David H. Kaye & David A. Freedman, 
Reference Guide on Statistics, in Federal Judicial Center, Reference 
Manual on Scientific Evidence, at 124 n. 138 (2d ed. 2000). Using a 
two-tailed test, a statistically significant disparity is a 
disparity with a significance level of 0.05 or less (subject to the 
consideration of what is a meaningful difference). This criterion 
means that, e.g., a disparity in the pay between males and females 
being either positive or negative, would have a less than a 1-in-20 
chance of occurrence unrelated to potential discrimination.
---------------------------------------------------------------------------

    E. The contractor must contemporaneously create and retain the 
following documents and data:
    (1) Documents necessary to explain and justify its decisions with 
respect to SSEGs, exclusion of certain employees, factors included in 
the statistical analyses, and the form of the statistical analyses. 
Such documents must be retained throughout the period in which OFCCP 
would deem the contractor's compensation practices in compliance with 
Executive Order 11246, as described in Section IIB of these Voluntary 
Guidelines;
    (2) The data used in the statistical analyses and the results of 
the statistical analyses for two years from the date that the 
statistical analyses are performed;
    (3) The data and documents explaining the results of the non-
statistical methods that the contractor used to evaluate pay decisions 
of those employees who were eliminated from the statistical evaluation 
process, which must be retained throughout the period in which OFCCP 
would deem the contractor's compensation practices in compliance with 
Executive Order 11246, as described in Section IIB of these Voluntary 
Guidelines;
    (4) Documentation as to any follow-up investigation into 
statistically-significant disparities, the conclusions of such 
investigation, and any pay adjustments made to remedy such disparities. 
These documents must be retained for a period of two years from the 
date that the follow-up investigation is performed.
    F. The contractor must make all of the documents and data 
referenced in Section IE of these Voluntary Guidelines available to 
OFCCP during a compliance review. OFCCP may also review any personnel 
records and conduct any employee interviews necessary to determine the 
accuracy of any representation made by the contractor in such 
documentation or data.

II. Procedure

    If the contractor's compensation self-evaluation program meets the 
general standards set forth in Section I of these Voluntary Guidelines, 
OFCCP will coordinate its compliance monitoring activities as follows:
    A. During a compliance review, OFCCP will assess whether the 
contractor's compensation self-evaluation program comports with the 
general standards outlined in Section I of these Voluntary Guidelines. 
A contractor that seeks the compliance coordination incentive under 
these Voluntary Guidelines should respond to the Item 11 request in 
OFCCP's Scheduling Letter by noting that the contractor ``seeks 
compliance coordination under the voluntary

[[Page 35122]]

OFCCP compensation self-evaluation voluntary guidelines.''
    B. If the contractor's compensation self-evaluation system 
reasonably meets the general standards outlined in Section I of these 
Voluntary Guidelines, OFCCP will consider the contractor's compensation 
practices to be in compliance with Executive Order 11246. However, 
OFCCP may suggest in a written letter that the contractor make 
prospective modifications to improve the self-evaluation program's 
conformity with the general standards outlined in Section I of these 
Voluntary Guidelines, where OFCCP concludes that the self-evaluation 
program is only marginally reasonable under these Voluntary Guidelines; 
thereafter, during future compliance reviews, OFCCP will assess whether 
the contractor made the suggested changes in determining the 
contractor's prospective compliance with these Voluntary Guidelines. 
If, during a future compliance review, OFCCP determines that the 
contractor has not made the changes that OFCCP suggested during the 
prior compliance review, the contractor's self-evaluation program will 
no longer be deemed to comport with the general standards outlined in 
Section I of these Voluntary Guidelines.
    C. OFCCP may review the documents and data set forth in Section IE 
to determine whether the contractor's compensation self-evaluation 
program reasonably meets the general standards outlined in these 
Voluntary Guidelines and, if applicable, whether the contractor 
reasonably made the changes that OFCCP suggested during a prior 
compliance review.
    D. OFCCP personnel will direct technical issues about whether a 
contractor's self-evaluation program meets the general standards 
outlined in Section I of these Voluntary Guidelines to OFCCP's Director 
of Statistical Analysis in the National Office, or his or her designee.
    E. Confidentiality of Compensation and Personnel Information: OFCCP 
will treat compensation and other personnel information provided by the 
contractor to OFCCP under these Voluntary Guidelines as confidential to 
the maximum extent the information is exempt from public disclosure 
under the Freedom of Information Act, 5 U.S.C. 552. It is the practice 
of OFCCP not to release data where the contractor is still in business, 
and the contractor indicates, and through the Department of Labor 
review process it is determined, that the data are confidential and 
sensitive and that the release of data would subject the contractor to 
commercial harm.
    F. Alternative Compliance Certification: OFCCP understands that 
some contractors may take the position, based on advice of counsel, 
that their compensation self-evaluation is subject to certain 
protections from disclosure, such as the attorney client privilege or 
attorney work product doctrine, and that these protections would be 
waived if the contractor disclosed the self-evaluation. OFCCP does not 
take any position as to the applicability of these protections in the 
context of a compensation self-evaluation. However, to avoid protracted 
legal disputes over the applicability of such protections, OFCCP will 
permit the contractor to certify its compliance with 41 CFR 60-
2.17(b)(3) in lieu of producing the methodology or results of its 
compensation self-evaluation to OFCCP during a compliance review. The 
certification must be in writing, signed by a duly authorized officer 
of the contractor under penalty of perjury, and the certification must 
state that the contractor has performed a compensation self-evaluation 
with respect to the affirmative action program or establishment at 
issue, at the direction of counsel, and that counsel has advised the 
contractor that the compensation self-evaluation and results are 
subject to the attorney-client privilege and/or the attorney work 
product doctrine. Because in such an instance OFCCP cannot evaluate the 
contractor's compliance with the general standards outlined in Section 
I of these Voluntary Guidelines, a contractor that opts for this 
compliance certification alternative will not be entitled to the 
compliance coordination incentive outlined in Section IIB of these 
Voluntary Guidelines. That is, contractors that opt for this 
alternative compliance certification do not receive the benefit of 
OFCCP coordination of agency compliance monitoring activities. Thus, 
for contractors that elect only to certify compliance with section 60-
2.17(b)(3), OFCCP will evaluate their compensation practices without 
regard to their compensation self-evaluation. This Alternative 
Compliance Certification is an alternative to the contractor disclosing 
the self-evaluation and results to OFCCP. It is not to be construed as 
a limit on contractors' discretion to implement any self-evaluation 
technique it deems appropriate in order to comply with 41 CFR 60-
2.17(b)(3).

    Signed at Washington, DC this 12th day of June, 2006.
Victoria A. Lipnic,
Assistant Secretary for the Employment Standards.
Charles E. James, Sr.,
Deputy Assistant Secretary for Federal Contract Compliance.
[FR Doc. 06-5457 Filed 6-15-06; 8:45 am]
BILLING CODE 4510-CM-P