[Federal Register Volume 78, Number 40 (Thursday, February 28, 2013)]
[Rules and Regulations]
[Pages 13508-13520]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-04675]
[[Page 13508]]
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DEPARTMENT OF LABOR
Office of Federal Contract Compliance Programs
41 CFR Parts 60-1 and 60-2
RIN 1250-ZA00
Interpreting Nondiscrimination Requirements of Executive Order
11246 With Respect to Systemic Compensation Discrimination and
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, Labor.
ACTION: Notice of final rescission.
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SUMMARY: The Office of Federal Contract Compliance Programs (OFCCP) is
publishing a final notice rescinding two guidance documents: The
Interpreting Nondiscrimination Requirements of Executive Order 11246
with respect to Systemic Compensation Discrimination and Voluntary
Guidelines for Self-Evaluation of Compensation Practices for Compliance
with Executive Order 11246 with respect to Systemic Compensation
Discrimination. Rescinding these prior guidance documents will improve
OFCCP's ability to enforce the Executive Order's ban on pay
discrimination. It will eliminate a rarely used, ineffective and
burdensome compliance procedure. This rescission allows OFCCP to better
direct its resources for the benefit of victims of discrimination, the
government, contractors, and taxpayers.
DATES: Effective February 28, 2013.
FOR FURTHER INFORMATION CONTACT: Debra A. Carr, 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) 693-0103 (voice) or (202) 693-
1337 (TTY).
SUPPLEMENTARY INFORMATION:
I. Introduction
A. Background
The Department of Labor's OFCCP enforces Executive Order 11246, as
amended, which requires Federal Government contractors and
subcontractors to provide equal employment opportunity through
affirmative action and nondiscrimination based on race, color, national
origin, religion, and sex. Compensation discrimination is one form of
discrimination prohibited by the Executive Order. In particular,
federal contractors \1\ may not discriminate in ``rates of pay or other
forms of compensation.'' 41 CFR 60-1.4(a)(1). OFCCP enforces this
requirement through review and investigation of contractor pay
practices, data and other relevant information for potential systemic
and individual evidence of discrimination. In addition, contractors
must review and monitor their compensation systems to ``determine
whether there are gender-, race-, or ethnicity-based disparities.'' \2\
Contractors must maintain records, including but not limited to ``rates
of pay or other terms of compensation.'' \3\
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\1\ The term ``federal contractor'' or ``contractor'' used in
this notice refers to federal contractors, subcontractors, and
federally-assisted construction contractors and subcontractors.
\2\ 41 CFR 60-2.17(b)(3); see also 41 CFR 60-2.17(d) (required
internal auditing and reporting system must include compensation).
\3\ 41 CFR 60-1.12.
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OFCCP enforces the Executive Order's nondiscrimination provisions,
including the ban on compensation discrimination, consistent with Title
VII. Title VII forbids discrimination in employment, which includes
paying employees differently on the basis of race, sex or other
protected class membership. Congress intended for courts to read this
ban broadly. Franks v. Bowman Transportation Co., 424 U.S. 747, 763
(1976) (``Congress intended to prohibit all practices in whatever form
which create inequality in employment opportunity due to discrimination
* * *'') (citations omitted). There have long been three distinct
theories of discrimination under Title VII: Individual disparate
treatment, ``pattern or practice'' (systemic disparate treatment), and
disparate impact. While courts have developed some specific mechanisms
for presenting evidence and satisfying the burden of proof under each
theory, they consistently hold that there is no single way to prove
discrimination.\4\ Plaintiffs may rely on any evidence of
discrimination, whether direct, circumstantial, statistical, anecdotal,
or any combination of such evidence.
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\4\ See, e.g., McDonnell Douglas Corp. v. Green, 411 U.S. 792,
802 n.13 (1973) (``The facts necessarily will vary in Title VII
cases, and the specification of the prima facie proof required from
respondent is not necessarily applicable in every respect to
differing factual situations''); Furnco Constr. Corp. v. Waters, 438
U.S. 567, 575 (1978) (title VII approaches to proving discrimination
``not intended to be an inflexible rule'').
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This flexibility is critical because discrimination may be
difficult to identify. Pay discrimination can be easy to spot, like a
clear pattern of paying women less than men in the same job, where they
are just as qualified. But it can also be complex, like a practice of
discriminating against African-American sales workers in handing out
territory assignments--so that no matter how well they perform, they
can never have the same earnings opportunities as their white
counterparts. Title VII addresses all forms of compensation
differences, including those that come from channeling a favored group
into the better paying entry level jobs with better long-term
opportunities, or where glass ceilings or other unfair promotion
practices wrongly block advancement of talented workers on the basis of
illegal criteria like race or gender. And even where base wages or
salaries are fair, discrimination in access to overtime, or higher
paying shifts, or bonuses, can add up to unequal take home pay in
violation of federal civil rights law.
Further, because there is so much variation in pay practices across
industries, employers and types of jobs, investigating compensation
discrimination requires considering evidence and data in context, which
is the approach that federal courts have embraced when interpreting
Title VII. It is not possible to specify in advance a single test,
model or framework that accurately and fairly identifies discriminatory
pay differences in every case. Attempting to impose a uniform test for
pay discrimination without accounting for case-specific facts creates
opportunities for error. It means that some contractors who pay fairly
will be wrongly identified as discriminating in pay, and that some
workers who were underpaid due to discrimination will be left without a
remedy. Investigating and addressing compensation discrimination
requires a rigorous fact-based assessment of a broad array of pay
practices.
Nevertheless, OFCCP has since 2006 narrowed its focus, following
two guidance documents: Interpreting Nondiscrimination Requirements of
Executive Order 11246 with respect to Systemic Compensation
Discrimination (Standards) and the Voluntary Guidelines for Self-
Evaluation of Compensation Practices for Compliance with Executive
Order 11246 with respect to Systemic Compensation Discrimination
(Voluntary Guidelines).\5\ The Standards establish analytical
procedures to be followed generally by OFCCP when issuing a Notice of
[[Page 13509]]
Violation (NOV) alleging systemic compensation discrimination. The
Voluntary Guidelines provide a methodology for contractors' self-
evaluation of their pay practices, required by 41 CFR 60-2.17(b)(3);
following that methodology can provide a ``safe harbor'' during
compliance reviews.
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\5\ The Standards and Voluntary Guidelines were published on
June 16, 2006. See 71 FR 35124 (June 16, 2006) (Standards) and 71 FR
35114 (June 16, 2006) (Voluntary Guidelines).
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The Standards and Voluntary Guidelines addressed only a single type
of pay practice using limited evidence and a highly specified analytic
framework. The Standards did not actually apply to or explain
investigation procedures, and left many critical details undefined or
subject to potential exceptions. The companion document, the Voluntary
Guidelines, attempted to tell contractors exactly how to fulfill their
regulatory self-monitoring obligations. Yet the Voluntary Guidelines
were similarly inadequate, and contractors rarely utilized them to
demonstrate compliance.
In 2010, President Obama created the National Equal Pay Task Force,
bringing together the Department of Labor (DOL), the Equal Employment
Opportunity Commission (EEOC), the Department of Justice, and the
Office of Personnel Management to collectively address pay
discrimination under their enforcement mandates. The Director of OFCCP,
a member of the Task Force, committed OFCCP to review and revise its
enforcement guidance and practices to more effectively address
compensation discrimination under Executive Order 11246. OFCCP
reevaluated all aspects of its existing approach to addressing
compensation discrimination by federal contractors, including (1)
Guidance documents, (2) procedures for conducting compliance
evaluations, (3) training and best practices for investigating and
addressing compensation discrimination, and (4) approaches of other
federal agencies including the EEOC and the Department of Justice.
As part of this larger review and revision process, OFCCP assessed
the role of the Standards and Voluntary Guidelines, concluding they
were inconsistent with the Task Force's goal of improving enforcement.
On January 3, 2011, OFCCP published a Notice of Proposed Rescission
(NPR), proposing to rescind the Standards and the Voluntary Guidelines
in their entirety, and soliciting public comment. 76 FR 62. Because
neither 2006 guidance document has proved workable or effective in
practice, OFCCP is rescinding both guidance documents effective
immediately.
In their place, OFCCP is today committing to provide greater
clarity for contractors and improve equal employment protection for
workers. First, OFCCP will be applying Title VII principles as the
basis for determining whether a contractor has violated the Executive
Order's ban on pay discrimination, just as the agency does in assessing
contractor compliance with respect to all other employment practices.
Second, as explained in Section III below, OFCCP is disclosing its
interpretation of specific legal and technical issues to assist
contractors in evaluating their own practices and promoting greater
voluntary compliance. Third, OFCCP will be providing much greater
transparency on questions of investigation practices and procedures--
issues the Standards did not address--both in this document as well as
via ongoing compliance assistance. Collectively, this information
should provide ample notice to contractors of their legal obligations
as well as assist them in achieving voluntary compliance.
B. Summary of the Reasons for Rescission
The 2006 Standards set forth a single, specified analytical
procedure to be used for determining a violation in all systemic
compensation discrimination cases, except in unusual circumstances.
Under the 2006 Standards, OFCCP was to apply the same analytic
framework regardless of the industry, types of jobs, issues presented,
characteristics of workers, or available data. In particular, OFCCP may
only establish a systemic compensation violation of the Executive Order
by testing narrowly defined groupings of employees based on standards
typically used in individual disparate treatment cases. 71 FR at 35127-
28, 35140. Under the Standards, OFCCP must use multiple regression
analysis to test for pay disparities and must have anecdotal evidence
to establish a systemic compensation violation, ``except in unusual
cases.'' 71 FR at 35141. As explained above, employment discrimination
comes in many forms, which is why Title VII permits a flexible case-
specific approach to proof.
The Standards restrict OFCCP's ability to enforce the Executive
Order's non-discrimination mandate. The Standards address a single kind
of compensation disparity--pay differences among discrete pools of
workers limited by job category--to the potential exclusion of other
equal opportunity concerns. Pay differences arising from discrimination
in job assignments, unequal access to promotional opportunities,
channeling and glass ceiling issues can be obscured by the strict
grouping requirements of the Standards. The Standards do not favor
aggregation and place additional burdens on OFCCP where a pooled
regression is used, despite the longstanding legal rule that the proper
level of aggregation requires a case by case determination. The
regression analysis required under the Standards is not always
appropriate or feasible--other approaches may be preferable for certain
cases involving very high level or specialized positions or smaller
workforces, and cases involving missing or flawed data, among others.
The Standards create a special rule for anecdotal evidence in
compensation cases that has never been applied in other OFCCP contexts,
and which is particularly burdensome for workers who frequently lack
meaningful access to information about pay. Fair and effective
enforcement requires tailoring the compensation investigation and
analytical procedures to the facts of the case based on Title VII
principles.
Similarly, the Voluntary Guidelines establish a single one-size-
fits-all statistical model that contractors can elect to use in
conducting the self-analysis of their pay practices required by 41 CFR
60-2.17(b)(3). As an incentive to encourage contractors to use the
analytical procedures contained in the Voluntary Guidelines, OFCCP
would deem a contractor, whose self-evaluation meets the procedures
outlined in the Voluntary Guidelines, to be in compliance with section
60-2.17(b)(3). OFCCP would then coordinate review of the contractor's
compensation practices during a compliance evaluation in the manner
specified in the Voluntary Guidelines. 71 FR at 35122. In other words,
contractors may provide their own analysis of pay data, based on their
own determinations of how to apply the Voluntary Guidelines, and as
long as it ``reasonably meets'' the procedures detailed in the
Voluntary Guidelines, OFCCP is bound to accept it. Even if another,
equally ``reasonable'' analytic approach would reveal systemic
compensation discrimination against a protected class of workers, OFCCP
would seemingly have to consider the contractor in compliance.
In addition, the Voluntary Guidelines provide little practical
benefit. As the comments discussed below demonstrate, few contractors
rely on this model for purposes of a compliance evaluation. This
assessment is consistent with OFCCP's own experience since 2006, that
``contractors have rarely utilized the analytical
[[Page 13510]]
procedures outlined in the Voluntary Guidelines when analyzing their
compensation practices under section 60-2.17(b)(3).'' 76 FR at 63.
Further, the Voluntary Guidelines, like the Standards, take an overly
narrow approach to analyzing potential systemic pay discrimination--
which may lead contractors to shortchange the ongoing monitoring
required by OFCCP regulations and best practices. The Voluntary
Guidelines do not appear to have improved the level or quality of
voluntary compliance.
Non-discrimination in pay is a critical issue for workers and their
families, and a cornerstone of OFCCP's equal employment protections. As
detailed in the NPR, identifying and remedying compensation
discrimination has long been an important goal of OFCCP compliance
efforts. 76 FR at 62. The Executive Order and the implementing
regulations specifically require contractors to ensure pay equity. They
place federal contractors under affirmative duties to maintain data,
conduct internal reviews and monitor pay practices for potential
discrimination, and comply with the Executive Order's ban on
discrimination in the paying of wages, salaries, and other forms of
compensation. Sec. 202 of E.O. 11246, as amended, 41 CFR 60-1.12; 60-
1.4; 60-2.17(b)-(d). Nevertheless, Bureau of Labor Statistics data and
numerous research studies indicate that disparities in compensation on
the basis of sex and race continue to exist,\6\ even after accounting
for factors such as the type of job, worker qualifications such as
experience and education, and other potential explanations.\7\ Further,
because many employees do not know how their pay compares to others,
OFCCP compliance reviews and contractor voluntary compliance efforts
are critical tools for uncovering systemic pay disparities invisible to
individual workers. In light of these concerns, OFCCP should no longer
limit its analysis or consideration of evidence that points to
potential compensation discrimination in violation of the Executive
Order. Nor should OFCCP encourage contractors to limit their self-
evaluation practices to a single form of inquiry.
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\6\ According to the latest Bureau of Labor Statistics data,
women's weekly median earnings are about 81% of men's. In 2010,
women on average earned .81 for every dollar earned by a man. Bureau
of Labor Statistics, Women at Work (2011). Through the first three
quarters of 2012, that figure increased slightly. See also BLS,
Current Population Survey, Labor Force Statistics from Current
Population Survey, available at http://www.bls.gov/cps/earnings.htm#demographics; updated 2012 CPS earnings figures by
demographics by quarter available at http://www.bls.gov/news.release/wkyeng.t01.htm. And looking at annual earnings reveals
even larger gaps--approximately 23 cents less on the dollar for
women compared with men. U.S. Bureau of the Census, Income, Poverty
and Health Insurance Coverage in the United States, Current
Population Reports 2011 (Sept. 2012), available at http://www.census.gov/prod/2012pubs/p60-243.pdf. Analyzing the weekly
figures can be more precise in certain ways, like accounting for
work hours that vary over the course of the year, and less accurate
in others, like certain forms of compensation that don't get paid as
weekly wages. No matter which number you start with, the differences
in pay for women and men really add up. According to one analysis by
the Department of Labor's Chief Economist, a typical 25-year-old
woman working full time in 2011 would have already earned $5,000
less than a typical 25-year-old man. If that earnings gap is not
corrected, by age 65, she will have lost hundreds of thousands of
dollars over her working lifetime. White House Council on Women and
Girls, The Key to an Economy Built to Last (April 2012), available
at http://www.whitehouse.gov/sites/default/files/email-files/womens_report_final_for_print.pdf. For women of color, the gap
is even greater, approximately .70 on the dollar for African-
American women and approximately .60 for Latinas compared with white
men based on BLS data, and .64 for African American women and .56
for Latinas based on Census data.
\7\ A March 2011 White House report entitled ``Women in America:
Indicators of Social and Economic Well-Being,'' found that while
earnings for women and men typically increase with higher levels of
education, the male-female pay gap persists at all levels of
education for full time workers (35 or more hours per week),
according to 2009 BLS wage data. Potentially non-discriminatory
factors can explain some of the gender wage differences. See, e.g.,
June Ellenoff O'Neill, The Gender Gap in Wages, Circa 2000, American
Economic Review, May 2003, at 309. Even so, after controlling for
differences in skills and job characteristics, women still earn less
than men. Explaining Trends in the Gender Wage Gap, A Report by the
Council of Economic Advisers (June 1998). See also, e.g. Ariane
Hegewisch, Claudia Williams, Vanessa Harbin, The Gender Wage Gap by
Occupation (2012) (women's median earnings less than men in
virtually all occupations); Anthony T. LoSasso, et al, The $16,819
Pay Gap For Newly Trained Physicians: The Unexplained Trend Of Men
Earning More Than Women, 30 Health Affairs 193 (2011). Ultimately,
the research literature still finds an unexplained gap exists even
after accounting for potential explanations, and finds that the
narrowing of the pay gap for women has slowed since the 1980s. Joyce
P. Jacobsen, ``The Economics of Gender 44 (2007); Francine D. Blau &
Lawrence M. Kahn, The U.S. gender pay gap in the 1990s: slowing
convergence, 60 Industrial and Labor Relations Review, 45 (2006). In
addition to the gender pay gap, scholars have found race and
ethnicity-based pay gaps that put workers of color at a
disadvantage. Joseph G. Altonji and Rebecca M. Blank, Race and
Gender in the Labor Market, in, Orley Ashenfelter and David Card,
eds., Handbook of Labor Economics 3143 (1999).
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The Standards and Voluntary Guidelines may also lead OFCCP to
enforcement approaches that are inconsistent with how other federal
agencies address pay discrimination. OFCCP is presently working to
harmonize its approach with that of other federal enforcement agencies,
including the Department of Justice and the EEOC. Neither restricts its
analytic and evidentiary framework to a single approach. Along with
OFCCP, these agencies have committed to vigorous enforcement of federal
non-discrimination mandates. Through this rescission, OFCCP seeks to
provide workers the full protection of Title VII anti-discrimination
provisions and ensure consistent enforcement in its review of
contractor compensation practices.
Finally, by setting special analytical procedures restricting what
constitutes proof of discrimination for a particular employment
practice, the Standards and Voluntary Guidelines depart from OFCCP's
approach to evaluating contractor compliance in other areas. There are
no comparable Standards or Voluntary Guidelines for systemic
discrimination in hiring, promotion, termination or other employment
practices. In those other areas, Title VII principles have proved more
than adequate to put contractors on notice of their obligation, to
promote voluntary compliance measures, and to define the parameters of
a violation. OFCCP has traditionally focused on identifying
discrimination through the development of a variety of investigative
and analytical tools. Compensation should be no exception.
After considering the comments received, OFCCP concludes that
rescinding these prior guidance documents will improve OFCCP's ability
to enforce the Executive Order ban on pay discrimination. It will
eliminate a rarely used, ineffective and burdensome compliance
procedure. This rescission allows OFCCP to direct its resources more
efficiently--for the benefit of victims of discrimination, the
government, contractors, and taxpayers. These Standards and Voluntary
Guidelines have not been useful tools in combating compensation
discrimination. OFCCP can better achieve the objectives of the
Executive Order--including non-discrimination in pay for the federal
contractor workforce--through other methods of investigation and
analysis.
Nevertheless, OFCCP takes seriously its obligation to support
contractors seeking to comply voluntarily, and wishes to promote
transparency and fairness regarding OFCCP practices. The agency will be
providing as much clarity as possible regarding its application and
interpretation of important legal, factual and technical issues in
assessing systemic compensation discrimination, both in this document
(see Section III, below) and going forward. OFCCP traditionally has
established procedures for investigating compensation discrimination,
as well as other forms of
[[Page 13511]]
discrimination, through instructions for its compliance officers
contained in the OFCCP Federal Contract Compliance Manual (FCCM),
directives, and other staff guidance materials, and will continue to do
so. OFCCP will provide ongoing technical assistance through tools such
as written frequently asked questions (FAQs), conference calls,
webinars and online chats and will seek opportunities to take questions
and get feedback from all stakeholders. OFCCP is not currently
contemplating additional formal rulemaking associated with this
document.
II. Discussion of the Comments
OFCCP received 22 comments on the NPR from the following: employer
associations; employee and other women's and workers' rights
associations; named employers, including consultants and law firms
focused on employment and personnel practices; a comment from a group
of 40 statisticians, economists, sociologists, and psychologists
(Social Science Researchers); and one individual comment. OFCCP has
considered all of the comments received. Of the 22 comments, ten
support the proposed rescission of both the Standards and Voluntary
Guidelines, five oppose the proposed rescission of the Standards, and
three oppose the proposed rescission of the Voluntary Guidelines--with
one comment that recommends partial rescission of the Voluntary
Guidelines. The remaining comments do not clearly state a position, but
instead comment on particular issues.
With regard to the Standards, comments addressed the following
issues: (1) The framework under the Standards for determining the
proper comparison groups for analysis; (2) the mandate of the Standards
to use multiple regression analysis; (3) the mandate of the Standards
that OFCCP have anecdotal evidence; (4) the OFCCP proposal to rely on
multiple investigative and analytical methods to address compensation
discrimination issues; and (5) cost to contractors should the Standards
be rescinded. See Section II.A.
With regard to the Voluntary Guidelines, comments addressed the
following issues: (1) Whether the Voluntary Guidelines are effective;
(2) substantive limitations of the Voluntary Guidelines; and (3) cost
to contractors should the Voluntary Guidelines be rescinded. See
Section II.B.
A. Comments Regarding the Standards
The Standards prescribe procedures that limit OFCCP's ability to
determine when a contractor has violated the Executive Order. They
restrict permissible evidence and require one form of proof of
potential systemic compensation discrimination, except in unusual
circumstances. These restrictions govern how to group employees for
analysis, the use of multiple regression analysis to decide whether
wage differences are discriminatory, and the requirement for anecdotal
evidence of compensation discrimination except in unusual cases. These
procedures are to be followed regardless of the facts of a particular
case.
1. How To Compare Workers for Purposes of Compensation Analysis
Under the Standards, OFCCP can generally only establish a systemic
compensation violation where there are statistically significant pay
disparities comparing highly specified groups of workers. In
particular, OFCCP is to begin by establishing groups of ``similarly
situated'' workers on the basis of the positions they hold, and then to
test for pay differences only among those workers within each separate
group. See 71 FR 35140. The Standards make it more difficult for OFCCP
to test for larger patterns across groups of jobs. These restrictions
include the formal limits on the use of an aggregate (or pooled)
statistical analysis, as well as the job-based comparison requirements,
which can make it more difficult to investigate the effect that
discrimination in job assignment, level or position has on pay.
Nearly half of the commenters addressed how the Standards require
OFCCP to compare workers for purposes of analysis. Two commenters
specifically identified concerns with the definition of ``similarly
situated employees'' or the requirement to group workers a specific
way--calling it ``overly stringent,'' ``problematic and easily
misinterpreted,'' and inconsistent with ``professional best
practices.'' Two commenters explicitly supported the appropriateness of
comparing similarly situated employees as described and defined by the
Standards on legal grounds.
The commenters supporting rescission raised several specific
problems with this aspect of the Standards. A women's rights group
pointed out a technical problem with performing separate analysis on
each group of similarly situated workers. Especially if these groups
are small, the analysis may be ``underpowered''--and therefore unable
to accurately detect discrimination when it exists. Another women's
rights group expressed concern that the basis for grouping under the
Standards could incorporate discrimination. The Standards define
similarly situated employees based on position qualifications, even
though qualifications can be illegal barriers where they operate to
exclude a protected class from the job. The Social Science Researchers
noted that a determination of how to group employees for analysis must
be made based on the particular facts and circumstances, Title VII
principles, and professional best practices. Multiple commenters
pointed out that compensation discrimination takes many forms, and that
the OFCCP's analysis should be flexible enough to address all pay
issues that may exist in a contractor's workforce.
Commenters supporting the Standards on this point largely relied on
the view of applicable law underpinning the Standards themselves. For
example, one management law firm referred to the Title VII cases cited
in the original Federal Register notice establishing the Standards and
noted that the NPR provided no legal authority to the contrary. An
employers' association stated that the Standards follow the EEOC's
Compliance Manual and that therefore they represent ``adherence to
Title VII principles.'' As explained below, the Standards do not
comport with a more comprehensive understanding of applicable legal
principles relevant to potential pay discrimination. Nor do they
accurately reflect the contents of the EEOC Compliance Manual, which
rejects the view that there is a single way to prove discrimination.
OFCCP has concluded that this aspect of the Standards is overly
narrow and creates both technical and substantive barriers to effective
enforcement. The legal analysis OFCCP used to support its adoption of
the Standards in 2006 did not explicitly discuss the most common
approaches for proving systemic discrimination. See 71 FR 35126-28. The
Standards applied a model typically applied in individual disparate
treatment cases, limiting the types of evidence and models of proof in
systemic cases. Further, the Standards require a specific technical
approach that substantially increases the risk that OFCCP would fail to
detect improper pay disparities, and limits investigations to a single
form of pay discrimination. Thus, as explained in the paragraphs that
follow, the Standards hamper OFCCP's ability to ensure contractor
compliance with the Executive Order.
The Standards inadequately rely on an inquiry relevant to
individual disparate treatment cases to evaluate
[[Page 13512]]
systemic discrimination. Individual disparate treatment cases typically
proceed under the McDonnell Douglas burden shifting framework. Reeves
v. Sanderson Plumbing Products, Inc., 530 U.S. 133 (2000); McDonnell
Douglas Corp. v. Green, 411 U.S. 792 (1973). Many individual disparate
treatment cases rely heavily on ``comparators''--specifically
identified workers who are similarly situated to the plaintiff but
outside the protected class. An otherwise unexplained difference in how
the employer treated the plaintiff and her comparator permits an
inference that the real reason was intentional discrimination.\8\
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\8\ For example, in Williams v. Galveston Ind. Sch. Dist., No
03-40436, 78 Fed. Appx. 946 (5th Cir. 2003), the court found that
differences in duties and supervisory roles explained the difference
in pay between the individual plaintiffs and the comparators.
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Virtually all of the cases OFCCP used to support the Standards
focus on how to prove individual instances of pay discrimination. See
71 FR 35127-28. These cases involve disputes over whether a particular
comparator is appropriate or not because of differences in their
positions. But there are other ways to prove discrimination in
individual cases.\9\ More importantly, systemic cases are not based on
person to person comparisons but on patterns within a workforce that
can transcend specific workers, jobs, locations, or functions.
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\9\ Other circumstantial or direct evidence of discrimination
can support an individual claim even in the absence of a formal
comparator. See Satz v. ITT Financial Corp., 619 F.2d 738, 745-46
(8th Cir. 1980). As the EEOC Compliance Manual explains, ``A claim
of compensation discrimination can be brought under [title VII] * *
* even if no person outside the protected class holds a
`substantially equal,' higher paying job.'' http://www.eeoc.gov/policy/docs/compensation.html.
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Proof in systemic disparate treatment cases can go beyond the
single scenario of the Standards. Rather than asking whether an
employer intentionally discriminated against a specific person,
systemic cases ask whether there is a pattern or practice of unequal
treatment of a protected class. Plaintiffs must show that
discrimination in the workplace manifests as the company's ``standard
operating procedure.'' International Brotherhood of Teamsters v. United
States, 431 U.S. 324, 336 (1977); see also Franks v. Bowman
Transportation Co., 424 U.S. 747, 772 (1976). Plaintiffs may support
their case by presenting evidence of a pattern of discrimination
against a protected class of workers, regardless of whether they all
have exactly the same jobs, responsibilities, supervisors or work
locations.\10\ This approach does not pre-specify how to test for a
pattern of pay or other disparities. Whether systemic discrimination
exists at all, exists within one particular position, location or
function, or spans multiple jobs, facilities or segments of the
workforce, is a factual inquiry that turns on case-specific evidence
and data.
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\10\ See, e.g., McReynolds v. Sodexho Marriott Svs. Inc., 349 F.
Supp.2d 1, 9, 21 (D.D.C. 2004) (companywide statistical model
covering jobs in multiple grades and locations sufficient for prima
facie case of a pattern or practice); Beckman v. CBS, 192 F.R.D.
608, 618 (D. Minn. 2000) (summary judgment not appropriate where
plaintiff alleged a pattern of segregating women in less well-paying
jobs and comparisons covered multiple types of jobs); Stender v.
Lucky Stores, 803 F.Supp. 259, 336 (N.D. Cal. 1992) (proof of
systemic discrimination supported by pattern of lower earnings for
women across multiple jobs); Greenspan v. United Auto Club of Mich.,
495 F.Supp. 1021, 1029-33 (E.D. Mich. 1980) (same). Applying an
analogous principle in ruling on class certification, courts have
agreed that proof of systemic discrimination can be supported by
evidence of patterns that span jobs or locations. See, e.g., Hnot v.
Willis Grp. Holdings, 228 F.R.D. 476, 483-84 (S.D.N.Y. 2005)
(disputes over statistical models to be resolved by factfinder at
liability); Satchell v. Fed. Express, 2005 WL 2397522, at *7 (under
Teamsters, proof of pattern and practice can be based on statistical
evidence covering workers in multiple jobs and locations); Warren v.
Xerox Corp., 2004 WL 1562884, at *9 (E.D.N.Y. 2004) (race-based
disparities in multiple pay grades relevant to merits of
discrimination claim). Courts have also approved consent decrees
settling pattern or practice or disparate impact claims of pay
discrimination covering multiple positions, levels and locations,
see e.g., Ingram v. The Coca-Cola Co., 200 F.R.D. 685 (N.D. Ga.
2001); Shores v. Publix Supermarkets, 1997 WL 714787 (M.D. Fla.).
---------------------------------------------------------------------------
In a pattern or practice case of compensation discrimination (or
any other type of discrimination) relying on statistical evidence,
courts permit a wide range of approaches--evaluating each model based
on the facts of the case. Proof frequently turns on the results of a
statistical analysis of the compensation paid to a protected class,
with controls used to ensure comparison of similarly situated employees
and accounting for potentially non-discriminatory explanations for
statistical disparities. However, there are no hard and fast rules
regarding how to group workers, what controls to use, or how to analyze
the pay practices at issue. For example, in Segar v. Smith, the court
found discrimination based on a regression analysis comparing all
African-American special agents to white special agents, even though
they held jobs that spanned multiple positions and pay grades. In that
case, the evidence demonstrated an overall pattern of racial
discrimination in compensation after controlling for qualifications and
other factors impacting pay. 738 F.2d 1249 (D.C. Cir. 1984). OFCCP
relied on a similar approach in the Harris Bank case involving systemic
pay discrimination against workers holding a variety of different
positions.\11\
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\11\ OFCCP v. Harris Bank, 1978-OFC-2, ALJ's Recommended
Decision on Remand (Dep't. of Labor Dec. 22, 1986). See also OFCCP
v. St. Regis Corp., 78-OFC-1, ALJ's Recommended Decision (Dep't. of
Labor Dec. 28, 1984).
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Courts consistently hold that there is no single correct model or
set of factors that must be included in a regression analysis. Bazemore
v. Friday, 478 U.S. 385, 400 (1986); McClain v. Lufkin Ind., 519 F.3d
264, 280 (5th Cir. 2008). Proper groupings for purposes of regression
analysis are based on a combination of statistical theory and relevant
facts, and should be a case-specific determination.\12\ To the extent
the Standards mandated specific and very narrowly defined groupings in
every case, they are not consistent with Title VII principles and not
appropriate as parameters to restrict OFCCP enforcement.
---------------------------------------------------------------------------
\12\ For example, in Harris Bank the ALJ noted that analysis of
two large groups of jobs that spanned multiple titles and levels--
professional and clerical--was appropriate based on the theory of
discrimination.
---------------------------------------------------------------------------
By setting limits on how OFCCP tests for pay differences, and by
grounding those limits in job similarity, the Standards make it much
harder to detect certain forms of pay discrimination. Where an employer
discriminates by channeling workers of a particular race or sex into
lower paying jobs, by a glass ceiling preventing advancement, or other
promotion or job assignment practices, it may be highly inappropriate
to use job similarity as the basis for analysis.\13\ There are also
problems with some of the specific factors for determining job
similarity, for example where the contractor has a policy linking
additional pay to certain qualifications, and reliance on those
qualifications may cause adverse impact.\14\ In those situations, the
Standards require OFCCP to accept potentially discriminatory decisions
or criteria as a neutral justification for pay differences, contrary to
longstanding Title VII principles. Defining employees as similar based
on their positions is
[[Page 13513]]
often appropriate, and OFCCP will continue to use that approach.\15\
But it is not the right framework for every single case.\16\ By
requiring only a single approach to determining who is ``similarly
situated,'' the Standards made it much more difficult to address the
full range of possible unfair pay practices.
---------------------------------------------------------------------------
\13\ See, e.g., Beckman v. CBS, 192 F.R.D. 608 (D. Minn. 2000);
Stender v. Lucky Stores, 803 F.Supp. 259 (N.D. Cal. 1992); OFCCP v.
St. Regis Corp., supra.
\14\ When the qualifications are not job related or consistent
with business necessity, their use would be illegal under title VII,
such as offering a higher paying job to workers able to pass a
lifting test when the job does not require lifting and women more
often fail the test. Cf., Valentino v. U.S Postal Service, 674 F.2d
56, 67-68 (D.C. Cir. 1982) (relying on qualifications to define
groups is potentially more appropriate for high level or specialized
positions than for general administrative, technical or clerical
jobs that share skill levels).
\15\ OFCCP v. Astra Zeneca, 2010-OFC-0005, ALJ Consent Decree
and Order (Dep't. of Labor June 6, 2011).
\16\ Harris Bank, at 25 (``Dr. Killingsworth's decision to group
the professional and clerical hires together in one study was
clearly correct for this particular issue. The key determination is
whether the distinction itself was based upon discriminatory
criteria. It is bard [sic] to visualize how the question could have
been properly examined without a simultaneous comparison of the
employees directly affected. Regressing each subgroup individually
would have assumed Harris' initial employment decisions were
correct, and included this assumption in the probits.'').
---------------------------------------------------------------------------
Removing the arbitrary restrictions of the Standards will also
align OFCCP practice with the EEOC. The EEOC's Compliance Manual
rejects the idea that there is one way to prove compensation
discrimination, and distinguishes between individual and systemic
approaches. The EEOC's Compliance Manual is careful to point out that
its approach to disparate treatment analysis is ``not intended as an
exclusive method'' (subsection 10-III.A). And, with respect to using
statistics, the Compliance Manual states that ``[t]he decision about
whether and how to use statistics to aid in investigation should be
made on a case by case basis'' (subsection 10-III.A.3).\17\
---------------------------------------------------------------------------
\17\ EEOC, Directives Transmittal, Compliance Manual, Section
10: Comp. Discrimination (Dec. 5, 2000), available at http://www.eeoc.gov/policy/docs/compensation.html.
---------------------------------------------------------------------------
In addition to the substantive questions about how to group
employees, the Standards attempt to dictate the level of aggregation--
traditionally a case-specific inquiry. For example, in Velez v.
Novartis, the plaintiffs' expert report tested for gender-based pay
differences by analyzing all sales employees in all jobs together,
including in some versions of the analysis a comparison for job level
to differentiate between entry-level and more senior employees. 244
F.R.D. 243, 261-62 (S.D.N.Y. 2004). The defense expert analyzed each
job level using a separate regression, and the court ruled that it was
up to the fact finder to decide which approach was more persuasive.
Under the Standards, OFCCP generally is to perform a separate
regression analysis for each of the defined groups of employees holding
similar jobs. While the Standards leave open the option of an aggregate
analysis, that approach is not preferred and subject to specific
technical limitations. See 71 FR 35131; 35140-41. Courts have
consistently held that the decision to aggregate data is a case-by-case
inquiry,\18\ and that overly fragmenting a regression analysis makes it
harder to detect discrimination when it exists.\19\ Further, certain
specific technical requirements for using a pooled regression model
under the Standards create additional unnecessary across-the-board
hurdles that instead should be case-by-case determinations.\20\
---------------------------------------------------------------------------
\18\ See, e.g., Stagi v. Amtrak, 391 F. App'x. 133, 11 (3d Cir.
2010); McReynolds, 349 F.Supp. 2d at 14.
\19\ Courts have recognized the value of aggregate data in a
variety of circumstances. Lilly v. Harris Teeter Supermarket, 720
F.2d 326, 336 n.17 (4th Cir. 1983) (aggregate data across years
preferred over single year); Eldredge v. Carpenters 46 N. California
Cnty Joint Apprenticeship and Training Comm., 833 F.2d 1334, 1339
(9th Cir. 1987) (aggregate data over years provides a ``more
complete and reliable picture''); Cook v. Boorstin, 763 F.2d 1462,
1468-69 (D.C. Cir. 1985) (evidence of discrimination across multiple
jobs is relevant to discrimination in a particular job group);
Capaci v. Katz & Besthoff, 711 F.2d 647, 654 (5th Cir. 1983)
(improper to fragment data in ways that make statistical tests
``less probative'').
\20\ For example, the Standards require a control for job
similarity in every pooled analysis. This will frequently be
appropriate, but as explained above, in cases involving a concern
about discrimination in assignment to job or level, it may not be
appropriate. The Standards also require testing for interaction
terms in every case where OFCCP is considering pooled analysis,
specifically mentioning the Chow test as an example. While this is a
standard statistical test, applying it in this particular context is
highly disputed by experts, is not always technically feasible, and
it has not been required by courts. See, e.g., Taylor v. District of
Columbia Water & Sewer Auth., 241 F.R.D. 33, 43 (D.D.C. Mar. 13,
2007); Rossini v. Ogilvy & Mather, 615 F.Supp. 1520, 1522-23
(S.D.N.Y. 1985), vacated and remanded on other grounds, 798 F.2d 590
(2d Cir. 1986); Vuyanich v. Republic Nat'l Bank, 505 F. Supp. 224,
299, 314 (N.D. Tex. 1980), vacated on other grounds, 723 F.2d 1195
(5th Cir. 1984).
---------------------------------------------------------------------------
Proof of discrimination under the Executive Order and Title VII
requires evidence sufficient to support a conclusion that
discrimination motivated the decision or that an identified employment
practice has an adverse impact on a protected class. That evidence can
take many forms. What the appropriate comparison groups are depends on
the pay practices at issue, the available data, types of workers, and
other case-specific factors. It may be important to test for
unjustified differences within a set of workers who are similar on the
basis of job, but it may be important to consider other approaches.
OFCCP will take a more proactive and rigorous approach to analyzing pay
differences that does not place unnecessary barriers in the way of
effective enforcement or hinder its ability to protect workers from
discrimination.
2. Multiple Regression Analysis
Most commenters discussed the use of regression analysis as
directed by the Standards. Eight of the seventeen agree with OFCCP that
the agency should not formally restrict its analytic method to multiple
regression analysis.
The commenters supporting rescission generally stated that multiple
regression is often the appropriate tool, but they also agreed that
OFCCP should retain the flexibility to consider all possible evidence
of discrimination. The Social Science Researchers concluded that
``OFCCP * * * should utilize this mode of analysis [regression
analysis] in investigating possible compensation where it is feasible
and appropriate to do so.'' A women's rights group noted that while
multiple regression is a ``powerful, versatile method of estimation * *
* it is not the ideal means for examining every analytical problem,
particularly when working with small samples.'' Commenters explained
that using regression analysis may not be appropriate especially where
data or sample size limitations could bias the results or where the
underlying technical assumptions necessary to support regression
analysis cannot be met. A women's rights group and a civil rights group
both noted that OFCCP does not require a regression analysis during the
investigatory phase of other types of discrimination cases.
Commenters opposing rescission largely agreed that Title VII does
not require regression analysis in all cases; \21\ however, they
challenged the view that the Standards unduly limit OFCCP's choice of
methods and
[[Page 13514]]
expressed concern regarding potential alternatives. For example, an
organization of businesses agreed that ``a multiple regression analysis
may not be the appropriate statistical model to analyze all
compensation issues, particularly for small sample sizes.'' However,
this commenter expressed concern that OFCCP would rescind the Standards
without identifying the methods to be used in place of regression
analysis. An employers' association makes a similar assessment, stating
that ``multiple regression analyses may not be the preferred
statistical methodology in all cases * * *'' but fearing ``OFCCP may
elect to use less sophisticated statistical analyses in its future
compliance evaluations * * *.''
---------------------------------------------------------------------------
\21\ A management law firm noted ``* * * statistical regression
analysis may not be required by Title VII (and in fact, no specific
methodology is), it is clear from case law that regression analysis
is an appropriate method for evaluating pay.'' (Emphasis in original
text). A comment signed by various human resources organizations and
a management law firm, similarly noted that ``multiple regression
has a long and well-established history in Title VII compensation
cases.'' Another management law firm went even further, asserting
that regression analysis is required under Title VII case law. A
consulting group's comment addressed the issue from a different
perspective--focusing on the analytic procedures used to prioritize
cases for investigation. The consulting group asserted that ``a more
robust, widespread, and consistent compensation evaluation system
should be installed.'' This commenter recommended that annual
submission of electronic compensation data by federal contractors
will contribute to an ``improved'' system and using a more robust
``tipping point test'' is needed. The comment concludes that with
these changes, ``multiple regression should be used as the sole tool
for identifying systemic pay disparities.'' OFCCP has sought input
on whether to ask contractors to submit annual data as the comment
suggests and how to analyze that data. 76 FR 33372 (June 8, 2011.)
---------------------------------------------------------------------------
Using a single analytic method to identify compensation
discrimination is inconsistent with Title VII's mandate and evidentiary
principles. Watson v. Ft. Worth Bank and Trust, 487 U.S. 977, 995
(1988) (Supreme Court's ``formulations'' for proof of discrimination
``have never been framed in terms of any rigid mathematical formula'').
Although regression analysis is a common method of proof in systemic
cases, courts have considered statistical techniques other than
multiple regression as potential evidence of discrimination.\22\
Similarly, published research on discrimination frequently relies on
multiple regression, but social scientists use a variety of
quantitative and qualitative methods to document differences in hiring,
pay or other outcomes on the basis of race and gender.\23\ There is no
single method of proving discrimination, and it is critical to consider
all relevant evidence in order to draw an appropriate conclusion. Most
systemic discrimination cases rely on statistical evidence, but as
explained in the prior discussion, there is frequent debate over the
choice of models, methods and variables; and courts have permitted a
variety of analytic approaches.
---------------------------------------------------------------------------
\22\ For example, courts have considered descriptive statistics
about the representation of protected groups in certain jobs, or
statistical analyses other than multiple regression, in combination
with other evidence, in determining proof of systemic
discrimination. See, e.g., Beckman, 192 F.R.D. at 611; Greenspan,
495 F.Supp. at 1029-1033. In addition, in St. Regis the ALJ
concluded there was a pervasive pattern of wage disparities
disfavoring women using statistical techniques other than regression
analysis. The wages of numerous small groups of comparable male and
female employees were compared. In statistically significantly more
groups, the wages of males were higher than the wages of females.
The ALJ concluded these differences were attributable to
discriminatory job assignments.
\23\ When researchers need to delve deeper into potential
explanations for differences in outcomes for particular groups, or
overcome biases and limitations of linear regression models for
particular cases, they have considered alternative techniques. See,
e.g., Jaume Garcia, Pedro Hern[aacute]ndez and Angel L[oacute]pez-
Nicol[aacute]s, How wide is the gap? An investigation of gender wage
differences using quantile regression, 26 Empirical Economics 149
(2001)(adjusting estimates of the wage gap to account for increases
in the wage scale). Social scientists have also increasingly applied
experimental techniques such as paired comparison testing to
identify race or sex discrimination in employment and other
contexts. See, e.g., Marianne Bertrand and Sendhill Mullainathan,
Are Emily and Brendan More Employable Than Lakisha and Jamal?
American Economic Review (2004).
---------------------------------------------------------------------------
Social science principles require choosing a method and a model
based on the research question and available data; \24\ Title VII
principles similarly require statistical evidence to be responsive to
the issues presented, the underlying facts and the relevant, available
data. Multiple regression analysis is frequently the appropriate
method; however other statistical or nonstatistical analyses may be
better suited, depending on the facts of the case and the available
data.
---------------------------------------------------------------------------
\24\ See Daniel Rubinfeld, Reference Guide on Multiple
Regression, in Reference Manual on Scientific Evidence 179, 186-91
(Federal Judicial Center 2000).
---------------------------------------------------------------------------
OFCCP has found that the use of multiple regression analysis may be
appropriate in some cases and not others. Even in the narrowed context
of examining systemic compensation discrimination, its application has
limitations. In smaller workplaces, in reviews involving high level or
very specialized positions, or in cases where important data are
unavailable or unreliable, it may be difficult to identify patterns of
discrimination by a single analytic method or type of evidence. OFCCP
has not abandoned the use of multiple regression analysis and will
continue to use this type of analysis to examine compensation issues
where it is feasible and appropriate to do so. Section II.A.4 and
Section III discuss more specifically how OFCCP intends to approach the
choice of analysis going forward.
3. Anecdotal Evidence
More than half of the commenters addressed the requirement that
OFCCP obtain anecdotal evidence to support the issuance of a Notice of
Violation (NOV). A majority of these commenters agreed that OFCCP
should not specifically require anecdotal evidence to support the
issuance of an NOV. The remainder opposed changing the current
treatment of anecdotal evidence under the Standards.
Commenters in favor of eliminating this requirement relied on legal
and practical considerations. They noted that courts have permitted
discrimination cases to go forward without anecdotal evidence. They
also stated that anecdotal evidence is much harder to obtain in cases
of compensation discrimination because victims are either unaware of
the compensation other employees receive or they are expressly
prohibited from gaining such information. One women's rights group
cited an Institute for Women's Policy Research survey of private and
public sector employees in which 50% of respondents and 61% of private
sector employees reported that discussing pay was prohibited or
discouraged in the workplace.
Commenters in favor of keeping the requirement based their position
on either a legal argument or on the view that such a rule places no
real burden on the agency. These commenters state that OFCCP is not
under a formal restriction, citing to language in the Standards that
indicates ``[t]here may be cases in which the statistical analysis is
so compelling that an allegation of systemic discrimination is
warranted even in the absence of anecdotal evidence of compensation
discrimination.'' 71 FR at 35134. They go on to state that it is common
in Title VII cases to provide anecdotal evidence to bring ``the cold
numbers convincingly to life,'' as the Supreme Court described in the
Teamsters case. 431 U.S. at 339.
OFCCP concludes that the mandate regarding anecdotal evidence
operates as a real barrier to enforcement and should be rescinded.
Identifying individuals harmed by pay discrimination is particularly
difficult. Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618, 645
(2007) (Ginsburg, J., dissenting). Many workers do not know they are
underpaid. If OFCCP finds evidence of pay discrimination by federal
contractors through its review of data, the agency should not let that
discrimination stand simply because the contractor had successfully
hidden it from its employees. Federal contractors have special
obligations to avoid discrimination, monitor their pay practices and
submit to reviews to make certain they are in compliance--regardless of
whether any individual applicant or employee actually has knowledge of
discrimination.
Further, Title VII does not dictate the use of anecdotal evidence
in all systemic cases. As the Supreme Court has explained, statistics
may at times be ``the only avenue of proof'' available ``to uncover
clandestine and covert discrimination.'' Teamsters, 431 U.S. at 339
n.20 (internal citation omitted). In
[[Page 13515]]
some cases, statistics alone can establish discrimination.\25\
---------------------------------------------------------------------------
\25\ Teamsters, 431 U.S. at 339 (``We have repeatedly approved
the use of statistical proof, where it reached proportions
comparable to those in this case, to establish a prima facie case of
racial discrimination in jury selection cases, see, e.g., Turner v.
Fouche, 396 U.S. 346; Hernandez v. Texas, 347 U.S. 475; Norris v.
Alabama, 294 U.S. 587. Statistics are equally competent in proving
employment discrimination.'') (S.Ct. and L. Ed. citations omitted).
Accord, Palmer v. Schultz, 815 F.2d 84, 90-91 (DC Cir. 1987);
Rossini, 798 F.2d at 604; OFCCP v. Greenwood Mills Inc., 89-OFC-39,
Decision and Order of Remand at 3 (Dep't. of Labor Nov. 20, 1995);
OFCCP v. Jacksonville Shipyards, 89-OFC-1, Decision and Order of
Remand at 6, (Dep't. of Labor May 9, 1995).
---------------------------------------------------------------------------
Although the Standards do allow OFCCP to proceed without anecdotal
evidence in certain circumstances, OFCCP finds this exception to the
requirement to be too narrow. No anecdotal evidence should be required
for any type of case, much less for a compensation case where it may be
extremely difficult or impossible to obtain. Regardless, OFCCP will
continue to actively seek anecdotal evidence during its investigations.
The agency will evaluate all available evidence--statistical and
anecdotal--before making a determination regarding contractor
compliance.
4. Multiple Investigative and Analytical Methods
The NPR states that OFCCP will continue to adhere to the principles
of Title VII in investigating compensation discrimination and will
reinstitute flexibility in its use of investigative approaches and
tools. Generally, the commenters, whether supporting or opposing
rescission of the Standards, acknowledged that multiple investigative
and analytical methods for addressing potential compensation
discrimination may be used by OFCCP.
A number of commenters expressed support for OFCCP's position in
this regard. Specifically, a women's rights group stated that, ``[i]t
is critical for OFCCP to have a full complement of investigative tools
and strategies at its disposal to be used at the various stages of the
investigation and litigation process.'' A civil rights organization
stated, ``OFCCP must be permitted to exercise discretion to investigate
compensation cases in the same manner that it exercises discretion in
other types of cases.'' The Social Science Researchers noted that OFCCP
should be able to choose an analytic method based on factors such as
sample size, data availability, or other circumstances.
Some commenters, opposing rescission of the Standards, raised two
concerns with the statement that OFCCP will reinstitute flexibility in
its use of investigative and analytical tools as it relates to
compensation discrimination. These commenters expressed concern that
this would result in inconsistent enforcement and a lack of guidance
for contractors. A comment signed by various human resources
organizations and a law firm stated that ``a contractor has a right to
know the standards by which it is being judged.'' Further it urges that
``a rescission of the Standards without new standards in place would be
damaging to both the spirit and enforcement of equal employment
opportunity.'' Additionally, this commenter challenged OFCCP's
statement that it adheres to Title VII principles and asserts that
``OFCCP's interpretation of Title VII principles in the proposed
rescission is not consistent with the legal standards established in
case law * * *.'' An employers' association noted agreement with
OFCCP's statement that compensation investigations and analytical
procedures should be tailored to the facts of the case based upon Title
VII principles. However, this commenter also expressed concern that
flexibility in OFCCP's use of investigative approaches and tools would
result in ``inconsistency and confusion.'' A comment submitted by a law
firm offered that, if ``* * * OFCCP believes other methodologies may be
appropriate for identifying systemic compensation discrimination under
other circumstances, the Standards should be modified appropriately,
but not discarded all together.''
These comments involving potential inconsistency and undue
flexibility raised one specific past OFCCP practice that involves the
so-called ``pay grade theory.'' This method made a comparison of
average pay differences using a particular employer's pay grade, salary
band or similar system to draw conclusions about pay discrimination.
The method made assumptions that workers in the same pay grade were by
definition similarly situated. 71 FR 35136-37. The Notice adopting the
Standards explicitly grounded the need for the Standards on the view
that this approach was legally untenable. 71 FR 35125-26. Because
concerns about the pay grade model animated the original Standards,
multiple commenters expressed alarm that this rescission means a return
to the prior model.
That is not OFCCP's intent in rescinding the Standards. On the
contrary, both approaches suffer from the same flaw. The Standards
simply replaced one across-the-board framework with another. Neither
permits careful case-specific consideration of the pay practices and
workers at issue and the available data and evidence. OFCCP does not
view employer pay grades as per se evidence of similarity; rather they
are one possible relevant factor among many others. However, OFCCP also
has determined that it was a vast overcorrection to address the
potential pitfalls of the ``pay grade'' theory by requiring multiple
regression analysis in all cases, or looking to only the narrowest
possible comparisons of workers.
OFCCP does not believe that increased flexibility necessarily leads
to greater inconsistency, and is committed to ensuring that it does
not. Flexibility is needed to allow OFCCP to adapt its approach to the
uniqueness of a given case within the framework of Title VII case law.
Flexibility also ensures that OFCCP's methodology reflects new legal
developments, new analytic practices, and new workplace practices, as
well as the relevant nuances of the contractor's workforce and
practices. The use of more than one approach to investigate and analyze
compensation issues is necessary because of the complexities of these
types of investigations. The particular tool, or combination of tools,
depends upon the facts of a specific case, and includes consulting with
labor economists and other experts, as appropriate.
Further, OFCCP is committed to ensuring consistency in conducting
its compliance activities. OFCCP adheres to Title VII principles in
developing and applying its compliance policies and procedures. The
OFCCP FCCM, directives, and staff training provide necessary guidance
to prepare compliance officers to address compensation issues. These
tools, used in conformance with the applicable regulations, provide the
structure within which compliance officers operate. OFCCP has begun
updating materials and implementing a comprehensive training program to
ensure that its staff investigate pay discrimination effectively,
rigorously, and fairly, consistent with prevailing law and the policy
goals animating the Executive Order. In addition, OFCCP will be
conducting regular quality audits of its compensation investigations.
Because of the requests from the contractor community for more
transparency on OFCCP's procedures for reviewing compensation
practices, the agency commits to take specific steps to support future
compliance assistance in this area. First, Section III below sets out
some specific details regarding how OFCCP intends to apply Title VII
principles in the context of its investigations. Second, OFCCP will
[[Page 13516]]
continue to provide compliance assistance to the contractor community
through written materials such as case examples, frequently asked
questions, and similar materials. Finally, OFCCP will provide online
and in-person opportunities for interactive discussion, such as
webinars, online chats, and compliance assistance workshops.
5. Cost to Contractors
A few commenters raised concerns regarding the cost to contractors
if the Standards are rescinded, stating that without the Standards in
place, contractors will incur unwarranted costs in their attempts to be
in compliance. A management law firm noted, ``[c]ompensation analysis
is not only nuanced and complex, but it also is costly. If contractors
are required to navigate the nuance and complexity and absorb these
costs, they are at least entitled to transparency in the standards they
should use, as well as those OFCCP will use, when doing so.'' The
commenter recommended that ``retaining and modifying the Voluntary
[sic] Standards and Guidelines to reflect improvements would be one way
to do this.'' Simply modifying the existing guidance is not a viable
option. OFCCP has not traditionally developed special procedural rules
for a single employment practice, instead using directives and other
internal guidance to the field. That approach allows the agency
sufficient flexibility to respond to changes in case law or the
workplace.
For contractors already taking their compliance obligations
seriously, the rescission should have little impact on cost. Existing
regulations mandate that contractors engage in regular and proactive
review of their compensation practices and pay data. Regardless of
whether the Standards addressed the full range of potentially
discriminatory pay practices, contractors have an independent legal
obligation not to discriminate and have affirmatively committed to
practice equal employment opportunity as a condition of the privilege
of federal contracting. OFCCP is aligning its enforcement procedures
with the scope of illegal pay discrimination under Title VII, and
ensuring that workers and their families do not bear the cost of unfair
discrimination. Further, OFCCP has committed to providing the requested
transparency to alleviate potential concerns regarding unnecessary
costs as a result of the rescission.
B. Comments Regarding Voluntary Guidelines
1. Contractor Use of the Voluntary Guidelines
In OFCCP's experience, contractors rarely use the Voluntary
Guidelines to demonstrate their compliance with the Executive Order.
Multiple commenters agreed with OFCCP's assessment, noting that fact
warranted rescission of the Voluntary Guidelines. According to an
organization of businesses, the Voluntary Guidelines have ``limited
utility and significant burden'' and should therefore be rescinded. A
consulting group, while identifying potential benefits of the Standards
and Voluntary Guidelines, noted that based on their experience
conducting ``pro-active compensation reviews for federal contractors,''
pay discrimination continues to be a problem. They observed that ``the
majority of the contractor community did not (unfortunately) go along
with the spirit and letter'' of the 2006 guidance.
However, other commenters asserted that contractors have in fact
used the Voluntary Guidelines--although not for the intended purpose of
OFCCP compliance reviews. These comments stated that contractors use
the Voluntary Guidelines for internal self-evaluation purposes without
taking advantage of the ``compliance coordination incentive option.''
In the experience of these commenters, contractors perform their
compensation analysis under attorney-client privilege and wish to
protect it from disclosure. A comment signed by various human resources
organizations and a law firm cited two surveys it conducted (with 113
contractors and 33 compensation ``experts'' responding), which found
that 61.3% of the contractors surveyed used the Voluntary Guidelines.
This commenter notes that ``OFCCP may be confusing a contractor's use
of the [Voluntary] Guidelines with contractor's use of the Compliance
Coordination Incentive Option (i.e., voluntarily submitting the results
of an equity analysis before any triggers have been identified) which
our survey indicates is used by fewer than 6% of contractors.'' Some
commenters expressed concern that without the Voluntary Guidelines, any
incentive to self-evaluate would be diminished. A law firm noted that
if rescinded ``* * * many contractors will be disincentivized from
conducting robust self-analysis that permit them to correct problematic
disparities [in compensation].''
While it may be true that some contractors privately use the
Voluntary Guidelines to predict how OFCCP will evaluate their
compliance under the Standards, contractors rarely use them in their
interactions with OFCCP. As previously mentioned, OFCCP intends to
engage in active compliance assistance regarding compensation analysis.
This assistance, as well as the discussion at Section III, below, will
provide contractors with notice about how the agency intends to
approach investigations of compensation issues and support voluntary
compliance activity.
Importantly, even in the absence of the Voluntary Guidelines or
some similar explicit instructions for performing pay audits,
contractors remain independently obligated to conduct self-evaluations
of their compensation practices as required by 41 CFR 60-2.17(b)(3).
They are independently obligated to refrain from pay discrimination in
violation of the Executive Order and Title VII, so self-monitoring
would be prudent even if not required. In addition to the OFCCP, they
are subject to potential enforcement actions by the EEOC or Department
of Justice or litigation from private plaintiffs. There is no basis to
conclude that the Voluntary Guidelines' purely voluntary, rarely
utilized and potentially burdensome procedure is the only available
mechanism for self-evaluation.
2. Substantive Limitations of the Voluntary Guidelines
In addition to the failure of contractors to use the Voluntary
Guidelines, OFCCP in the NPR discussed substantive problems with how
the Voluntary Guidelines evaluated potential pay discrimination. A
majority of commenters addressed the substantive approach of the
Voluntary Guidelines. Over half of those commenters agreed with OFCCP's
assessment that the analytical model detailed in the Voluntary
Guidelines has not been an effective enforcement strategy, while the
remainder defended the approach under the Voluntary Guidelines.
Some commenters noted similar legal and practical deficiencies
between the substantive framework of the Voluntary Guidelines and that
of the Standards, such as overly narrow groupings and analytic
requirements. Several commenters noted the problems with deferring to a
contractor analysis of pay, especially where that was not the approach
for investigating other types of employment practices.
Other commenters opposed OFCCP's position. A consulting group
states that the Voluntary Guidelines are ``technically rigorous and
sound in
[[Page 13517]]
almost every regard.'' An employers' association stated that it had no
objection to rescission of the ``coordination'' feature of the
Voluntary Guidelines but ``the remaining portions of the guidelines and
the interpretive standards have served as useful blueprints for both
OFCCP and federal contractors interested in monitoring compensation
patterns for potential systemic discrimination.'' Two commenters stated
that the Voluntary Guidelines conform to Title VII principles. A
comment signed by various human resources organizations and a
management law firm, citing to the two surveys which included 113
contractors and 33 compensation experts as participants in the surveys,
stated that ``[a]lthough contractors and experts might disagree with
some of the individual standards of the current Guidelines * * * 84% of
contractors [surveyed] believe the Guidelines increase fairness of an
audit by standardizing the process.''
Just like the Standards, the Voluntary Guidelines favor a highly
limited analysis that may fail to uncover discrimination in pay. The
problems with the proposed analytic groupings are the same for the
Standards and the Guidelines--as explained in Section II.A., they are
overly narrow, inconsistent with Title VII principles and fail to
address the variety of potential types of pay discrimination. These
limits are magnified by the fact that the Voluntary Guidelines
establish specific numerical thresholds to define statistical coverage,
group size, and application of regression analysis. The Voluntary
Guidelines define those limits across the board, in advance, and
without any other information about the pay practices at issue, the
types of workers, the number of explanatory factors, or the quantity or
reliability of the available data. That one-size-fits-all approach
lacks analytic rigor and legal foundation. It is unlikely to be
effective at distinguishing between contractors who are in compliance
with the Executive Order and those who are not. And it is therefore
unlikely to be a useful or appropriate self-evaluation tool.
The Voluntary Guidelines were always optional, but as an officially
recommended OFCCP method, these substantive limitations become
particularly problematic. Contractors assumed, even if they did not use
the Voluntary Guidelines for compliance coordination, that following
their dictates would guard against any charges of discrimination in
pay. By discouraging any broader examination of pay disparities, the
Voluntary Guidelines created a false promise of compliance serving
neither the interests of contractors nor of workers.
There is an additional problem specific to the Voluntary
Guidelines--the compliance coordination procedure itself. Although
rarely used, it is still in conflict with the OFCCP's goal of fully
addressing pay discrimination in the contractor workforce. Because
compliance coordination requires deference to any analysis that
``reasonably meets'' the Voluntary Guidelines, and because the
Voluntary Guidelines take an overly narrow view of what constitutes
discrimination, OFCCP may be prevented from addressing legitimate
violations of the Executive Order. There is no reason to have such a
compliance coordination mechanism, and especially not one for a
specific employment practice. OFCCP does not formally defer to
contractor determinations of applicant or promotion pools, steps of
hiring procedures, job groups in Affirmative Action plans, or the many
other factual issues relevant to evaluating compliance in other areas.
Nor should OFCCP defer to contractor decisions about how to test for
pay differences.
In the absence of the Voluntary Guidelines, contractors may
continue to choose a self-evaluation method appropriate to assess
potential pay disparities among their workforce. OFCCP will not be
mandating any specific methodology. However, the principles outlined in
Section III, below, should be useful to contractors devising a self-
audit program. Under section 60-2.17(b)(3), contractors must be
assessing specifically ``whether there are gender-, race-, or
ethnicity-based disparities'' in compensation, and under section 60-
2.17(d) any self-audit program must be ``periodic'' and must include
specific internal reporting to management of results. OFCCP will assess
compliance with these aspects of the regulations by determining whether
the scheduled reporting mechanism meets these standards.
3. Cost to Contractors
Several commenters spoke to the issue of cost to the contractors
should the Voluntary Guidelines be retained or rescinded. They
expressed concern regarding increased costs to the contractors in terms
of the ``absence'' of any guidance. A federal contractor organization,
referring to both the Standards and Voluntary Guidelines, noted that
``[i]n the absence of such guidance, many employers, particularly
smaller and mid-size employers without the `deep pockets' to hire
costly third-party experts, will be discouraged from conducting any
type of proactive self-analysis.'' Taking a different approach to the
issue of costs to the contractor, an organization of businesses,
supporting rescission of the Voluntary Guidelines, stated that ``* * *
the [Voluntary] Guidelines ignore the burden associated with developing
sophisticated regression models that would satisfy the standards
articulated by OFCCP. The cost and complexity of conducting such
analyses is too much for many [of our] members to undertake on an
annual basis.''
Speculations about potential future costs is not a basis to retain
a rarely used, ineffective and potentially burdensome compliance
regime. This is particularly true where the current approach may
already be costly for some contractors, and where it clearly fails to
advance the agency's core policy objective.
OFCCP is taking steps to mitigate any potential cost or burden
associated with rescinding the 2006 guidance. In addition to the
discussion in Section III below, OFCCP will be providing written
materials, such as FAQs, and compliance assistance sessions going
forward--clearly describing its investigative procedures and
interpretation of key issues. This should make it easier for
contractors to assess their own practices. It will also avoid the
possibility that the absence of guidance imposes a cost on contractors.
C. General Comments Regarding the Need for Formal Rulemaking
Numerous commenters discussed the OFCCP proposal to communicate its
procedures for investigating and analyzing compensation discrimination
through the traditional means of using its compliance manual,
directives and other staff guidance. A few commenters supported OFCCP's
use of the same methodology for establishing policy and procedures as
it uses in addressing other discrimination issues, noting that the use
of its compliance manual, directives, and other similar guidance have
been effective.
Several commenters raised concerns regarding OFCCP's decision not
to use formal rulemaking. This was coupled with comments that by not
using formal rulemaking, OFCCP is not being transparent in its actions.
An employer association noted that if OFCCP rescinds the Standards and
Guidelines, ``new guidelines should be established through a formal
public rulemaking process that mirrors the EEOC's enforcement of Title
VII.'' A management law firm asserted that the proposed approach ``* *
* moves from a transparent, consistent approach to
[[Page 13518]]
compensation analysis by OFCCP to a more covert, possibly ever-changing
approach.''
Another management law firm challenged the view that OFCCP has not
traditionally addressed investigation standards through formal
rulemaking, citing the Uniform Guidelines on Employee Selection
Procedures, the Sex Discrimination Guidelines, and the Internet
Applicant Rule. The Executive Order implementing regulations establish
legal requirements; they do not prescribe or limit the models of proof
that the agency may use to demonstrate noncompliance. OFCCP has
traditionally established investigation procedures through
subregulatory materials such as compliance manuals, directives, and
training and will continue to do so.
Because OFCCP adopted the Standards and Voluntary Guidelines by
means of the notice and comment process, OFCCP has decided to take
subsequent action regarding the specific published guidance in the same
manner. However, OFCCP's general practice has been to develop specific
investigative procedures for all of its programs through training
programs, internal guidance documents, the FCCM, and similar materials.
OFCCP has developed and conformed its investigative procedures based on
its interpretation of Title VII principles as the law has developed
over time. OFCCP will continually refine these procedures to ensure
that they are as effective and efficient as possible. In addition,
OFCCP plans to provide written materials and compliance assistance as
explained above. Going forward, OFCCP will provide as much transparency
and public disclosure as possible about its procedures for
investigating compensation discrimination. Technical assistance will
include tools such as written Frequently Asked Questions, webinars,
conference calls, online chats, and presentations, which also provide
opportunities for stakeholder dialogue and feedback. The comments
received in response to the NPR do not present a compelling argument
for OFCCP to unnecessarily restrict its ability to be responsive and
timely in this regard.
D. Statutory and Regulatory Reviews
Executive Order 12866 and Executive Order 13563 (Regulatory
Planning and Review)--This rule has been designated an ``other
significant'' regulatory action, although not economically significant,
under Executive Order 12866. The public was provided a meaningful
opportunity to provide input on this document through a 60-day comment
period on a Notice of Proposed Rescission issued on January 3, 2011.
Paperwork Reduction Act--The Paperwork Reduction Act (PRA), 44
U.S.C. 35, does not apply to this document because it does not involve
any collection of information subject to the approval of the Office of
Management and Budget. The information reviewed under the Title VII
framework described in this document is collected and reviewed as a
result of a desk audit of a contractor's or subcontractor's employment
practices. The information collected during the desk audit is covered
under OMB Control Number 1250-0003. The compensation analysis described
in the Notice occurs after OFCCP compliance officers identify one or
more indicators of compensation discrimination during the desk audit
that warrant a more in-depth investigation or a compliance evaluation.
Pursuant to 5 CFR 1320.4(a)(2), the PRA does not apply to information
collections during an ``administrative action, investigation, or audit
involving an agency against specific individuals or entities.''
Regulatory Flexibility Act--OFCCP determined that, pursuant to the
Regulatory Flexibility Act (RFA), 5 U.S.C. 601, et seq., this
rescission does not require a regulatory flexibility analysis. Agencies
must conduct a regulatory flexibility analysis for any regulatory
action that requires a notice of proposed rulemaking. 5 U.S.C. 603(a).
The Notice provides subregulatory guidance to contractors and
subcontractors regarding OFCCP's application of Title VII principles to
compensation discrimination evaluations. Therefore, a regulatory
flexibility analysis is not required.
E. Conclusion
After careful consideration of these comments, OFCCP concludes that
the Standards and Voluntary Guidelines impede the agency's ability to
detect and investigate compensation discrimination, which disserves
workers, contractors, and the agency. They require an overly narrow
definition of what may constitute systemic compensation discrimination,
encourage a less rigorous approach to self-evaluation, and preclude
full enforcement of the Executive Order ban on pay discrimination.
There should be no unnecessary barriers to enforcing the promise of
equal opportunity for workers, and certainly not with respect to
ensuring non-discrimination in pay.
OFCCP has concluded that the Standards and Voluntary Guidelines
have failed to meet the objectives they were designed to address. They
significantly undermine the ability of the agency and contractors to
vigorously investigate and identify compensation discrimination
consistent with Title VII principles. OFCCP has developed and will
continue to develop more effective methods for investigating and
addressing compensation discrimination. OFCCP rescinds the Standards
and Voluntary Guidelines in their entirety.
Going forward, OFCCP will follow Title VII principles in
investigating and analyzing compensation discrimination. The agency
proposes to make its treatment of compensation cases consistent with
other types of OFCCP discrimination investigations. With the rescission
of the Standards and Voluntary Guidelines, OFCCP 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.
III. Applying Title VII Principles To Evaluate Whether Contractor Pay
Practices Comply With Executive Order 11246
As explained above, OFCCP is rescinding the 2006 guidance documents
to ensure its enforcement practices address all forms of pay
discrimination that may violate Title VII. In order to assist
contractors seeking to comply, and to provide transparency, OFCCP is
setting forth its interpretation of certain significant legal and
technical issues. This will provide notice of the standards OFCCP
intends to rely upon when conducting compliance evaluations, and the
standards OFCCP will be instructing its compliance officers to follow.
A. Investigation Procedures
Under Executive Order 11246 and its implementing regulations,
contractors may not discriminate in ``rates of pay or other forms of
compensation;'' \26\ and must review and monitor their compensation
systems to ``determine whether there are gender-, race-, or ethnicity-
based disparities.'' \27\ Contractors must maintain records, including
but not limited to ``rates of pay or other terms of compensation.''
\28\ During compliance evaluations, OFCCP requests compensation data
and analyzes contractors' compensation systems and practices to
determine if
[[Page 13519]]
discrimination exists and, if so, how it should be remedied.
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\26\ 41 CFR 60-1.4
\27\ 41 CFR 60-2.17(b)(3), (d)
\28\ 41 CFR 60-1.12
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OFCCP's approach to investigating and enforcing non-discrimination
in compensation follows Title VII principles. The approach involves
factual investigation, and data and legal analyses, which allow OFCCP
to identify and remedy all forms of compensation discrimination. OFCCP
will tailor the compensation investigation and analytical procedures to
the facts of the case as appropriate under Title VII. This case-by-case
approach to compensation discrimination includes the use of a range of
investigative and analytical tools. Statistical analyses and non-
statistical analyses, such as the use of comparators or cohort
analysis, will be applied as feasible and appropriate given available
data and evidence, and the factual issues being studied. OFCCP will
seek anecdotal evidence, but will investigate and remedy instances of
compensation discrimination regardless of whether individual workers
have reported being underpaid.
This approach is designed to eliminate unnecessary barriers to
OFCCP's ability to protect workers from discrimination. It ensures
OFCCP fully takes into account any possible explanations or responses
from contractors, and that OFCCP conducts an analysis tailored to a
contractor's specific compensation systems and practices.
B. Reviewing Contractor Pay Practices
In particular, OFCCP will consider five principles when reviewing
contractor pay practices: 1. Determine the most appropriate and
effective approach from a range of investigative and analytical tools;
2. Consider all employment practices that may lead to compensation
discrimination; 3. Develop appropriate pay analysis groups; 4.
Investigate large systemic, smaller unit and individual discrimination;
and 5. Review and test factors before including them in analysis. Each
of these is explained in more detail below.
1. Determine the Most Effective and Appropriate Approach From a Range
of Investigative and Analytical Tools
Investigation of potential compensation discrimination presents
complex and nuanced issues. The choice of the best approach for a case
depends upon the underlying facts, the available data, and the
contractor's compensation system and practices. As such, OFCCP takes a
case-by-case approach to analyzing compensation issues. In every case
there are three key questions to be addressed: a. Is there a measurable
difference in compensation on the basis of sex, race, or ethnicity?
\29\ b. Is the difference in compensation between employees comparable
under the contractor's wage or salary system? c. Is there a legitimate
(i.e. nondiscriminatory) explanation for the difference? OFCCP will
conduct an appropriate factual investigation, data and legal analyses
to address each of these questions. An investigation may include
analysis of workforce data and contractor compensation policies and
practices; interviewing personnel and employees; examining payroll and
Human Resource Information Systems (HRIS) data and records; conducting
statistical analyses, such as regression analysis; and non-statistical
analyses, such as comparative and/or cohort analysis, and consulting
with statistical analysts, labor economists and other experts; as well
as examining other relevant information.
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\29\ In situations where there is sufficient data and analytic
power to use regression analysis, a measurable difference generally
means a statistically significant difference, two standard
deviations, consistent with title VII. In the situation of
disparities in small group and/or individual compensation, a
measurable difference and sufficient evidence will be determined in
conformance with title VII principles.
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At the early phase of a scheduled compliance evaluation, OFCCP may
use a range of preliminary analysis techniques to determine whether
further review is warranted to make a final determination of
compliance, and to assist offices in prioritizing investigative
resources. As a compliance evaluation moves from the desk audit to an
onsite investigation and a final determination regarding compliance,
OFCCP will review and refine the approach in light of further
information provided by the contractor or developed through
investigation. All ultimate determinations of compliance will be based
on a rigorous, appropriate and legally sound analysis of the facts and
data.
2. Consider All Employment Practices That May Lead to Compensation
Discrimination
OFCCP will examine all employment practices that have the potential
to lead to compensation disparities that are relevant given the case-
specific facts and data. Compensation includes any payments made to, or
on behalf of, an employee as remuneration for employment, including but
not limited to salary, wages, overtime pay, bonuses, commissions,
vacation and holiday pay, allowances, insurance and other benefits,
stock options, profit sharing, and contributions to retirement. The
compensation a group of employees or an employee receives may be
negatively affected by denial of equal access to certain earnings
opportunities. OFCCP will examine employee access to opportunities
affecting compensation, such as: Higher paying positions or job
classifications, work assignments, training, preferred or higher paid
shift work, and other such opportunities. OFCCP will also examine
policies and practices that unfairly limit a group's opportunity to
earn higher pay, such as: ``Glass ceiling'' issues; and access to
overtime hours, pay increases, incentive compensation, and higher
commission or desired sales territories. OFCCP will tailor the approach
and tools to be used to examine possible unequal access and denial of
opportunity issues based on the compensation practices relevant to a
particular case. Differences may be observed with regard to base
salary; job assignment or placement; opportunities to receive training,
promotions, and other opportunities for advancement; earnings
opportunities; and differences in access to salary increases or add-
ons, such as bonuses.
3. Develop Appropriate Pay Analysis Groups
If the data allow, OFCCP will begin by testing for statistical
significance on large groups of employees. The analysis may be based on
groups that are larger than individual job titles and job groups. By
combining employees into appropriate pay analysis groups, using
statistical controls as necessary for title or level, OFCCP will be
able to more easily identify potential systemic discrimination needing
further investigation and potential remedy. Additionally, if the data
allow, OFCCP will analyze pay disparities based on protected class
status that cannot be explained by neutral job-related factors, e.g.,
identifying potential placement or classification issues for further
investigation.
A pay analysis group is a group of employees subject to a single
statistical framework, model or test. For compensation analysis, a
group may be limited to a single job or title, may be performed
separately on multiple distinct units or categories of workers, or may
be a pooled regression analysis that combines employees from multiple
job titles, units, categories and/or job groups that are comparable for
purposes of the contractor's pay practices. Where a combination of job
titles or jobs at multiple levels is used, it may be appropriate to
control for title and level within the group, in order to ensure
comparison of similarly situated
[[Page 13520]]
workers (see below). The size and definition of a group, including
questions such as whether to include title or level as a control in the
analysis, depends on available data and evidence and the compensation
practices at issue. Reasonable differences may exist among workers in a
pay analysis group as long as these differences are properly accounted
for in the statistical analysis to be conducted. OFCCP will conduct
regression analysis on the pay analysis groups to determine whether
statistically significant disparities in compensation exist.
Statistical testing for practices that impact compensation such as job
assignment may require a different model than tests for within job
compensation differences.
OFCCP will develop pay analysis groups by considering the
following, at a minimum: The particular industry, the types of jobs and
compensation at issue, the contractor's actual compensation practices
and available data. Compensation practices may differ by role (e.g.,
executives, managers, supervisors and individual contributors), by
level (with higher-level employees tending to receive additional or
alternate forms of compensation), by function (such as sales employees
who are paid on commission), by unit (department, division, location,
etc.) and/or by job classification (exempt or non-exempt, part time or
full time, bargaining unit, etc.). This information may be found
through a review of the contractor's policy or training documents,
description of its compensation system or practices, compensation data,
records and coding, job descriptions, and other facts relevant to
determining groups, such as the ability of workers to rotate or
transfer among different positions within a business unit, a common
hiring or selection process, a common performance review practice or
other common identifiable employment practice relevant to compensation.
As the results of the initial analysis and facts warrant, OFCCP
will refine the analysis, and may conduct subsequent statistical and/or
non-statistical tests of smaller units or individuals.
4. Investigate Large Systemic, Smaller Unit and Individual
Discrimination
OFCCP will investigate possible large systemic, smaller group or
unit, and individual compensation discrimination. Pay analysis groups
are to be developed to examine possible systemic issues. Systemic
discrimination may be a pattern or practice of discrimination or an
identified employment practice with adverse impact that affects
multiple employees or groups of employees or applicants. When OFCCP
completes analysis of larger pay analysis groups, or in cases where the
data are inappropriate or insufficient for regression analysis, the
agency will examine the data to further address possible compensation
discrimination involving specific job titles, particular units or
locations, or other smaller groupings. These additional analyses will
be used to confirm, refine or supplement the larger analysis.
After analyzing the data for potential systemic discrimination in
larger and smaller groups, 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. The mere fact that
there are pay differences between comparators, without any other
evidence of pretext or other indicia of possible discrimination,
generally is not sufficient to find a violation of E.O. 11246.
For purposes of evaluating compensation differences, the
determination of similarly situated employees is case specific.
Relevant factors in determining similarity may include tasks performed,
skills, effort, level of responsibility, working conditions, job
difficulty, minimum qualifications, and other objective factors. In
some cases, employees are similarly situated where they are comparable
on some of these factors, even if they are not similar on others. For
example, when evaluating a job assignment issue, workers are similarly
situated when their qualifications are comparable, but they are
assigned to jobs at different levels. Employees are similarly situated
when they are comparable on factors relevant to the compensation issues
presented. Who is similarly situated for purposes of an individual
analysis or review of a single specific employment decision may be
determined based on different criteria than when conducting a systemic
discrimination analysis.
5. Review and Test Factors Before Including Them in Analysis
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. Factors may include internal and
external elements potentially affecting compensation. A factor may be a
qualification or skill that the worker brings to the position such as
education, experience, etc. It may also be a job-related element such
as position, level or function; tenure in position; performance
ratings, etc.
As in any investigation, OFCCP will review and test the factors
offered before accepting them as appropriate for inclusion in the
analytical model and/or comparative analysis to be conducted. OFCCP
will evaluate whether these factors actually explain compensation,
whether they are implemented fairly and consistently applied, whether
data regarding that factor is accurate, and whether they should be
incorporated into the analysis to be conducted. Where a factor that
explains pay differences is based on an identified employment practice,
such as a specific qualification, performance review instrument, job
assignment policy, or a similar policy or practice, OFCCP will evaluate
it for potential disparate impact or disparate treatment before
determining whether to include it in the analysis.
C. Application to Pending Compliance Evaluations
The procedures and principles described in this document apply to
all OFCCP reviews scheduled on or after February 28, 2013.
The 2006 Compensation Standards and Voluntary Guidelines will
govern determinations regarding the issuance of an NOV for systemic
compensation discrimination in any OFCCP review scheduled, open or
otherwise pending on the effective date of this Notice of Rescission.
Contractors may elect to waive application of the 2006 Guidelines, and/
or to have pending reviews conducted under these procedures, by
notifying OFCCP in writing.
Authority: E.O. 11246, 30 FR 12319, 3 CFR, 1964-65 Comp., p.
339, as amended by E.O. 11375, 32 FR 14303, 3 CFR, 1966-70 Comp., p.
684. E.O. 12086, 43 FR 46501, 3 CFR, 1978 Comp., p. 230.
Dated: February 22, 2013.
Patricia A. Shiu,
Director, Office of Federal Contract Compliance Programs.
[FR Doc. 2013-04675 Filed 2-26-13; 11:15 am]
BILLING CODE 4510-45-P