The Office of Federal Contract Compliance Programs and the National Industry Liaison Group recently hosted a panel discussion regarding the agency’s practices for investigating potential compensation discrimination.

The NILG is an association of federal contractors focused on collaborating with the OFCCP, the Equal Employment Opportunity Commission, and other agencies to facilitate effective communication between the government and the contracting community. (Full disclosure: I am Legal Counsel to the NILG Board.) 

The panel included representatives from the OFCCP, such as Robert LaJeunesse, Branch Chief for Expert Services, and David Garber, Labor Economist. The NILG provided the following labor economists and industrial/occupational psychologists:

• Mike Aamodt, I/O Psychologist, DCI
• Lisa Harpe, I/O Psychologist, DCI
• Paul White, Labor Economist, Resolution Economics
• Rick Holt, Labor Economist, Resolution Economics
• Valentín Estévez, Labor Economist, Welch Consulting
• Jora Stixrud, Labor Economist, Welch Consulting
• Mike DuMond, Labor Economist, Economists Inc.
• Rob Speakman, Labor Economist, Economists Inc.
• Dan Kuang, I/O Psychologist, Biddle
• Christopher Haan, Labor Economist, Seyfarth Shaw
• David Cohen, I/O Psychologist, DCI

The focus of the dialogue was the OFCCP’s Directive 2018-05, Analysis of Contractor Compensation Practices During a Compliance Evaluation, and ways that it could be improved. The highly technical discussion lasted more than two hours, and was robust and wide-ranging. Hundreds attended the event in person and by webinar. 

The panelists praised and criticized the OFCCP’s compensation Directive. Elements of the Directive that generated praise included the following:

• Increased transparency in the OFCCP’s approach to investigating compensation discrimination
• The OFCCP’s stated acceptance of Similarly Situated Employee Groups if reasonably designed
• Ability to analyze small groups without using a regression analysis
• Willingness to control for factors that affect compensation

Components of the Directive that panelists highlighted as potential problems included the following:

• A “one-size-fits-all” approach to analyzing compensation that does not take into account differences among contractors’ pay systems
• The OFCCP’s failure to accept contractors’ reasonable SSEGs
• The agency's use of Pay Analysis Groups that combine dissimilar jobs for comparison
• The agency's apparent push to design PAGs to meet size thresholds, rather than limiting to similarly situated employees
• The lack of guidance for small contractors with smaller samples for analysis
• The OFCCP's failure to account for factors that influence compensation, such as tenure, education, grade, etc., in a method consistent with the contractor’s actual pay practices
• A lack of specificity regarding the variables that are considered “tainted” by discrimination and how to prove a process is “tainted”

The panel's recommendations included the following:

• Accepting contractors’ SSEGs unless they violate express criteria articulated by the OFCCP
• Assuming SSEGs are reasonable if they include 70 percent of the workforce at an establishment
• Not rejecting SSEGs simply because they do not meet a specific sample size
• Not combining jobs that cross grades, functions, or other structural barriers into SSEGS or PAGs
• Accepting methods for analysis of small groups, such as t-Test or Fisher’s Exact test
• Understanding that some jobs will not have any direct comparators
• Including all of the major factors that affect compensation in a regression analysis
• Defining “tainted variable” and explaining how to test for that
• Allowing age to be used as a proxy for experience
• Including a discussion regarding practical significance and adopting a process for disregarding statistical findings that are not practically significant

Like I said – a “highly technical” discussion!

Although receptive to the experts’ views, the agency representatives defended current practices. In particular, the OFCCP stated that the creation of large PAGs is essential to examining data for patterns that demonstrate potential discrimination. If the agency confines itself to examining smaller SSEGs, they said, nothing would constitute a pattern, and discrimination would go unremedied. 

As the OFCCP becomes more sophisticated in analyzing compensation, contractors must as well. The current Directive provides a preliminary roadmap for contractors in conducting self-evaluations, but the contracting community hopes that the OFCCP takes the recommendations to heart and provides more clarity, consistency, and accuracy for federal contractors striving to ensure pay equity.    

We hope that this conversation will continue, so don’t forget to register for the NILG 2020 National Conference, which will be held July 28-31 in National Harbor, Maryland.