OFCCP Issues New Directive on Compensation Analysis
On February 28, 2013, the Office of Federal Contract Compliance Programs (OFCCP) rescinded its existing enforcement guidance on compensation standards and issued a new Directive 307 regarding investigation of compensation pay practices. A copy of the Directive can be found here.
In releasing Directive 307, the OFCCP emphasized that it intends to address compensation issues on a case-by-case basis rather than using a rigid analytical approach. The OFCCP states that it will review pay discrimination issues based on Title VII principles without relying on inflexible formulas.
Directive 307 will apply to all OFCCP compliance evaluations scheduled on or after February 28, 2013. Desk audits will begin by conducting preliminary analysis on the compensation data obtained by the OFCCP pursuant to Item 11 of the Scheduling Letter. Depending on the results of the preliminary analysis, the OFCCP may request individual level employee data from the contractor.
The OFCCP apparently intends to begin a compensation analysis by first comparing large groups of similarly situated employees to determine whether systemic discrimination exists. The agency may then proceed to analyze a smaller unit or group of employees and, eventually, individual employee situations. Each audit will be case specific.
Takeaway: Affirmative action contractors or covered subcontractors should be aware that the OFCCP is taking a new approach to analyzing compensation practices and should anticipate higher agency focus on compensation compliance.