OFCCP SUBMITS COMPENSATION DATA COLLECTION TOOL ANPRM TO OMB

by Fred Satterwhite, Senior Consultant, DCI Consulting Group

OFCCP submitted its Advanced Notice of Proposed Rulemaking (ANPRM) for "Non Discrimination In Compensation: Compensation Data Collection Tool" to the Office of Management and Budget's Office of Information and Regulatory Affairs (OIRA) on February 18, 2011. This is the first step in the official process to implement a new contractor survey tool similar to the Equal Opportunity (EO) Survey that was rescinded in 2006.

In the Fall 2010 Unified Agenda and Regulatory Plan, OFCCP stated: "OFCCP is considering the development of a new strategic compensation data collection tool that will effectively identify contractors that are likely to violate E.O. 11246. In addition, the data collection tool may be used to conduct establishment-specific, contractor-wide, and industry-wide analyses. Through publication of an Advance Notice of Proposed Rulemaking (ANPRM), OFCCP will seek input from stakeholders on issues relating to the scope, content, and format of the tool to ensure that it is an effective and efficient data collection instrument."

OFCCP provided some details about the agency's plans for this data collection tool in last week's FY 2012 Congressional Budget Justification:

OFCCP plans to develop and implement a web-based compensation data collection tool that would enable the agency to identify indicators of pay disparity among federal contractors. As stated above, the agency is issuing an ANPRM to solicit information on how to collect and use such data. The tool would collect compensation data from 70,000 to 110,000 contractors (depending on threshold set for completing the survey). These data would be likely arrayed by job group. The scope of the data has yet to be fully determined. Current possibilities include salary, gender, race and ethnicity data for each employee or average compensation and variances for each group by gender, race and ethnic category. Also not yet determined is the type of personnel activity data that will be required (terminations, promotions, etc. by group and demographic category) and whether data on veteran status and disability will be included in the application.

Obviously, this description covers a much wider scope than just contractors' compensation data.

After OIRA completes its review of OFCCP's submission, the ANPRM will be published in the Federal Register and the public will be given an opportunity to submit comments.

OIRA is also still reviewing OFCCP's Notice of Proposed Rulemaking (NPRM) that would revise the regulations implementing the nondiscrimination and affirmative action provisions for veterans, including requirements to conduct substantive analyses of recruitment and placement activities and to use numerical goals to measure the effectiveness of the affirmative action program for veterans. OFCCP submitted this NPRM to OIRA on July 2, 2010, and it was originally targeted for publication in December, 2010 before subsequently being rescheduled for January, 2011.

OFCCP INTRODUCES NEW ACTIVE CASE ENFORCEMENT DIRECTIVE

by Keli Wilson and Marcelle Clavette, DCI Consulting Group

Out with the old “Active Case Management” (ACM) and in with the new “Active Case Enforcement” (ACE) imposed by Patricia A. Shiu, Director of the Office of Federal Contract Compliance Programs (OFCCP). The Active Case Enforcement procedures make the previous directive obsolete and outline the revised protocol compliance officers will follow during a compliance evaluation. This directive is being immediately enforced by OFCCP due to a retroactive effective date of January 1, 2011.

The OFCCP will continue to use the Federal Contractor Selection System (FCCS) to select Supply and Service establishments for a compliance evaluation and pass the selected contractors to their respective Regional/District/Area office for audit (to be reviewed in “strict sequential order”). However, one change to note is the list of establishments will now be assigned to one of four types of investigative procedures; compliance review, off-site review of records, compliance check, or focused review. It is also important to note that the ACE does not offer any guidance as to how many contractors will be selected for each of the four investigative procedures.

If selected for a compliance review, a contractor can now expect the following to occur:

• Investigation of complaints at the establishment with the Equal Employment Opportunity Commission (EEOC) and the State and/or Local Fair Employment Practice (FEP);


• Full desk audit review (EO 11246, Section 503, and VEVRAA);


• Review of compliance history over previous three years; and


• Onsite review if the compliance officer can’t determine compliance through the AAP or supplemental documents submitted or if there are any indicators of potential discrimination or violation (unless it’s a minor technical violation with no indicators of potential discrimination).

Of particular interest is the new definition of a “pattern” of discrimination. As defined in the ACE, OFCCP defines an indicator of potential discrimination of a class as two or more victims. This is a monumental shift from what constituted a “pattern” under the ACM directive, which listed the potential affected class size as being 10 or more applicants/workers. Also, an additional change that OFCCP has now documented is that even one individual could indicate potential discrimination and initiate further investigation. Furthermore, a “patterns of individual discrimination is a new terms used in the ACE. What do these terms actually mean? What is the difference of a pattern of individual discrimination versus a pattern of systemic discrimination? Historically, the courts have defined a pattern or practice using some sort of statistical significance testing (e.g. Hazelwood, Teamsters, etc.). More clarification from OFCCP may be necessary.

If selected for an investigative procedure other than a compliance review (e.g., off-site review of records, compliance check, or focused review), the contractor will be required to submit the AAP and supporting documentation for a full desk review. The new ACE does promise to provide contractors with closure letters for those audits that are found to have: no potential discrimination and no unresolved minor technical violations, as well as major technical violations resolved or discrimination remedied through a conciliation agreement. Each of these four audit outcomes has a specific closure letter that compliance officers are instructed to use (but a contractor may be rewarded with an optional paragraph inserted in their closure letter applauding the “cooperation and courtesies” extended to OFCCP). However, as before, if an audit is deemed unsuccessful because a contractor has denied OFCCP access or refused to provide requested information, the compliance officer will initiate show cause procedures.

THE NEW OFCCP TIPPING POINT TEST

by Jana Moberg, DCI Consulting Group

As most of you are aware, Item 11 of OFCCP’s scheduling letter requests that compensation data be submitted with the desk audit submission. Item 11 reads: “Please provide annualized compensation data (wages, salaries, commissions, and bonuses) by either salary range, rate, grade, or level showing total number of employees by race and gender and total compensation by race and gender.” As quoted here, contractors are requested to submit the total number of employees and total compensation by race and gender at the aggregation level of their choice. For instance, a contractor may elect to submit its data grouped by job title or Similarly Situated Employee Group (SSEG). In the desk audit phase, if an “indicator” of potential discrimination is identified, OFCCP will request additional data and the audit will move into a second phase known as the 12-factor mini-regression. The question is: what is an indicator?

Prior to 2010, OFCCP appeared to be using a procedure termed the three-prong test (or tipping test) when analyzing the initial data submitted by contractors. Through this method, a contractor would “fail” the test if each of the following were found:

• Titles with a 5% or larger difference in pay between males and females*


• The total number of females across the male-favored titles is at least 30


• The number of females in the male-favored titles represent at least 10% of the total of females in the AAP


• The percentage of females in male-favored titles is at least 3 times the percentage of males in female-favored titles

In 2010, contractors began noticing that OFCCP appeared to have no consistency in the manner in which it analyzed Item 11 data. In fact, at NILG, OFCCP publicly denied ever using the three-prong test and refused to respond to contractors’ requests to identify the screening procedure it was using.

It is our understanding that a new internal (to OFCCP) directive was released in the summer of 2010 giving compliance officers guidance on the procedure for screening Item 11 data. We are now coining the new screening mechanism “double deuce.” Using this new procedure, a contractor would receive the “12-factor” (sometimes we are seeing a 14-factor) request if it has pay differences of either $2,000 or 2% between the average compensation of compared groups in at least ONE job grouping. As a result of this new screening procedure, clients are reporting an increase in the frequency with which they are receiving 12-factor letters. Furthermore, clients are reporting that when they submit Item 11 by title or SSEG, OFCCP is quickly responding that it wants the data by job group – a grouping that is never used by contractors to actually make compensation decisions nor is it a specified grouping mechanism in the Item 11 request.

The change in screening has important implications for contractors. The Item 11 screen is designed to identify contractors that might be engaging in systemic compensation discrimination. With this new method, it appears that OFCCP may be moving away from systemic-level analysis. In the new procedure, it is possible to be flagged for a 2% difference in ONE male-favored job group even if there is also one female-favored job group.

The new procedure appears to be fairly liberal in the sense that a pay difference of $2,000 or 2% is not uncommon – especially when conducted by job group – and is often found in cases when the compared groups would not have a statistically significant difference in average compensation. In other words, it seems that this new procedure may identify most, if not all, contractors as having potential discrimination. Should this be the case, the procedure could not be considered a “screening” tool, as a screening tool would provide a division of those contractors with evidence of discrimination from those without evidence. Using such a liberal difference in pay may lead OFCCP to conduct an in-depth analysis of ALL contractors, rather than flagging those contractors with greater likelihood of yielding an investigation resulting in some corrective action.

Due to the implications of using the new screening procedure, we set out to compare the failure rates of the new method with the previously used three-prong test. To do so, data from over 225 AAPs were analyzed using both the old three-prong screening method and the new $2,000/2% method at the levels of job title, SSEG, and job group. Using the old three-prong method, 8.4% of contractors by job title, 18.1% by SSEG, and 39.7% by job group would fail. Using the new $2,000/2% method, 100% of contractors by job title, 100% by SSEG, and 99.6% by job group failed.

Given the nearly 100% failure rate with the new method, all contractors should expect to receive the 12-factor letter and be prepared to submit their data to OFCCP for further analyses. The question that arises for the contractor community is this: With a 99% failure rate, is the OFCCP’s new screening method an actual “screening” method or is it an attempt by OFCCP to expand the scheduling letter without permission from the Office of Management Budget? We would like to hear your thoughts.

*Job title used as aggregation level for data; gender (with females as minority group) used as comparison groups.

OFCCP SETTLES GENDER HIRING CASE WITH GREEN BAY DRESSED BEEF FOR $1.65 MILLION

OFCCP announced on February 3 that the agency had reached a settlement agreement with Green Bay Dressed Beef LLC that will pay $1.65 million in back wages, interest, and benefits to 970 women who were rejected for general laborer positions at the company's Green Bay, WI plant in 2006 and 2007.

In addition to financial compensation, the beef supplier will extend a total of 248 offers of employment to affected women as positions become available. The company already has hired more than 60 of the women in the original class, and also has agreed to undertake extensive self-monitoring and corrective measures to ensure that all employment practices fully comply with the law and will immediately correct any discriminatory practices.

Two of Green Bay Dressed Beef’s largest clients are the U.S. Department of Agriculture and the U.S. Department of Defense — as one of the largest suppliers of beef products for the federal school lunch program and one of the leading providers of beef products to American military personnel worldwide.