• OFCCP Update: Proposed guidelines/self-audit advice
  • December 17, 2004
  • Law Firm: McGlinchey Stafford, PLLC - Baton Rouge Office
  • The Office of Federal Contract Compliance Programs (OFCCP) has published for public comment two proposed guidelines dealing with potential systemic compensation discrimination. One contains proposed guidelines for contractor self-evaluations of compensation, and the other addresses the methodology that the OFCCP will use during compliance reviews to evaluate potential compensation discrimination. The methodology set forth in the proposed guidelines represents a radical change for the OFCCP. The agency has abandoned the grade-focused analysis, as well as other techniques used in the past during the both the investigation and conciliation phases of the compliance process. Instead, the OFCCP is adopting a multiple regression analysis approach that has been urged by contractors and used by a number of courts in assessing issues relating to systemic compensation discrimination.

    The guidance provides contractors with the opportunity to establish an internal framework for a compensation review by identifying similarly-situated positions for purposes of analysis as well as the factors that influence compensation decisions in those groupings. Additionally, for the first time, the OFCCP has recognized the practical consideration of the "discoverability" of any compensation analysis, and offers contractors an alternative vehicle to protect such audits under the attorney-client and work-product privileges.

    It should be noted that the proposed guidelines require that companies with more than 250 employees who choose to do a compensation self-audit are obligated to use multiple regression analyses. As a result, many existing employer systems for data collection, which typically do not track such things as years of relevant experience, education, and performance, will require modification in order to allow contractors to perform the required analysis.

    These are very positive changes designed to assist contractors in balancing the need to comply with the OFCCP, utilize a more realistic analysis of compensation disparities, and avoid unnecessary disclosure of critically sensitive data. Contractors have until Thursday, December 16, 2004, to submit comments.

    OFCCP Director Charles James reported that slightly more than 1,700 Federal Contractor Selection System letters were mailed on November 1, 2004 to the heads of corporations with two or more facilities. Those letters identify the facilities that will be scheduled for compliance reviews at some point later in OFCCP's fiscal year, using the Agency's new selection methodology. Mr. James also reported that approximately 600 "regular" scheduling letters were mailed out during the OFCCP's first fiscal quarter, and that additional waves of scheduling letters would be going out quarterly thereafter. In all, the OFCCP has identified more than 3,600 establishments for audits this fiscal year.

    It is imperative to keep an eye out for the OFCCP notifications. Companies should implement a procedure to promptly notify those responsible for preparing and implementing the affirmative action plans in the event of receipt of one of these notices. It is the policy of the agency to give serious consideration to any remedial action voluntarily undertaken by a contractor to address any problems that were discovered through a self-audit, to the extent that the remedial action completely corrects the problems at issue. Thus, selected facilities ought to consider performing a self-audit under the guidance of counsel to take advantage of the work-product and attorney-client privileges.

    In addition, facilities with calendar year AAPs should put measures into place now to ensure a prompt and effective data collection and verification process in the event that a selected facility is targeted to receive a compliance review scheduling letter in the upcoming quarter. Desk audit submissions resulting from the wave of January scheduling letters could mean that a contractor might have to produce its AAPs by mid-to-late-February 2005.