OFCCP Issues Final Rule on Pay Bias

June, 2006

The Office of Federal Contract Compliance Programs (OFCCP) recently issued a final rule providing federal contractors with guidelines for evaluating their compensation programs and practices for systemic discrimination.  

The OFCCP is the agency charged with enforcing Executive Order 11246 with respect to employment discrimination, specifically focusing on employers' recruitment, hiring, retention, promotion, and compensation policies and procedures.  The purpose of this new rule is to make the agency's interpretation of compensation discrimination more consistent with Title VII of the Civil Rights Act of 1964 and Executive Order 11246.

The final rule has three basic parts for evaluating for systemic compensation discrimination.  First, employees must be grouped by how similarly situated they are.  Employees are considered similarly situated if they perform similar work, have similar responsibility levels, and if the positions have similar skills and qualifications.  Second, the rule requires use of a multiple regression analysis.  This type of statistical analysis assesses the different factors that influence an employer's compensation decisions.  The factors will vary from company to company, but typically include level of education, experience, and performance.  The analysis then determines which factor has the most influence on compensation decisions.  Finally, the rule states that in addition to the statistical evidence, it will also consider anecdotal evidence to determine whether systemic compensation discrimination exists.

The good news is that these guidelines are voluntary and the OFCCP added a provision stating that contractors who do not follow the voluntary guidelines will not be subject to adverse inference.  The burden is on the OFCCP, not the contractor, to gather the necessary information and conduct the multiple regression analysis.  However, contractors whose compensation evaluation procedures reasonably meet the standards set out in the guidelines will be considered in compliance with Executive Order 11246.

For more information about this new rule and its applicability to your organization, please contact Cascade.


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