OFCCP Directive on Pay Discrimination

March, 2013

Effective February 28, 2013, the OFCCP put in place Policy Directive 307. This directive explains the OFCCP’s current philosophy on how it is going to investigate and assess pay discrimination within federal contractor establishments. The directive rescinds the OFCCP’s "Voluntary Guidelines” and "Compensation Standards” that it has been following to review contractors’ pay practices.

The OFCCP’s Directive says the change will provide "clarity and transparency regarding OFCCP practices,” but it also says that its approach is going to be case specific, and with that they list eight possible procedures the compliance officers may use to analyze contractor’s pay. The Directive also states that the compliance officers will determine the approach to use for each contactor from a range of investigative and analytical tools. It seems that the contractor will not have any specific guidance on how the assigned Compliance Officer will evaluate their pay practices.

In past publications, Cascade has described the OFCCP’s practice of applying the 2-or-2 test to contractor pay. If the contractor failed this test in any job category/job title (based on how the contractor grouped its pay data for the desk audit), the OFCCP had justification to dig further into the contractor’s pay practices in order to look for potential pay discrepancies based on race or gender. Will the OFCCP still be using the 2-or-2 test as their initial indicator? It’s unclear. The Directive says that they will still be conducting a preliminary analysis to indicate if further review of the contractor’s compensation is needed, but the exact method used is not clear.

Up until now if a contractor "failed” the 2-or-2 test, the compliance officer sent the contractor a request for more information to conduct a 13-factor mini regression analysis. It appears that process is not going to continue, either. The Directive states that the compliance officer’s investigation may include:

  • Analysis of company compensation policies and practices;
  • Interviewing personnel and employees;
  • Examining payroll and Human Resource Information Systems (HRIS);
  • Conducting non-statistical analyses, such as comparative and/or cohort analysis; and
  • Conducting statistical analyses, such as regression analysis.

The bottom line, for the moment, is that we no longer have a clear direction to follow in analyzing contractor pay so that it reflects what the contractor might expect in an audit. Rest assured, however, that as we learn and understand more about this Directive and what it means to contractors, we will communicate our recommendations for best practices. Additionally, if you are a contractor and Cascade completes your AAP, we will be making the changes necessary to ensure our compensation analysis identifies the pay issues that could arise in an audit.

Stay tuned. And please contact us any time if you have any questions about Affirmative Action compliance.


View other Alerts & Reminders