Casting a Wider Net

Legal experts weigh in on the best ways for contractors to get through compliance audits without sparking an investigation, following the Office of Federal Contract Compliance Programs' move to revise its guidance for compensation discrimination.

Tuesday, March 26, 2013
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Since the 1970s, it has been the responsibility of the Office of Federal Contract Compliance Programs to make sure federal contractors and subcontractors provide equal-employment opportunity. However, despite conducting an average of 4,000 audits each year, previous administrations have been hard-pressed to actually find proven examples of systemic compensation discrimination. Still, the Obama administration seems certain that pay discrimination exists and the OFCCP simply hasn't gone far enough to find it. Feb. 28, the OFCCP now will go to greater depths than ever before in searching for evidence of pay-discrimination practices. To that end, Patricia A. Shiu, director of the OFCCP, rescinded two 2006 guidance documents and announced a directive, which will employ a wide variety of new procedures, analyses and protocols in conducting compensation-discrimination investigations.

"Until today, the existing rules hampered our efforts to take this kind of nuanced approach," she stated. "Under the 2006 guidance, OFCCP investigators were forced to apply a narrowly defined, cookie-cutter approach to evaluating contractor pay practices. Investigators looked at each case the same way, regardless of the industry, types of jobs or pay practices. These restrictions prevented us from detecting evidence of illegal pay discrimination. They also conflicted with the basic principles of Title VII. OFCCP has now lifted these arbitrary barriers, bringing our enforcement approach in line with how courts and other federal agencies apply Title VII."

According to William E. Doyle, Jr., senior counsel in Morgan Lewis's labor and employment practice in Washington, the OFCCP'S new directive is a game-changer, and not in a good way.

"My concern is that this could lead to employers feeling like they're being subject to a controversial approach with costs imposed and the choice to either litigate or avoid litigation costs and strike a settlement," he says. "This could lead the employer community to have negative views of the OFCCP and some of the burdens being imposed. It's an important agency and needs employers' support; and it shouldn't treat them like the enemy."

As former deputy director of the OFCCP from 2001 to 2005, Doyle was the architect of OFCCP's proposed and final standards and guidelines on systemic compensation discrimination. "I spent three years of my life writing and working on the 2006 compensation standards," he says. "To see it go away doesn't make me feel warm and fuzzy. On the other hand, I understand the political realities about why this is happening. They are looking at things from a plaintiff's perspective. I'm not surprised that this is on their agenda."

Doyle says he's concerned that the chances of finding systemic pay discrimination in routine audits will rise significantly. "The directive also allows OFCCP auditors to conduct broad investigations into a host of other areas that theoretically impact compensation and that fall outside of OFCCP's traditional review process," he says. "However, if employers do risk studies, I think they'll be able to minimize those situations they might get into trouble on if they can do some proactive work to come up with strategies to address the OFCCP compensation audits.

"They need to look at their own data, position themselves and have a game plan to manage the risk," he says, "so they don't have the OFCCP alleging pay discrimination."

"Now more than ever, preparation is the key," says Linda Cavanna-Wilk, employment attorney in the New York office of FordHarrison. "Pay discrimination is an agenda item for this administration, and companies need to take it seriously and eradicate discrepancies; putting their resources into preparation instead of reaction."

Based in New York, attorney Nita Beecher is the compliance chair for Mercer's U.S. Diversity Networks and follows the OFCCP's changing landscape closely.  "Compensation is now broadly defined to include every single one of your policies that lead to people getting or not getting paid," she says, noting that bonuses, stock options and other perks also will be scrutinized based on race, gender and ethnicity.

David Goldstein, shareholder in the Minneapolis office of Littler Mendelson's Affirmative Action/OFCCP Compliance practice, said that he believes discrimination is not as prevalent as the OFCCP suspects. "There are certainly issues in society and our culture that result in women often getting paid less than men, but I don't think they're commonly the result of an intention. That's one reason I think OFCCP has had trouble finding actual examples of discrimination," he observes.  "The OFCCP has thrown off the shackles they placed upon themselves with regard to how they approach audits. Now they are free to prosecute like a plaintiff would."

Goldstein echoed the advice to "have good policies in place for setting compensation and for periodically self-assessing compensation practices. The bottom line is to understand what Title VII and the Equal Pay Act requires and to adopt best practices for complying with the laws," he said. "The best thing is to do things the correct way up-front. Secondly, when you are audited make sure you're giving numerical data as well as job titles, which need to reflect people's job differences. Beyond that, if you really have a mistake and you can't justify pay differences, you have to correct the problem."

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David Harvey, labor and employment counsel in the Johnson City, Tenn., office of Baker Donelson, advises contractors to delegate audit tasks to someone with experience. "When a company first gets the scheduling letter, I'm a firm believer that they should have a law firm on hand that deals with the OFCCP on a regular basis. Right off the bat, the lawyer should give the compliance officer a call; to put forth some good will. I've found the OFCCP in my region to be very good to work with."

"Employers, this is not new," says Leigh Nason, shareholder in the Columbia, S.C. office of Ogletree, Deakins, Nash, Smoak & Stewart. "You need to understand the ramifications of any decisions when you're dealing with the government. You need to understand your data better than they do. You don't want to be ambushed, so it takes preparation. Fight back with knowledge and facts. Do that under privilege with a lawyer so that you are protecting your information. "

OFCCP spokesman Michael Trupo says, "It is important to note that under a case-by-case analysis, we do not expect 'uniformity' as reviews will apply Title VII principles to the specific facts, and may depend on the industry, type of jobs, available data and contractor pay practices."

The policies appear nebulous, so Trupo offers this advice: "There is technical assistance for contractors to encourage voluntary compliance and improve self-monitoring of pay practices for signs of potential discrimination, which will include written FAQs, webinars and other support. Any employer with questions about compliance can contact their nearest OFCCP office for information.

"Please note," he says, "the OFCCP has a long-established policy of not triggering audits or investigations simply because an employer requests compliance assistance."



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