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• New OFCCP Directive Signals New Focus on Pay Equity – read now

New OFCCP Directive Signals New Focus on Pay Equity

By Michael A. Stover

The Department of Labor, through the Office of Federal Contract Compliance Programs (OFCCP) has issued a new directive to ensure pay equity in the workplace.  The Directive states that as part of the required affirmative action obligations, supply and service contractors are required to perform an in-depth analysis of their total employment practices to determine whether and where impediments to equal employment opportunity exist.  This includes conducting an in-depth analysis of their compensation systems to determine whether there are gender, race, or ethnicity based disparities.  OFCCP believes that by proactively conducting the pay equity audit, contractors can determine whether impediments to pay equity exist and develop action-oriented programs to address these problems, as provided in 41 CFR 60-2.17(c).

Under the Directive, during a compliance evaluation OFCCP will review information to determine whether the contractor is meeting its affirmative action and nondiscrimination obligations. This includes, but is not limited to, conducting an analysis of the contractor’s compensation practices.  OFCCP will also look broadly at a contractor’s workforce (across job titles, levels, roles, positions, and functions) to identify patterns of segregation by race, ethnicity, and gender, which may result from assignment, placement, or upgrading/promotion barriers that drive pay disparities. Where possible, OFCCP will use regression and other systemic analyses to look for disparities in patterns of assignment or in salary paid across similar functions and positions.

Failure to provide the required pay equity audit information will be considered by OFCCP as an admission of noncompliance with these regulatory requirements.  Further, OFCCP’s regulations provide that where the contractor has failed to preserve records, including its affirmative action program and documentation of good faith efforts, as required, “there may be a presumption that the information destroyed or not preserved would have been unfavorable to the contractor” if the contractor cannot show that the destruction of failure to provide records is due to circumstances outside of the contractor’s control.

The Directive recognizes that federal contractors often retain counsel to assist with the preparation of the pay equity audit and compliance records required by OFCCP’s regulations.  Notwithstanding, the Directive states that federal contractors must maintain and make available to OFCCP the documentation of their compliance with OFCCP regulations and contractors cannot withhold these documents by invoking attorney-client privilege or the attorney work-product doctrine.  The Directive notes that contractors may conduct a separate pay equity audit for the purpose of obtaining privileged legal advice, and not for demonstrating compliance with OFCCP regulations.  In the event a contractor conducts a dual-purpose pay equity audit or analysis of employment processes − i.e., one that implicates both legal concerns and OFCCP compliance − OFCCP may request those records in appropriate circumstances.

The Directive signals the importance that the Biden Administration will be placing on pay equity in the workplace, and federal government contractors should be prepared for increased enforcement and compliance.  The Directive’s position regarding privilege of course can be subject to challenge in the appropriate circumstance, but it raises the issue of considering conducting dual pay equity audits, one for legal analysis and one for compliance reporting, to preserve the attorney client privilege.  If you need help with your compliance audits, please contact any member of our Labor and Employment or Government Contracts practice groups.

If you have questions, please email me at mstover@wcslaw.com.

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