OFCCP Enforcement Trends: How to Proactively Prepare for An Audit
OFCCP Enforcement Trends: How to Proactively Prepare for An Audit Sponsored by Lynn A. Clements | Jackson Lewis LLP Partner [email protected]
May 23, 2013
The information in this PowerPoint and related presentation is for general informational purposes only. These materials and the presentation are not intended to provide legal advice and do not establish an attorney-client relationship where none currently exists. This material may not be copied, reproduced, or used without permission of the author.
New Compensation Directive 307 Criminal Background Checks Good Faith Efforts to Recruit Veterans and Individuals with Disabilities Hiring Cases: The Agency’s Bread and Butter Steps To Take Now To Proactively Prepare
Pay equity initiatives at OFCCP are not new…remember these . . . ? Glass Ceiling Initiative The DuBray Analysis
Compensation Standards and Voluntary Guidelines 4
President Obama’s Equal Pay Task Force o The Obama Administration’s National Equal Pay Enforcement Task Force includes the DOL (OFCCP), EEOC, the Department of Justice and the Office of Personnel Management designed to address issues of pay inequity
Lilly Ledbetter Fair Pay Act Paycheck Fairness Act (proposed)
OFCCP recently announced the hiring of a labor economist! In short, your pay processes are under a microscope! 5
The Persistent “Wage Gap” Between Men and Women o Top-down direction to enforcement agencies to find new tools in the “tool box” to correct this “wage gap”
6
Settlements for alleged discriminatory pay are on the rise. . . o
FY 2008 – 0 pay settlements
o
FY 2009 – 2 pay settlements
o
FY 2010 – 10 pay settlements
o
FY 2011 – 27 pay settlements
o
FY 2012 – 32 pay settlements
Mostly from individual or small group findings 7
OFCCP rescinds 2006 Standards and Voluntary Guidelines…
Issues “Game-Changing” Compensation Directive 8
Highly Coordinated Roll-out o Rescission of 2006 Standards and Issuance of Directive 307
o Webpage: www.dol.gov/ofccp/regs/compliance/CompGuidance/ o FAQs and Fact Sheet
o Press release and blog by OFCCP Director o Immediate Field Training
9
Directive 307 is not a regulation. See United Space Alliance, LLC v. Solis (D.D.C. 2011). o It is not law. It is considered “persuasive authority” in court…meaning courts are not bound to follow it o Directives are not subject to the Paperwork Reduction Act, so there is no notice and comment period, nor is there review or approval by the U.S. Office of Management & Budget (“OMB”)
10
Effective as of February 28, 2013, the date of publication o 2006 Standards govern “issuance of systemic discrimination NOVs” in reviews scheduled, open or pending on 2/28/2013 o Directive 307 applies to (1) all reviews scheduled on or after 2/28/2013 and (2) all pending reviews to the “extent not inconsistent with the Standards”
11
OFCCP will use a variety of statistical and non-statistical tools on a case by case basis o
Multiple regression
o
Fisher’s Exact
o
Cohort analysis
o
Anecdotal with statistics
o
Anecdotal without statistics
o
Statistics without anecdotal
OFCCP wants to investigate total compensation o
Incentive Pay, Commissions, Overtime, Shift Differentials, Vacation and Holiday Pay, and Benefits
OFCCP wants to look at issues that impact pay o
Promotions, Performance Review Process, Training, Job Steering, Glass Ceiling 12
1. Conduct Preliminary Analysis of Summary Data (if necessary or appropriate) 2. Conduct an Analysis of Individual Employee-Level Data 3. Determine Approach from a Range of Investigative and Analytical Tools 4. Consider All Employment Practices that May Lead to Compensation Disparities 5. Develop Pay Analysis Groups 6. Investigate Systemic, Small Group and Individual Discrimination 7. Review and Test Factors before Accepting the Factors for Analysis 8. Conduct Onsite Investigation, Offsite Analysis, and Refinement of Model 13
Step 1 - Preliminary Analysis of Item 11 Data o Must submit by job group or salary grade/band or OFCCP will request individual data o Snapshot for compensation must be date of organizational profile
o Triggers used by OFCCP are currently unknown, appears to be pass/fail o Qualitative Factors o Quantitative Factors •
Size of overall average pay differences
•
Largest pay difference
•
Number of employees affected by average pay difference
•
Number of job groups or grades where average pay differences exceeds certain threshold 14
Step 2 – Request Individual Compensation Data o Requests will be similar to current 12-factor requests o Most likely for entire workforce at establishment o Must submit data electronically o Information regarding factors impacting pay and pay policies o Examination of practices affecting compensation •
Work assignments
•
Training
•
Job classifications
•
Promotions
•
Preferred shift or overtime work 15
Step 3 – Group individual data into groupings of OFCCP’s choosing o Case by case approach to analyses - seeking to identify “measurable differences” in pay on the basis of protected traits between employees who are “comparable” under the contractor’s pay system o No more SSEGs – group into “pay analysis groups” – Groupings at discretion of CO – BEWARE - May cross job title, group, grade, band or level – Will control for dissimilarity in jobs in statistical analysis rather than in groupings o No need for anecdotal evidence
16
17
Step 4 - Review and test factors impacting pay o
Factors used in analysis will be determined by OFCCP
o
May remove factors if:
o
•
not represented by accurate and complete data
•
not identified as a factor impacting pay in written policies
•
not fairly implemented
•
not consistently applied
•
not statistically correlated with pay
•
have adverse impact
If factor has adverse impact, OFCCP will determine whether the issue is one of disparate treatment or impact
o If disparate impact, OFCCP will seek data regarding (1) validity and (2) consideration of alternatives with less impact 18
Step 5 – Refinement of model o Onsite investigations and interviews o Offsite data analysis
Key Questions 1.
Will the agency keep looking until it can explain all measurable pay disparities for comparable positions?
2.
When the will agency stop?
19
Inconsistent results among locations of same contractor Aggressive pursuit of much broader audits of compensation practices
Multiple refinements of data Significant increase in costs to defend audits Significantly reduced ability to predict compliance
20
Do your homework Share your homework with legal and compensation teams Review currently-approved scheduling letter and OFCCP initial requests carefully Review written pay policies Review and strategically revise current AAP job group structure o
Are you using EEO-1 categories?
o
How big are your job groups?
o
Are you grouping employees who are similar or dissimilar in terms of pay?
21
Validate processes that impact pay Improve your recordkeeping about pay factors Conduct self-analyses of pay under privilege o Use model that makes sense for your pay system o Consider reviewing total compensation o Decide when and if you will share your self-analyses with the OFCCP o Anticipate but do not match OFCCP’s approach
22
Adopts EEOC’s new guidance on criminal background checks o
Individualized assessment of job-relatedness of conviction to the job for which the candidate applied
o
Where disparate impact occurs, employers must validate their criminal background check policies
What to Do o
Ensure use of criminal history is job-related and consistent with business necessity
o
Tailor criminal history screens to the situation
o
Periodically conduct adverse impact analyses of criminal history screens - if adverse impact occurs, consider validation or changes to the company’s approach to criminal conduct exclusions
o
Train staff on how to use and interpret criminal history information
o
Review applications for “ban the box” implications
23
OFCCP is now aggressively scrutinizing employer’s good faith outreach efforts to the female, minority, veteran, and disabled communities Employers must be able to demonstrate a commitment to outreach. Employers who appear to have just gone through the motions will face greater scrutiny OFCCP now regularly demands detailed information on how many applicants were referred by diversity recruitment sources and of these, how many were interviewed, hired, etc. If OFCCP finds the contractor was deficient in recordkeeping and/or outreach, the Agency will issue technical violations 24
In the past, the OFCCP focused on goals and good faith efforts to address areas of underutilization. Then, the agency began to focus more on adverse impact trends (especially applicant-to-hire adverse impact) o Traditionally, analyzed how minorities and females fared in the employer’s hiring process as compared to Whites and males
Now, the agency is following the numbers o “Reverse” adverse impact o Sub-minority adverse impact 25
4 Traditional Analyses 8 “All Other” Analyses 20 “Sub-Minority” Analyses
That’s 32 ways to trigger in each job group! Take a moment to think about how many job groups you have… If you have ___ job groups, the OFCCP will run: o 5 job groups: 160 analyses o 10 job groups: 320 analyses o 15 job groups: 480 analyses o 20 job groups: 640 analyses!! 26
Affirmative Action is really “Proactive EEO” o AAPs should be strategic tools to identify and address “hidden barriers” to EEO o Don’t wait for audits; that’s too late
Privileged pay equity analyses Conduct mock audits
Perform sub-minority analyses
27
Use strategic disposition codes that identify the step and reason each candidate “fell out” of your hiring process Reevaluate use of pre-employment screens Ensure that you are posting jobs with state Document and audit all good faith efforts and develop relationships with referral organizations Audit reasonable accommodation procedures o Online accessibility o Leave and accommodation examples
Prepare AAP packet to send to OFCCP that includes items you know they want to see
28
Thanks for attending!
Lynn A. Clements Jackson Lewis LLP [email protected]
(410) 415-2009
29
May 23, 2013
The information in this PowerPoint and related presentation is for general informational purposes only. These materials and the presentation are not intended to provide legal advice and do not establish an attorney-client relationship where none currently exists. This material may not be copied, reproduced, or used without permission of the author.
New Compensation Directive 307 Criminal Background Checks Good Faith Efforts to Recruit Veterans and Individuals with Disabilities Hiring Cases: The Agency’s Bread and Butter Steps To Take Now To Proactively Prepare
Pay equity initiatives at OFCCP are not new…remember these . . . ? Glass Ceiling Initiative The DuBray Analysis
Compensation Standards and Voluntary Guidelines 4
President Obama’s Equal Pay Task Force o The Obama Administration’s National Equal Pay Enforcement Task Force includes the DOL (OFCCP), EEOC, the Department of Justice and the Office of Personnel Management designed to address issues of pay inequity
Lilly Ledbetter Fair Pay Act Paycheck Fairness Act (proposed)
OFCCP recently announced the hiring of a labor economist! In short, your pay processes are under a microscope! 5
The Persistent “Wage Gap” Between Men and Women o Top-down direction to enforcement agencies to find new tools in the “tool box” to correct this “wage gap”
6
Settlements for alleged discriminatory pay are on the rise. . . o
FY 2008 – 0 pay settlements
o
FY 2009 – 2 pay settlements
o
FY 2010 – 10 pay settlements
o
FY 2011 – 27 pay settlements
o
FY 2012 – 32 pay settlements
Mostly from individual or small group findings 7
OFCCP rescinds 2006 Standards and Voluntary Guidelines…
Issues “Game-Changing” Compensation Directive 8
Highly Coordinated Roll-out o Rescission of 2006 Standards and Issuance of Directive 307
o Webpage: www.dol.gov/ofccp/regs/compliance/CompGuidance/ o FAQs and Fact Sheet
o Press release and blog by OFCCP Director o Immediate Field Training
9
Directive 307 is not a regulation. See United Space Alliance, LLC v. Solis (D.D.C. 2011). o It is not law. It is considered “persuasive authority” in court…meaning courts are not bound to follow it o Directives are not subject to the Paperwork Reduction Act, so there is no notice and comment period, nor is there review or approval by the U.S. Office of Management & Budget (“OMB”)
10
Effective as of February 28, 2013, the date of publication o 2006 Standards govern “issuance of systemic discrimination NOVs” in reviews scheduled, open or pending on 2/28/2013 o Directive 307 applies to (1) all reviews scheduled on or after 2/28/2013 and (2) all pending reviews to the “extent not inconsistent with the Standards”
11
OFCCP will use a variety of statistical and non-statistical tools on a case by case basis o
Multiple regression
o
Fisher’s Exact
o
Cohort analysis
o
Anecdotal with statistics
o
Anecdotal without statistics
o
Statistics without anecdotal
OFCCP wants to investigate total compensation o
Incentive Pay, Commissions, Overtime, Shift Differentials, Vacation and Holiday Pay, and Benefits
OFCCP wants to look at issues that impact pay o
Promotions, Performance Review Process, Training, Job Steering, Glass Ceiling 12
1. Conduct Preliminary Analysis of Summary Data (if necessary or appropriate) 2. Conduct an Analysis of Individual Employee-Level Data 3. Determine Approach from a Range of Investigative and Analytical Tools 4. Consider All Employment Practices that May Lead to Compensation Disparities 5. Develop Pay Analysis Groups 6. Investigate Systemic, Small Group and Individual Discrimination 7. Review and Test Factors before Accepting the Factors for Analysis 8. Conduct Onsite Investigation, Offsite Analysis, and Refinement of Model 13
Step 1 - Preliminary Analysis of Item 11 Data o Must submit by job group or salary grade/band or OFCCP will request individual data o Snapshot for compensation must be date of organizational profile
o Triggers used by OFCCP are currently unknown, appears to be pass/fail o Qualitative Factors o Quantitative Factors •
Size of overall average pay differences
•
Largest pay difference
•
Number of employees affected by average pay difference
•
Number of job groups or grades where average pay differences exceeds certain threshold 14
Step 2 – Request Individual Compensation Data o Requests will be similar to current 12-factor requests o Most likely for entire workforce at establishment o Must submit data electronically o Information regarding factors impacting pay and pay policies o Examination of practices affecting compensation •
Work assignments
•
Training
•
Job classifications
•
Promotions
•
Preferred shift or overtime work 15
Step 3 – Group individual data into groupings of OFCCP’s choosing o Case by case approach to analyses - seeking to identify “measurable differences” in pay on the basis of protected traits between employees who are “comparable” under the contractor’s pay system o No more SSEGs – group into “pay analysis groups” – Groupings at discretion of CO – BEWARE - May cross job title, group, grade, band or level – Will control for dissimilarity in jobs in statistical analysis rather than in groupings o No need for anecdotal evidence
16
17
Step 4 - Review and test factors impacting pay o
Factors used in analysis will be determined by OFCCP
o
May remove factors if:
o
•
not represented by accurate and complete data
•
not identified as a factor impacting pay in written policies
•
not fairly implemented
•
not consistently applied
•
not statistically correlated with pay
•
have adverse impact
If factor has adverse impact, OFCCP will determine whether the issue is one of disparate treatment or impact
o If disparate impact, OFCCP will seek data regarding (1) validity and (2) consideration of alternatives with less impact 18
Step 5 – Refinement of model o Onsite investigations and interviews o Offsite data analysis
Key Questions 1.
Will the agency keep looking until it can explain all measurable pay disparities for comparable positions?
2.
When the will agency stop?
19
Inconsistent results among locations of same contractor Aggressive pursuit of much broader audits of compensation practices
Multiple refinements of data Significant increase in costs to defend audits Significantly reduced ability to predict compliance
20
Do your homework Share your homework with legal and compensation teams Review currently-approved scheduling letter and OFCCP initial requests carefully Review written pay policies Review and strategically revise current AAP job group structure o
Are you using EEO-1 categories?
o
How big are your job groups?
o
Are you grouping employees who are similar or dissimilar in terms of pay?
21
Validate processes that impact pay Improve your recordkeeping about pay factors Conduct self-analyses of pay under privilege o Use model that makes sense for your pay system o Consider reviewing total compensation o Decide when and if you will share your self-analyses with the OFCCP o Anticipate but do not match OFCCP’s approach
22
Adopts EEOC’s new guidance on criminal background checks o
Individualized assessment of job-relatedness of conviction to the job for which the candidate applied
o
Where disparate impact occurs, employers must validate their criminal background check policies
What to Do o
Ensure use of criminal history is job-related and consistent with business necessity
o
Tailor criminal history screens to the situation
o
Periodically conduct adverse impact analyses of criminal history screens - if adverse impact occurs, consider validation or changes to the company’s approach to criminal conduct exclusions
o
Train staff on how to use and interpret criminal history information
o
Review applications for “ban the box” implications
23
OFCCP is now aggressively scrutinizing employer’s good faith outreach efforts to the female, minority, veteran, and disabled communities Employers must be able to demonstrate a commitment to outreach. Employers who appear to have just gone through the motions will face greater scrutiny OFCCP now regularly demands detailed information on how many applicants were referred by diversity recruitment sources and of these, how many were interviewed, hired, etc. If OFCCP finds the contractor was deficient in recordkeeping and/or outreach, the Agency will issue technical violations 24
In the past, the OFCCP focused on goals and good faith efforts to address areas of underutilization. Then, the agency began to focus more on adverse impact trends (especially applicant-to-hire adverse impact) o Traditionally, analyzed how minorities and females fared in the employer’s hiring process as compared to Whites and males
Now, the agency is following the numbers o “Reverse” adverse impact o Sub-minority adverse impact 25
4 Traditional Analyses 8 “All Other” Analyses 20 “Sub-Minority” Analyses
That’s 32 ways to trigger in each job group! Take a moment to think about how many job groups you have… If you have ___ job groups, the OFCCP will run: o 5 job groups: 160 analyses o 10 job groups: 320 analyses o 15 job groups: 480 analyses o 20 job groups: 640 analyses!! 26
Affirmative Action is really “Proactive EEO” o AAPs should be strategic tools to identify and address “hidden barriers” to EEO o Don’t wait for audits; that’s too late
Privileged pay equity analyses Conduct mock audits
Perform sub-minority analyses
27
Use strategic disposition codes that identify the step and reason each candidate “fell out” of your hiring process Reevaluate use of pre-employment screens Ensure that you are posting jobs with state Document and audit all good faith efforts and develop relationships with referral organizations Audit reasonable accommodation procedures o Online accessibility o Leave and accommodation examples
Prepare AAP packet to send to OFCCP that includes items you know they want to see
28
Thanks for attending!
Lynn A. Clements Jackson Lewis LLP [email protected]
(410) 415-2009
29
