Breaking OFCCP News: Will Your Compensation Data Stand Up?

Would your compensation data stand up to regulatory scrutiny in its current form? If not, you need to get your data into a production-ready state. You may have to hand it over sooner than you think.

On August 10, the Office of Federal Contract Compliance Programs (OFCCP) published the Advanced Notice of Proposed Rulemaking on the compensation data collection tool. The compensation data collection tool is the latest addition in the government’s arsenal in the war on pay discrimination.

According to the ANPRM, the purpose of the new tool is "to provide insight into potential problems of pay discrimination by contractors that warrant further review or evaluation by OFCCP or contractor self-audit. Accordingly, it is envisioned primarily as a screening tool, although it may also have research value."

The Advanced Notice goes on to discuss possible uses for the collected data, including generating insight into potential problems of compensation discrimination at the establishment level that warrant further review or evaluation by OFCCP, identifying employers for full compliance reviews and conducting analyses at the establishment level, as well as to identify and analyze industry trends, Federal contractors’ compensation practices and potential equal employment-related issues.

In case you’re inclined to dismiss this tool as just another way of collecting W2 earnings, you should know that the OFCCP is planning on collecting very granular and detailed information about total compensation. Possible data elements that would be collected include:

• Average starting or initial total compensation, including paid leave, health benefits and retirement benefits;
• Average pay raises;
• Average bonuses;
• Minimum and maximum salary levels;
• Standard deviation or variance of pay;
• Number of workers in each gender and race/ethnicity category;
• Average tenure;
• Average compensation data by job series (e.g., all engineers within a particular department);
• Total W-2 earnings;
• Base salary;
• Holiday pay;
• Hourly wage;
• Shift differentials;
• Commissions;
• Stock options;
• Paid leave, health and retirement benefits.

Employers would be required to produce this data separately for each job category. Possible candidates for job categories include two or three-digit Standard Occupational Classification Codes, salary bands within EEO-1 categories, and individual job titles.

In addition to the data, employers may also have to produce their policies and procedures for initial pay setting, shift pay, bonus decisions, promotion decisions, and any other decisions impacting compensation.

Even though it’s only an advanced notice, it gives significant insight into where the Agency is heading and what employers can expect. If we look at the chain of recent events, it’s clear that the Agency is seeking greater latitude in finding employers liable for pay discrimination.

In December 2010, OFCCP proposed the rescission of the Compensation Standards and Guidelines. These two guidance documents outlined the methodology that OFCCP would use in evaluating compensation data for discrimination and outlined a self-analysis method that employers could use for compliance purposes. OFCCP claims the rescission is necessary because the current standards "significantly undermine OFCCP’s ability to vigorously investigate and identify compensation discrimination."

Based on available information, it doesn’t look like the Compensation Standards and Guidelines will be replaced by any rigorous analysis methodology. OFCCP has stated that it will use "Title VII principles" in investigating and analyzing compensation discrimination. Nearly any methodology could be considered consistent with Title VII principles, from formal multiple regression analysis to simply looking at overall averages and midpoints.

The compensation data collection tool is the logical successor to the rescission of the Compensation Standards and Guidelines. OFCCP may have nearly universal access to employers’ compensation data and will be free to study that data using whatever techniques and methodologies it deems appropriate. This is a very frightening prospect and employers need to take action to prepare for what inevitably will be carte blanche for OFCCP in examining compensation data for discrimination.