It seems as though the OFCCP has intentions of travelling back in time...
At last summer's National Industry Liaison Conference, Patricia Shiu announced that the OFCCP would be rescinding the Compensation Standards and Guidelines. Since then, the OFCCP has been relatively silent on the pending rescission - that is, until this week.
On Monday, a Federal Register Notice provided some additional detail into the underlying reason for the rescission:
OFCCP is proposing to rescind the Standards which have limited OFCCP's ability to effectively investigate, analyze and identify compensation discrimination. In doing so, OFCCP will continue to adhere the principles of Title VII of the Civil Rights Act of 1964, as amended (Title VII) in investigating compensation discrimination and will re-institute flexibility in its use of investigative approaches and tools. OFCCP also proposes to establish procedures for investigating compensation discrimination through the traditional means of using its compliance manual, directives and other staff guidance. OFCCP is proposing to rescind the Voluntary Guidelines because they are largely unused by the Federal Government contracting community and have not been an effective enforcement strategy.
The Notice goes on to say that the current method - multiple regression analysis based on similarly situated employee groupings - is too "rigid":
The Standard's mandate to use a multiple regression analysis to identify compensation discrimination is also overly narrow and is not required under Title VII principles. While a multiple regression analysis may be a useful tool in identifying compensation discrimination, other statistical or non-statistical analyses may be better suited, depending on the facts of the case.
While not explicitly stated, the language of the Notice suggests that the OFCCP may return to the "Pay Grade" analysis used in the 1990's. As you may recall, a pay grade analysis simply compares the average compensation of men and women (or whites and nonwhites) in the same pay grade. The result of this simple comparison is then used as the basis for alleging systemic pay discrimination.
WHAT?!?!?! You're kidding me, right? We're taking a 20-year backward jump in time to return to a technique that doesn't account for legitimate nondiscriminatory factors influencing compensation, and that doesn't test the statistical significance of any difference found?
Wait - it gets better! While contractors will be given one opportunity to comment on the proposed rescission, the Notice indicates that the OFCCP will not permit contractors to comment on the new analysis methods prior to their implementation:
If the Standards are rescinded, OFCCP will re-institute the practice of exercising its discretion to develop compensation discrimination investigation procedures in the same manner it develops other investigation procedures... for example through the FCCM, directives and staff guidance materials.
Wow. And what about the Guidelines for compensation self-auditing?
OFCCP has found that contractors rarely use the analytical procedure suggested in the Voluntary Guidelines for conducting the compensation analyses required in section 60-2.17(b)(3). In the few instances when contractors have conducted their compensation analysis in the manner suggested in the Voluntary Guidelines, the coordination procedures of the Voluntary Guidelines have not proved to be an efficient method for verifying that the contractor's compensation system is not discriminatory.
So where does this leave us? Transported through time back to pre-2006 with no guidance, and perhaps back as far as the 1990s with conclusions of systemic pay discrimination based on a non-statistical and barely scientific method.
The OFCCP will be taking comments from interested parties regarding the proposed rescission through March 4, 2011 (view the Notice for details). In the meantime,experts are recommending that employers not change their current compensation practices or policies. Additionally, if you're not yet performing proactive (and legally privileged!) assessments of your pay practices, you should consider doing to in the near future.
(Image courtesy of Terabass via Wikimedia Commons)
Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. For more than a decade, she's been working with businesses and government agencies providing expert EEO analysis. Stephanie has published several articles on examining compensation systems with respect to equity. She is the host of The Proactive Employer, and is the owner of Thomas Econometrics. Follow her on Twitter at ProactiveStats.
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