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06/13/2011

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Hindsight is always 20-20. Before the adverse finding, things looked different, one could imagine. Prior to the OFCCP audit, I'd bet that anyone advocating preventive action involving expensive research that could be waved as a smoking gun plus expensive corrective actions would have been deterred by counsel. Or they might have been sternly advised that the shareholders/owners would jump hard with both feet on sensitive parts of the organs of anyone so rash as to recommend an obviously unjustified diversion of income. Launch into a fishing expedition? Come on, how could anyone seriously expect a board fiduciary to justify that? Bottom line: compulsion is easier to justify than prevention.

Thanks for the comment Jim - your insights are always appreciated. I agree that legal counsel is often hesitant about preventive approaches, and that shareholders/owners may be quick to dismiss proactive efforts as unjustified expenditures. I think you've summed up the majority opinion on proactive analyses. I'm suggesting that we look at the issue from a different perspective.

Proactive analyses are not expensive fishing expeditions. If the organization has a clear understanding of the how and why behind their employees' compensation and has appropriate data collection protocols in place, these analyses can be done relatively quickly for - in most cases - a few thousand dollars.

The cost explosion comes when the policies aren't clearly articulated or documented (e.g., we have to guess what determines compensation), data isn't collected cleanly and routinely, etc. The cost explosion is attributable to defects in the company's processes, not the actual analysis itself.

With respect to "fishing", the analysis should follow the way in which compensation is determined. It's not necessary to mine your data for all potential arguments a plaintiff or regulatory agency could make (in certain circumstances this information can be useful, albeit more expensive to obtain). If there are legitimate problems with internal equity with respect to gender, race, or any other protected characteristic, they'll surface - you won't have to fish for them.

Why spend the money to uncover a smoking gun? If you don't find that smoking gun yourself, someone else will - whether it's the regulatory agencies, plaintiff bar, etc. And when someone else finds it, you're going to be spending the money to do the analysis and take the required corrective actions anyway, plus forking over additional cash for legal expenses and penalties. In the current climate, and given what we know about enforcement efforts already in the pipeline, spending a little now to save a lot later makes sense to me.

Thank you, Stephanie... well answered!


Hi, Stephanie. A great blog ... again!

So lets say hypothetically I'm an employer and have read your article and think that perhaps a proactive statistical review would be justified.

But won't my company (that is well-intentioned in developing non-discriminatory personnel practices) be at risk to having such internal studies become discoverable?

We've seen how certain governmental entities who should know better misuse statistics to promote a political agenda. So the last thing my company wants is to have these internal statistics become misused in the media.

What strategy would you recommend to keep that internal study from becoming publicly disclosable?


Thanks for the question Paul - privilege / confidentiality / discoverabiity is a big concern for many. In fact, it's such a big issue, I think it deserves a full length response rather than a reply to a comment. My post on Thursday the 23rd will focus on this issue.

In the meantime, here are some thoughts to hold you over until I elaborate next week!

(1) involve legal counsel from the onset;
(2) limit the involvement of internal personnel;
(3) communicate why you are conducting the analyses (presumably to improve your efforts in developing non-discriminatory personnel practices);
(4) focus on equity in general, not just women, racial minorities, age-protected, etc.

Thanks for the great question, and I hope you'll stay tuned for my full response next week!

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