The federal government has withdrawn two guidance documents in an effort to broaden its ability to investigate pay discrimination in contractors. But some industry advocates and attorneys say the increased discretion could create more burdens for companies.
The Office of Federal Contract Compliance Programs announced late last month that it has rescinded two executive orders from 2006 that addressed pay discrimination. The office determined the two documents — one which described the procedures OFCCP should use when issuing a violation notice and the other which gave contractors directions they could follow to avoid violations — “narrowly define the types of evidence and issues OFCCP can consider when addressing unfair pay policies and practices,” the agency said on its Web site.
The agency will no longer be relying on these documents, and instead will use the standards that the courts use when considering pay discrimination claims. The agency says this approach will allow it consider all the evidence and data available.
“In 2006, [OFCCP] put together what has been [its] current method of looking at compensation,” said Elizabeth Lewis, a partner in Cooley’s employment and labor practice. “What they have basically decided is that method is not getting to them to the results they want to achieve.”
In effect, the agency will be moving away from a specific set of standards and looking more broadly and from more perspectives at how companies handle compensation, said Alan Chvotkin, executive vice president and counsel at the Professional Services Council, an industry group.
The shift could prove troubling for companies unprepared for its scope, said Connie N. Bertram, a partner in the labor and employment department at Proskauer Rose.
Contractors are concerned about “the breadth of OFCCP’s inquiry,” Bertram said. The agency is saying “we’re going to look at compensation in hiring, we’re going to look at compensation practices in bonusing and in even doing commissions and we’re going to look at it in the promotion process.”
OFCCP officials declined to be interviewed for this story, but Patricia A. Shiu, the agency’s director, said in a statement that OFCCP is providing support for contractors, including setting up a resource page and hosting Webinars.
Andrew Turnbull, an associate in Cooley’s employment and labor practice, said smaller companies may struggle to prepare.
“They just do not have the resources internally to conduct these robust compensation analyses,” he said. “It’s going to be very burdensome for them.”
Bertram recommended companies continue to simulate the compensation audits they face and analyze the pay employees receive from as many angles as possible.
“For certain companies, we’re going to see more pay bands and pay grades established, because that is a very safe way to try to protect the company,” she said. “The more that you routinize your compensation and make it very lockstep and very narrowly tailored, it’s less likely there will be a finding of discrimination.”