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Non-passage of Paycheck Fairness Act, Dukes ruling puts increased emphasis on OFCCP enforcement initiatives, experts say

November 1st, 2011  |  Cynthia L. Hackerott

Because the Paycheck Fairness Act (PFA) has failed to pass Congress, the current OFCCP Director, Patricia A. Shiu, is extremely important to the White House politically, said John C. Fox, former OFCCP official and current president of Fox, Wang & Morgan P.C. in San Jose, California, at the National Employment Law Institute’s (NELI) Twenty-Ninth Annual Affirmative Action Briefing held in Chicago, Illinois. The PFA, a measure intended to create stronger incentives for employers to comply with equal pay laws and strengthen federal outreach and enforcement efforts, would have, among other things, imposed additional duties on the OFCCP and the EEOC. With the defeat of the Paycheck Fairness Act, the Obama Administration is transferring the political pressure from women’s groups to the OFCCP, according to Fox.

Another presenter at the briefing, Jon A. Geier, a partner in the employment practice department at Paul Hastings in Chicago, said that the U.S. Supreme Court’s decision this past June in Wal-Mart Stores, Inc v Dukes (94 EPD ¶44,193) has also heightened the OFCCP’s focus on compensation discrimination. In Dukes, the High Court held that a potential class of women, estimated at anywhere from 500,000 to over 1.5 million, should not have been certified; the named plaintiffs had sued Wal-Mart under Title VII alleging that women employed by the retail giant were paid less than men in comparable positions and receive fewer promotions to management. Although Dukes has made broad nationwide pay equity class actions virtually impossible, we have not seen the death knell of pay equity class actions, Geier asserted, noting that smaller, regionwide class action claims may still be possible.

In addition to being a member of the Obama Administration’s National Equal Pay Enforcement Task Force, along with officials from the EEOC, the Department of Justice, and the Office of Personnel Management, Director Shiu has undertaken several initiatives designed to unearth and remedy compensation discrimination.

Compensation data collection tool. One of the major OFCCP initiatives regarding compensation discrimination is its pending development of a compensation data collection tool. To that end, an Advance Notice of Proposed Rulemaking (ANPRM) was published in the Federal Register on August 10, 2011 (76 FR 49398-49401) seeking stakeholder comments on 15 specific inquiries related to the development and implementation of such a tool. The comment period on this APRM closed on October 11, 2011.

Geier reported that over 2400 comments were submitted in response to this ANPRM. He predicts that the proposal for this tool will come out around June of 2012, in time for election-year campaigning.

Scheduling letter/itemized listing changes. Another compensation discrimination initiative is the OFCCP’s pending proposal that would allow the agency to seek more, and more detailed, information from federal contractors during the desk audit phase of compliance evaluations. Notice of a revised proposal was published in the September 28, 2011 edition of the Federal Register (76 FR 60083-60084). The revised proposal addressed comments received regarding the OFCCP’s initial proposal issued in May of this year (76 FR 27670-27671) and, in response to those comments, contains several changes to the original proposal. However, neither of the Federal Register notices contained the content of the proposed revisions. Rather, the content of these revisions is revealed in supporting documentation for the notice provided to the Office of Management and Budget (OMB) by the OFCCP. The comment period on the revised proposal closed on October 28, 2011.

Once a federal contractor has been selected for an OFCCP audit, the agency sends its standard scheduling letter and corresponding itemized listing requesting the contractor to provide the OFCCP with its affirmative action programs and specified supporting documents and records. The scheduling letter and itemized listing and the contractor’s response to it are known collectively as the “desk audit” phase of a compliance review. The proposed revisions to the OFCCP’s scheduling letter, itemized listing and the OFCCP’s statement submitted to the OMB explaining the changes are posted on the Regulations.gov website. If the results of the desk audit reveal “indicators” of potential discrimination or other compliance issues, the OFCCP may dispatch a compliance officer to conduct an on-site review of the contractor.

New item 12. The itemized listing that accompanies the current OFCCP scheduling letter contains 11 items, and the proposed changes would increase this number to 13 items. In regard to compensation, the OFCCP is proposing to change what is currently item 11 of the itemized listing, which would become the new item 12. The changes would require a contractor to submit precise aggregate data rather than the disaggregate data requested in the current item 11.  A submission of aggregated data would allow the OFCCP to perform more specific analyses, and pinpoint possible discrimination based on race or sex. The OFCCP states it will no longer ask for disaggregate compensation data, which required contractors to aggregate the data themselves, thereby increasing their burden. In addition, the disaggregate data was less effective in allowing the OFCCP to analyze compensation, according to the agency.

Geier noted that rather than summary data, the proposal would allow the OFCCP to get individual employee-level data by: (1) job group and job title, (2) individual race/ethnicity categories; and (3) base/salary plus merit increases, bonuses and other supplemental compensation. With the agency seeking these types of individual information, performance ratings will become critical and will increasingly be the focus of enforcement, Geier said. Employers will often say that pay increases are performance driven, but performance reviews can have an adverse impact on certain groups, Geier cautioned. 

Disclosure/confidentiality concerns. Among the many concerns regarding the proposed new  item 12 are concerns about confidentiality surrounding the production of compensation data. Fox explained that data submitted to the OFCCP at the desk audit stage of a compliance evaluation is subject to Freedom of Information Act (FOIA) requests from the public. Under current Obama Administration policy, federal agencies subject to FOIA have been instructed not to exert any applicable FOIA exemptions from otherwise required disclosures, Fox pointed out.

Director Shiu believes that the OFCCP has never had a “fair shake” in getting compensation data, and the agency’s initiatives reflect its attempts to collect data, which was previously unavailable at the desk audit stage of a compliance review, that may help identify compensation discrimination, Fox explained. However, gathering and evaluating compensation data is time consuming and expensive, both for contractors and the government, and, thus, the OFCCP’s focus on compensation discrimination is decreasing the total number of audits conducted by the agency. Fewer audits impacting fewer workers may also be a political problem for the Obama Administration, Fox said. Moreover, previous audits, including glass ceiling reviews, have rarely resulted in findings of pay discrimination.

Geier advised the audience to be proactive and conduct internal pay equity diagnostic reviews.  “If you don’t have a model you are confident in defending when [the OFCCP/the EEOC/plaintiff’s attorney) knocks on your door, you are too late,” he warned. However, he emphasized that before conducting such reviews, there must be a prior commitment from senior leadership to fix any issues that are identified.

In addition, it is critical to maximize attorney-client privilege and work product protections for these internal reviews, Geier stated. He recommended: (1) using a special engagement letter; (2) creating a project team of internal subject matter and external experts; (3) creating  communications protocols to establish attorney-client privilege and work product and following them consistently; (4) making certain that legal advice is actually provided (sometimes outside counsel may be needed); and (5) when completed, organizing project files and destroying them per company record retention policy. He also advised to anticipate that privilege may be waived, therefore, employers should be cautious about what they put on paper; employers cannot do anything about the numbers, but they should resist beating themselves up in their documentation.

Fox  represents companies and tries cases in state and federal courts that involve primarily individual trade secret claims, employment contract disputes, wage-hour and employment discrimination class actions, wrongful termination, corporate investigations, and the use of statistics in employment matters. Fox previously served as Executive Assistant to the Director of the OFCCP, where he was responsible for all enforcement and policy matters.

Geier represents employers in all aspects of labor and employment law, but focuses his practice on advising federal contractors on their obligations under Executive Order 11246 and related statutes and regulations. He was the lead outside counsel for The Boeing Company in negotiating its nationwide settlement with the OFCCP in 1999.

NELI’s Twenty-Ninth Annual Affirmative Action Briefing was held in Chicago on October 20-21, 2011. For more information on NELI, including its publications and future programs, call (303) 861-5600 or go to NELI’s website at: http://www.neli.org/.