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National Research Council report means OFCCP must re-think its entire approach to compensation data collection, employment law experts say

October 12th, 2012  |  Cynthia L. Hackerott

A recent report from the National Research Council (NRC) of the National Academies of Sciences (NAS) means that the OFCCP must go back to the drawing board and re-think its entire approach to data collection, according to employment law expert David A. Copus, a shareholder of Ogletree Deakins in the Morristown, New Jersey office. Copus, together with John C. Fox, a former OFCCP official and current president of Fox, Wang & Morgan P.C. in San Jose, California, discussed the implications of the report at the National Employment Law Institute’s (NELI) Thirtieth Annual Affirmative Action Briefing in Chicago, Illinois.

The report. At the suggestion of a White House Task Force, the EEOC asked the NRC, through its Committee on National Statistics, to convene a panel to review methods for measuring and collecting pay information by gender, race, and national origin from U.S. employers. The Panel on Measuring and Collecting Pay Information from U.S. Employers by Gender, Race and National Origin considered suitable data collection instruments, procedures for reducing reporting burdens on employers, and issues of confidentiality protection and data access. A pre-publication version of the report, entitled “Collecting Compensation Data from Employers,” was released on August 15, 2012.

The panel concluded that the collection of earnings data would be a significant undertaking for the EEOC and that there might be an increased reporting burden on some employers. It also found that there is, currently, no clearly articulated vision of how the data on wages could be used in the conduct of the enforcement responsibilities of the relevant agencies. Furthermore, the panel concluded that existing studies of the cost-effectiveness of an instrument for collecting wage data and the resulting burden are inadequate to assess any new program. Unless the agencies have a comprehensive plan that includes the form of the data collection, it will not be possible to determine, with precision, the actual burden on employers and the probable costs and benefits of the collection.

Specific mechanisms lacking. Fox commented on several quotes from the report. Among them, he cited the following:

“The main purpose for which the wage data would be collected, as articulated to the panel by EEOC and OFCCP representatives, is for targeting employers for investigation regarding their compliance with antidiscrimination laws. But beyond this general statement of purpose, the specific mechanisms by which the data would be assembled, assessed, compared, and used in a targeting operation are not well developed by either agency.”

According to Fox, “this is a damning statement for the [OFCCP]” given that the agency has repeatedly said that pay discrimination is their number one priority.

Few complaints. He also noted:

“The panel found no evidence of a clearly articulated plan for using the earnings data if they are collected. The fundamental question that would need to be answered is how the earnings data should be integrated into the compliance programs, for which the triggers have primarily been a complaint process that has generated relatively few complaints about pay matters.”

Fox explained that the EEOC received about 100,000 total charges in FY 2011. Since 1964, the percentage of EEOC charges alleging pay bias has been less than 1 percent, usually 1,000 or so a year – of those only about half are pure compensation claims, he added.

Compensation data collection tool. The report notes that in August 2011, the OFCCP issued an Advance Notice of Proposed Rulemaking (ANPRM) to seek public comment on the development and implementation of a new compensation data collection tool (76 FR 49398-49401). The ANPRM did not contain the proposed tool; rather, the agency sought stakeholder comments on the issues under consideration to assist it in developing and implementing the proposed tool. The comment period on that ANPRM closed in October 2011.

However, Fox cited the following related quote:

“Furthermore, the panel concludes that existing studies of the cost-effectiveness of an instrument for collecting wage data and the resulting burden are inadequate to assess any new program. Unless the agencies have a comprehensive plan that includes the form of the data collection, it will not be possible to determine, with precision, the actual burden on employers and the probable costs and benefits of the collection. Therefore, the first recommendation is to develop such a plan.”

Copus asserted the NRC report’s extensive criticisms mean the death knell for this compensation data tool proposal. Fox said that, in essence, the panel is telling the OFCCP, it needs to “start at the beginning” with a comprehensive plan in order to precisely determine what the burden of any compensation data collection tool would be on contractors. All agencies lie about burden cost hours, according to Fox, and such underestimation of burden hours has long been occurring regardless of the presidential administration in power.

Recommendations. According to the NRC report, developing a wage data collection program requires a clearly articulated vision of how the data could be used by the relevant agencies to enforce antidiscrimination laws. To that end, the report makes the following six recommendations for targeting employers for investigation regarding their compliance with antidiscrimination laws:

(1) In conjunction with the OFCCP and the Civil Rights Division of the Department of Justice, the EEOC should prepare a comprehensive plan for use of earnings data before initiating any data collection.

Fox reports that the OFCCP is already building a database derived from the compensation data the agency is receiving via the implementation of a secret, internal written directive (No 289), issued on June 4, 2010, that changed the way desk audits are done to provide the OFCCP with more meaningful compensation data than it was previously obtaining.  The agency now has over 120,000 establishments of compensation data and data on over 5 million employees, he said.

(2) After the EEOC, the OFCCP, and the DOJ complete the comprehensive plan for use of earnings data, the agencies should initiate a pilot study to test the collection instrument and the plan for the use of the date. The pilot study should be conducted by an independent contractor charged with measuring the resulting data quality, fitness for use in the comprehensive plan, cost, and respondent burden.

It will take the EEOC and the OFCCP about 4-6 years to complete this prescription; in the real world it “may be roadblock for both agencies,” Fox noted.

(3) The EEOC should enhance its capacity to summarize, analyze, and protect earnings data.

Title VII prohibits the government from releasing pay data from employers via the Freedom of Information Act (FOIA), Fox expounded. That is why citizens cannot get EEO-1 reports from EEOC, but can get them from OFCCP.  The panel is recommending that the EEOC find ways to protect the data it exchanges/shares with the OFCCP, given that the OFCCP doesn’t share the EEOC’s data protection obligations under Title VII.

(4) The EEOC should collect data on rates of pay, not actual earnings or pay bands, in a manner that permits the calculation of measures of both central tendency and dispersion.

Copus emphasized that the only thing the Ledbetter Fair Pay Act did was to extend the charge filing period indefinitely when a Title VII claimant challenges a discrete pay decision. It did not however, change the requirement, mandated in the Supreme Court’s 2007 decision in Ledbetter v Goodyear Tire & Rubber Co,  that Title VII claimants must identify and challenge discrete pay decisions. Thus, according to Copus, the focus of Title VII is on decisions not data.

(5) In anticipation of increased user demand for microdata on pay information by demographic detail for research and analytical purposes if such data are collected by the EEOC, the agency should consider implementing appropriate data protection techniques, such as data perturbation and the generation of synthetic data to protect the confidentiality of the data, and it should also consider supporting research for the development of these applications.

Perturbation,” means protecting the data by masking/disguising it, Fox explained. Perturbation should be part of every Human Resources and affirmative action compliance person’s job description, he asserted.

(6) The EEOC should seek legislation that would increase the ability of the agency to protect confidential data. The legislation should specifically authorize data-sharing agreements with other agencies with legislative authority to enforce antidiscrimination laws and should extend Title VII penalties to nonagency employees.

Expanding on it third recommendation, the panel here is recommending that the EEOC advocate for legislation to protect the data it shares with the OFCCP and other entities that don’t share the EEOC’s data protection obligations under Title VII, Fox said.

The NRC report is a “major stop sign” for the OFCCP, he observed. The agency has now been put on notice of the consequences of disclosing data and that the potential for misuse of data is a serious problem. Prior to the Clinton Administration, the OFCCP went on-site to review sensitive pay data, thus such data was not in OFCCP’s possession, and thereby, not subject to FOIA. As explained above, via the implementation of a secret, internal Directive No 289, the OFCCP is now getting substantially more data during the off-site, desk audit phase of its compliance evaluations.

Proposed scheduling letter changes. Copus and Fox agreed that the NRC report means that the OFCCP’s proposed expansion of its standard audit scheduling letter and corresponding itemized listing — to the extent it would allow the agency to collect more, and more precise compensation data from contractors at the desk audit phase of a compliance evaluation — is dead. The itemized listing requests the contractor to provide the OFCCP with its affirmative action programs (AAPs) and specified supporting documents and records. 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 initial proposal issued in May, 2011 (76 FR 27670-27671) and contained several changes to the original proposal. The revised proposal would require a contractor to submit precise aggregate data, instead of the disaggregate data requested in the current itemized listing.

Copus, who has more than 35 years of litigation and counseling experience, regularly represents employers in OFCCP matters, including hundreds of standard OFCCP compliance evaluations and “glass ceiling” audits. He began his legal career in 1969 at the Equal Employment Opportunity Commission (EEOC), where for many years he headed the National Programs Division. Since 1977, he has been in private practice representing employers, and he is currently in the Morristown, New Jersey office of Ogletree Deakins.

Fox, president, founder and senior partner of Fox, Wang & Morgan P.C., 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.

NELI’s Thirtieth Annual Affirmative Action Briefing was held in Chicago on October 4-5, 2012. 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/.

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