On August 24, 2018, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) rescinded Directive 307 and its Obama-era procedures for reviewing contractor compensation practices during a compliance evaluation and replaced it with a new directive where the OFCCP’s approach to compensation analysis is “clarified and constrained.”
The Office’s new directive applies to all compliance evaluations on or after August 24, 2018, as well as open reviews, to the extent the current guidance does not conflict with OFCCP guidance or procedures in place prior to August 24. The OFCCP anticipates that this new directive will provide clear guidance to contractors, which will result in more effective self-auditing, and facilitate the elimination of pay discrimination.
Under the new directive, compensation analysis must be performed based on similarly situated analysis groupings (SSAGs) as determined by job similarity (e.g., tasks performed, skills required, effort, responsibility, working conditions, and complexity) and other objective factors, such as minimum qualifications or certifications.
The Office will assess similarly situated employees by first developing pay analysis groupings (PAGs), which may span multiple job titles, units, categories, and groups. However, the Office has clarified that pay analysis groupings will track contractors’ compensation hierarchies and job structures when that information is reasonable and verifiable.
Notably, OFCCP has provided a process where contractors can communicate and offer input from during the audit process. Firstly, at the conclusion of the desk audit, the Office will notify the contractor in writing of the general nature of any preliminary compensation disparities it intends to investigate.
Secondly, OFCCP will now attach to any Pre-Deter-mination Notice (PDN) for preliminary discrimination findings the individual-level data necessary for the contractor to replicate the pay analysis groupings and regression results. This will give the contractor a formal opportunity to offer a nondiscriminatory explanation for the purported pay disparities.
Federal contractors are encouraged to take a close look at their pay groupings as well as perform a self-audit to determine whether their current compensation practices could potentially be flagged as a potential discriminatory practice.
Members can learn more about the new directive on the U.S. Department of Labor’s OFCCP website, smac.news/direc51424.