Understanding OFCCP Directive 307: Procedures for Reviewing Contractor Compensation Systems and Practices. Part 1 of 2. March 6, :00 11:00am
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1 Understanding OFCCP Directive 307: Prcedures fr Reviewing Cntractr Cmpensatin Systems and Practices Part 1 f 2 March 6, :00 11:00am Patrick Nren Dan Kuang Biddle Cnsulting Grup, Inc.
2 Biddle Cnsulting Grup Institute fr Wrkfrce Develpment (BCGi) BCGi Memberships (free): ~5000+ members / 13,000 HRCI credits t-date Online cmmunity Mnthly webinars n EEO cmpliance tpics EEO Insight Jurnal (e-cpy) BCGi Platinum Membership (paid) Includes validatin/cmpensatin analysis bks EEO Tls including thse needed t cnduct AI analyses EEO Insight Jurnal (e-cpy and hardcpy) Access t the BCGi library f webinars, training materials, and much mre 2
3 Cntact Infrmatin Biddle Cnsulting Grup, Inc. 193 Blue Ravine, Suite 270 Flsm, CA Patrick Nren Ph.D. Daniel Kuang Ph.D. Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 3
4 Agenda Cmpensatin Enfrcement: A Histrical Perspective and Why the OFCCP has t Get it Right this Time. Unwrapping the New Directive Summary/Cnclusins Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 4
5 Cmpensatin Enfrcement: A Histrical Perspective and Why the OFCCP has t Get it Right this Time. Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 5
6 The Rise f the Cmpensatin Standards and Guidelines July 2003: Active Case Management Dramatic reductin f Agency resurces under Charles James (788 FTEs 585 FTEs) Designed t fcus Agency resurces n issues f systemic discriminatin Statistics drve investigatins Resulted in 6+ cnsecutive years f recrd enfrcement Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 6
7 The Rise f the Cmpensatin Standards and Guidelines June 2006: Cmp Standards and Guidelines - SSEGs, Regressin, Anecdtal Evidence Cdified OFCCP realized that litigatin-wrthy analyses were necessary t successfully investigate cmpensatin. Cmp Standards (i.e., what the Agency will d) and Guidelines (i.e., what cntractrs shuld d) were released in 2006 Included guidance regarding regressin, SSEGs, and the need fr anecdtal evidence t supprt statistical findings (mst f the time) Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 7
8 The Fall f the Cmpensatin Standards and Guidelines Splat! : Cmp Standards Enfrcement Era The bar set high fr cmpensatin enfrcement (is that such a bad thing?) Cmp investigatins are inherently quirky, can be very time cnsuming, and typically invlve several stages: 1) SSEG argument, 2) Regressin argument, 3) Anecdtal evidence On the cntrary, systemic hiring investigatins are relatively straightfrward by cmparisn (and the OFCCP has a successful histry f enfrcement) N systemic cmpensatin-based cnciliatin agreements in 4+ years (until 2011 Astra Zeneca) Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 8
9 The Fall f the Cmpensatin Standards and Guidelines 2009/2010: Change f Administratin and Significant Increase in OFCCP Budget President Obama inaugurated January 20, 2009 January 29, 2009 Ledbetter signed int law (Paycheck Fairness Act fails) January 2010: Establishment f the Equal Pay Enfrcement Task Frce Patricia Shiu becmes directr f OFCCP Frmer EEO litigatin attrney (OFCCP is an enfrcement agency ) OFCCP receives $20M+ budget increase and apprval fr 200+ mre FTEs Tremendus amunt f pressure t perfrm! Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 9
10 The Fall f the Cmpensatin Standards and Guidelines Jan 2011: Ntice t Rescind Cmp Standards and Guidelines Standards have limited OFCCP s ability t effectively investigate, analyze, and identify cmpensatin discriminatin OFCCP wants t dramatically lwer the bar by eliminating the requirement fr SSEGs, regressin, and anecdtal evidence... (which, by the way, are firmly cdified in legal precedent) S... why lwer the bar if the new strategy isn t quite as legally defensible? Because sme rganizatins will cnciliate. Cpyright Biddle Cnsulting Grup, Inc. 10
11 It s a Big Deal fr the OFCCP... And They Have t Get it Right This Time! Feb 2011: Release f OFCCP 2012 Budget Justificatin OFCCP is making the issue f pay equity a tp pririty OFCCP plans t develp and implement a web-based cmpensatin data cllectin tl that wuld enable the agency t identify indicatrs f pay disparity amng federal cntractrs The scpe f the data is yet t be fully determined. Current pssibilities include salary, gender, race and ethnicity data fr each emplyee OR average cmpensatin and variances fr each grup by gender, race and ethnicity Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 11
12 It s a Big Deal fr the OFCCP... And They Have t Get it Right This Time! August 5, 2011: OFCCP submits NPRM fr cmpensatin data cllectin tl OFCCP prpses changes t the audit scheduling letter t allw fr cllectin f individual emplyee-level cmpensatin data (still nt yet cdified as f tday) Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 12
13 It s a Big Deal fr the OFCCP... And They Have t Get it Right This Time! February 2012: Release f OFCCP 2013 Budget Justificatin OFCCP Outlines the Federal Cntract Cmpliance System (FCCS), a cludbased tl that will include: Basic case and cntent management functinality Dashbard reprting Autmated data analysis Electrnic submissin f AAP data and ther HR reprts Integratin f a cmpensatin data cllectin tl Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 13
14 It s a Big Deal fr the OFCCP... And They Have t Get it Right This Time! February 2013: OFCCP Frmally Rescinds Cmp Standards and Guidelines and Releases Directive Standards and Guidelines are n lnger in effect Directive 307 frmally replaces all previus directives n the subject f cmp enfrcement and bradens (dramatically) the ability f the OFCCP t investigate cmpensatin OFCCP nw bringing a wide variety f enfrcement and analytical strategies t bear There has NEVER been mre pressure t perfrm!! Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 14
15 Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 15
16 Pat Shiu public annuncement (February 16):... the Vluntary Guidelines and Cmpensatin Standards... have limited OFCCP s ability t cnduct full investigatins int emplyer pay practices and t use every tl that shuld be at ur dispsal... Mrever, we are aligning ur enfrcement with the principles used t enfrce the main federal law against emplyment discriminatin Title VII f the Civil Rights Act f Interesting t nte: Standards and Guidelines discuss(ed), at length, hw they were firmly rted in curt precedence and Title VII. They clearly utlined (and cited) hw certain strategies (previusly used by OFCCP) were nn-defensible and hw analyses needed t cnsider nly similarly situated emplyees. The new Directive, while being extremely different than the Standards and Guidelines, utlines hw it, nt the Standards and Guidelines, fllws curt precedence and the law. Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 16
17 Effective fr all audits scheduled n r after February 28, 2013 Als applicable t current/pen reviews t the degree they dn t cnflict with current guidance r prcedures (specific t the audit?) 2006 Cmpensatin Standards and Vluntary Guidelines gvern determinatins regarding the issuance f an NOV fr systemic cmpensatin discriminatin in any OFCCP review scheduled, pened, r therwise pending n February 28, 2013 Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 17
18 Summary f OFCCP Cmpensatin Investigatin Prcedures Cmpliance Officer (CO) will: 1. Cnduct preliminary analysis f summary data 2. Cnduct an analysis f individual emplyee-level data 3. Determine the apprach frm a range f investigatins and analytical tls 4. Cnsider all emplyment practices that may lead t cmpensatin disparities 5. Develp pay analysis grups 6. Investigate systemic, small grup, and individual discriminatin 7. Review and test factrs befre accepting factrs fr analysis 8. Cnduct nsite investigatin, ffsite analysis, and refinement f the mdel Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 18
19 1. Cnduct a Preliminary Analysis f Summary Data Used t determine if, and where, further investigatin is necessary (and individual emplyee-level data is necessary) Summary cmpensatin data submitted in a frmat ther than by AAP jb grup, r the cntractr s existing pay grade r band system, generally is nt acceptable fr analysis - data by jb title (nly) will, likely, nt be accepted Includes quantitative and qualitative review: Size f the verall average pay difference / largest average pay difference within AAP jb grups, r the cntractr s existing salary bands and/r grades The number f jb grups r grades where average pay differences exceed a certain threshld The number f emplyees affected by average pay differences within jb grups r grades Cmpliance histry, OFCCP/EEOC cmplaints, anecdtal evidence, ptential vilatins n ther practices, r data integrity issues, amngst thers. Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 19
20 1. Cnduct a Preliminary Analysis f Summary Data (cnt.) Determinatins will als include factrs such as agency resurces and pririties Preliminary analyses will nt be used t limit further requests r t define specific issues the OFCCP may pursue at later stages f the review (n mre trying t frce the OFCCP t fcus n just ne area) Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 20
21 2. Cnduct an Analysis f Individual Emplyee-Level Data Used t cnduct an in-depth evaluatin f the cmpensatin data Shw-Cause ntice will be issued if data is nt received in a timely manner Must be submitted in electrnic frmat (if maintained electrnically) If at any pint, the CO determines that there is sufficient evidence f ptential cmpensatin discriminatin, OFCCP may prceed t an nsite investigatin Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 21
22 3. Determine the (Best) Apprach frm a Range f Investigative and Analytical Tls Specific analytical strategy t be based n underlying facts, available data, particular cmp system and practice(s) N single tl t be used in every case Analytical strategy will be determined in cnsultatin with supervisrs, OFCCP statistical experts, Slicitrs f Labr, and natinal ffice persnnel Strategy may be refined, r a new strategy may be used, at any pint in the investigatin Three (3) guiding questins will dictate the apprach and reslutin: Is there a measurable difference in cmpensatin n the basis f sex, race, r ethnicity? Is the difference in cmpensatin between emplyees wh are cmparable under the cntractrs wage r salary system? Is there a legitimate (i.e., nn-discriminatry) explanatin t the difference? Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 22
23 3. Determine the (Best) Apprach frm a Range f Investigative and Analytical Tls (cnt.) Upn finding a difference, the CO will cnduct a factual investigatin t address each questin Investigatin may include a review f wrkfrce data, cmpensatin plicies/practices, interviews, examinatin f payrll systems and HRIS data, nn-statistical analyses such as chrt cmparisns, and statistical analyses such as regressin Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 23
24 4. Cnsider All Emplyment Practices that May Lead t Cmpensatin Disparities Including, but nt limited t: Starting salary, base pay, nn-base pay, and ther practices Access t pprtunities affecting cmpensatin (such as higher paying psitins, wrk assignment, training, preferred shift wrk, access t vertime, pay increases, incentives, higher cmmissins r desirable sales territries, etc.) Plicies and practices that result in a Glass Ceiling Funneling int high/lw paying psitins Interesting nte: many f these are n lnger technically a cmpensatin analysis... they are tailred t evaluate the distributin f pprtunities... this is a very different analytical structure Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 24
25 5. Develp Pay Analysis Grups Used t test fr statistically significant differences in large grups f emplyees Pay Analysis Grups (PAGs) will be created t... mre easily identify ptential systemic discriminatin... PAGs are grups f emplyees ptentially frm multiple jb titles, units, categries, and/r jb grups, that are cmparable Regressin is the likely tl fr analyzing PAGs OFCCP will use statistical cntrls, as necessary, fr different titles/levels CO are t include reginal/natinal supprt and SOL t develp mdels Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 25
26 5. Develp Pay Analysis Grups (cnt.) COs are t cnsider a brad variety f infrmatin when creating PAGs, such as: industry, types f jbs, cmpensatin practices, rle (manager, supervisr, individual cntributr), level f emplyee, functin, pay structure (e.g., largely cmmissin, salary, etc.), perfrmance review practices, ther cmmn practices amngst PAG members COs als t create PAGs t evaluate: Assignment (e.g., sales/territry rutes) Classificatin (wmen/minrities int entry-level v. men/whites starting higher) Placement (aka funneling minrities get the back f the huse jbs) These types f analyses d NOT evaluate cmpensatin... they evaluate the allcatin and/r distributin f equal pprtunities Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 26
27 5. Develp Pay Analysis Grups (cnt.) COs develps and applies the mdel at the desk audit phase, using preliminary data and infrmatin CO may als require an nsite t develp preliminary PAG analysis mdel Analyses will be cntinuusly refined thrughut the prcess f the investigatin This is where the bld will be shed!! I cannt wait t see the highlight reels fr when the first cuple arguments reach the Administrative Law Judge!! Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 27
28 6. Investigate Systemic, Small Grup, and Individual Discriminatin Systemic Use regressin t analyze PAGs Use adverse impact-type analyses t evaluate distributin f pprtunities Small Grups May be by title r specific unit/lcatin Individual Discriminatin CO starts by identifying similarly situated emplyees CO cnducts a cmparative/chrt analysis Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 28
29 6. Investigate Systemic, Small Grup, and Individual Discriminatin (cnt.) Similarly Situated The determinatin f wh is similarly situated is case-specific. Wh is similarly situated fr the purpses f an individual analysis r review f a single specific emplyment decisin may be determined based n different criteria than when cnducting a systemic discriminatin analysis Fr the purpses f evaluating cmpensatin differences, emplyees are similarly situated where it is reasnable t expect they shuld be receiving equivalent cmpensatin absent discriminatin. Relevant factrs in determining similarity may include tasks perfrmed, skills, effrt, and respnsibility, wrking cnditins, jb difficulty, minimum qualificatins, and ther bjective factrs. In sme cases, emplyees are similarly situated where that are cmparable n sme f these factrs, even if they are nt n thers. CO will request applicatins, persnnel files, perfrmance ratings, cmpensatin histries, etc. Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 29
30 7. Review and Test Factrs Befre Accepting Factrs fr Analysis COs will evaluate infrmatin frm the cntractr regarding factrs cnsidered when making cmpensatin decisins OFCCP will cnsider all factrs, ffered by cntractrs; hwever, the CO will evaluate the factrs using a fur (4) step prcess: 1. Is the data cmplete and accurate? Has the data been cllected/retained? (Think: starting salary and all factrs related t it. Educatin: has the data been updated?) 2. Is the factr relevant t cmpensatin in terms f the cntractr s plicy and hw it was applied? (Statistically relevant r practically relevant?) 3. Was the factr cnsistently applied? (D yu have dcumentatin t prve it?) 4. Des inclusin f the factr lead t an adverse impact issue? Is it tainted by discriminatin? (Des yur rganizatin have all f the necessary validity dcumentatin? Example - If perfrmance scres are t be included, des yur rganizatin have evidence f validatin? Is the prcess jb-related and cnsistent with business necessity? Training fr reviewers? Use f multi-rater panels? Higher-level review f ratings? An analysis f ratings fr impact? Etc. ) Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 30
31 8. Cnducting Onsite Investigatins, Offsite Analysis, and Refinement f the Mdel After cnsideratin f all relevant infrmatin, CO will crdinate with statistical analysts, Reginal Slicitr f Labr (RSOL), and supervisrs t determine curse f actin The cntractr will be given an pprtunity t timely prvide any additinal relevant facts fr cnsideratin If the infrmatin is insufficient, and an nsite has nt yet been scheduled, the CO can crdinate an nsite t cllect any/all additinal infrmatin Additinal data will be requested... including interviews If, during interviews, the CO discvers that a factr was nt cnsistently applied, and it results in adverse impact, the OFCCP can/will refine the mdel t eliminate the factr (even if it is related... but it simply wasn t unifrmly applied and dcumented) Reslutin f the investigatin will be made based upn all available infrmatin/analyses Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 31
32 Cnfidentiality f Infrmatin Freedm f Infrmatin Act (FOIA) applies t all infrmatin cllected during the investigatin Citizens can make a FOIA request t receive the infrmatin OFCCP must infrm rganizatins affected by a FOIA request f the request itself and allw them t respnd prir t any release f the infrmatin/data OFCCP will nt release any data during the curse f an active investigatin Nte: Cntractrs can dummy cde sensitive infrmatin. Hwever, crsswalks must be prvided t allw interpretatin. S... Des this sund like a rck-slid assurance f cnfidentiality? Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 32
33 Summary/Cnclusin The cst f being a federal cntractr has gne up. Budget/bid accrdingly. Pat Shiu OFCCP cmpensatin Standards and Guidelines are n lnger in effect Directive 307 dramatically increases the stakes... as well as the cmpliance requirements fr cntractrs The amunt f time/effrt/csts fr cntractrs t defend against claims f cmpensatin-based disparities will increase dramatically (t put it lightly) Cntractrs will need t be practive t best prtect their rganizatins Diligent/practive cntractrs abslutely can take steps t dramatically reduce legal expsure... but it wn t be easy r quick We hpe t see yu all at the fllw-up t this presentatin, which will dive mre in-depth int the directive, hw it will likely be applied, what it means t cntractrs, and what yu can d t buffer against the cming strm Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 33
34 Upcming BCGi Platinum Presentatin Part 2: An In-Depth Discussin f the New OFCCP Cmpensatin Directive, its Effect n Cntractrs, and Recmmendatins fr Limiting the Liability (and the Pain) March 22, 10am pst Tw (2) hurs $99 Free t BCGi Platinum members If yu are nt a Platinum member, click n the Checkmark Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 34
35 Questins? Cpyright (c) 2013 Biddle Cnsulting Grup, Inc 35
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