OFCCP Likely to Issue New Pay Equity Guidance in 2012, Sends Second Notice to OMB to Rescind 2006 Compensation Guidelines

 How can we know what the standards for pay equity compliance are, if OFCCP doesn't tell us? OFCCP seems to be heeding that message from the contractor community and has taken a step toward providing new guidance for compensation evaluations.

On January 17, 2012, the OFCCP submitted a second "Notice of Proposed Rescission, Interpreting Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination ("Standards") and Voluntary Guidelines for Self-Evaluation" ("Voluntary Guidelines") to the Office of Management and Budget (OMB). OFCCP published its first Notice proposing rescission of the guidelines well over a year ago on October 25, 2010, and solicited public comment on its proposal to rescind the guidelines. Click here for a discussion of the 2006 Compensation Standards and Guidelines and OFCCP's first Notice.

In the first Notice, OFCCP did not propose a replacement for the 2006 guidelines. Many of the comments to the first Notice were highly critical of the Agency's plan to abandon the old guidelines without proposing a new compensation assessment procedure. Although the content of the second Notice has not been released, recent comments by OFCCP Director Patricia A. Shiu suggest that OFCCP's second Notice includes a proposal for new compensation guidelines to replace the 2006 guidelines.

In a recent interview with Bloomberg BNA, Director Shiu said that the "overwhelming response to that [first Notice] was: please do not rescind this without providing something in its place. We heard that loud and clear. And I think it's a reasonable request." In terms of possible approaches for evaluating potential pay discrimination, Shiu noted that given the complexities of pay analyses, "there's just no one cookie-cutter approach." Shiu also added that EO 11246 follows Title VII of the 1964 Civil Rights Act precedent, under which "there is no one approach nor could there be."

The OMB must review and approve the second Notice before it is published in the Federal Register. OMB can take up to 90 days to conclude its review, which is expected to be around April or May of 2012.

What This Means For Contractors

For the federal contractor and subcontractor community, there continues to be uncertainty surrounding current compliance standards that will be used in reviewing compensation during OFCCP audits. The contractor community will have to wait at least weeks, maybe months, to see if OFCCP took contractor comments to heart in proposing new compensation guidelines. It is an open question how much the OFCCP will de-emphasize multiple regression analysis as a standard for analyzing pay, and if so, what methodology or methodologies may be suggested. Once OFCCP publishes the second Notice in the Federal Register, the public will have the opportunity to comment on any proposed new compensation guidelines. Until further information is available, multiple regression remains a good practice for many employers who wish to review pay equity, particularly those with larger work forces, even outside the context of OFCCP compliance. Contractors should consult with their legal counsel to discuss the best approaches for pay equity analysis generally and for OFCCP compliance purposes.

By:Valerie Hoffman and Regina Grattan

Valerie Hoffman is a partner in Seyfarth's Los Angeles and Chicago offices and Regina Grattan is counsel in the firm's Sacramento office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Valerie Hoffman at vhoffman@seyfarth.com,  Regina Grattan at rgrattan@seyfarth.com or any attorney on our OFCCP & Affirmative Action Compliance Team.