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OFCCP Gets Its Way: Compensation Data Now Required As Part of Initial Audit Submission

OFCCP Gets Its Way: Compensation Data Now Required As Part of Initial Audit Submission
  • January 15, 2000

On December 3, 1999 the Office of Management and Budget cleared the way for the Office of Federal Contract Compliance Programs to start including in its initial scheduling letter a requirement for covered federal contractors to submit summary compensation data. Thus, within thirty days of receiving a scheduling notice, contractors must now comply with the following directive.

Please provide annualized compensation data (wages, salaries, commissions, and bonuses) by either salary range, rate, grade or level showing total number of employees* by race and gender and total compensation by race and gender. Present these data in a manner that is most consistent with your current compensation system. If the information is maintained in electronic format, please submit in that format. See 41 CFR 60-1.4(a)(1). You may also include any other information you have already prepared that would assist us in understanding your compensation system(s).

*For this purpose, the method used to determined employee totals by the contractor should be the same as that used to determined employee totals in the workforce analysis for the AAP.

The OFCCP uses such compensation data to conduct a controversial and aggressive form of compensation analysis to allege discrimination in the pay practices of federal contractors. However, prior to this change, such compensation data only was required to be produced during the on-site phase of a compliance review, although the Agency often would request it earlier. The significance of the OFCCP’s action is that the Agency has more time to review and draw conclusions from the data. Of equal concern is the limited amount of time within which a contractor will have to gather, verify and analyze the data. Since it is very difficult to gather such information within 30 days after receiving an unexpected notice of audit, much less having the time to analyze it sufficiently, it is imperative for contractors to immediately implement procedures for self-auditing compensation data.

When conducting the analysis, the Agency compares the mean and median salaries of minorities and females to the mean and median salaries of non-minorities and males, respectively, according to “groupings” identified by the Company’s own compensation system. The Agency will compare salaries by job title, job group, salary grade, broadband or other system used by the Company to administer its compensation practices, whether or not the incumbents in such salary administration constructs actually perform equal work. Nevertheless, if there is any difference between the mean or median salaries of protected and non-protected group members, which cannot be explained by group variables, such as average years in the position, average years in grade, prior related experience or performance reviews, the OFCCP will allege that a pattern and practice of discrimination exists and seek “make-whole” relief.

Editor’s Note: Employers should review their compensation data immediately and, thereafter, on an ongoing and regular basis. A contractor may review compensation data according to the OFCCP’s method or any defensible method. Jackson Lewis can help employers perform such analyses.

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