By Robin E.
Shea,
Winston-Salem, N.C.
November 17, 2004
The pay practices of federal contractors will be assessed
using only statistically sound methods, according to proposed
regulations issued yesterday by the Office of Federal Contract
Compliance Programs (“OFCCP”). This is obviously
good news for contractors, who were accustomed to the dubious “DuBray
Analysis.” However, the change means that contractors
may have to work harder to preventively assess their compensation
practices, and they may have less leeway to defend themselves
in the event that OFCCP finds violations.
First, the good news. The OFCCP has unequivocally disavowed
the “DuBray Analysis.” The DuBray Analysis assumed
that employees in a given pay grade held equivalent jobs.
Thus, if there was an undefined “significant” pay
disparity in the grade between women versus men, or minorities
versus non-minorities, the employer faced potential liability
for pay discrimination. The DuBray Analysis has been rejected
by many federal courts.
The new, and vastly improved, method outlined in the proposed
regulations will examine actual job duties and other legitimate
criteria to determine which employees are truly “similarly
situated” for purposes of compensation analysis. In
most cases, the OFCCP will conduct multiple regression analyses
on groups of similarly situated employees. In the context
of a compensation review, multiple regression analysis examines
pay (the “dependent variable”) against all the
factors that may affect pay (the “explanatory variables”) – for
example, experience with prior employers and relevant education.
Only after all legitimate variables are taken into account
does the OFCCP presume that a pay disparity is a result of
discrimination. And, even then, the OFCCP says that it will
not prosecute disparities unless they are statistically significant
(more than two standard deviations). Moreover, the new guidelines
say that the OFCCP will normally not find discrimination
based solely on statistical evidence but will require some “anecdotal” evidence
of discrimination as well.
In addition to the guidelines, the OFCCP also issued proposed
regulations regarding employer self-evaluation of compensation
practices. Although the proposed regulations provide a “safe
harbor” for employers who conduct self-evaluations
that are not attorney-client privileged, Constangy recommends
extreme caution before conducting any compensation analysis
that can be disclosed to third parties, including but not
limited to the OFCCP.
Comments on both sets of proposed regulations should be submitted
no later than December 16, 2004 . . . to none other than
Joseph DuBray. If and when a Final Rule is published, Constangy
will issue another Affirmative Action Alert outlining the
new regulations.
The grain of salt. It is certainly good news that OFCCP will
be using a statistically sound method of assessing pay discrimination
issues. Presumably, this means that OFCCP will find fewer
employers liable for alleged pay discrimination. However,
employers may need to be more vigilant than before, now that
OFCCP has abandoned its “junk statistics.” When
the OFCCP finds a violation under the new methods, employers
can expect to have a more difficult time defending themselves.
In that regard, it will be essential for employers to proactively
make sure that employees are appropriately grouped for comparison
and that all explanatory variables that may affect compensation
are identified so that the variables can be included in the
OFCCP’s analysis. This will require hard work on the
part of Human Resources professionals and/or company attorneys,
and it may require that a statistician be retained.In other
OFCCP news, Director Charles James has announced that 1,700
selection letters were mailed to employers on November 1 – so,
be on the lookout.
If you have any questions relating to the OFCCP’s
proposed regulations or need assistance with a selection
letter, please
contact any member of the Affirmative Action Practice Group,
or the Constangy attorney of your choice.
NOTICE: Constangy realizes that not all employers are
government contractors and that many of you may not wish
to receive our Affirmative
Action
Alert. If you desire to continue receiving this publication,
please e-mail vwhitaker@constangy.com.
