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Oracle’s Win Over DOL Will Shake Up Pay Equity Enforcement (1)

Sept. 23, 2020, 5:02 PMUpdated: Sept. 23, 2020, 9:46 PM

Oracle’s victory in a Labor Department pay discrimination lawsuit dealt a blow to how the agency scrutinizes federal contractors’ compensation practices and will likely alter how it litigates cases alleging unfair pay based on race and sex, lawyers said.

A DOL administrative law judge ruled Tuesday that Oracle didn’t discriminate against women and minorities in pay, closing a chapter in the multi-year saga for both the tech giant and the Labor Department’s Office of Federal Contract Compliance Programs.

“It’s not that OFCCP lost, they were annihilated,” said David Cohen, co-chair of the Institute for Workplace Equality, a business group specializing in federal contractor compliance. “OFCCP has to do a complete reset on its approach to evaluating compensation.”

How the agency will revamp its approach remains to be seen, and the looming presidential election also adds an element of uncertainty to potential next steps. But this litigation loss for the agency could give the Trump administration an outlet to back off of oversight and enforcement, said Maya Raghu, the director of workplace equality and senior counsel at the National Women’s Law Center.

“To the extent that the agency was going to pursue enforcement actions against companies, I think this gives them ammunition, an argument, to not pursue it,” she said.

Oracle is a multi-national software provider based in Redwood City, Calif. The Labor Department sued the company in January 2017, just before President Donald Trump was sworn into office. The company has about 135,000 employees worldwide.

The OFCCP audits federal contractors for compliance with equal employment opportunity and anti-discrimination obligations. These reviews include statistical analyses of contractors’ workforce pay data.

It currently has a compensation discrimination suit pending against JPMorgan Chase & Co. It’s also settled a number of pay bias allegations against companies including TIAA, Analysis Group, and Cisco.

Insufficient Statistical Evidence

Oracle isn’t the first federal contractor to defeat the agency’s allegations of pay discrimination. Analogic Corp., a Boston-based medical imaging and security technology company, didn’t discriminate against female workers by paying them less than their male colleagues, a judge found in March 2019.

“If you look back, there are not that many compensation cases that have been litigated by OFCCP, and the two that have been litigated, Analogic and Oracle, OFCCP lost,” Cohen said. “And they didn’t just lose, they lost big.”

Judge Richard M. Clark found that the agency’s evidence of the alleged pay bias in the Oracle lawsuit “did not bring the statistics to life and was not suggestive of widespread discrimination by the alleged wrongdoers.”

He added that there wasn’t “good evidence for OFCCP’s allegation that Oracle’s executives knew about, hid, and ignored widespread disparities.”

An Oracle spokesperson directed Bloomberg Law to a Tuesday press release in which Dorian Daley, the company’s general counsel, said, “This case never should have been brought in the first place.”

In the Analogic case, Judge Colleen Geraghty similarly found that the statistical analysis of the alleged bias “did not show any difference in female wages that was statistically significant such that any difference could not be attributed to chance or random fluctuation.”

The agency’s methodology for analyzing compensation practices has been “emphatically rejected” by Judge Clark, said Mickey Silberman, an attorney who represents contractors in discrimination litigation. One immediate effect of the Labor Department loss could be a “chilling effect” on federal contractors’ willingness to settle pay bias allegations that were uncovered using that same methodology, considering the agency’s losing record in court, he said.

Alissa Horvitz, an attorney with Roffman Horvitz who counsels employers on OFCCP matters, said Clark provided an “important layer of legal interpretation” to the statistics presented by the agency.

“The administrative law judge correctly focuses on the need to ensure that employees are similarly situated when making comparisons about whether or not they are paid fairly,” she said. “At the end of the day, if you’re not looking at people who are doing the same job, it is likely that there are going to be differences in pay, and it’s very difficult to demonstrate that it’s because of race,” or gender.

Future Uncertainty

The agency can appeal the judge’s decision to the DOL’s Administrative Review Board, but the agency didn’t say whether it plans to do so.

“The Department is reviewing the decision and will evaluate its options,” said Edwin Nieves, an agency spokesperson.

The Labor Department, helmed by Trump appointee Secretary Eugene Scalia, finalized a rule in May that expands the secretary’s power to review and potentially overturn ARB decisions. Critics have expressed concern that this could politicize the administrative review process.

Katz, Marshall & Banks partner Alexis Ronickher said she finds the ALJ decision “disturbing given the strength of the evidence.”

“Civil rights cases that challenge discriminatory practices prevalent throughout a whole industry—like the Oracle litigation does for the tech industry—often fail at the trial level because individual judges apply their biases and in doing so misinterpret the facts and misapply the law,” she said in an email. “This is why our legal system has appeals courts that review trial court decisions, and why it is so critical for DOL to appeal this decision so that it receives a rigorous review.”

How the agency alters its approach to compensation discrimination depends on who occupies the White House, and the election is in 40 days.

Raghu of NWLC said she anticipates the OFCCP will carry out “the wish list of the business community” if President Donald Trump is elected.

“I feel like this decision will embolden them to continue to pursue that path,” she said. If Democratic nominee Joe Biden wins, she sees the prospect of a “more aggressive enforcement posture.”

Election aside, Cohen said the OFCCP should more closely align its compensation analysis with standards established by Title VII of the 1964 Civil Rights Act.

“That’s what killed them in Analogic, and that’s one of the many reasons that killed them in Oracle,” he said.

(Updated with additional reporting throughout.)

To contact the reporter on this story: Paige Smith in Washington at psmith@bloomberglaw.com

To contact the editors responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com

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