The Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) has now suffered two significant losses related to its approach to enforcing pay discrimination. These developments could upend the federal contractor watchdog’s enforcement and policy priorities.
Some in the contracting community will applaud these decisions as vindicating their positions, but contractors should look forward as the agency will undoubtedly continue to enforce compensation discrimination.
The administrative decision in OFCCP v. Analogic Corp. represented the first sign that OFCCP’s approach had flaws. The administrative law judge (ALJ) determined that OFCCP’s compensation expert failed to consider the factors used by Analogic in making its pay decisions and held that, absent strong anecdotal evidence of discrimination, a 2.84 standard deviation level did not establish a “gross disparity” under Title VII.
Notwithstanding the Analogic decision, the 280-page decision in OFCCP v. Oracle America Inc. by a separate ALJ issued a stinging rebuke to OFCCP’s approach to compensation. The touchstone of Title VII compensation law is that liability exists when pay disparities occur among similarly situated employees. See Furnco Constr. Corp. v. Waters (1978).
The high-stakes question for OFCCP and contractors has been whether the government could employ highly aggregated models that included employees who were not similarly situated and then use statistical controls to account for job similarity. The contractor community has long believed that OFCCP cannot mix dissimilar groups. In Oracle, the ALJ sided with the contractor community.
These decisions place OFCCP at a crossroads as the agency clearly staked its pay discrimination enforcement protocol on winning the Oracle case. Further, the case required vast resources and the allegations made national headlines. The legal wrangling here, though, is perhaps less important than forecasting where a $100-million agency goes after a bad loss. We explain six options for the agency.
1. OFCCP Can Continue to Fight
OFCCP and DOL’s Office of the Solicitor (SOL) will take a deep dive into the ALJ’s Oracle decision. While the decision may provide some basis to appeal to the DOL’s Administrative Review Board (ARB), OFCCP will face a high standard to overcome the detailed findings of fact favoring Oracle on the major statistical issues. OFCCP also risks an adverse ARB decision, which would bind OFCCP to a much greater extent than the recommended ALJ decisions.
The agency could wash its hands of the case by taking the position that it was technically filed by the Obama administration. Nonetheless, filing exceptions gives OFCCP the opportunity to think through significant changes to its compensation program. In addition, the result of the November elections and a potential new administration could take a different approach.
2. OFCCP Could Upend Its Compensation Program
OFCCP’s current leadership has taken an aggressive approach to compensation and relies on its “pay analysis group” rubric which allows the agency to aggregate dissimilar groups. In addition, OFCCP has issued compensation-related directives, FAQs, and guidance documents, and obtained very significant and high-dollar settlements with many large financial services and technology companies. However, the Oracle decision forces OFCCP to take a second look at its approach.
3. OFCCP Can Move to Smaller Cases
During the Obama administration, OFCCP stated that that the Bush-era compensation standards hamstrung its efforts to expand recovery for aggrieved employees. As such, while working to rescind those standards, it employed less controversial cohort approaches comparing employees with greater level of similarity. The agency also took on the practice of steering protected classes into lower-paying jobs at hire.
OFCCP could enforce compensation discrimination by going back to these approaches while it arrives at a standard statistical approach that meets the test in the Oracle decision.
4. The Government Can Require Greater Cooperation Among Civil Rights Agencies and Institute One Legally Sound Standard
OFCCP has been the lead for the federal government in aggressive enforcement of laws related to compensation discrimination. Other federal agencies, such as the Equal Opportunity Employment Commission and Department of Justice, have also been involved in these efforts with a lower profile. Better agency coordination, akin to the 2010 National Equal Pay Enforcement Task Force, could result in a single standard across all agencies that would have the potential to meet the legal tests.
5. OFCCP Could Cede Enforcement of Cases to the DOJ
An often-overlooked and rarely used portion of the OFCCP regulations provides the DOJ with jurisdiction in discrimination matters brought under Executive Order 11246. This does not suggest that the SOL is not capable of bringing and effectively litigating OFCCP cases. Indeed, it prevailed in a recent hiring case. However, this consideration will be on the table after the November election.
6. OFCCP Can Ramp Up Its Ability to Receive Pay Complaints
OFCCP has relied principally on its compliance audit process to investigate and enforce pay equity. In that process, OFCCP’s desk audit review of pay data automatically focuses on statistical pay disparities in the aggregate or in large groups. At the same time, contractors are immediately placed on guard with accusations of systemic discrimination without having a single employee file a formal complaint.
If OFCCP refocuses its compensation program to investigate individual complaints and then seeks to determine how widespread the discriminatory practice is, stronger factual cases may surface.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
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Christopher Wilkinson is a senior counsel at Perkins Coie in Washington, D.C., in the firm’s Labor and Employment Practice group. He formerly served as associate solicitor for civil rights at the Department of Labor.
David Cohen is founder and president of DCI Consulting Group Inc., a human resources risk management consulting firm in Washington, D.C.