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Sep 01, 2022

OFCCP revises its directive on compensation analysis

Affirmative ActionHarassment & DiscriminationWage and Hour 

On August 18, 2022, the Office of Federal Contract Compliance Programs (OFCCP) updated the pay equity directive it had published just five months earlier (which we reported here). OFCCP compliance officers will now follow Directive 2022-01 Revision 1 (Advancing Pay Equity Through Compensation Analysis) when conducting affirmative action audits of federal supply and service contractors (not construction contractors). The revised directive contains the following changes:

New options for proving that you conducted a compensation analysis: The revised directive clarifies that the OFCCP cannot require contractors to produce analyses that are protected by the attorney-client privilege or attorney work product doctrine. If contractors aren’t willing to turn over their full analysis due to these protections being in place, they have three options to prove that they conducted a proper compensation analysis as required by the affirmative action regulations: (1) Conduct a separate analysis that doesn’t contain privileged information and share it with the OFCCP (this is the approach Vigilant takes when representing our affirmative action clients in an audit); (2) Provide a redacted version of the analysis that contains the information listed below; or (3) Provide a detailed affidavit that contains the information listed below.

Information that must be provided: Regardless of which method you choose, the OFCCP will require you to provide the following information:

  1. When you completed the analysis;
  2. Number of employees included in the analysis and the number and categories of employees excluded from the analysis;
  3. Types of compensation analyzed and how they were separated or combined (if applicable) for the analysis (e.g., base pay, bonuses, commissions, etc.);
  4. That you analyzed compensation by gender, race, and ethnicity; and
  5. The method of analysis used.

Verification of action-oriented programs to fix problem areas: If your compensation analysis finds differences based on race/ethnicity or gender, you must take action to address these problems. The OFCCP will require you to prove that you did so by providing the following information:

  1. Nature and extent of any pay disparities found, including affected job categories, the degree of the disparities, and the groups adversely affected;
  2. Whether you investigated the reasons for any pay disparities you found;
  3. That you implemented action-oriented programs to correct any problem areas identified;
  4. Nature and scope of the action-oriented programs, including jobs affected and any changes you made to employees’ pay or your compensation system; and
  5. How you will measure the effectiveness of your action-oriented programs on employment opportunities and any barriers you identified.

Tips: The jobs where you’re most likely to be at risk for pay discrimination claims are those in which you have large numbers of employees in comparable positions and managers have wide latitude to set pay for them. Depending on the size of your workforce that fits this description, it may be worth pursuing an attorney-directed analysis of your compensation by a company that specializes in such work. Your Vigilant Law Group employment attorney can discuss your options and provide referrals. If you use Vigilant to prepare your annual written affirmative action plan (AAP), we will conduct a basic cohort analysis (comparing individual employees with the same job title but different race/ethnicity and gender). This is non-privileged and we will compile the required information for the OFCCP in the event of an audit. Questions? Contact your Vigilant Law Group employment attorney or your Vigilant affirmative action representative.

This website presents general information in nontechnical language. This information is not legal advice. Before applying this information to a specific management decision, consult legal counsel.