OFCCP Issues New Directive Requiring Pay Equity Audits

On March 15, 2022, the Workplace of Federal Contract Compliance Packages (OFCCP) issued its first directive of the Biden Administration to handle the requirement that federal authorities contractors and subcontractors carry out pay fairness audits. In step with predictions that the Biden OFCCP would give attention to pay fairness enforcement, the brand new Directive 2022-01 highlights the requirement that federal contractors and subcontractors carry out common pay fairness audits as a part of their affirmative motion program (AAP) obligations, and signifies that OFCCP will intently scrutinize the outcomes of those audits throughout its compliance evaluations.

OFCCP’s AAP laws have lengthy required {that a} federal contractor “perform in-depth analyses of its total employment process to determine whether and where impediments to equal employment opportunity exist,” together with analysis of “compensation system[s] to determine whether there are gender-, race-, or ethnicity-based disparities.” Nevertheless, OFCCP has not beforehand supplied particular steering concerning the scope of this requirement.  Within the new directive, OFCCP seems to take the place that the AAP laws require that contractors carry out a daily, in-depth pay fairness audit of their workforce to establish potential disparities.

Extra importantly, OFCCP’s directive additionally makes clear that the company intends to request and scrutinize contractor pay fairness audits in its compliance evaluations.  Below the directive, if a compliance analysis “reveals disparities in pay or other concerns about the contractor’s compensation practices,” then OFCCP intends to request documentation of the contractor’s pay fairness audits.  Some circumstances that OFCCP identifies as triggering a request for this follow-up data embody:

1.     Pay disparities or proof of pay discrimination amongst similarly-situated workers.

2.     Worker complaints of pay discrimination or different anecdotal proof of discrimination.

3.     Inconsistencies in how the contractor is making use of its pay insurance policies.

4.     Statistical analyses or different proof {that a} body of workers is disproportionately concentrated in decrease paying positions or pay ranges primarily based on a protected attribute.

If one in every of these circumstances happens, OFCCP will search “a complete copy” of the pay fairness audit displaying all pay groupings that have been evaluated, any variables used, and the outcomes of the analyses. OFCCP may also search details about mannequin statistics if a statistical evaluation is employed and the frequency of audits, communication to administration, and the way the outcomes have been used.

The directive additionally takes an aggressive place concerning the privileged standing of contractor pay fairness audits.  Contractors generally carry out pay fairness audits with the help of authorized counsel with a purpose to make sure the audit is protected against disclosure by the attorney-client privilege.  Within the directive, nevertheless, OFCCP takes the place that as a result of its laws require that contractors keep and supply OFCCP with proof of their compliance with the AAP obligations, “contractors cannot withhold these documents by invoking attorney-client privilege or the attorney work-product doctrine.”  The directive does acknowledge, nevertheless, {that a} contractor could conduct a “separate” pay fairness audit for the aim of acquiring authorized recommendation, not for compliance with OFCCP obligations, which stays privileged.  The directive asserts that the failure to supply pay fairness audits in response to an OFCCP request shall be thought-about “as an admission of noncompliance with these regulatory requirements.”

The brand new directive ups the ante for federal contractors and subcontractors to carry out common pay fairness audits as a part of their AAP compliance efforts.  Such audits have all the time been advisable as a greatest apply to establish and rectify potential compensation disparities earlier than they ripen into litigation, however are actually a required train for these doing enterprise with the federal authorities.  In mild of OFCCP’s aggressive positions concerning the utility of the attorney-client privilege to pay fairness audits, contractors and their counsel may also must rigorously construction their audits with a purpose to make sure that no less than a portion of the audit stays shielded from disclosure.

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