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New OFCCP Director Appointment Signals Renewed Focus on Pay Discrimination

President Biden’s appointment of Jenny Yang to Director of the Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) on his first day in office signals a new direction in federal equal employment opportunity enforcement.  Prior to this appointment, Director Yang had a career as a plaintiff’s attorney before being appointed to Chair of the Equal Employment Opportunity Commission (“EEOC”) under the Obama administration.  Notably, during Director Yang’s time as Chair of the EEOC, the agency introduced a highly contested requirement for employers to disclose certain employee pay data when filing EEO-1 Reports.

We expect that many of the Biden administration’s equal employment initiatives, including a renewed emphasis on pay discrimination, will be vetted through the OFCCP by Director Yang.  The EEOC may not experience as much of an immediate sea change since the Republican EEOC commissioners will remain in place through 2022.

Importantly, the OFCCP has the authority to audit private employers’ hiring and pay practices if the employer falls within the agency’s jurisdiction, which is broadly defined and applies to approximately 25% of private employers.  For example, a private employer is a government contractor or a subcontractor under the OFCCP’s jurisdiction if it has 50 or more

OFCCP Issues New Compensation Directive

The OFCCP’s recent Directive, issued on August 24, 2018, signals a move towards greater transparency in the compensation review process for contractors.  With this new Directive, the OFCCP has rescinded former Obama-era guidance on compensation review, for a more open and transparent process.  The OFCCP sent out 750 corporate scheduling announcement letters to contractors on September 7, 2018, so compliance reviews may be imminent for a number of employers.


Pay Analysis Groupings

The Directive sets out the OFCCP’s procedures for grouping similarly-situated employees for statistical compensation analysis.  The OFCCP explains that it analyzes compensation for similarly-situated employees by:

  • developing pay analysis groupings (PAGs); and
  • statistically controlling for further structural differences within the PAGs and individual employee characteristics, such as tenure, prior experience, education and grade level.

In a significant change, the OFCCP will use the contractor’s compensation hierarchy and job structure to run its analysis, provided that:

  • the structure is reasonable,
  • the OFCCP can verify the structure as reflected in the contractor’s compensation policies, and
  • the groupings are of sufficient size to conduct a meaningful statistical analysis.

If the contractor does not provide information about its compensation system, the OFCCP will as a default use

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