The Office of Federal Contract Compliance Programs (OFCCP) has been busy since the start of fiscal year 2023, which began on October 1, 2022. Since this time, they have completed over fifteen investigations that have resulted in large settlements totaling more than ten million dollars. Many of the investigations centered around discrimination in hiring and compensation.
Pay Transparency Nondiscrimination
OFCCP has made very clear that pay equity will be at the forefront of their priorities, but one investigation is of particular interest as it focused on retaliation following an employee’s inquiry about compensation. The Conciliation Agreement reached between the parties states that, “OFCCP found that Contractor is not in compliance with 41 CFR § 60-1.4(a)(3) when it discharged (. . .) (“Complainant”) because (. . .) inquired about (. . .) pay.” The Equal Opportunity Clause referenced in the Agreement affirms that contractors may not discharge or discriminate against any employee or applicant if they inquire about, discuss, or disclose their own or another employee or applicant’s compensation.
This case resulted in a $100,000 settlement for the affected employee. In addition to monetary remedies, the Contractor was instructed to provide training approved by OFCCP to educate employees on nondiscrimination against employees and applicants regarding pay transparency. They were also required to develop and implement new policies, practices, and procedures to solidify the organization’s stance on pay transparency nondiscrimination.
What Should You Do?
There are steps that you should take to protect yourself from an adverse finding regarding pay transparency. Federal government contractors and subcontractors who hold a single federal contract or subcontract in excess of $10,000 or who hold contracts or subcontracts with the federal government in any 12-month period that have a total value of more than $10,000 are required to adhere to the provisions of the regulation which prevents covered contractors from terminating the employment of or discriminating against employees for disclosing compensation information. Most all applicants and employees are protected by this regulation, even those who are not directly engaged in contract performance. The one exception is those whose essential functions involve accessing, protecting and maintaining the privacy of employee compensation data. Not only must covered contractors comply with the provision, they must also make applicants and employees aware of the protection provided to them. This provision should be included in your handbook and posted in a prominent location in your workplace as well as online so that applicants and remote workers may access the notice. You may put the provision on company letterhead or use OFCCP’s sample poster.
In addition to the requirements of Federal Government Contractors to practice pay transparency, many states and cities have enacted pay transparency laws which may include additional reporting requirements and inclusion of pay ranges in job postings and specific postings. In addition, President Biden issued EO 14069 “Advancing Economy, Efficiency and Effectiveness in Federal Contracting by Promoting Pay Equity and Transparency.” This EO requests the Secretary of Labor, Heads of Executive Departments and the FAR Council to consider issuing proposed rules to enhance pay equity and transparency for applicants and employees of federal contractors and subcontractors. All employers should be proactive in reviewing state laws and government contractors should be mindful of potential action items which may result from EO 14069.
Pay Equity
Pay Equity continues to be a prevalent topic in OFCCP investigations. FY 2023 has seen numerous findings of discrimination in pay based on gender and race. The Conciliation Agreements entered into in 2023 involve salary adjustments, significant back wages, and interest payments to resolve the allegations of pay discrimination. Along with the monetary implications ranging from several hundred thousands of dollars to several millions of dollars, contractors were required to complete compensation analyses, implement stringent recordkeeping practices, provide in-depth training relating to pay equity, and provide OFCCP with periodic progress reports.
What Should You Do?
Pay equity analysis should be performed as part of a covered contractor’s Affirmative Action Program obligations. Developing a sound compensation strategy and plan will provide for a meaningful pay equity analysis which can be reasonably explained and justified. Having this plan in place and the supporting routine analysis of equity is the goal before an OFCCP audit ensues. The analysis should be reviewed to determine if there are signs of disparate treatment or inequity of pay amongst Job Groups and/or pay analysis groups, which are key components of a compensation plan. Any disparities should be reviewed and outcomes documented. If it is determined that a pay adjustment is not warranted, you should ensure the justification is clearly documented.
Compensation planning and pay equity is not only a matter of checking a box for compliance, but if done in a meaningful and intentional way, can provide for efficient and successful internal practices and a structure which compliments and enhances recruitment, motivation, and retention. If you need assistance with developing a competitive and effective compensation structure, please reach out to our experienced team of HR consultants.
Sheri joined Redstone Government Consulting, Inc. in December 2012 as a Human Resources Consultant. She provides HR consulting services to our customers on a wide range of issues, from specific projects to an ongoing outsourced solution of the human resources function. Sheri has two decades of experience in providing a comprehensive assessment of all areas of HR, including establishing and implementing policies and practices, contract transition efforts/onboarding, and investigations. Sheri’s experience covers a broad spectrum of compensation planning and analysis for total compensation projects, reasonableness assessments including executive compensation, compensation philosophy development, total reward strategies, benefits analysis, market pay and pay equity evaluations. She regularly supports clients with the analysis and mapping of labor categories and the preparation and analysis of wage calculations and supports clients in pricing disputes with DCAA. Sheri has a wealth of experience in navigating the many compliance challenges associated with Service Contract Act and Davis Bacon Act. She has been a valuable resource to our clients in all these areas. She stays abreast of the various requirements of the Department of Labor and, of great importance to government contractors, the Office of Federal Contract Compliance Programs, as well as other federal and state regulations impacting human resources. Professional Experience Prior to joining Redstone Government Consulting, Inc., Sheri served in various roles in the Human Resources arena. While employed by a mid-size government contractor she assisted with database development, recruiting, affirmative action planning and contract proposals. Sheri later became an Employment Specialist with one of the largest employers in Huntsville, where she assisted and led managers in the interpretation and documentation of the progressive disciplinary process, conducted employee investigations and allegations of discrimination, sexual harassment, wrongful discharge and employee disputes, conducted unemployment hearings and conducted new employee orientation. Sheri developed and presented management training, administered facility compensation plan, monitored staffing budgets and wrote job descriptions and handbook revisions.