Federal Agency Revises Compensation Analysis Directive

By Jessica Showers posted 09-09-2022 09:43 AM


The Office of Federal Contract Compliance Programs (OFCCP) recently issued an updated directive, revising and renaming Directive 2022-01, Pay Equity Audits. In accordance with affirmative action obligations, contractors are required to conduct an analysis of their compensation structure to determine if there are any gender or race disparities. The compensation analysis serves to determine possible barriers to equal employment opportunities.    

Per the regulations, contractors are required to retain and make available documentation demonstrating their compliance with affirmative action planning (AAP) requirements, including compensation analysis. The purpose of the revised directive is to create processes allowing the OFCCP to more efficiently review the records and assess if the contractor is making good faith efforts to remove barriers.

The revised directive makes the following points clear:

  • The OFCCP does not require contractors to produce attorney-client privileged communications or attorney work product associated with compensation analysis.

  • The documentation contractors must provide to the OFCCP.

  • The documentation required to show action-oriented programs implemented by contractors when they identify problem areas in their compensation structure.

The directive provides further details regarding alternative documentation that may be provided if a contractor believes their full analysis contains attorney-client privileged communications/work product. As contractors have a duty under the regulations to provide compensation analysis information to the OFCCP, they cannot simply claim attorney-client privilege/work product to avoid providing the information.

The OFCCP understands some of the information gathered may be subject to privilege and provides the following alternatives for contractors:

  • Provide a redacted version of the compensation analysis, removing the privileged information.

  • Conduct a separate analysis for the AAP period that does not include the privileged information.

  • Create a “detailed affidavit” that does not contain privileged material and states the following information:

    • When the compensation analysis was completed.

    • The number of employees the compensation analysis included and the number of categories or employees the compensation analysis excluded.

    • Which forms of compensation were analyzed and, where applicable, how the different forms of compensation were separated and combined for analysis.

    • That compensation was analyzed by gender, race, and ethnicity.

    • The method of analysis employed by the contractor.

If the contractor’s analysis identifies areas of concern, they are required to create and execute programs aimed at addressing the concerns. Furthermore, as stated in the revised directive, contractors must be prepared to provide the following documentation:

  • The nature and extent of any pay disparities found, including the categories of jobs for which disparities were found, the degree of the disparities, and the groups adversely affected.

  • Whether the contractor investigated the reasons for any pay disparities found.

  • That the contractor has instituted action-oriented programs designed to correct any problem areas identified.

  • The nature and scope of these programs, including the job(s) for which the programs apply and any changes (g., pay increases, amendments to compensation policies and procedures) the contractor made to the compensation system.

  • How the contractor intends to measure the impact of these programs on employment opportunities and identified barriers.

If you are preparing for or undergoing an audit, would like more information on Employers Council's Pay Equity or AAP services, or have any questions, contact Employers Council.

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