U. S. District Court Allows OFCCP Compensation Review to Proceed

United Space Alliance, LLC, a space operations company owned by two leading federal contractors, received an audit letter from the Office of Federal Contract Compliance Programs (OFCCP) in August 2009. At the time, OFCCP used the “tipping point” test to analyze compensation data included in the audit submission. The data submitted passed the initial test but upon further review the District Director identified patterns in compensation, in favor of men, that he believed should be further investigated. When United Space Alliance received the letter requesting detailed compensation data, it challenged OFCCP because the data passed the tipping point test— countering the company had found no disparities in their internal analysis of pay.

In an effort to compel United Space Alliance to provide the requested information, OFCCP issued a letter for on-site review of records. The company responded it would provide additional compensation data in a different format than requested by OFCCP during an on-site review—subject to a specific set of provisions laid out by the company. OFCCP then issued a show cause notice, notifying United Space Alliance enforcement proceedings would begin if the compensation data was not received in the format requested. At the administrative hearing, the company presented a labor economist who criticized OFCCP compensation analysis methodology, and alleged the OFCCP’s request violated the Fourth Amendment, Fifth Amendment, and the Paperwork Reduction Act. The hearing was decided in favor of OFCCP, and United Space Alliance was ordered to provide the requested compensation information. United Space Alliance appealed the decision to the District Court, which also issued a judgment in favor of OFCCP.

The takeaway from this case for contractors is OFCCP is not bound to a single test to ascertain if compensation discrimination has occurred, and has reaffirmed the right to ask for detailed compensation data during an audit.

For more information on what this ruling means in regards to compensation compliance, or the requests OFCCP may ask of your company during an audit, please contact your Berkshire representative or a Berkshire expert at 800.882.8904 or bai@berkshireassociates.com.