OFCCP Issues Second Opinion Letter on Pay Analysis Groups

Posted by Rachel Rubino, MS, SPHR, SHRM-SCP on July 26 2019

OFCCP Opinion Letter 7.24Earlier this week, the Office of Federal Contract Compliance Programs (OFCCP) issued an opinion letter that serves as Director Leen’s first attempt at directly addressing the use of Pay Analysis Groupings (PAGs) in audits. This is the agency’s second opinion letter since a November 2018 directive that committed to providing guidance to federal contractors through these opinion letters.

Specifically, this letter reviews the question of whether contractors can work directly with the agency to establish a PAG structure that would be deemed acceptable prior to an OFCCP audit. Director Leen writes that contractors can submit their PAG structure to the agency for review and feedback, to be considered in future audits. However, he also writes that the agency cannot “conclusively agree” that it will use any predetermined PAGs in future compliance reviews as the factors affecting that workforce and its compensation might have changed since review of the PAGs. OFCCP analyzes compensation data based on the systems and structures that were in place during the period under review, so that information would take precedence over any previously reviewed or “approved” PAGs.

Director Leen’s letter strikes a positive tone when it comes to contractors potentially undertaking this voluntary submission of PAGs. He writes that submitting PAGs to OFCCP for review and feedback is consistent with Directive 2018-05, which detailed how OFCCP will evaluate compensation in audits. Director Leen also notes that a contractor’s submission of PAGs prior to an audit could help OFCCP understand the contractor’s policies and practices, particularly those that might negatively impact a protected group but are still job-related and consistent with business necessity.  

What is not made clear in this opinion letter is how this process of submitting PAGs would work, specifically, what data would be required to begin the process. The letter directs contractors who want to request assistance to contact OFCCP’s Director of Enforcement, currently Robert LaJeunesse is acting in this capacity. The letter states that “the submission [of PAGs for review] should include sufficient data for OFCCP to determine if the aggregation is similar to what would be available in a compliance review”.  Without further detail on what is required for submission, it is challenging for contractors to make a determination on whether proactively submitting PAGs to the agency for review and feedback makes sense for their organization.

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Tags: OFCCP Audit, OFCCP