Compensation in the New Administration – Mainstays and New Directions in Investigations

A change in presidential administrations can influence federal enforcement agencies’ priorities, how they interpret laws and guidelines, and how they carry out enforcement. Consequently, the transition to the Trump administration will have critical implications for employers wishing to remain compliant. What may have been compliant in the Biden administration may be up for legal scrutiny in the Trump administration. What the future holds for the OFCCP and DOL is merely speculation at this point, however there are a few areas where we think employers can expect changes and others that will likely remain the same.

To begin, of the two major federal enforcement agencies (EEOC and OFCCP), the one that will experience the most impact will be OFCCP. Traditionally, EEOC is able to avoid major shifts because of its five-commissioner leadership structure and the fact that a commissioner’s tenure is not tied to the presidential election calendar. Generally, only one to two commissioners change during a presidential election and the commission will be a democrat majority through 2026. That being said, it is unlikely the EEO-1 Component 2 pay data will be collected in this next administration. 

OFCCP, however, is expected to undergo considerable change. The President has announced his intent to nominate Lori Chavez-DeRemer as the Secretary of Labor. If confirmed, she will appoint an OFCCP Director and we will have much more insight into what the future holds for compliance. From our experience, every OFCCP Director is different in their priorities, how they direct the agency to carry out enforcement, and how the agency interprets laws and guidelines. Case in point, the Biden Administration rescinded several critical directives from prior administrations, which employers relied on for guidance in compliance and audits. Consequently, employers always need to retool their practice to be aligned with the new administration and their enforcement approach. 

Second, with a shift to a Republican administration, employers can expect substantial differences in compliance requirements and audit investigations. To be clear, the agency, regardless of political party, is focused on its mission—to advance civil-rights in the workplace. The way they execute that mission, however, will be influenced by the political climate. In general, under a Republican administration, the agency tends to implement policies and requirements that are more transparent while also focusing on ways to help employers achieve compliance. Under a Democratic administration, the agency tends to have more staffing to support broader and more expansive policies and requirements, which results in more complex audit investigations. Regardless of political party, however, OFCCP enforcement and audit investigations are equally difficult.  

Third, we think its likely that certain enforcement priorities will continue to be a focus – including artificial intelligence, pay equity, adverse impact in personnel selection and promotion. OFCCP’s expansion of their expert teams this past year is a critical tell—with the addition of the Branch of Validation and Analytics (BVA), the agency has added a powerful sibling to its already potent Branch of Expert Service (BES).  

Pay Equity Audit Investigations Under the New Administration 

The analytics and approaches applied to pay equity investigations will likely be different under the new administration. Even over the last four years of the Biden administration, OFCCP methods and approaches to investigating pay equity have evolved and shifted. From discussions of using meta-analysis to identify systemic pay bias across an organization to leveraging pay disparities among broad groupings of employees (e.g., EEO job categories) for further investigations in employment decisions, OFCCP’s approach to pay equity analysis has taken different shapes in pay equity investigations. However, contractors can expect pay equity audit investigations to continue to focus on these three elements of the analysis:  

1) developing appropriate similarly situated employee groups 

2) variables used in pay equity investigations, and  

3) statistical methods used to identify pay disparities.  

Developing Appropriate Similarly Situated Employee Groupings (SSEGs) 

How employees are grouped for analysis will always play a central role and must be carefully created. Title VII of the Civil Rights Act (1964) is clear that employee groupings in an analysis should reflect employees that are similarly situated. Typically, pay equity investigations examine employees performing the same job (i.e., equal pay for equal work), however enforcement agencies will use their latitude in the definition of “similarly situated” to group multiple jobs into a single analysis group. To their point, while there are guidelines for identifying similarly situated employees, they are not concrete. Organizations who proactively develop proper SSEGs using job analysis will have a strong case against over aggregation of jobs to form SSEGs.  

Variables in Pay Equity Investigations 

The outcome variable of interest in pay equity investigations has typically been base salary, however the OFCCP is now requesting all forms of pay in compliance evaluations, including bonus, incentives, commissions, overtime, and other non-base compensation. Modeling these non-base pay variables requires advanced knowledge of the organization’s job architecture, working conditions, performance appraisal measures, bonus and incentive structures and other explanatory factors. The agency’s investigators have begun to include these non-base and total pay variables in their analyses. Contractors should be prepared to examine and explain disparities in both base pay and non-base pay. 

Statistical Methods Applied in Pay Equity Analyses 

Typical pay equity investigations examine employee snapshots on a given date. With those data, the core statistical methods used in pay equity investigations continue to be regression-based analyses (e.g., OLS and maximum likelihood multiple linear regression) for groups with 30 or more employees and non-parametric analyses for small samples (e.g., Wilcoxin rank-sum test). The OFCCP now requests two separate compensation snapshots in audits and uses repeated-measures analyses to incorporate the temporal element and enhance their statistical power. The OFCCP has also floated the concept of using meta-analysis to detect systemic pay bias within the entire organization (see scheduling letter, OFCCP, 2023). The myriad of statistical methods at the agency’s disposal are extensive and preparing for the enforcement agency’s next move in compliance evaluations is dependent upon several factors. The new administration is likely to continue using a variety of statistical methods depending on the case at hand. Contractors are strongly encouraged to conduct proactive, privileged pay equity analyses using multiple linear regression to control for the relevant pay factors in the pay structure. The regression-based approach will continue to be the foundation of pay equity analyses and will allow contractors to stay on top of their pay equity. 

Stay Tuned for Further Updates 

As soon as a new OFCCP Director is appointed, we will be able to discuss the Trump administration’s approach to pay equity investigations and how employers can investigate pay equity consistent with the enforcement agency’s priorities. Stay tuned to the Berkshire newsletter, as we will continue to provide updates when the Trump administration takes office on January 20, 2025. The cascading events will be telling for the future of compliance, with the issuance and rescindment of executive orders, confirmation of a Secretary of Labor, and appointment of a new OFCCP Director.