OFCCP May Soon Require More Compensation Data

As OFCCP continues to move forward with sweeping changes to the Supply & Service Scheduling Lett...

As OFCCP continues to move forward with sweeping changes to the Supply & Service Scheduling Letter and Itemized Listing (Scheduling Letter), contractors should take steps now to prepare for more in-depth questions during audits, especially around employee pay. While pay equity has been an OFCCP enforcement priority for several years, the proposed Scheduling raises the stakes in this area. 

The Scheduling Letter formally initiates a review of federal contractors selected for a compliance audit by the agency and identifies the items that a federal contractor must initially produce to OFCCP during the audit. The agency released an updated Scheduling Letter proposal and a Supporting Statement on April 19, 2023, providing the public with 30 days to provide further comment. All indications are that OFCCP hopes to move forward with its proposal without a lot of additional changes. 

One of the biggest surprises for contractors may be the amount of pay data that needs to be provided in every audit – not just where a desk audit reveals concerns.  If the Scheduling Letter proposal is finalized, all contractors will be required to provide the following items: 

  • Two compensation snapshots which provides OFCCP with employee-level pay data for the period under review and the one-year period prior
  • Copies of compensation policies
  • Information about the factors used to determine pay at your organization (such as time in job, time in company, job family, etc.) 
  • Consistent with OFCCP’s recent Directive 2022-01 Revision 1, “documentation that the contractor has satisfied its obligation to evaluate its “compensation system(s) to determine whether there are gender-, race-, or ethnicity-based disparities” including when the analysis was completed, the number of employees included and excluded, type of compensation analyzed, the method of analysis and documentation that pay was analyzed by gender, race and ethnicity.  

 You may be wondering: why does OFCCP want all this information? The answer is simple: OFCCP’s Supporting Statement for these sweeping changes makes clear that the agency believes more data is always better: 

Generally, OFCCP uses statistical analyses to determine whether there are statistically significant gender, race, or ethnicity-based disparities after controlling for legitimate pay related factors. Two years of data allows OFCCP to better identify whether there is a pattern or practice of systemic compensation discrimination. Also, if the data reveals disparities for the two-year period, OFCCP can remedy the discrimination for the full two-year period (and going forward if it is a continuing violation), thereby ensuring that victims are made whole. 

What to do next? 

  • Carefully review the OFCCP’s revised proposal so you can prepare internal stakeholders, especially your compensation team, about what lies ahead. 
  • Determine how your organization will respond to OFCCP’s request for documentation about your annual compensation systems review. 
  • Review and update your compensation policies so they accurately explain how you establish starting pay and pay increases. This work can include updating market studies, pay grades and job architecture, as well as your employee facing compensation policies. This is a good place to start for reasons beyond just the OFCCP’s proposal – the focus on pay transparency and the mounting number of states and localities that require disclosure of pay ranges means a spotlight is being shone on your pay policies and practices. 
  • Identify the pay factors that are important to your compensation practices and evaluate how readily available the information is; consider a plan to collect explanatory pay factors. Again, a good idea even if the OFCCP’s proposal isn’t finalized! 
  • Conduct a robust pay equity study that incudes a budget for any compensation adjustments that may need to be made. 

Berkshire will be closely monitoring developments regarding the agency’s proposed changes to its audit process and will keep you updated.  In the meantime, if you have been thinking about embarking on a pay equity journey, now is the time to start.   

Lynn A. Clements, Director, Audit and HR Services
Lynn A. Clements, Director, Audit and HR Services
As Berkshire’s Director of Audit & HR Services, Lynn manages Berkshire’s Pay Equity, HR Services and Audit Defense practices. With 25 years of experience in the EEO and affirmative action space -- including nearly eight years working as a former senior official at the EEOC and OFCCP -- Lynn brings a unique blend of regulatory knowledge and practical compliance expertise to every project she oversees.

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