EMPLOYMENT LAW

OFCCP Audit Reminder: Have You Performed Federal Contractor Self-Evaluation?

May 2007

By Dana R. Scott, HR and Benefits Consultant

Beginning this month, the Office of Federal Contract Compliance Programs (OFCCP) will be scheduling compliance evaluations (desk audits) for non-construction federal contractors from a scheduling list for 2007. The list includes about 4,500 facilities that have either identified themselves as federal contractors or have been identified as such by the OFCCP. If you are unsure if your company is a federal contractor, go to the OFCCP's website at www.dol.gov/esa/ofccp.

Once contacted, you will have 30 days to respond to the OFCCP's Scheduling Letter and provide the data requested regarding your company's current Affirmative Action Plan and those of the past couple of years. For more information, see A Legal Roadmap to Affirmative Action Audits

As part of the Desk Audit, the OFCCP investigates whether the federal contractor's pay practices are discriminatory. In June of last year, the OFCCP published a set of formal standards to be used in assessing discriminatory practices with respect to compensation. The analysis to be performed will now use a two-pronged approach:

• Ensuring that employees in positions which the contractor has grouped into the same pay grade and are therefore "similarly situated" perform similar work, have similar levels of responsibility, and require similar skills and qualifications;
• The use of a statistical technique known as multiple regression.

These analyses will also include such factors as education, prior work experience, performance in the position, productivity and time in the position.

Federal contractors are required to adopt some type of compensation self-evaluation to ensure that discrimination does not exist. The OFCCP has also issued voluntary guidelines to facilitate this process. They are as follows:

1. The compensation program of the federal contractor must group employees who are similarly situated (Similarly Situated Employee Groupings, or SSEGs). Employees should be placed in SSEGs if they perform work that is similar, occupy positions that are similar in responsibility level and require similar skills/qualifications.

2. The SSEGs must be large enough to conduct a meaningful statistical analysis, but should only include those employees who are actually similarly situated. In general, the SSEGs should contain at least 30 employees overall and at least five or more employees who are minority or female.

3. On an annual basis, the federal contractor should perform a statistical analysis of each of the SSEGs to determine if pay disparities exist which cannot be explained by such factors as education, experience performance, productivity, etc.

4. If any significant compensation disparities are identified during the self-evaluation which cannot be explained by the factors listed above in #3, the contractor must take steps to remedy the disparity.

5. The contractor must create and retain all documents related to the self-evaluation of its compensation system, including the statistical analyses performed, and make this data available to the OFCCP during a desk audit.

While following the OFCCP's self-evaluation guidelines are voluntary, conducting a self-evaluation is required. A federal contractor who has not performed a self-evaluation of its compensation practices will not be in compliance.

Given the breadth of the OFCCP audit initiative that is underway, federal contractors are encouraged to ensure that the required self-evaluation is complete and that affirmative action plans for the past few years are complete and readily accessible now — don't wait until the scheduling letter arrives.

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