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OFCCP Issues Opinion Letter on Pay Analysis Groupings

by | July 25, 2019

On Monday, July 22nd, OFCCP Director Craig Leen issued an opinion letter on behalf of the agency that addresses the issue of “whether contractors can work with OFCCP to develop a [Pay Analysis Groupings (PAGs)] structure that OFCCP would accept as valid for use in future OFCCP audits.

PAGs are groupings developed by OFCCP for purposes of conducting statistical analysis during compensation audits, and are meant to assist with pay comparisons between employees holding jobs with similar content, qualifications, wages, and/or promotional opportunities. PAGs do not necessarily constitute groupings of similarly-situated employees – widely considered the legal standard of comparing employees for purposes of determining whether employment discrimination has occurred.

An opinion letter is one of the technical assistance tools that OFCCP has at its disposal. These are typically issued in response to a stakeholder’s inquiry requesting guidance on a specific scenario and/or set of facts. The response, known as an opinion letter, allows OFCCP to provide an opinion in writing based upon a specific set of facts, but without explicitly issuing legal advice.

In the PAGs opinion letter, Leen addressed the question of whether contractors can collaborate with OFCCP on the establishment of PAGs, and the potential impact on future compliance evaluations, stating:

“…contractors have the opportunity to submit their PAG structure for review and to receive feedback from OFCCP, which OFCCP would take into account in future compliance evaluations. The submission should include sufficient data for OFCCP to determine if the aggregation is similar to what would be available in a compliance review. OFCCP would also note, however, that it is unable to conclusively agree that it will rely upon specific, predetermined PAGs in all future compliance evaluations as there may have been material changes to factors considered by OFCCP in its initial evaluation of the contractor’s PAGs. OFCCP must conduct its analyses based on the contractor’s pay systems, functions, and workforce organization as they exist or existed during the period under review, and thus if those have materially changed since OFCCP’s prior review, OFCCP will need to make a new determination as to whether the PAGs are appropriate.”

Opinion Letter on Pay Analysis Groupings, U.S. Department of Labor’s Office of Federal Contract Compliance Programs (July 2019)

While Leen stated the agency couldn’t unilaterally approve a PAG structure for use in all future compliance reviews, he sees benefit in the submission of prior PAGs. In the letter, he reiterates one of the agency’s core missions from its recent compensation directive (2018-05): ” …to fully understand the contractor’s compensation system, policies and practices…”.

Furthermore, he states in the letter that “…a contractor’s submission of its PAG structure furthers OFCCP’s ability to ‘work collaboratively with the contractor’ to understand any compensation policy or practice that has a disparate impact on a protected group but is job-related and consistent with business necessity.”

Stay tuned to our blog for all future OFCCP updates.