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[Federal Register Volume 76, Number 1 (Monday, January 3, 2011)]
[Proposed Rules]
[Pages 62-64]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-32602]

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DEPARTMENT OF LABOR

Office of Federal Contract Compliance Programs

41 CFR Parts 60-1 and 60-2

RIN 1250-ZA00

Interpretive Standards for Systemic Compensation Discrimination 
and Voluntary Guidelines for Self-Evaluation of Compensation Practices 
Under Executive Order 11246; Notice of Proposed Rescission

AGENCY: Office of Federal Contract Compliance Programs, Labor.

ACTION: Notice of proposed rescission.

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SUMMARY: The Office of Federal Contract Compliance Programs (OFCCP) is 
proposing to rescind two guidance documents addressing compensation 
discrimination: Interpreting Nondiscrimination Requirements of 
Executive Order 11246 with respect to Systemic Compensation 
Discrimination (Standards) and Voluntary Guidelines for Self-Evaluation 
of Compensation Practices for Compliance with Executive Order 11246 
with respect to Systemic Compensation Discrimination (Voluntary 
Guidelines). OFCCP is proposing to rescind the Standards which have 
limited OFCCP's ability to effectively investigate, analyze and 
identify compensation discrimination. In so doing, OFCCP will continue 
to adhere to the principles of Title VII of the Civil Rights Act of 
1964, as amended (Title VII) in investigating compensation 
discrimination and will reinstitute flexibility in its use of 
investigative approaches and tools. OFCCP also proposes to establish 
procedures for investigating compensation discrimination through the 
traditional means of using its compliance manual, directives and other 
staff guidance. OFCCP is proposing to rescind the Voluntary Guidelines 
because they are largely unused by the Federal Government contracting 
community and have not been an effective enforcement strategy.

DATES: Comments must be received on or before March 4, 2011.

ADDRESSES: You may submit comments, identified by number 1250-ZNE, by 
any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Fax: (202) 693-1304 (for comments of 6 pages or fewer).
     Mail: Director, Division of Policy, Planning, and Program 
Development, Office of Federal Contract Compliance Programs, Room 
N3422, 200 Constitution Avenue, NW., Washington, DC 20210.
    Receipt of submissions will not be acknowledged; however, the 
sender may request confirmation that a submission has been received by 
telephoning OFCCP at (202) 693-0102 (voice) or (202) 693-1337 (TTY) 
(these are not toll-free numbers).
    All comments received, including any personal information provided, 
will be available online at http://www.regulations.gov and for public 
inspection during normal business hours at Room C3325, 200 Constitution 
Avenue, NW., Washington, DC 20210. Individuals needing assistance to 
review comments will be provided with appropriate aids such as readers 
or print magnifiers. Copies of this Notice of Proposed Rescission will 
be made available in the following formats: Large print; Braille; 
electronic file on computer disk; and audiotape. To schedule an 
appointment to review the comments and/or to obtain this Notice of 
Proposed Rescission in an alternate format, contact OFCCP at the 
telephone numbers or address listed above.

FOR FURTHER INFORMATION CONTACT: Director, Division of Policy, 
Planning, and Program Development, Office of Federal Contract 
Compliance Programs, 200 Constitution Avenue, NW., Room N3422, 
Washington, DC 20210. Telephone: (202) 693-0102 (voice) or (202) 693-
1337 (TTY).

SUPPLEMENTARY INFORMATION:

I. Background

    The Department of Labor's OFCCP enforces Executive Order 11246 
which requires Federal Government contractors and subcontractors to 
provide equal employment opportunity through affirmative action and 
nondiscrimination based on race, color, national origin, religion, or 
sex. Compensation discrimination is one form of discrimination 
prohibited by the Executive Order.
    OFCCP enforces contractors' compliance with this obligation 
primarily by conducting compliance evaluations. (See 41 CFR 60-1.20.) 
OFCCP's longstanding policy is to follow Title VII principles when 
conducting analyses of potential discrimination under Executive Order 
11246, including compensation discrimination. Compensation 
discrimination may occur on an individual basis, or systemically, that 
is, it is widespread in an organization due to discriminatory 
compensation systems. OFCCP traditionally has established procedures 
for investigating compensation discrimination, as well as other forms 
of discrimination, through instructions for its compliance officers 
contained in the OFCCP Federal Contract Compliance Manual (FCCM), 
directives and other staff guidance materials.
    Identifying and remedying compensation discrimination has been an 
important part of OFCCP compliance efforts for many years. Concerns 
about compensation discrimination led OFCCP in Calendar Year (CY) 2000 
to begin requiring contractors to submit compensation data requested in 
the scheduling letter at the outset of a compliance evaluation as a 
matter of course and as part of the data reported in a new Equal 
Opportunity Survey, which covered contractors were required to submit 
to OFCCP. (The Scheduling Letter was approved under the Paperwork 
Reduction Act OMB NO. 1215-0072; see 65 FR 68022, 68036 (November 13, 
2000) for the notice regarding the Equal Opportunity Survey.) In CY 
2000, OFCCP also began requiring contractors to proactively conduct in-
depth analyses of their compensation systems to ensure that those 
systems were not discriminatory. (See 41 CFR 60-2.17(b)(3).)
    OFCCP changed its approach to investigating compensation 
discrimination in 2006. On June 16, 2006, OFCCP published in the 
Federal Register two final guidance documents related to identifying 
compensation discrimination under Executive Order 11246 that contained 
interpretations of OFCCP regulations and Title VII principles: 
Interpreting Nondiscrimination Requirements of Executive Order 11246 
with respect to Systemic Compensation Discrimination

[[Page 63]]

(Standards) and Voluntary Guidelines for Self-Evaluation of 
Compensation Practices for Compliance with Executive Order 11246 with 
respect to Systemic Compensation Discrimination (Voluntary Guidelines). 
(See 71 FR 35124 (June 16, 2006) for the Standards and 71 FR 35114 
(June 16, 2006) for the Voluntary Guidelines.) Further, OFCCP rescinded 
the Equal Opportunity Survey in 2006. (See 71 FR 53032 (September 8, 
2006).)
    The Standards set forth a new, rigid procedure for investigating 
and analyzing systemic compensation discrimination cases. Systemic 
compensation discrimination is defined as discrimination under a 
pattern or practice of disparate treatment. (See 71 FR at 35140.) The 
Standards prescribe procedures to be followed by OFCCP compliance 
officers when conducting investigations of systemic compensation 
discrimination in all cases, including how to group employees whose 
compensation is to be compared in a discrimination analysis, requiring 
anecdotal evidence of compensation discrimination except in unusual 
cases, and requiring the use of multiple regression analysis when 
deciding whether wage differences between groups are discriminatory. 
These procedures are to be followed regardless of the facts of a 
particular case. The rigidity of the Standards represents a significant 
departure from OFCCP's traditional tailoring of compensation 
investigation and analytical procedures to the facts of the case based 
on Title VII principles. Investigations of systemic compensation 
discrimination are complex and nuanced. During the conduct of 
compliance evaluations, OFCCP has traditionally focused on identifying 
compensation discrimination through the development of a variety of 
investigative and analytical tools. The use of a particular tool, or 
combination of tools, depends upon the facts of a specific case, and 
includes consulting with labor economists and other experts, as 
appropriate.
    The Standards also significantly limit OFCCP's ability to identify 
compensation discrimination by imposing overly narrow investigation 
procedures that go beyond what would be required under Title VII 
principles in litigation. For example, the Standards state that, except 
in unusual cases, OFCCP will not issue a notice of violation (NOV) 
without providing anecdotal evidence to support OFCCP's statistical 
analysis. But under Title VII, a pattern or practice class-wide 
disparate treatment case may be proven by statistics. See, e.g., Int'l 
Brotherhood of Teamsters v. United States, 431 U.S. 324, 339-40 (1977); 
Palmer v. Shultz, 815 F.2d 84, 90-91 (DC Cir. 1987). Cf. OFCCP v. 
Greenwood Mills, Inc., No. 89-OFC-39, Decision and Order of Remand, 
slip op. at 14 (Sec'y of Labor Nov. 20, 1995); OFCCP v. Jacksonville 
Shipyards, 89-OFC-1, Decision and Remand Order, slip op. at 5 (Sec'y of 
Labor May 9, 1995). Moreover, requiring anecdotal evidence is 
particularly problematic in compensation cases as employees often are 
unaware of the compensation received by co-workers and, as a result, 
anecdotal evidence from victims of pay discrimination may not exist.
    The Standard's mandate to use a multiple regression analysis to 
identify compensation discrimination is also overly narrow and is not 
required under Title VII principles. While a multiple regression 
analysis may be a useful tool in identifying compensation 
discrimination, other statistical or nonstatistical analyses may be 
better suited, depending on the facts of the case.
    In short, we now believe the Standards significantly undermine 
OFCCP's ability to vigorously investigate and identify compensation 
discrimination.
    The Voluntary Guidelines establish procedures that contractors can 
elect to use in conducting the self-analysis of their pay practices 
required by 41 CFR 60-2.17(b)(3). As an incentive to encourage 
contractors to use the analytical procedures contained in the Voluntary 
Guidelines, OFCCP would deem a contractor, whose self-evaluation 
``reasonably meets'' the procedures outlined in the Voluntary 
Guidelines, to be in compliance with section 60-2.17(b)(3) and would 
coordinate OFCCP's review of the contractor's compensation practices 
during a compliance evaluation in the manner specified in the Voluntary 
Guidelines. (See 71 FR at 35122.) In OFCCP's experience since 2006, 
contractors have rarely utilized the analytical procedures outlined in 
the Voluntary Guidelines when analyzing their compensation practices 
under section 60-2.17(b)(3).
    Additionally, the analytical model set forth in the Voluntary 
Guidelines suffers from many of the same flaws as the investigative 
procedures prescribed by the Standards. For example, the Voluntary 
Guidelines established certain rigid numerical thresholds by which the 
similarly situated employee groupings are to be analyzed. OFCCP 
believes that for some contractors, these thresholds may be exceedingly 
difficult to meet.

II. Proposal

    OFCCP proposes to rescind the Standards and the Voluntary 
Guidelines in their entirety. OFCCP believes it is unnecessary to issue 
new Federal Register notices articulating its interpretations of Title 
VII principles related to compensation discrimination. OFCCP will 
continue to follow Title VII principles in investigating and analyzing 
compensation discrimination and in interpreting regulations related to 
compensation discrimination. The agency is proposing to normalize its 
treatment of those cases with other types of OFCCP discrimination 
investigations. Once rescinded, nothing in the Standards or the 
Voluntary Guidelines or their preambles could be relied upon as a 
statement of OFCCP's interpretation of Title VII principles or OFCCP 
regulations.
    If the Standards are rescinded, OFCCP will reinstitute the practice 
of exercising its discretion to develop compensation discrimination 
investigation procedures in the same manner it develops other 
investigation procedures. OFCCP will continually refine those 
procedures to ensure that they are as effective and efficient as 
possible. OFCCP will develop and issue compensation investigation 
procedures in the same manner as procedures for investigating other 
forms of discrimination, for example through the FCCM, directives and 
staff guidance materials.
    As mentioned above, OFCCP has found that contractors rarely use the 
analytical procedure suggested in the Voluntary Guidelines for 
conducting the compensation analyses required by section 60-2.17(b)(3). 
In the few instances when contractors have conducted their compensation 
analysis in the manner suggested in the Voluntary Guidelines, the 
coordination procedures of the Voluntary Guidelines have not proved to 
be an efficient method for verifying that the contractor's compensation 
system is not discriminatory. The agency has concluded that the 
Voluntary Guidelines have not proved to be either an effective vehicle 
for providing guidance about how to conduct the analyses required by 
section 60-2.17(b)(3) or an effective incentive for contractors to 
conduct the analysis in the manner described in the Voluntary 
Guidelines.
    In the absence of the Voluntary Guidelines, contractors will still 
be obligated to conduct self-evaluations of compensation practices as 
required by 41 CFR 60-2.17(b)(3). OFCCP will continue to provide any 
needed compliance assistance on section 60-

[[Page 64]]

2.17(b)(3) through various means, including webinars and the Web site 
distribution of Frequently Asked Questions as appropriate, rather than 
through the issuance of a Federal Register notice.
    OFCCP invites any interested party to comment on the proposal to 
rescind the Standards and the Voluntary Guidelines.

Patricia A. Shiu,
Director, Office of Federal Contract Compliance Programs.
[FR Doc. 2010-32602 Filed 12-30-10; 8:45 am]
BILLING CODE 4510-45-P
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