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Reviewing compensation has become a standard part of any OFCCP audit. There are four legal grounds for examining compensation issues.
Equal Pay Act
Individual Disparate Treatment
Class-type Disparate Treatment
Disparate Impact
The Equal Pay Act prohibits pay disparities based on gender. There is strict liability for violations, no intent to discriminate is required. Men and women in substantially similar jobs must be paid the same. You may legally differentiate their pay only if there are differences of seniority, merit, productivity, or any other factor other than sex. Most of these claims revolve around proving that the jobs are "substantially similar." Comparable jobs and minorities are not covered by the Equal Pay Act.
Individual Disparate Treatment theory is used by the OFCCP in the vast majority of their audits. The OFCCP calls this their "Cohort Analysis." A job is identified where one or more minorities or women are paid less than whites or men. The burden is then on you to show a "legitimate, non-discriminatory" reason for the pay disparity. The OFCCP would have to prove that your reasons were a pretext for
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discrimination in order for their case to succeed in court.
Class-type Disparate Treatment involves showing a pattern or practice of discrimination through statistical disparity. The OFCCP often tries to use their average and mean analysis of wages to prove disparities, but very quickly moves to comparing individually affected persons. You can rebut the statistical disparity by using other statistical tests such as the Regression Analysis in the Complete AAP, or by articulating a "legitimate, non-discriminatory" reason for each individual's pay disparity, just as in an Individual Disparate Treatment case. The OFCCP must then prove that your evidence is not credible in order to enforce penalties.
Disparate Impact theory is based upon the idea that discrimination can be the result of a practice or policy that appears neutral on its face, but that in reality has an adverse impact on women or minorities. The OFCCP shows that a particular policy/procedure has a statistically significant disparity on a protected group. You can submit your own statistical analysis to rebut OFCCP's statistics, and/or show that the practice is job related and consistent with business necessity. OFCCP will then try to show there were alternatives available that would have had a lesser impact.
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Our experience has been that OFCCP's compensation examinations almost always end up being a "Cohort" analysis. We suggest that you educate the Compliance Officer about the jobs in question and present legitimate, business-related reasons for disparities in pay. Most compensation issues can be successfully resolved in this manner.
If you find it necessary to perform a statistically based defense, it is recommended that you retain a firm with specific expertise in employment compensation claims. Performing multiple regression analysis in compensation issues can be very complicated and expensive!
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