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OFCCP Opinion Letter Endorses Pre-Approval of PAGs

In a welcome development for federal government contractors, OFCCP issued its second opinion letter on July 22, 2019.  The opinion letter endorsed a process through which contractors can submit proposed pay analysis groups (PAGs) to OFCCP for pre-approval for future audits.

PAGs are groups of employees who OFCCP deems comparable for purposes of the contractor’s pay practices.  The PAG is the building block of an OFCCP compensation audit as OFCCP compares the compensation of PAG members to assess whether there is systemic discrimination in employee compensation.  PAG members need not have the same job title, work in the same departments, or be members of the same affirmative action plan job group.  Because OFCCP demands PAGs consist of a certain number of employees for statistical purposes, creating PAGs for non-entry level positions that do not have a large number of employees with the same title or performing the same functions requires careful analysis. 

By permitting contractors to gain pre-approval of their PAG composition, the opinion letter provides an opportunity for contractors to obtain certainty about how their employees will be grouped and analyzed in compensation audits.  Contractors can then self-audit and identify and address potential compensation disparities before they face the pressure of an OFCCP compliance audit.  Contractors should note, however, that OFCCP reserves the right to dispense with the pre-approved PAGs if there is a material change in the contractor’s compensation system between the pre-approval and the time of the audit.

This development is the latest in a trend of OFCCP efforts to work cooperatively with contractors to obtain compliance.  Similarly to the Voluntary Enterprise-Wide Review Program announced earlier this year, PAG pre-approval may provide contractors with an opportunity to work more collaboratively with OFCCP to avoid or reduce the cost and uncertainty of random annual compliance evaluations. 

Contractors should consider taking advantage of this procedure to obtain certainty that their self-audits are consistent with the analysis that OFCCP will perform in a compliance evaluation.  That being said, contractors should work with counsel before submitting data or information to the OFCCP to ensure that the submission does not contain information that would draw unwanted OFCCP scrutiny.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume IX, Number 207


About this Author

Conne Bertram Government Contract Lawyer Polsinelli Law Firm

Connie focuses her practice on whistleblower, trade secrets, government contractors and employee mobility counseling and litigation. She frequently conducts confidential internal investigations involving executive-level employees, including alleged fraud, theft or misuse of company data, trade secrets, sexual harassment and code of conduct violations. She routinely counsels, investigates and litigates restrictive covenant and trade secrets disputes between employers and former employees.

Connie has defended complex whistleblower, trade secrets and restrictive...

Jack Blum Polsinelli Employment Attorney

Jack Blum is an associate in the firm’s Employment Disputes, Litigation, and Arbitration practice, where he represents employers in connection with a wide range of employment law issues. Jack has extensive experience in defending employers against claims by their employees in federal and state courts, as well as before government agencies like the EEOC, Department of Labor, and state human rights commissions. Jack aggressively defends his client’s personnel practices and decisions while not losing sight of their underlying business goals and objectives. Jack represents clients in all aspects of complex employment litigation and has advised and defended employer clients regarding a wide variety of employee claims, including:

• Employment discrimination, harassment, and retaliation
• Wage and hour
• Employment contract disputes
• Independent contractor/employee misclassification audits 
• Tort claims arising out of the employment relationship

Jack also has extensive experience representing parties in litigation arising from employee mobility, including claims involving non-competition, non-solicitation, and confidentiality agreements as well as the misappropriation of trade secrets. Significantly, Jack has experience in both prosecuting and defending these claims and is, therefore, able to offer clients a well-rounded assessment of their options and courses of action. Jack also has experience redressing employee data breaches under the Computer Fraud and Abuse Act.

Jack also has a background in employment counseling, where he has worked closely with in-house counsel, human resources personnel, and business executives to craft personnel policies that meet the client’s business requirements while complying with applicable laws. Jack has particular experience in assisting clients with issues relating to employee/independent contractor classifications, and regularly advises clients regarding the defensibility of classifications, drafts independent contractor agreements to provide the strongest possible arguments in support of the classification, and defends misclassification claims asserted by employees and government agencies. Jack also walks clients through sensitive personnel actions to reduce the potential for litigation or at least best position the client in the event that litigation is inevitable. Jack draws heavily upon this counseling experience in representing clients in litigation.

During law school, Jack served as a legal intern in the U.S. Securities and Exchange Commission’s Office of the Inspector General where he contributed to several high-profile internal investigations, and also interned with the Maryland Attorney General’s Office.