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.