This past Tuesday, March 15, marked Equal Pay Day, a day signifying how far into this year women (across all races and ethnicities) had to work to earn what men were paid in 2021. While the topic of pay equity is not new, recently there has been growing momentum on the state and federal levels to strive towards equal pay across genders. We previously wrote about the changing landscape on the pay equity front here. To commemorate Equal Pay Day, the Office of Federal Contract Compliance Programs (OFCCP), the agency responsible for ensuring that federal contractors meet their affirmative action and non-discrimination obligations towards their workforce, issued a new directive. Directive 2022-01, Pay Equity Audits (the Directive), focuses on federal contractors’ obligations to conduct pay equity analyses. Below is a brief summary of the important takeaways for federal contractors and recommendations to ensure compliance.
It is notable that the OFCCP’s newly-appointed director, Jenny Yang, spearheaded the pay equity movement during her time as Chair of the U.S. Equal Employment Opportunity Commission. Because of her background, many observers deemed it inevitable that Director Yang would continue those efforts at the OFCCP. Sure enough, those predictions have held true. The OFCCP said it issued the Directive “to provide guidance on how the OFCCP will evaluate federal contractors’ compliance with pay equity audit obligations and clarify OFCCP’s authority to access and review pay equity audits.” Specifically, the Directive makes clear that federal contractors have an obligation to conduct an annual in-depth analysis of their compensation practices to identify any pay disparities that may exist and to correct problem areas. During a compliance evaluation, the OFCCP may request not only a copy of the contractors’ pay equity analysis but also additional information that may help illuminate pay practices, including prior education or experience and information regarding promotions or assignments.
With equal pay protections expanding and a heightened emphasis on pay equity at both the national and state levels, federal contractors should be especially diligent in identifying and rectifying unjustified pay disparities. The OFCCP can obtain copies of federal contractors’ pay equity audits that are done to comply with the OFCCP regulations, but communications with counsel may remain privileged because of attorney-client privilege. Therefore, engaging legal counsel to lead the effort and provide legal advice has the critical benefit of attaching confidentiality to communications with counsel involving corrective actions taken, the process underlying the analysis, and any strategic decisions. Additionally, nothing prevents a federal contractor from conducting a proactive, preliminary analysis with legal counsel for the sole purpose of obtaining legal advice, which the Directive makes clear may remain privileged.
Conducting a proactive pay analysis will position your company to determine, at the very least, whether and where any unjustified pay disparities exist and preemptively take remedial measures to help mitigate any risk of liability. Beyond the analysis itself, legal counsel can also assist in reviewing and drafting policies pertaining to pay practices and help with diagnosing and responding to existing disparities. Conducting proactive, privileged pay analyses will give contractors the necessary information and strategies to make appropriate pay adjustments and identify and fix systemic compensation practices to prevent future disparities.
If you need any assistance navigating the many updates on the pay equity front, or if you would like to discuss conducting a proactive pay equity analysis for your workforce, please contact Sara Nasseri or Sarah Nash or a member of PilieroMazza’s Labor & Employment for Government Contractors Group.