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OFCCP Issues Compensation and Enforcement Directives

The Office of Federal Contractor Compliance Programs (OFCCP) has recently released two directives aimed at federal contractor compliance. Directives are intended to provide guidance to OFCCP staff and/or federal contractors on enforcement and compliance policy or procedures.

Directive 2022-01

Coinciding with Equal Pay Day, on March 15, 2022, the Office of Federal Contractor Compliance Programs (OFCCP) released a new compensation directive (Directive 2022-01: Pay Equity Audits or “Directive”).

This Directive is intended to provide clarity to the public regarding existing requirements under the law or agency policies. The Directive 2022-01 provides guidance on federal contractors’ obligation to conduct an annual in-depth analysis of their compensation practices to determine whether there are pay disparities based on gender, race and/or ethnicity, and to correct problem areas. OFCCP has also indicated that for compliance enforcement of pay equity the agency will also look broadly at a contractor’s workforce (across job titles, levels, roles, positions, and functions) to identify patterns of segregation by race, ethnicity, and gender, which may result from assignment, placement, or promotion barriers that drive pay disparities. If their initial review reveals disparities in pay or other concerns about the contractor’s compensation practices, they may request additional information, including the contractor’s pay equity audit to investigate the contractor’s compliance.

Directive 2022-02

Additionally, on March 30, 2022, OFCCP also issued Directive 2022-02 Effective Compliance Evaluations and Enforcement (or “Directive”) to promote effective enforcement of its equal employment opportunity laws. The Directive is aimed at strengthening OFCCP compliance evaluations and reducing delay by promoting the timely exchange of information. The Directive explains updated agency policies regarding the scheduling of contractors for compliance evaluations, including enhancing the agency’s neutral scheduling procedures to reach a broader universe of federal contractors, and eliminating delays in scheduling. The Directive further describes contractors’ obligations regarding timely submission of Affirmative Action Programs (AAPs) and support data, supplemental information and access to employees, applicants, and other witnesses.

The Directive also highlights how the agency is increasing contractor accountability through the Contractor Portal, a platform through which covered contractors are required to register and annually certify that they have developed and maintained AAPs in compliance with OFCCP’s requirements. The directive makes clear that when covered contractors use OFCCP’s Contractor Portal to annually certify compliance with their AAP obligations, contractors are certifying that they have developed and maintained complete AAPs in compliance with OFCCP’s requirements. Contractors could begin certifying their compliance in the Contractor Portal on March 31, 2022, and have until June 30, 2022, to complete the certification. For additional information on the Contractor Portal, see this prior post from HR Works.

Directive 2022-02 will also rescind prior OFCCP guidance under the following directives:

Additional Information

In addition to the OFCCP Directive, employers should also take notice of the Biden administration’s announcement to take steps to advance pay equity and promote women’s economic security in hiring by the federal government and by federal contractors. Specific to federal contractors, President Biden signed an Executive Order on Advancing Economy, Efficiency, and Effectiveness in Federal Contracting by Promoting Pay Equity and Transparency (EO) directing the Federal Acquisition Regulatory (FAR) Council to consider enhancing pay equity and transparency by limiting or prohibiting federal contractors from seeking and considering information about job applicants’ and employees’ existing or past compensation when making employment decisions and implementing appropriate accountability measures. The DOL will consult with the FAR Council on potential regulatory changes and the most effective implementation strategy for any subsequent rulemaking.

Next Steps for Employers

While directives do not change the laws and/or regulations governing OFCCP’s programs and do not establish any legally enforceable rights or obligations, covered contractors should ensure, or continue to ensure, that they are addressing pay inequality through unbiased pay setting practices and that they are proactively conducting a regular analysis of compensation systems, and that documentation from any analyses are retained in accordance with recordkeeping requirements to ensure that if they are requested by OFCCP, the employer is able to produce records showing compliance.

It should be noted that Directive 2022-01 does not prescribe how contractors should be looking at their pay systems and instead focuses on OFCCP’s review of, and right to request the analysis. However, a good review will identify barriers to pay and ensure the development of action-oriented programs to address pay inequities.

Employers should also continue to except increased federal and state legislation related to pay equity. Notably, several states and localities already have established laws which impact private employers and are more far reaching than just federal contractors. Employers may consider it a best practice to remove any inquiries or reliance on prior salary history in its recruiting/hiring and internal promotion or transfer practices due to the increased legislation and patchwork of laws surrounding this issue.

HR Works will continue to monitor any final rulemaking that is produced related to the President’s EO and provided updates as needed.

How HR Works Can Help

With new state and federal laws related to compensation discrimination being passed, and the OFCCP’s focus on reviewing pay equity in Affirmative Action Plans, employers are now at a much higher risk of being penalized for non-compliance. HR Works offers pay equity analysis services that includes a review compensation practices, create appropriate pay groups, performing regression analysis, identify irregularities, providing recommendations for adjustments and producing final results report. To learn more contact us at 1-877-219-9062.

HR Works, Inc., headquartered at 200 WillowBrook Office Park in Fairport (Rochester), New York, with an office in East Syracuse, is a human resource management outsourcing and consulting firm serving clients throughout the United States. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.