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June 20, 2006
New Rule for Investigating Systemic Compensation Discrimination

The Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) has published a final rule for evaluating compensation practices for systemic discrimination.

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The rule provides guidance for OFCCP evaluations of federal contractors' compensation practices during compliance reviews. The rule sets the standards the agency will use when reviewing pay practices for systemic compensation discrimination under Executive Order 11246.

The rule establishes that the agency is adopting multiple regression analysis to compare the compensation of "similarly situated" employees. Multiple regression analysis is a statistical tool for understanding the relationship between two or more variables. The agency says the tool will allow it to compare the compensation of similarly situated employees while taking into account legitimate factors--such as education, experience, and performance--that influenced the employers' pay decisions.

The determination of employees who are "similarly situated" will focus on the similarity of the work performed, the levels of responsibility, and the skills and qualifications involved in the positions.

OFCCP notes that the agency will seldom make a finding of systemic discrimination based on statistical analysis alone. The agency says it will obtain anecdotal evidence to support the statistical evidence.  

The regulation became effective on the same date the agency published it, June 16, 2006.

In a separate notice, the agency also published voluntary guidelines for contractors' self-evaluation of compensation practices for compliance with nondiscrimination requirements of Executive Order 11246. The agency says it will continue to allow contractors to choose their own form of compensation self-evaluation techniques. However, the agency is offering an incentive for contractors to implement a compensation self-evaluation system that conforms to its voluntary guidelines. If the contractor's compensation self-evaluation system meets the general standards outlined in the guidelines, OFCCP will consider the contractor's compensation practices to be in compliance Executive Order 11246.

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