On June 16, 2006 the Office of Federal Contract Compliance Programs (OFCCP) published final versions of its compensation audit standards and guidelines for self-analysis: Interpreting Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination (Interpretive Standards) and Voluntary Guidelines for Self-Evaluation of Compensation Practices for Compliance With Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination (Voluntary Guidelines).

Today's alert addresses the OFCCP's voluntary guidelines for self-analysis. Our next issue will discuss the OFCCP's internal standards for pay analysis.

The Voluntary Guidelines encourage, but do not require, contractors to self-analyze their compensation data for gender and race/ethnicity disparities according to specific procedures. In exchange the OFCCP "would not conduct an independent evaluation of the contractor's compensation practices during a compliance review." In order to be considered for this privilege, the self-analysis must comport with the following summarized standards set by the OFCCP:

• Employees must be grouped into Similarly Situated Employee Groupings (SSEGs) based on similar work, responsibility level, skills and qualifications;

• At least 70% of the establishment's employee population must be included in the SSEGs;

• SSEGs should include 30 or more employees and at least five comparators of each category (male/female and non-minority/minority);

• Contractor establishments with over 500 employees must use multiple regression as the method of analysis for their SSEGs. Employees that did not fit into SSEGs may be analyzed using non-statistical methods;

• The analysis must be produced annually; and

• Any statistically significant (2 standard deviations) compensation disparities must be investigated and resolved in a reasonable manner.

We are currently developing a list of "Points to Consider" to help guide clients in their decision of whether or not to conduct an OFCCP-style self-analysis. When complete it will be posted for clients on our website.

If you have any questions or comments, please feel free to contact us.