As reported in our last Compliance Alert, 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 interpretive standards for its internal audit compensation analyses. Our previous alert discussed the OFCCP's guidelines for an employer's voluntary self-analysis.

The Interpretive Standards are the OFCCP's documentation on how it will conduct audits of employer compensation. In general (and subject to change), the OFCCP will use a tiered-review approach as follows:

• During the desk audit, the OFCCP will conduct a simple average compensation comparison using pay grades or other aggregated compensation information submitted in response to Item 11 of the OFCCP's audit Scheduling Letter;

• If the simple average compensation comparison indicates a "significant disparity" in compensation for minorities or women, the OFCCP will request additional employee-specific compensation and personnel information;

• The OFCCP will then conduct a "cluster regression" using the employee-specific information;

• If the "cluster regression" indicates "significant disparities" in compensation and a contractor is unable to provide additional information and/or analyses that persuade the OFCCP that further investigation is not warranted, the OFCCP will conduct a comprehensive evaluation of compensation;

The comprehensive evaluation of compensation involves grouping similarly situated employees, determining appropriate pay factors, and performing multiple regression analyses.

The OFCCP makes clear that the agency has the burden of gathering data and conducting the multiple regression analyses, and employers are not required to convert their data to electronic format. However, employers will want to ensure that the data, pay factors, and other information used by the OFCCP accurately and appropriately reflect the employers' pay practices.

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