OFCCP Guideline on Internal Pay Equity Audits Supports Lien Claims | Coie Perkins

Federal contractors who conduct pay equity audits under attorney-client and work product privileges face heightened risks under a new directive from the Office of Federal Contract Compliance Programs (OFCCP). US Department of Labor (DOL). On March 15, 2022, the OFCCP issued Directive 2022-1 stating that in certain circumstances, its compliance officers have the authority to request pay equity audits conducted by federal contractors even if those audits were conducted in accordance with well-established privileges. While this directive is sub-regulatory guidance and does not have the effect of a regulation, it follows the rigorous tactics noted in this previous update.

About Directive 2022-1

The starting point for understanding Directive 2022-1 is the regulatory language of 41 CFR 60-2.17(b). In relevant part, this regulation requires contractors to “assess [their] [c]compensation system(s) to determine if there are disparities based on gender, race or ethnicity. The OFCCP has not detailed the precise method an entrepreneur can use to assess compensation. This lack of detail created tension between the contractors and the agency, where the agency sought to investigate compliance with this provision while the contractors conducted their own lien self-analysis. In practice, this has led to stalemates where the agency has always frowned on claims of privilege.

Directive 2022-1 represents the agency’s attempt to resolve this tension and address claims of privilege head on. The policy section of Directive 2022-1 begins by retracing the steps of a compliance audit which begins with a scheduling notice, the submission of documents by contractors in response to the notice, and the on-site audit of those documents. by the OFCCP. Desk audits include a review of contractor affirmative action plans and other data, including compensation data provided by a contractor. At this point, the OFCCP may close the case without substantial findings or seek to gather additional information if there are indicators of statistical disparities in any covered employment practice (typically hirings, promotions, firings, and remuneration). It is also at this stage that Directive 2022-1 states that the OFCCP has the authority to request a contractor compensation study including “all compensation groupings that have been assessed, all variables used and the results analyses, including the discrepancies observed”.

In a nod to frequent contractor objections, the OFCCP acknowledges that contractors can perform these audits under solicitor-client privilege. However, the OFCCP responded to these objections by stating that (1) it has the authority to request internal audits under its general investigative power and (2) solicitor-client privilege does not apply. compliance audits. The directive allows contractors to carry out a privileged “second” audit. However, the agency says it can request this second audit if the contractor has not sufficiently verified that the audit was conducted under privilege.

Legal and procedural issues

In general, the directive appears to raise concerns about the Paperwork Reduction Act by adding a category of records that the agency can request without the required authorization from the United States Office of Management and Budget (OMB). Additionally, it is difficult to reconcile Directive 2022-1 with the agency’s 2016 regulations to revise its gender discrimination guidelines. Not only are the regulations silent on any requirement for contractors to conduct detailed pay equity audits, but they also make it clear that contractors have “substantial discretion in deciding how to assess their compensation systems to comply.” to regulation”. See 81 Fed. Reg. 115, 39126 (2016). Further, Directive 2022-1 does not include any discussion of ad hoc federal court rulings that pay equity audits are preferred. See, for example, Cahill v. Nike 2020 WL 5989202 (D. Or. 2020) (Attorney-client and work product privileges apply to internal pay equity audit).

Another area of ​​inaccuracy relates to the type of verification that would be sufficient to establish that the contractor performed the audit under recognized privileges. Perhaps most importantly, while the directive took effect on March 15, 2022, nothing prevents the agency from requesting audits performed before the effective date. As such, the audits conducted two years ago appear to be fair game for the agency’s compliance officers.

Take away food

Directive 2022-1 significantly complicates the landscape for federal contractors conducting pay equity audits under lien. Steps contractors can take to mitigate increased risk include:

  • Work with experienced attorneys to ensure strong protection for their audits.
  • Ensure that audits are performed in a manner that mitigates any inadvertent waiver of privileges.
  • Consider OFCCP’s option of conducting a second audit.
  • Prepare to defend established privileges during a compliance audit.

It is likely that the next step for the agency will be to threaten and possibly file denial of access complaints against contractors who have failed to adequately preserve privileges and refuse to provide internal audits.

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