OFCCP Guidelines on Claims of Privilege on Pay Equity Verification Documents
April 12, 2022
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Since President Biden took office in January 2021, employers’ compensation and non-discrimination practices have come under increasing scrutiny from the federal government. For example, recently released Directive 2022-01 – the first directive from the United States Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) since President Biden took office – directly emphasizes that fairness salary is a priority of the new administration. This directive, among other mandates, makes it clear that the OFCCP intends to challenge whether employers can rely on solicitor-client privilege and the work product doctrine to prevent internal audits from being produced. pay equity at the request of the OFCCP as part of its regulatory compliance investigations. Therefore, companies should pay particular attention to how they conduct internal pay equity analyzes in the future. This is particularly important given that OFCCP Director Jenny Yang recently said that in the future she is “increasing efforts to remove barriers to pay equity”.
Recent legal developments
The guidance, which was issued March 15, 2022, attempts to clarify federal contractors’ affirmative action obligations under 41 CFR § 60-2.17(b)(3), which requires federal contractors to analyze their systems of remuneration based on gender, race or ethnic origin. -based on disparities to ensure fair compensation policies and practices. Although the directive does not create new legal rights or requirements, it is an example of the federal government’s increased attention to pay equity. The guidance outlines how the OFCCP will assess “thorough” pay equity audits required by federal affirmative action regulations. According to the guidance, the OFCCP may assess the compliance of federal contractors during an “on-site audit,” during which the OFCCP will “comprehensively review a contractor’s workforce (through job titles, levels, roles, positions and functions) to identify patterns of segregation by race, ethnicity and gender. . . that lead to wage disparities. Although the guidance does not specify exactly what methods the OFCCP will use to make this assessment, “wherever possible”, the OFCCP will use “regression and other systemic analyses” to identify potential wage disparities in the schemes. assignment or in the salary paid in similar functions. and posts. If this audit reveals pay disparities, the OFCCP may request additional information, such as additional pay data, and conduct follow-up interviews. The OFCCP may also request additional information if the audit reveals employee complaints of wage discrimination, other anecdotal evidence of discrimination, or inconsistencies in how the contractor enforces its wage policies.
Importantly, the guidance makes it clear that the OFCCP may request production of the employer’s pay equity audit required under 41 CFR § 60-2.17(b)(3), as well as any material and communication related to this audit. Employers often conduct privileged internal pay equity audits to proactively assess potential legal issues and receive legal advice. Employers have generally resisted the production of these privileged studies on the grounds of attorney-client confidentiality and work product.
The directive emphasizes that federal contractors “must retain and make available to the OFCCP documentation of their compliance with OFCCP regulations” and that it “has the authority under its regulations to request that the contractor has performed to comply with the regulations of the OFCCP”. The OFCCP may also request information relating to the frequency of pay equity audits, communication to management, and how the results have been used to rectify disparities based on gender, race and/or gender. ‘Ethnicity. The guideline assumes that since federal contractors have an independent regulatory obligation to provide this information to the OFCCP, they cannot withhold it on the basis of solicitor-client privilege or pursuant to the work product doctrine. of the lawyer. The OFCCP has made it clear that its position is that this requirement “runs counter to any expectation” that the results of the company’s pay equity audit and compliance records prepared by or with the assistance of a lawyer would remain confidential. ID.
Notwithstanding this general position, the guidance suggests that as long as federal contractors produce a pay equity audit and compliance records sufficient to comply with 41 CFR § 60-2.17(b)(3), the OFCCP “will not seek usually not [production of] complementary privileged analyses” carried out for any other purpose.
While OFCCP’s enforcement of this new position remains to be seen, it does suggest that a prudent course of action for government contractor employers might be to conduct separate compensation audits – one for the sole purpose of get privileged legal advice, and a potentially non-privileged second audit. to demonstrate regulatory compliance. Employers who perform a single audit run the risk that the OFCCP may challenge the audit as performed, at least in part, for regulatory compliance purposes, making communications and other records regarding the exercise subject to disclosure. Additionally, while it is unclear at this time how far the OFCCP will go to challenge any assertions of privilege over pay equity audit records, whether the OFCCP’s recent aggressive actions (such as its proposed modifications to the notice prior to the application and to the conciliation procedures, see above note 1) serve as an indication, the OFCPP may become more insistent in challenging an employer’s claims of privilege. If, in fact, OFCCP takes an aggressive approach to challenging these assertions of privilege, the limits of OFCCP’s position and the contours of privilege in this context will likely have to be resolved through litigation. Employers must therefore be prepared to vigorously defend any assertion of privilege in this context and minimize the risk of waiver.
Conclusion and next steps
In light of the OFCCP’s emphasis on pay equity, employers subject to the OFCCP’s requirements must take care to ensure compliance with the pay equity obligations established by 41 CFR § 60-2.17. This means performing regular audits of compensation systems, as well as implementing action-oriented programs to correct identified problems. To the extent that employers wish to conduct audits for the purposes of legal advice and to maintain privilege over these documents, it is important to establish a clear separation between privileged audits conducted solely for the purpose of legal advice and audits conducted in order to comply with federal regulations. Blurring the lines between these goals could result in a waiver of preferred materials. Additionally, if employers choose to conduct separate pay equity audits, they should be aware of potential differences in the data used for preferred and non-preferred audits, as there could be inconsistent results between the audits. Employers subject to OFCCP requirements should seek the advice of an attorney to ensure that appropriate processes and safeguards are in place to meet these federal obligations.
 However, this is not the only evidence of the government’s recently increased control over non-discrimination in general. On March 21, 2022, the OFCCP announced new proposed changes to its current rules governing its prosecution of potential violations of discrimination. The OFCCP released rules titled “Federal Contractors and Subcontractors Non-Discrimination Obligations: Procedures for Addressing Potential Discrimination in Employment” on December 10, 2020. The rules were meant to provide transparency in the OFCCP process to assess compliance with non-discrimination and clarity for contractors in understanding substantive requirements. the OFCCP to issue findings of discrimination. However, the amendments proposed by the OFCCP, if implemented, would have the effect of eliminating certain evidentiary and procedural safeguards that are currently in place (and which tend to protect contractors under a more flexible framework). . To see Pre-Performance Notice and Conciliation Procedures, 87 Fed. Reg. 16138 (proposed March 22, 2022) (to be codified at 41 CFR § 60).
 Press release, US Department of Labor, US Department of Labor Announces Pay Equity Audit Directive for Federal Contractors to Identify Barriers to Equal Pay (March 15, 2022), https://www.dol.gov/newsroom/releases/ofccp/ofccp20220315 .
 Directive 2022-01.
The following Gibson Dunn attorneys assisted in preparing this client update: Jason C. Schwartz, Karl G. Nelson, Dhananjay S. Manthripragada, Lindsay M. Paulin, Tiffany Phan, Lauren Fischer, and Virginia Baldwin.
Gibson Dunn attorneys are available to answer any questions you may have regarding these developments. To learn more about these matters, please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s labor and employment practice or government contracts groups, or the following:
Labor and Employment Group:
Karl G. Nelson – Dallas (+1 214-698-3203, [email protected])
Tiffany Phan – Los Angeles (+1 213-229-7522, [email protected])
Eugene Scalia – Washington, DC (+1 202-955-8543, [email protected])
Jason C. Schwartz – Co-Chair, Washington, DC (+1 202-955-8242, [email protected])
Katherine VA Smith – Co-Chair, Los Angeles (+1 213-229-7107, [email protected])
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