July 23, 2013

INITIAL EFFECTS OF DIRECTIVE 307 DURING OFCCP AUDITS

In light of the recent OFCCP Directive 307, DCI has noted trends during audit situations related to how OFCCP staff are interpreting and enforcing the directive.

In some Regional and District Offices, there are circumstances where compliance officers are refusing an Item 11 submission by job title. After refusing the Item 11 submission, the compliance officer asks for a re-submission of Item 11 data by something other than job title. This initial refusal of Item 11 by job title appears to originate from internal guidance and interpretation of Directive 307. Compliance officers are citing the scheduling letter, Item 11, “Please provide annualized compensation data (wages, salaries, commissions, and bonuses) by either salary range, rate, grade, or level…” as evidence that a job title submission does not meet the outlined definition of a compensation submission per the scheduling letter. However, the instructions from Item 11 also go on to state “Present these data in the manner most consistent with your current compensation system.” Contractors could reasonably argue that the submission of compensation data by job title is in alignment with their current compensation system. It is important to note that Item 11 submissions by job title are still being accepted in some audit scenarios.

In other audit situations, compliance officers are asking contractors for follow-up information to item 11 submissions that is not relevant to pay equity. For example, DCI has observed requests for the minimums and maximums of salary pay bands or grades. In many strategic compensation systems, this information does not exist (i.e., there are no minimums and maximums for strategic pay bands encompassing broad job categories across many divisions and operations), and the request appears nonsensical when applied to particular compensation systems. Even in situations in which the information does exist, it is unclear how the data are useful for determining base pay compensation equity. Perhaps OFCCP compliance officers intend to create novel salary ranges and pay analysis groups based on such information.

Other effects of Directive 307 include “compensation interviews” via conference call by compliance officers. These interviews are occurring post-audit submission, where the compliance officers ask the contractor’s compensation experts, or company representatives, questions regarding the compensation system at the contractor location. Recent compensation interview calls have lasted between 60-90 minutes via a conference call. Typical interview questions focus on how salary is set by the contractor, how salary increases are determined, as well as the performance appraisal process. DCI previously trended “compensation interviews” prior to Directive 307; however, many more interviews have been noted in recent months than before the directive was issued.

To date, OFCCP revised FAQs for contractors on interpreting Directive 307 are still pending.

by Joanna Colosimo, M.A., Senior Consultant, DCI Consulting Group

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