OFCCP and the Rule of Law - Part IV:

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In the three prior articles in this series, we have evaluated OFCCP's recent regulatory and enforcement positions through the lenses of the fundamental and perennial question, "What is Law?" Since our earlier articles, Secretary of Labor R. Alexander Acosta has continued to build his team at the Department of Labor (DOL). For example, the Senate recently confirmed Patrick Pizzella as Deputy Secretary of Labor. We expect that Deputy Secretary Pizzella will work with OFCCP Director Ondray Harris and Senior Advisor Craig Leen to review existing OFCCP regulatory interpretations and policies, and to make revisions that reflect the policy outlook of the new Administration.

In this article, we consider OFCCP's changing definitions of similarly situated employees with regard to inferences of compensation discrimination and whether the Agency's current regulatory definition satisfies the Rule of Law. Pertinent to our inquiry are the principles that rules do not satisfy the Rule of Law or the "inner morality of law" where they are "contradictory" or "require conduct beyond the powers of the affected party." Lon L. Fuller, The Morality of Law, at 39.

In this context, OFCCP has issued, rescinded and then revised the definitions of similarly situated employees in a way expressly intended to be contradictory. In particular, the revised definition was expressly designed to permit comparisons that the initial definition was designed expressly to prohibit. In practical terms, the latest OFCCP definition of similarly situated employees was designed to require contractors to make race- and gender-based payments to correct pay differences based on comparisons of employees who were not similarly situated in the earlier definition. It becomes clear that OFCCP's current definition of similarly situated employees, which has been and continues to be applied by the Agency during audits, does not comport with judicial interpretations of Title VII. Because of this defect, OFCCP seeks to impose mandates on contractors beyond their lawful powers to comply.

In 2006, OFCCP adopted a formal regulatory definition of "similarly situated" employees for purposes of determining whether contractors' compensation practices were discriminatory under Executive Order 11246. See Interpreting Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination, 71 Fed. Reg. 35124-141 (June 16, 2006). These 2006 Standards were adopted after affording interested parties notice and an opportunity to comment. OFCCP evaluated the comments and discussed dozens of federal court decisions interpreting Title VII of the Civil Rights Act of 1964. See 71 Fed. Reg. at 35,127-130, 136-137. In the 2006 Standards, OFCCP adopted a formal definition of similarly situated employees:
 
Employees are similarly situated under these standards if they are similar with respect to the work they perform, their responsibility level, and the skills and qualifications involved in their positions. In determining whether employees are similarly situated under these standards, actual facts regarding employees' work activities, responsibility, and skills and qualifications are determinative. Preexisting groupings, such as pay grades or Affirmative Action Program (AAP) job groups, are not controlling; rather, such groupings may be relevant only to the extent that they do in fact group employees with similar work, skills and qualifications and responsibility levels. To determine whether such preexisting groups are relevant, one must evaluate and compare information obtained from job descriptions and from employee interviews. The determination that employees are similarly situated may not be based on the fact that the contractor or subcontractor has grouped employees into a particular grouping, such as a pay grade or pay range, or that employees' pay can progress to the top of the pay grade or range based on performance or without changing jobs. Rather, such preexisting groupings may only be used if employees within the group perform similar work, and occupy positions involving similar skills, qualifications, and responsibility levels, which may be determined only by understanding employees' actual work activities. In addition to work performed, responsibility level, and skills/qualifications involved in the positions, other factors may have a significant bearing on whether employees are similarly situated. Such additional factors may include, for example, department or other functional unit of the employer, employment status (e.g., full-time versus part-time), compensation status (e.g., union versus non-union, hourly versus salaried versus commissions), etc.

71 Fed. Reg. at 35,140.

When rescinding the 2006 Standards, OFCCP argued that broader comparisons of employees who would not otherwise meet the above definition of similarly situated employees are necessary for two reasons: (1) inferences of discrimination can be derived from comparisons of employees who are not similarly situated where the allegation is a pattern or practice of discrimination, see 78 Fed. Reg. at 13,511-512; and (2) restricting comparisons to similarly situated employees might miss discrimination in promotions or job assignments that may result in pay differences, id. at 13,512-13.

Different Legal Standards for Similarly Situated Employees?

OFCCP appeared to concede in 2013 that the definition of similarly situated employees in the 2006 Standards is in fact the applicable standard under Title VII for cases of "individual disparate treatment." See 78 Fed. Reg. at 35,112. By contrast, OFCCP asserted in 2013, an inference of discrimination can be drawn from comparisons of employees who are not similarly situated in pattern or practice cases. It is far from obvious how that could be the case.

If comparison of one doctor to one lawyer does not raise an inference of pay discrimination, it is hard to see how comparisons of a hundred or a thousand or even a million doctors to an equally large number of lawyers would change the reasonableness of the inference. There is, of course, a theory by which comparisons of doctors and lawyers might raise an inference of discrimination: "comparable worth," and it has been rejected by the Supreme Court. See County of Washington v. Gunther, 452 U.S. 161, 165 (1981) (‘‘Respondents' claim is not based on the controversial concept of ‘comparable worth' under which plaintiffs might claim increased compensation on the basis of a comparison of the intrinsic worth or difficulty of their job with that of other jobs in the same organization or community.'' [footnotes omitted]); Gunther, 452 U.S. at 203 (Rehnquist, J., dissenting) ("The opinion does not endorse the so-called ‘comparable worth' theory . . . the Court does suggest that allegations of unequal pay for unequal, but comparable work will not state a claim on which relief may be granted. The Court, for example, repeatedly emphasizes that this is not a case where plaintiffs ask the court to compare the value of dissimilar jobs or to quantify the effect of sex discrimination on wage rates.").
Pointing to companywide disparities without factoring into the equation different geographic areas and different jobs and different employment demographics does not necessarily lead to the conclusion that the company is responsible for those disparities...
Nor is it hard to find cases involving systemic discrimination claims where courts have rejected statistical analyses because they did not compare similarly situated employees. See, e.g., Anderson v. Westinghouse Savannah River Co., 406 F.3d 248, 262-63 (4th Cir. 2005) (affirming district court's exclusion of plaintiffs' regression analysis in pattern or practice compensation discrimination case because the analysis failed to compare similarly-situated employees); Cooper v. Southern Co., 390 F.3d 695, 717 (11th Cir. 2004) (approving district court's grant of summary judgment to the employer on pattern or practice compensation discrimination claim and noting that the plaintiffs' expert "did not tailor her analysis to the specific positions, job locations, or departmental and organizational structures in question; however, the wide-ranging and highly diversified nature of the defendants' operations requires that comparisons take these distinctions into account in order to ensure that the black and white employees being compared are similarly situated"); Coward v. ADT Security Systems, Inc., 140 F.3d 271, 274 (D.C. Cir. 1998) (discussing importance of comparing similarly situated employees in multiple regression analysis as evidence of a pattern-or-practice of compensation discrimination); Jones v. GPU, Inc., 234 F.R.D. 82, 95 (E.D. Pa. 2005) ("Lumping all exempt employees, Dr. Killingsworth ignored critical differences in employee status, experience, job requirements, and education, thus reducing the reliability of his statistical study. . . Pointing to companywide disparities without factoring into the equation different geographic areas and different jobs and different employment demographics does not necessarily lead to the conclusion that the company is responsible for those disparities and that racial discrimination was the company's standard operating procedure.").

Perhaps the OFCCP policy-makers in 2013 would have agreed that there are limits on the comparisons and that they did not intend to sanction extreme comparisons, such as doctors and lawyers. However, once this concession is made, it is clear that the premised distinction between individual and pattern or practice cases has nothing to do with whether any inference of discrimination can be drawn between employees who are not similarly situated.

The few case examples provided by OFCCP in the Notice of Rescission do not suggest otherwise. For example, OFCCP cited Segar v. Smith, 738 F.2d 1249 (D.C. Cir. 1984), which involved a challenge to the DEA's promotion practices and initial assignments of GS-levels at hire. Under the federal structure, compensation is determined through a rigid schedule organized by levels. All employees within the same level (and perhaps step) are paid the exact same amount. In such a system, there can be no discrimination in setting compensation, because compensation is determined based on published schedules. This is far afield of the typical pay systems used by many large corporations that are federal contractors. This case certainly does not justify OFCCP's ongoing arguments that employees in a job function or family are comparable regardless of the differences in their actual job duties, responsibility levels and the skills and qualifications involved in the positions.

Conflating Compensation, Promotion and Job Assignment Discrimination? In addition, OFCCP argued that an analyses limited to inferences drawn from comparisons of similarly situated employees would miss promotion discrimination and other forms of discrimination in access to positions. See 78 Fed. Reg. at 35,112-113 ("By setting limits on how OFCCP tests for pay differences, and by grounding those limits in job similarity, the Standards make it much harder to detect certain forms of pay discrimination. Where an employer discriminates by channeling workers of a particular race or sex into lower paying jobs, by a glass ceiling preventing advancement, or other promotion or job assignment practices, it may be highly inappropriate to use job similarity as the basis for analysis."). Again, it is unclear how this concern relates to OFCCP's analyses of compensation data to evaluate compensation discrimination. OFCCP routinely requests data on applicants, hires and promotions, and should continue to evaluate whether there is promotion discrimination or job assignment discrimination.

Nor did OFCCP question how it could be determined whether statistical differences derived from comparisons of employees who are not similarly situated are simply caused by such invalid comparisons or whether those differences constitute evidence of promotion or job assignment discrimination.

May Contractors Lawfully Make Pay Adjustments to Correct Pay Differences Resulting from Comparisons of Employees Who Are Not Similarly Situated?

Contractors that make pay adjustments in response to OFCCP's assertion of comparisons of employees who are not similarly situated run the risk of a violation of the disparate treatment prohibitions of Title VII. The Supreme Court has ruled that sex-based or race-based remedial actions are lawful under Title VII if there is a "strong basis in evidence" that the challenged employment practices are unlawful under Title VII. See Ricci v. DeStefano, 557 U.S. 557, 585 (2009).

Current DOL and OFCCP policy-makers should reconsider the Agency's unsustainable position that sanctions comparisons of employees who are not similarly situated. That position does not reflect the Rule of Law and contractors should not be subject to such conflicting interpretations, nor required to implement an approach that is inconsistent with Title VII.