According to Department of Labor Secretary Hilda Solis, the Office of Federal Contract Compliance Programs (OFCCP) will provide a key avenue for victims of employment discrimination seeking class-wide relief, particularly following the United States Supreme Court's decision in Dukes, et al. v. Wal-Mart Stores, Inc. During a speech given at the National Employment Lawyers Association's 22nd Annual Convention in New Orleans, Louisiana, on July 1, Solis spoke about "the big impact with limited resources at the Department of Labor." She stated her belief that OFCCP is "a vital civil rights agency within the federal government," particularly in the wake of the Dukes v. Wal-Mart decision, which many commentators believe made certifying nationwide class actions more difficult. In Dukes, as described in our Management Alert here, the Supreme Court made it more difficult for plaintiffs to satisfy the "commonality" requirement for class certification under Rule 23(a)(2), and also held that claims for backpay and other monetary relief may not be certified under the injunctive or declaratory relief provisions of Rule 23(b)(2), where such monetary damages are not incidental to such relief.

Inapplicability of Dukes to OFCCP

In her speech on July 1st, Secretary Solis pointed out that the Department of Labor does not need to abide by Federal Rule of Civil Procedure 23 in order to seek class-type remedies and relief. She specifically discussed class relief in instances of alleged pay discrimination. "[OFCCP] can obtain class-wide relief for victims of pay discrimination without having to file a class action lawsuit." Solis did acknowledge that government lawyers may "have to tweak some of their legal arguments based on the reasoning used" in Dukes. Presumably, however, such "tweaking" will be subject to judicial review, and employers should be attuned to the DOL's focus on widening potential avenues to class-wide relief.

Focus on Class Relief for Alleged Pay Discrimination

Solis continued to explain that OFCCP is "dramatically shifting" its enforcement priorities, in part by increasing pay equity investigations from 14% last year to 20-40% this year. According to Solis, in light of the Paycheck Fairness Act failing to pass in Congress by two votes, OFCCP needs to "close loopholes that give employers unjustified defenses" to pay discrimination, strengthen the ban on retaliation against employees who complain about pay, and "rescind the Bush-era guidelines that prevent effective enforcement of equal pay laws." For more about OFCCP's plans to rescind the 2006 Compensation Standards and Voluntary Guidelines, click here.

What Contractors Should Do Now

In the area of pay equity, contractors should consider self-auditing their pay practices and actual pay data under attorney-client privilege. This self-audit should include a robust compensation analysis and it should be conducted now and on a periodic basis. If pay disparities that are difficult to justify are found, you may choose to address them by making pay adjustments. These adjustments represent the proverbial "ounce of prevention" worth the "pound of cure." Pay equity litigation can expose the employer's pay system to public view, and can be expensive, whether brought on a local, regional, or national basis. In addition, discrimination findings by the OFCCP are remedied with backpay plus interest, as well as the prospective adjustment.

In deciding whether to undertake a pay equity review, contractors should take heed of the "threshold test" used by the OFCCP in its audits: Any difference between male and female or minority and non-minority compensation of $2000 or 2% is considered a "red flag" by the agency. Contractors should explore pay differences that fail this "threshold test," and work with experienced counsel to discuss appropriate methodologies for more robust compensation analysis, including multiple regression analysis. While OFCCP plans to rescind its 2006 compensation guidance committing itself to using regression analysis methodology as its principle tool to find class-wide discrimination, we expect the agency not to abandon regression analysis, which remains the gold standard for examining larger employee groups for pay equity.

Of course, contractors should also continue to focus on equal employment opportunity and affirmative action compliance generally, including reconsidering internal auditing procedures both in light of Dukes and the OFCCP's focus. Such analyses should be conducted under the attorney-client privilege whenever possible.