Audit Package Preparation: Best Practices for a Positive

Audit Experience

Myra Cars - Applied Materials, Inc.Bonnie Corley - OFCCPLinda Grossman - ConsultantMonty Peralta - Synopsys, Inc.Joanne Snow - JSA Consulting, Inc.Eleanor Sue - Sun Microsystems, Inc.

Silicon Valley Industry Liaison Group Presents:

Best Practice # 1

Don’t panic, but don’t ignore the 30-day notice

Alert CEO’s office now re possibility of audit Take notes of OFCCP phone calls Prepare and submit the best possible package. If package will be late, call OFCCP a week before due

date If you are non-responsive, OFCCP will send

a show-cause notice Keep current

Best Practice #2

Make contact and establish a good working relationship with the Compliance Officer at the very beginning

Establish the Relationship

Establish the relationship with OFCCP

Set and confirm expectations

Follow-up

Establish the Relationship

Call the contact person named at the end of the letter

Confirm he or she is your contact person

Make sure you are talking about the same site

Establish you are his or her contact person

Set and Confirm Expectations

Submittal is due 30 days from the receipt of the letter Confirm when they expect the package

Confirm the address where the package is to be sent

Follow Up

Follow up agreements with an email or letter.

Once package is sent, follow up with your contact that they received the package.

Let your contact know you are available to answer any questions they may have about your submittal.

Best Practice # 3

Understand what you are submitting and own it Company’s responsibility Work closely with the person who prepares the AAP to

understand the data Few surprises if you know what you are sending Be the expert

Best Practice #4

Be thorough and complete Read the scheduling letter carefully, and organize

complete answers to each of the requests on the itemized list

Submit the desk audit package with a cover letter explaining what you are providing to make the review as simple and easy as possible

Best Practice #5

Prepare and explain your applicant, hire, promotion and termination data How you do this can make the difference between an

on-site review and closure at desk audit

Personnel Activity

Scheduling letter requires: “Data on your employment activity (applicants, hires,

promotions and terminations) for the preceding AAP year. ... These data shall be presented either by job group or by job title.”

Personnel Activity

Regulations require: Analysis of your selection process, including whether selection process eliminates a

significantly higher percentage of minorities or women than non-minorities or men.

Analyzing Personnel Activity

Complying with the regulations usually requires Adverse Impact Analyses--a comparison of the rate of selection. [OFCCP calls this Impact Ratio Analysis (IRA).] An IRA below 80% is considered Adverse Impact Adverse Impact does not automatically mean there is

discrimination. It is simply an indicator there could be a problem.

Adverse Impact Analysis

10 female engineer hires 100 female engineer applicants

IRA = ____________________________

80 male engineer hires 400 male engineer applicants

IRA = 10% 0.50 = 50% = Adverse Impact20%

Example:

Choices for Audit Submission

How will you submit the requested personnel activity data?

Do you send: summaries by job group? summaries by job title?

Choices for Audit Submission

How will you submit the requested personnel activity data?

Do you send: summaries only? summaries along with your complete adverse impact

analyses? summaries, but adverse impact analyses only where

IRAs are statistically significant (Two

Standard Deviations or Fisher's Exact)?

Choices for Audit Submission

Do you send: adverse impact analyses for total minorities or minority

subgroups? explanations of significant adverse impact? explanations of all adverse impact? no explanations?

Choices for Audit Submission

Suggestions: Always know what you're sending Know what it means Evaluate whether displaying data in a different manner

clarifies apparent "problem areas” If there's even a hint of a problem, explain it up front in

writing and when you deliver the package to assigned compliance officer

Choices for Audit SubmissionExample: (Displaying the data by Job Group)

10 minority engineer promotions 100 minority engineers in feeder Job Group

IRA = ____________________________

80 Anglo engineer promotions 400 Anglo engineers in feeder Job Group

IRA = 10% 0.50 = 50% = Adverse Impact 20%

Choices for Audit SubmissionExample: (Displaying the data by title)

10 minorities promoted to Sr. Software Engineers 30 minority entry-level Software EngineersIRA = __________________________________________

80 Anglos promoted to Sr. Software Engineers 200 Anglo entry-level Software Engineers

IRA = 33% 0.83 = 83% = no Adverse Impact 40%

How to Decide

Summaries by job group? Possibly in a very small company with few

personnel actions Summaries by job title?

Then must provide baseline data by job title Summaries only?

Possibly in a very small company with few personnel actions

How to Decide

Summaries along with your complete adverse impact analyses? Probably

Summaries, but adverse impact analyses only where IRAs are statistically significant (two standard deviations or Fisher's Exact)? Recommend giving all IRAs or no IRAs Including relevant tests of statistical

significance a good idea

What to Explain

Depends on the situation Explanations of significant adverse impact Explanations of all adverse impact No explanations

What to Explain

Examples of possible causes of adverse impact to be discussed: Hiring unusual specialties (e.g., MDs with electrical

engineering degrees plus 3-5 years business experience)

Lay-off based on elimination of business unit, company-wide ranking, etc.

Interns returning to college (in future exclude "contract employees" from AAP)

What to Explain

Examples of possible causes (cont’d): Competitive promotions only (provide any written

materials explaining program & "applicant" data as baseline)

In-line promotions based on years of education or experience completed (provide written materials and actual baseline data)

Best Practice #6

Analyze and understand what the compensation data mean Review your compensation data regularly - not just at

OFFCP audit time. For regular internal audit purposes as well as for the

the Desk Audit, look at compensation the same way the agency does and go a step further.

Remember Attorney-client privilege when conducting internal audits on sensitive data.

Scheduling Letter: Item #11

Even if you don’t use this compensation report internally, prepare the annualized compensation report as directed in Item #11 of the Scheduling Letter

Even though a third party may have created the report, understand what you are submitting before sending it in

Item # 11, Example

Male Female Minorities African

Americans

Asian

Americans

Hispanic

Americans

210/

16,527,580

40/

2,480,610

100/

6,643,010

10/

787,490

80/

5,130,640

10/

724,880

Caucasians

150/

12,365,180

Item #11, What Does it Mean?

Average

Salary Men

Average

Salary Women

Average

Salary

Minorities

Average

Salary

Caucasians

78,702.76 62,015.25 66,430 82,435

Statistical Tests

Let the experts and/or the software do it If you use them, understand what the data show Examples of statistical tests:

t-Test and Rank Sum Multiple Regression Analysis

Cohort Salary Analysis

This is an easy test anyone can perform internally using Excel software

It makes good business sense as well as good EEO sense

It is recommended that it be conducted by job title and, if appropriate, by organizational unit – particularly if different organizations pay differently because of non-discriminatory factors

Cohort Salary Analysis (cont.)

Employee

Name or ID #

Job Title Salary Gender Ethnicity Date of Hire

Location of Work Site

Department Supervisor Date Entering Job Title

College

Degrees

Years of

Experience in Job

Perform. Rating

Cohort Salary Analysis (cont.)

Sort by Job Title and, then, by Salary - low to high

Highlight individuals who appear lower- paid and, then, move on to determining Equal Pay Act reasons for the low salaries

Examples: Merit, Seniority, Quality/Quantity of Work and Geographic location of the job

Cohort Salary Analysis (cont.)

Salary Gender Ethnicity Date of Hire Location of

Work Site

55,224 F H 2/13/1998 Chicago

58,488 F A 1/2/2002 California

64,000 F W 12/1/2001 California

68,950 M A 4/19/1996 Washington DC

71,195 M W 7/19/2002 California

From the Department of Labor

Dol.gov/esa/regs/compliance/ofccp/compdata.htm Wage differentials are not discriminatory or

unlawful when based on neutral job-related factors Analysis of comp data is a useful tool to ensure

fairness in compensation Problems, where identified, can be corrected Analysis may be conducted without “expert” or

outside assistance

From the Department of Labor (cont.)

The OFCCP strongly encourages Federal contractors to conduct analyses of their compensation systems in accordance with the self-audit responsibilities under E.O. 11246, in order to eliminate or prevent discriminatory policies and practices in this very important aspect of employment

From your HR Department

We want to attract and retain the best qualified people

We want this to be a great place to work for those people

We want our good employees to refer other highly talented people for employment

Conclusion

We may be on the same page in intent even if not always in method or conclusion

If we can do our homework, document our good efforts, and communicate with the other, maybe we can reach the same conclusion (i.e. “fair compensation practices”)

Best Practice #7

Go the extra mile Company information Good faith efforts Postings Tabs, binders, colors Detailed cover letter Hand deliver, if reasonable Others?

Best Practice #8

Be certain to explain unusual business activity (conditions)

For example Company is facing bankruptcy, Closed a product line and laid off all those employees Acquired another company

Discuss this in the narrative and let the auditor know as well

Best Practice #9

Carefully review and analyze all data submitted for six-month update

If you are more than six months into the new plan year, follow the instructions in the Itemized Listing B You will need updated reports on your progress

towards goals in your current AAP and personnel activity for the most recent six months

Possible Other Factors

Review carefully all the differences in summary data between the plan documents and the current data

Explain significant differences - not only in terms of personnel activity, but also in terms of changes made to reporting methodologies, job groups, etc.

Other Factors (cont.)

Were there changes in your organizational structure, job groups, organizations included in the plan?

Are all job titles resident in the same job groups as in the Plan at the beginning of the year?

Are there other changes that may make review of your updated data confusing?

If the answer is “Yes”

Explain the differences and try to compare apples with apples, or. . .

Simply clarify the reason for changes In any event, it is recommended that you NOT

submit the results without clarifying changes that have occurred that affect the updated reports

Best Practice #10

Formulate goals for individual minority groups as well as total minorities - even if you don’t submit these analyses with the plan documents for Desk Audit Many attorneys advise against their clients submitting

goals for individual minority groups There are differing views

Best Practice #11

Audience - anything to add?

Silicon Valley Industry Liaison Group

www.svilg.com

Thank you for joining us today.