Practical Compensation Compliance Strategies for 2016

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Lauren Dixon Associate Editor Talent Management magazine

Prac6cal Compensa6on Compliance Strategies for 2016

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Murray Simpson Manager, Consul<ng Services PeopleFluent

Prac6cal Compensa6on Compliance Strategies for 2016

© PeopleFluent 2015

Practical Compensation Compliance Strategies for 2016

Murray Simpson, Ph.D. PeopleFluent Research Institute

10 © 2015 PeopleFluent | Confiden<al Prac<cal Compensa<on Strategies for 2016

•  PeopleFluent Research Ins<tute (PRI) – Who We Are

•  Compensa<on Compliance Landscape •  President Obama and the Wage Gap

•  Equal Employment Opportunity Commission (EEOC)

•  Office of Federal Contract Compliance Programs (OFCCP)

•  Wage and Hour Division (WHD) of Department of Labor

•  Job Steering: A Dangerous Intersec<on Ahead

•  Prac<cal Strategies

Overview


•  A team of experts and support staff who specialize in:

–  Evalua<ng allega<ons of discriminatory employment prac<ces

–  Assessing claims that wage-‐and-‐hour laws have been violated

–  Advising clients on risk-‐mi<ga<ng improvements in their human resource systems and prac<ces

PRI – Who We Are


•  Manager, Consul<ng Services

•  Ph.D. in Economics

•  15 years experience as a tes<fying and consul<ng expert •  Taylor and Harley, et al. v. SSA •  Sco:, et al. v. City of New York •  Valladon, et al. v. City of Oakland

•  Formerly an associate professor of economics

Dr. Murray Simpson


Compensa6on Compliance Landscape


•  On January 29, 2009, nine days aèr his inaugura<on, President Obama signed the Ledbeaer Fair Pay Act, making it easier for women to challenge unequal pay

•  In January 2010, the President announced the crea<on of the Na<onal Equal Pay Enforcement Task Force to specifically address issues of pay discrimina<on

•  President has charged the federal agencies on the task force with elimina<ng the wage gap

President Obama and the Wage Gap

Females $0.77

Males $1.00

Hispanic Females $0.55

Black Females $0.64


•  Equal Pay Act of 1963 (EPA) •  Title VII of the Civil Rights Act

of 1964 (CRA) •  Age Discrimina<on in

Employment Act of 1967 (ADEA)

•  Americans with Disabili<es Act of 1990 (ADA)

•  Gene<c Informa<on Nondiscrimina<on Act of 2008 (GINA)

•  LedbePer Fair Pay Act of 2009 (LFPA)

EEOC Equal Employment

Opportunity Commission (EPA, Title VII of CRA, ADEA,

ADA, GINA, LFPA)

Any employer 15 or more employees

Equal Employment Opportunity Commission


•  One of six na<onal priori<es is enforcing equal pay laws •  “The EEOC will target compensa<on systems and prac<ces that discriminate based on gender.”

•  Emphasis placed on direct inves<ga<ons and Commissioner charges as modes of enforcement

•  Priority given to class charges of unequal pay discrimina<on

•  Seek greater collabora<on with OFCCP, Dept. of Jus<ce, and plain<ffs’ bar to iden<fy employers engaging in pay discrimina<on

EEOC’s Strategic Enforcement Plan


Direct Investigations of Unequal Pay

•  EEOC typically must wait for a charge of discrimina<on to be filed: •  Individual charge, class charge, Commissioner’s charge

•  However, the Equal Pay Act is enforced pursuant to the FLSA, giving the EEOC the authority to: •  Ini<ate inves<ga<ons of Equal Pay Act viola<ons without any prior charge of pay discrimina<on (“direct inves<ga<ons”)

•  Used sparsely in the past, but now expanding such inves<ga<ons


Footnote: CA, NY Revise Their Equal Pay Laws

•  What mo<vated the revisions? •  Statewide gender pay gap •  Repeated failure of Congress to pass the Paycheck Fairness Act

•  Three main revisions (among others) •  More challenging for employers to assert some legal defenses used in the past

•  Pay transparency •  Broader defini<on of “same establishment” (CA in par<cular)


•  Compensa<on is a top priority

•  Compensa<on Direc<ve 307

•  Item 19 of Revised Scheduling Leaer

•  Pay Transparency

•  Equal Pay Report

Office of Federal Contract Compliance Programs

OFCCP Office of Federal Contract

Compliance Programs (Executive Order11246, Section 503, VEVRAA)

Federal contractor

50 or more employees


•  OFCCP issued the direc<ve on February 28, 2013

•  Provides guidance to the agency’s compliance officers on how to conduct an inves<ga<on of a federal contractor’s compensa<on prac<ces during a compliance evalua<on

•  Affords them greater la<tude and discre<on than the previous standards that were in place from 2006-‐2013

Compensation Direc<ve 307


•  Effec<ve as of October 2014

•  Employee-‐level compensa<on data – no longer submit aggregated data

•  Required to submit the following for each employee •  Gender and race/ethnicity •  Hire date •  Job <tle, job group and EEO-‐1 category •  Base salary or wage •  Hours worked in a typical workweek •  Other compensa<on or adjustments to salary such as bonuses,

incen<ves, commissions, merit increases, locality pay or over<me, each iden<fied separately for each employee

Revised Scheduling Leaer – Item 19


•  May (but not obligated to) provide addi<onal data on factors used to determine employee compensa<on such as: •  Educa<on •  Past experience •  Duty loca<on •  Performance ra<ngs •  Department or func<on •  Salary level, grade or band

•  Should include documenta<on and policies related to compensa<on, par<cularly those that explain factors and reasoning used to determine compensa<on

Revised Scheduling Letter – Item 19


•  Final rule expected to be issued in Spring 2016

•  Filing period is January 1 – March 31 of each year

•  Covers the same employees included in the federal contractor’s most recent EEO-‐1 report

•  For each EEO-‐1 job category, report the following for males by race category and then again for females by race category •  Total number of employees •  Total W-‐2 pay •  Total work hours

Equal Pay Report (proposed)


•  To compare federal contractors in the same industry •  Likely defined by two-‐digit primary NAICS codes

•  For each contractor in a given industry, compute the ra<o of, say, female to male W2 pay (“pay ra<o”) •  Adjusted for total hours worked? By EEO-‐1 category? Companywide?

•  Place the contractors in descending order from the highest pay ra<o down to the lowest pay ra<o

•  Consider for a compliance audit those contractors with pay ra<os below some “industry standard” determined by the OFCCP

Equal Pay Report – Its Probable Use?


•  Final regula<ons (“Prohibi<ons Against Pay Secrecy Policies and Ac<ons”) published by the OFCCP on Sept. 11, 2015

•  Regula<ons apply to contracts or subcontracts over $10,000 that are entered into or modified on or aèr January 11, 2016

•  Federal contractor cannot discriminate or retaliate against applicants or employees for inquiring about, discussing or disclosing compensa<on informa<on

•  Extends beyond the “concerted ac<vity” protec<ons afforded by the NLRB-‐-‐ applicants and supervisors are included in the OFCCP’s regula<ons

Pay Transparency Regula<ons


DOL’s Wage-‐and-‐Hour Division (WHD)

•  Fair Labor Standards Act of 1938 (FLSA) •  Migrant and Seasonal Agricultural

Worker Protec<on Act if 1983 (MSPA) •  Employee Polygraph Protec<on Act of

1988 (EPPA) •  Family and Medical Leave Act of 1993

(FMLA) •  Also:

•  Wage garnishment provisions of Consumer Credit Protec<on Act

•  Prevailing Wage Requirements of Davis Bacon Act and Service Contract Act

WHD Wage-and-Hour Division

(FLSA, MSPA, EPPA,FMLA, Other Provisions)


•  New rule proposing changes to the exemp<ons for execu<ve, administra<ve, professional and highly-‐compensated employees

•  Rule was published in the Federal Register on July 6 (Note: 60-‐day public comment period closed on September 4 with nearly 250,000 comments)

•  No changes proposed in the du<es standards for these exemp<ons, only the salary thresholds

•  Increases the minimum salary level for the execu<ve, administra<ve, and professional exemp<ons from $455 per week ($23,660 per year) to $921 per week ($47,892 per year), subject to annual increases thereaèr

•  For highly compensated employees, in addi<on to at least $921 per week on a salary basis, the rule increases the minimum total annual compensa<on from $100,000 to $122,148, subject to annual increases thereaèr

“White Collar” Overtime Exemptions


Job Steering: A Dangerous Intersection

Ahead


What Is Job Steering?

•  Occurs when an employer channels applicants or employees to lower-‐ or higher-‐paying jobs based on characteris<cs protected under an<-‐discrimina<on laws, such as gender or race

•  Examples •  Direc<ng Hispanic job seekers to apply only for certain jobs even

though they are qualified for other higher-‐paying jobs •  Hiring qualified female applicants dispropor<onately into cashier

posi<ons rather than higher-‐paying sales associate posi<ons •  Informing only qualified White employees of opportuni<es to post for

par<cular promo<ons


Job Steering and Enforcement Agencies

•  Job steering has long been on the radar of the EEOC •  Direct reference to prac<ce in 2000 when Sec<on 10 (“Compensa<on Discrimina<on”) of EEOC Compliance Manual was issued

•  “Racial Steering” specifically referenced in 2006 when Sec<on 15 (“Race and Color Discrimina<on”) of the manual was issued

•  EEOC specifically men<ons in its 2013-‐2016 Strategic Enforcement Plan “the channeling/steering of individuals into specific jobs due to their status in a par<cular group.”


Job Steering and Enforcement Agencies

•  More recent focus by OFCCP on job steering

•  Compensa<on Direc<ve 307 •  Agency instructs compliance officers to examine any employment prac<ces that may lead to pay dispari<es, including “differences in job assignment or placement”

•  Sealement with G&K Services Company (November 2013) •  Seales allega<ons raised by OFCCP that the company steered female laundry workers to lower-‐paying “light duty” jobs compared to male laundry workers assigned to higher-‐paying “heavy duty” jobs

•  Sealement with Comcast Corpora<on (April 2015) •  Seales allega<ons that the company steered women into lower-‐paying posi<ons that assisted customers with cable services compared to males assigned to higher-‐paying “technical” posi<ons providing customer assistance for Internet services


Practical Strategies for 2016


Is Your Company at Risk?

Some Helpful Ques<ons


The Path to Fair Compensa<on

Last <me analyzed compensa<on prac<ces for pay dispari<es?

Any employees voicing complaints?

How confident that pay prac<ces can withstand

scru<ny?

How similar to compe<tors who lost or sealed a lawsuit?

Ques<ons to assess company’s risk of pay discrimina<on claims



Understand the legal founda<ons for a finding of discrimina<on

Protected statuses

Legal theories of discrimina<on

Standards for comparing employees



Start with a clearly ar<culated ques<on

Form appropriate comparison groups

Refine analysis as gain greater insight

Determine which sta<s<cal model

to apply

Understand the sta<s<cal founda<ons for a finding of discrimina<on


Pay Variables Analyzed

•  Base Pay •  Bonuses •  Merit Increases •  Overtime Pay •  Commissions

Conduct a Comprehensive Self-Audit

Adopt a methodology that examines distinct comparison groups as well as patterns across groups

Adopt a methodology that mimics OFCCP

1 Company-wide Race/Gender

Analysis

2 OFCCP-Style Analysis by

AAP

3a Decide what pay disparities merit

further investigation

3b Determine pay

equity adjustments if needed



Iden<fy employees in 2015 EEO-‐1 Report filed in August/September

Iden<fy employees who subsequently terminated by

year end

Combine informa<on into proper repor<ng

format

Collect W2 pay and total work hours for each employee

If a federal contractor, conduct a dry-‐run for the Equal Pay Report



Iden<fy salaried exempt employees with annual salaries less than $47,892 (or perhaps $50,440)

Iden<fy highly-‐compensated exempt employees with total annual compensa<on between

$100,000 -‐ $122,148

Increase salary/compensa<on to maintain exempt status or allow

employees to become non-‐exempt?

An<cipate the impact of proposed revisions to white-‐collar exemp<ons


Conduct Manager Training

Training Should Be An Ongoing Process

Train managers on EEO and AA regulations

Training

Training Training

Train managers on evaluating

performance and making equitable

compensation decisions

Train managers on overtime regulations, including the salary and duties tests for

exemptions


•  Stay informed of changes in the compensa<on compliance landscape

•  Expand your knowledge of the legal and sta<s<cal founda<ons for discrimina<on claims

•  Conduct a comprehensive pay equity self-‐audit

•  Prepare for the Equal Pay Report and the revised white collar exemp<ons

•  Promote manager training

2016 can be a good year if you….



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@PeopleFluent

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Practical Compensation Compliance Strategies for 2016