When the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) begins an affirmative action compliance review, it sends the organization subject to the review a letter that requests various types of information. This letter is referred to as a “scheduling letter.” The scheduling letter includes an itemized listing of specific information that OFCCP expects will be included when information is submitted to the agency. The scheduling letter used for federal contractors and subcontractors that provide supplies or services to the government gives these organizations 30 days to submit information to OFCCP.
On October 1, 2014, OFCCP released a new version of the scheduling letter and itemized listing. While the revisions to the scheduling letter were not particularly substantive, there were extensive revisions to the itemized listing. The previous version of the itemized listing asked for 11 items; the revised version asks for 22 items. The 11 new items relate to requirements found in OFCCP’s revised regulations regarding protected veterans and individuals with disabilities. There were also substantive changes to several of the provisions that were previously included in the itemized listing.
The changes in the itemized listing have caused much consternation for federal contractors and subcontractors. Some of the changes in the itemized listing appear to be very burdensome; others appear to be problematic because organizations haven’t necessarily collected the information that seems to be required by OFCCP.
There is no question that the expansion of the number and nature of items found in the itemized listing can be burdensome for federal contractors and subcontractors. However, organizations undergoing an affirmative action compliance review should read the itemized listing carefully, and then compare the requests in the itemized listing to the federal regulations that authorize the collection of this information. The itemized listing does not present an entirely clear picture of what OFCCP is requesting or is authorized to request.
In this article and a companion article in the next issue of The OFCCP Digest, we’re going to provide some tips on responding to the new scheduling letter and itemized listing. This article will focus on the new requests for compensation data found in the revised itemized listing; in the next article, we’ll focus on the revised requests for personnel activity data and the new requests for information growing out of the revised veterans and disability regulations.
Background on the Item Requesting Compensation Information
One of the most important changes to the itemized listing involves OFCCP’s request for compensation data. In the previous version of the itemized listing, item 11 requested summary compensation data for the facility undergoing a compliance review. The current request for compensation data, found as item 19, includes the following provisions:
- OFCCP is requesting individualized compensation data on all employees found in the workforce analysis for the relevant affirmative action plan (AAP). Companies are asked to submit the following information on each employee: base salary or wage rate, gender, race/ethnicity, hire date, job title, EEO-1 category, job group, and “hours worked in a typical workweek.” OFCCP does not provide a definition for “hours worked in a typical workweek,” nor does the agency indicate how hours worked should be displayed for exempt employees.
- OFCCP is asking for compensation data on all employees who are part of the relevant AAP, including “full-time, part-time, contract, per diem or day labor, [and] temporary” employees. OFCCP provides no definition for any of these terms.
- Item 19(a) indicates that “adjustments to salary such as bonuses, incentives, commissions, merit increases, locality pay, [and] overtime should be identified separately for each employee.”
- Item 19(b) indicates that companies may provide additional data on factors used to determine employee compensation.
- Item 19(c) indicates that companies should provide documentation and policies related to compensation.
- Compensation data must be provided to OFCCP in an electronic format.
The language used in item 19 seems to suggest that OFCCP wants extensive compensation data and compensation policies on all types of employees, including employees who traditionally would not be included in an affirmative action plan. However, a clearer reading of item 19 gives federal contractors and subcontractors much greater discretion in what to submit to OFCCP.
Types of Employees to Include in Data Submitted to OFCCP
Item 19 states that organizations must submit compensation data on a broad cross-section of employees. This includes “contract, per diem or day labor, [and] temporary” employees. The inclusion of contract and temporary employees in this list has caused concern for organizations that make extensive use of temporary workers who are paid through an outside agency. However, the key word to consider here is the word “employees.” OFCCP has traditionally defined “employees” as those individuals who are on the payroll of an organization undergoing a compliance review. OFCCP traditionally does not ask for data on independent contractors, temporaries employed through an agency, and other workers who are not on a company’s payroll.
- Tip Number 1: Limit the data on employees appearing in compensation data submitted to OFCCP to the individuals who are actually on the company payroll.
Matching the Employees in the Workforce Analysis to Compensation Data
Item 19 indicates that organizations should provide compensation data “as of the date of the workforce analysis” in the affirmative action plan for minorities and females that is submitted to OFCCP. In the past, organizations have provided summary data on the employees found at the facility under review as of the date of the submission of the AAP. It is clear from the language in the revised itemized listing that OFCCP expects to receive compensation data on every employee who is shown in the workforce analysis of the relevant AAP. This compensation data should be for the start date of the AAP and NOT for the date that information is submitted to OFCCP or some other time frame. Changes in compensation subsequent to the time the AAP was prepared may skew compensation data in various ways that will complicate OFCCP’s analyses.
- Tip Number 2: Make sure that the compensation data is submitted only for employees found in the workforce analysis, and that this data is for the date the AAP was prepared. If subsequent changes to compensation for certain employees will help present a more positive picture to OFCCP, annotate the report to OFCCP to show these changes have occurred.
Submitting Documents and Policies on Compensation
Item 19(c) states as follows: “Documentation and policies related to compensation practices…should also be included in the submission…” Note that item 19(c) does not say that this information MUST be submitted to OFCCP. While OFCCP has the right to request this information during the course of a compliance review, federal contractors and subcontractors are under no obligation to submit it when a review begins. It is possible, of course, that documentation and policies about compensation practices or decisions may be helpful to an organization in explaining certain compensation data, at which point the organization may want to make the strategic decision to submit certain information.
- Tip Number 3: Send documentation and policies relating to compensation with the initial submission to OFCCP only when this information will be helpful in explaining compensation decisions and data.
Determining What Constitutes a “Typical Workweek”
Item 19(a) states as follows: “For all employees, compensation includes base salary and or wage rate, and hours worked in a typical workweek.” While this sentence has a variety of issues, what OFCCP is effectively saying is that it expects companies to supply information on both pay and hours worked.
It is useful to understand what OFCCP is trying to do by requesting hours worked. The agency wants to regularize data so that it can properly compare employees within one job title or salary grade. The agency’s concern is that employers will submit annual wage data without acknowledging that part-time employees make less than full-time employees in comparable jobs. The agency hopes to use hours worked as a way to create a full-time equivalent wage for part-time employees. The agency is then attempting to compare apples to apples by examining the full-time equivalent wages for all employees.
What OFCCP should have done in its revised itemized listing is to request full-time equivalent wages for all employees. Instead, the agency asked for base salary or wage rate along with “hours worked in a typical workweek.” There are two different types of problems with this idea of “hours worked in a typical workweek.” First, hours worked in a typical workweek are irrelevant to pay for a full-time exempt employee. Such an employee will receive his or her salary for any given week regardless of whether the employee works 35 hours or 45 hours or 65 hours. Showing an average number of hours worked for full-time exempt employees can be misleading if OFCCP divides this average number of hours by salary to come up with an hourly rate for these employees.
- Tip Number 4: Show “hours worked in a typical workweek” for full-time exempt employees as 40 hours per week. Various OFCCP officials have acknowledged that this provision about hours worked has little or no value for full-time exempt employees, and that 40 hours is an appropriate substitution.
There is a second issue with the idea of “hours worked in a typical workweek.” Some non-exempt employees do not have an easily definable “typical workweek.” Is a typical workweek the average number of hours an employee worked over the last year? Is it the typical number of hours an employee would work where there are no opportunities or requirements for overtime? How does one factor in voluntary or involuntary layoffs? What is a typical workweek for an on-call employee, or an employee who has an alternating schedule of longer and shorter workweeks? What is a typical workweek for an employee who is on an erratic schedule and never has a set workweek? In these situations, it remains important to realize that OFCCP is trying to understand how employees in the same job title and same grade are paid. Thus, the critical question is not what constitutes a typical workweek. The critical question is how should pay be displayed. If pay is displayed as an hourly amount so that it can be appropriately compared to the hourly amount paid other employees, the fact that there is no typical workweek becomes far less important. The only question remaining becomes what number should be used to show a typical workweek for employees with unusual schedules. Options for various types of situations might include the following:
- Showing 40 hours for a regular full-time employee even if the employee often receives additional overtime hours;
- Showing an average number of hours for workers with part-time erratic schedules along with an explanation of those schedules;
- Showing the regular work hours for employees who are on schedules that include occasional (or frequent) layoffs.
- Tip Number 5: For employees with unusual work schedules, be sure to show compensation as an hourly amount. In regard to “hours worked in a typical workweek,” consider showing how a workweek absent overtime, layoffs, or other unusual scheduling might appear. If employees truly have an erratic schedule, show an average number of hours worked per week. Consider providing annotations about hours worked if employees in a particular job title or salary grade have widely varying hours worked.
As of the date of this article (3/19/2015), OFCCP has rarely asked for extensive additional information on compensation during compliance reviews involving the new scheduling letter and itemized listing. Providing clear and appropriate compensation data with explanatory information where necessary can potentially limit the additional inquiries OFCCP might otherwise make into compensation practices and decisions.
Please note: Nothing in this article is intended as legal advice or as a substitute for any professional advice about your organization’s particular circumstances. All original materials copyright © HR Analytical Services Inc. 2015