Enhanced Pay Discrimination Enforcement: What You Should Do To Respond Presented By: Mickey Silberman, Esq. (303) Jackson Lewis Presents For The INDUSTRY LIAISON GROUP 2012 National Conference

© 2012 Jackson Lewis LLP INTRODUCTORY STATEMENT THE MATERIALS CONTAINED IN THIS PRESENTATION WERE PREPARED BY THE LAW FIRM OF JACKSON LEWIS LLP FOR THE PARTICIPANTS’ OWN REFERENCE IN CONNECTION WITH EDUCATION SEMINARS PRESENTED BY JACKSON LEWIS LLP. ATTENDEES SHOULD CONSULT WITH COUNSEL BEFORE TAKING ANY ACTIONS AND SHOULD NOT CONSIDER THESE MATERIALS OR DISCUSSIONS THEREABOUT TO BE LEGAL OR OTHER ADVICE. 2

© 2012 Jackson Lewis LLP ABOUT JACKSON LEWIS LLP Jackson Lewis LLP is dedicated to representing management exclusively in workplace law and related litigation. With nearly 50 offices and more than 700 attorneys nationwide, the firm has a national perspective and sensitivity to the nuances of regional business environments. Guided by the principle that a positive work environment results in enhanced morale and increased productivity, the firm devotes a significant portion of its practice to management education and preventive programs. This approach helps limit exposure to grievances, charges and lawsuits. 3

© 2012 Jackson Lewis LLP ABOUT THE AFFIRMATIVE PRACTICE GROUP We have unparalleled experience preparing AAPs and defending them before the OFCCP in all industries and areas of the country. Our diverse team of 35 attorneys, analysts, statisticians, and support staff prepares approximately 2,500 AAPs a year. Since 2009, we have defended over 250 OFCCP audits, including successful defense of Corporate Management (“Glass Ceiling”) Compliance Evaluations. As a law firm, we offer more than consulting services, we offer strategic thinking and sophisticated legal representation. 4

© 2012 Jackson Lewis LLP ABOUT MICKEY SILBERMAN, ESQ. 5 Mickey is the Managing Partner of the firm’s Denver office and Chair of the Jackson Lewis National Affirmative Action Practice Group. Mickey represents management exclusively in all areas of employment law and specializes in EEO, affirmative action and diversity. Mickey spends much of his time counseling employers on complex, “real world” issues relating to Equal Employment Opportunity, including pay equity. He has helped employers develop strategic compliance processes relating to pay systems, applicant tracking, recruitment, pre-employment testing, performance assessment, succession planning, etc.

© 2012 Jackson Lewis LLP PAY ENFORCEMENT - TOP AGENCY PRIORITY President Obama and OFCCP made pay discrimination among its top enforcement priorities WHY? The persistent “Pay Gap” Since early 1980s, pay gap for women plateaued around 80¢ on the dollar for men In 2011, women earned approximately 77¢ for every $1 earned by men 6

© 2012 Jackson Lewis LLP NATIONAL EQUAL PAY ENFORCEMENT TASK FORCE To implement President Obama’s pledge to “crack down” on equal pay violations, the Administration formed the Task Force made up of the EEOC, DOJ, DOL, OPM, and OFCCP Recommendations of the Task Force included:  Improve interagency coordination and enforcement efforts  Collect detailed annual pay data on the private workforce to identify employers for targeted enforcement  Greatly increased audits and investigations of employers’ pay practices 7

© 2012 Jackson Lewis LLP A NEW PAY DATA COLLECTION TOOL - THE RETURN OF THE EO SURVEY? To more vigorously enforce pay equity, OFCCP developing a pay data collection tool In August 2011 Agency issued an Advance NPRM to solicit feedback on form data collection tool  Agency received roughly 7,800 comments OFCCP wants to use as tool to select employers for audit, similar to the EEO-1 The EEOC wants to develop its own pay collection tool for all private employers  Equal Pay Act Investigation Pilot Program – “flips” the model – EEOC initiates the actions 8

© 2012 Jackson Lewis LLP Settlements for alleged discriminatory compensation are on the rise...  FY 2008 – 0 compensation settlements  FY 2009 – 2 compensation settlements  FY 2010 – 10 compensation settlements  FY 2011 – 27 – 33% of all CAs involved comp 9 COMPENSATION: THE OFCCP’S NEW HOT SPOT

© 2012 Jackson Lewis LLP 10 DON’T FORGET ABOUT EEOC... EEOC settlements for alleged discriminatory pay are also on the rise... FY 2009  $4.8 million in EEOC Equal Pay Act settlements FY 2010  $12.6 million in EEOC Equal Pay Act settlements FY 2011  $23 million in EEOC Equal Pay Act settlements

© 2012 Jackson Lewis LLP In January 2011, OFCCP published notice proposing to rescind the Systemic Compensation Discrimination Standards and Voluntary Guidelines for Self Evaluation of pay practices On January 17, 2012 OFCCP submitted a Second Notice to Rescind to OMB for approval Why rescind? OFCCP believes they are too rigid OFCCP wants much greater flexibility to conduct different types of pay investigations depending on the facts OFCCP acting as if the Standards already gone WHERE WE STAND TODAY – RESCISSION OF THE STANDARDS AND GUIDELINES 11

© 2012 Jackson Lewis LLP OLD OFCCP COMPENSATION ANALYSES Under the 2006 Standards, at least employers knew the rules...  OFCCP would initially run the tipping point test by job groups  If test resulted in a “red flag”, OFCCP would require submission of “12-Factor” data to conduct “mini- regression” analysis  OFCCP would conduct a “deep dive” class-action style investigation including on-site investigations, wide-ranging review of personnel documents and policies and extensive interviews 12

© 2012 Jackson Lewis LLP OFCCP WANTS OPTIONS... LOTS OF ‘EM Now, OFCCP will use a variety of statistical and non-statistical tools and is out to find and demand back pay for pay disparities both big and small… COHORT Multiple Regression 2% or $2K difference by “pay division” Anecdotal with Statistics Anecdotal without Statistics 13

© 2012 Jackson Lewis LLP 14 THE CURRENT COMPENSATION ENFORCEMENT MODEL Before, OFCCP looked for big groups to analyze  SSEGs  Roll-Up to Job Group And now for some good news... Employers asked to present data “in the manner most consistent with current compensation system” OFCCP currently analyzing data in the groupings we decide on – so take advantage and get strategic  Opportunity to present data in positive light

© 2012 Jackson Lewis LLP WHAT ARE THEY LOOKING AT? 15 The “Two & Two” Test Looking for average pay difference of $2,000 or 2% (or more) between individuals with the same title  They call it a “screening device”... but there’s no screen If Two & Two average difference, OFCCP will ask for points of detailed compensation and personnel data and conduct a “deep dive”

© 2012 Jackson Lewis LLP HOW ARE THEY LOOKING TO GET IT? Big Change: OFCCP is going after TOTAL COMPENSATION This means requests for: - Base Pay - Commissions - Bonuses - Equity - Other types of compensation 16

© 2012 Jackson Lewis LLP WHAT ARE THEY LOOKING FOR? Highly detailed follow-up requests  Complete Wage History –Individualized documents and data for:  ALL merit increases  ALL promotion increases  ALL equity awards –For employee’s entire history with the organization For groups of ALL sizes... From 2 to 300+ The OFCCP’s taking it to a new level:  Aggregation of data  Enterprise or multi-establishment reviews 17

© 2012 Jackson Lewis LLP A GAME CHANGER: PROPOSED CHANGES TO THE SCHEDULING LETTER 18 OFCCP wants to dig deeper from the start of the audit... Detailed Pay Data as of Feb. 1 st for ALL Employee-specific data – summary no longer allowed Not permitted to submit by job title Breakdown of all compensation components – bonus, commission, stock options etc. Date of hire, PT/FT, contract, temp, etc. With recent delivery of 2,000 CSALS, the new scheduling letter could be in place by the time your audit letter arrives... So, consider getting a jump start on this NOW

© 2012 Jackson Lewis LLP 19 SO HOW IS TECHNOLOGY MAKING IT EASIER TO BRING SYSTEMIC PAY DISCRIMINATION CLAIMS? Easy to get data... Easy to analyze... Easy to find systemic pay trends across the organization HRIS systems allow ready access to huge amounts of electronic data These electronic reports of data easily allow for “deep dive” analyses of pay trends Systemic pay trends discovered “at the touch of a button”

© 2012 Jackson Lewis LLP HOW TO BE PROACTIVE AMIDST THE UNCERTAINTY... OFCCP’S FIRST STEP IN AUDITS TODAY IS  2% or $2,000 disparity by pay groupings that employer submits SO, NEED TO BE STRATEGIC ABOUT JOB TITLES  Important pay groupings are as clear and meaningful as possible –Should mirror your pay process –Who truly is similarly situated for pay purposes JOB TITLES need to tell the real story of who truly ought to be compared 20

© 2012 Jackson Lewis LLP FOR EXAMPLE…  Employer has 100 employees in the job title “Diagnostic Technician”  But not all 100 do the same thing – in fact, they do very different things and require very different education, experience, and skills  DO THIS   Engineering Diagnostic Technician I  Communications Diagnostic Technician II  Design Diagnostic Technician III  NOT THIS  Diagnostic Technician 21 HOW TO BE PROACTIVE AMIDST THE UNCERTAINTY...

© 2012 Jackson Lewis LLP Always conduct statistical analyses on trend data before submitting to OFCCP  Know what the data will show before submission  Conduct the same analysis as OFCCP  If you identify pay differences, before submission, determine whether you can explain  If you can’t, consider making adjustments before submission  After submission, discuss with OFCCP scope of data requested, encourage Agency to focus on “red flags” 22 OK, SO THE RULES HAVE CHANGED... WHAT CAN I DO NOW FOR AN AUDIT?

© 2012 Jackson Lewis LLP Conduct periodic self-audits of your pay practices under privilege  Formal Self-Audits – Statisticians, Counsel, 3 rd Party Vendor  Internal Self-Audit – Review compensation between individuals with the same job title – Investigate underlying pay disparities to ensure you can defend it as being job- related and consistent with business necessity 23 OK, WHAT CAN I DO BEFORE AN AUDIT?

© 2012 Jackson Lewis LLP PROTECT YOUR SELF-AUDITS If in your proactive self-audit you find an issue you cannot explain, consider making pay adjustments  But only after getting the advice of counsel To protect about unwanted disclosure and obligation to produce during litigation, you should take every precaution to ensure the highest degree of protection and confidentiality possible when conducting self-audits  Conduct self-audits under privilege 24

© 2012 Jackson Lewis LLP Thank you for attending! 25 Please contact us with any questions: Mickey Silberman, Esq. P: (303) Jackson Lewis LLP