How To Be The “Good Guy” Without Creating Bad Evidence
Affirmative action is for the “good guys.” Federal contractors (and subcontractors) do not wait to be sued to address equal employment opportunity (EEO) issues, nor do they accept the status quo. Federal contractors do not assume good intentions are being carried out by managers and recruiters. Rather, they seek out and address potential EEO barriers in their employment processes, proactively, and work to ensure employees and applicants are treated fairly.
But not everyone sees it that way.
As this election season heats up, employers can expect to hear more about the gender “wage gap.” For years, Congressional Democrats have attempted to pass robust “equal pay” bills, with little to show for it. Some states – like California and New York – grew impatient waiting and passed their own exacting standards in an effort to advance “fair” and “equitable” pay for workers. In late 2015, both of these states enacted aggressive fair pay laws making it easier for employees to bring and prove claims of pay discrimination. Similar measures are being considered in other states, such as Colorado, Oregon and New Jersey.
Not to be outdone, in January, the EEOC proposed an amendment to the EEO-1 Report that would require employers to disclose not only their workforce by race/ethnicity and gender, but also total compensation – “W-2 earnings” – earned during the year. According to EEOC, it will use this data to “assess complaints of discrimination, focus investigations, and identify employers with existing pay disparities that might warrant further investigation.”
Clearly, there is a growing, national cry to close the “wage gap,” and OFCCP has been doing its part to help. In its 2017 Budget Justification, OFCCP declared it has eliminated its “case closure production targets to focus efforts on its robust open inventory of systemic discrimination cases.” Rather, the Agency is encouraging deeper dives into employer processes, including hiring and pay practices. This is leading to a closer examination of how pay is administered and how employment decisions are made. In turn, this change of posture is causing Compliance Officers increasingly to request the results of proactive pay analyses and adverse impact analyses.
Against this backdrop, more employers are realizing they need to conduct advanced EEO analyses, including internal pay equity analyses. However, as the saying goes: ”No good deed goes unpunished.” Accordingly, protecting these proactive analyses from disclosure should be a critical component of any employer’s affirmative action planning. But what does that mean and how it is it done?
(BASICS OF) THE ATTORNEY-CLIENT PRIVILEGE
In general, the attorney-client privilege may be available where a client seeks an attorney’s legal advice, and that advice was intended to be and was actually kept confidential. And, where that legal advice relies on statistical analyses performed by or at the direction of counsel, the analyses may be privileged as well. However, if the analyses are conducted by the employer internally or by third-parties and do not involve legal advice, such analyses likely are not privileged.
OFCCP understands this well. In fact, two of the most high-profile OFCCP appointments in the past few years were career employee-side litigators – plaintiffs’ lawyers – as Regional Directors. They are familiar with the “rules” of litigation discovery, and they’re not afraid to challenge an employer’s assertion of privilege. Believe it. In recent reviews, OFCCP requested evidence proving that the privilege existed during the review period and a litigation-type “privilege log” identifying all documents withheld on the basis of the attorney-client privilege. Even 18 months ago, requests like these simply did not occur.
What does this mean for employers? Before beginning a sensitive EEO analysis, employers should make every effort to ensure that the analysis will be protected by the attorney-client privilege. The attorney client privilege is a “sliding scale” – while an employer’s in house legal department is sufficient to establish the privilege in certain circumstances, beware that rendering business, not legal, advice can blur the boundaries of the attorney client privilege and waive its protections. This is especially true in EEO pay analysis projects where in-house counsel provides business advice at the end of the project in evaluating employee pay adjustments within the employer’s budget. Therefore, given this combination of business and legal advice often required of in-house counsel, it is safer to consult with outside counsel to provide the legal advice and direct the EEO analyses to further protect employers on this “sliding scale” of privilege.
AAP ANALYSES MAY BE PRIVILEGED, BUT THE UNDERLYING DATA IS NOT
Federal contractors and subcontractors must prepare annual statistical analyses as a part of their affirmative action plans. While the underlying data a company maintains, including applicant tracking and Human Resource Information System (HRIS) data necessary to prepare AAP analyses, may not be protected by privilege; the analyses themselves may be.
For example, the “Workforce Analysis” and “Job Group Analysis” group and regroup unprotected data on the workforce in different ways. These analyses do little more than resort unprotected data. But this small step alone may be sufficient to implicate the privilege.
Similarly, the “Utilization Analysis,” which compares the percentages of females and minorities in a workforce with statistics on the availability of each group in the relevant labor market, goes beyond mere groupings of underlying data and may fall under the privilege’s protections. But, because the mechanisms for these AAP analyses are clearly explained in, and required to be performed by, the regulations, there are limited arguments that they are privileged.
Analyses of an employer’s “compensation system(s)” and “personnel process” are different. While many employers interpret these regulations to require complicated statistical analyses, the regulations set a much lower bar. Instead, a contractor is only required to evaluate its “employment process,” including “whether there are gender-, race-, or ethnicity-based disparities” in its “compensation system(s)” and “personnel activity . . . to determine whether there are selection disparities.” The specific methodology an employer must apply is absent.
This slight crack opens a world of opportunity. Because the regulations do not require a specific type or method of analysis, employers have options in how to satisfy these obligations. Remember, analyses performed pursuant to a legal duty (e.g. a regulatory obligation) may not qualify for the privilege.
Consider, for a moment, two contractors. Contractor A elects to meet its AAP regulatory obligation to review its pay processes through sophisticated multiple-regression analyses. As a result, Contractor A discovers statistical indicators suggesting women are paid less than similarly-situated males. Because Contractor A met its required AAP analysis obligations through these robust statistical analyses, there is a weaker argument that the results are protected from disclosure during an OFCCP audit or litigation, and the analyses could be used against the contractor.
Contractor B, however, segregates its analyses. It performs a basic evaluation of its compensation system to ensure that each employee is paid pursuant to his or her job title and that any material pay difference between races and/or genders can be explained through cohort analyses. Contractor B then prepares a separate, company-wide pay analysis that transcends AAP establishments. Because it met its regulatory obligations through non-statistical evaluations, Contractor B has strengthened its arguments that it may properly withhold the regression analyses from its separate, company-wide pay analysis, assuming it was prepared under attorney-client privilege.
“BEST PRACTICES” ANALYSES MAY BE PRIVILEGED
While not specifically required as a part of affirmative action planning, the regulations discuss additional “best practices” analyses that “good guys” may perform to ensure more than minimally compliant EEO practices. As discussed above, multiple regression compensation analyses qualify as “best practice” analyses that may qualify for the privilege. Similarly, standard deviation-based statistical adverse impact analyses likely fall into that same category, if structured properly.
The Uniform Guidelines on Employee Selection Procedures (the Guidelines) also contemplate that an employer should analyze for adverse impact between subminority groups – focusing on the difference between the selection rates between each racial or ethnic group and the racial or ethnic group with the highest selection rate. The Guidelines also advise that if an employer determines there is statistical disparate impact in the overall selection process (e.g. males are hired more frequently statistically than females, Hispanic applicants are hired more frequently statistically than Asian applicants, etc.), the employer “should” evaluate each component of the selection process for potential discrimination. Likewise, the Guidelines recommend analyses of the various stages of a hiring process (not just the process as a whole) and discuss “validating” any pre-employment test to prevent potential liability for statistical indicators of discrimination. Because the AAP regulations require none of these analyses, they need not be included in annual affirmative action plans.
If these analyses are prepared with counsel, but are not prepared pursuant to a regulatory obligation, then there is a good argument that they can be protected by the privilege. In other words, the (potentially damaging) results can be insulated from being used as a “smoking gun” against the contractor.
Finally, given the current landscape of new and aggressive pay discrimination laws, the ongoing narrative of the “wage gap,” and the EEOC’s new proposal to collect race-, ethnicity-, and gender-based pay data, the only thing more risky than not doing an EEO pay analysis, is doing one, uncovering inappropriate pay differences, and doing nothing about them. However, because the regulations do not require a robust self critical investigation for potential pay disparities, it too may be cloaked in privilege, if done properly.
Managing risk in the current regulatory, statutory, and litigation climate requires an understanding that despite the best of intentions, contractors cannot identify EEO issues and correct them, without first looking for them. Therefore, it is becoming increasingly important to ensure any analyses are performed under the attorney-client privilege. That way, if the analyses raise any concerns, they will be protected from potential disclosure.
So, contractors should contact their legal department and examine their current procedures. “Best practices” include working with counsel to ensure equal treatment through robust analyses, beyond the minimum required by law, and appropriately managing the risks of what may, unknowingly, be lurking beneath the surface.
That’s the “good guy” thing to do.
To learn more about best practices in equal employment opportunity, EEO pay analyses, OFCCP compliance, and audit defense, contact Scott Pechaitis at 303-876-2201 or [email protected] or Chris Patrick at 303-876-2202 or [email protected].
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Copyright © 2016 Jackson Lewis P.C.