The wait is over… yesterday OFCCP released the Advanced Notice of Proposed Rulemaking on the compensation data collection tool.

Even though it’s only an advanced notice, it gives significant insight into where the Agency is heading and what employers can expect. Because there’s so much information, we’ll be focusing on various aspects of the ANPRM over the next few days. Today’s post will focus on the purpose and potential uses of the compensation data collection tool.

According to the ANPRM, the purpose of the new tool is “to provide insight into potential problems of pay discrimination by contractors that warrant further review or evaluation by OFCCP or contractor self-audit. Accordingly , it is envisioned primarily as a screening tool, although it may also have research value.”

According to the ANPRM:

Possible uses for the collected data include generating insight into potential problems of compensation discrimination at the establishment level that warrant further review or evaluation by OFCCP or contractor self-audit. OFCCP could use the data collected by the tool to conduct analyses at the establishment level, as well as to identify and analyze industry trends, Federal contractors’ compensation practices and potential equal employment-related issues.

I think it’s a great idea for businesses to have their compensation data cleaned, assembled and ready to go. Given that I’m an evangelist for compensation self-auditing, I’m generally in favor of anything that facilitates self-examination. But I do have some concerns about how OFCCP will be using this data and how they will be studying it.

My concerns are magnified by the pending proposed rescission of the Compensation Standards and Guidelines, which will leave us with little information about OFCCP’s analysis methodology. The Agency says that they will use methodologies consistent with “Title VII principles”, but that doesn’t really tell us very much. Without rigorous analysis methods in place, trying to study all of this compensation data could turn out to be a very difficult proposition.

One of my biggest concerns is that it seems as though the compensation data collection tool may move us backwards in our efforts to identify and combat real cases of compensation discrimination. The idea of using this data collection tool to identify specific industries or multi-establishment organizations for focused compensation reviews feels to me like we’re returning to the days of the EO Survey. And we all remember what happened with the EO Survey – it was abandoned after it was found to be an invalid predictor of compensation discrimination.

There is one additional use of the compensation data referenced in the ANPRM that gave me some pause:

An option that OFCCP is considering is the possibility of requiring businesses that are bidding on future Federal contracts to submit compensation data as part of the Request for Proposal process. In such a case, the data collected may be used for trend analyses as well as targeting contractors for post-award compliance reviews.

To me, this has a hint of “Pre-Crime” to it… as in “we’re only going to award contracts to those establishments whose compensation data leads us to believe that they will be in compliance post-award.”

Examining compensation data with respect to gender or race/ethnicity discrimination is not an easy process. It requires a detailed understanding of how individuals within the organization are compensated and why similarly situated employees may be compensated differently.

Without this understanding, a researcher has very little chance of building a compensation model that accurately reflects the reality of compensation within the organization. Even with the most comprehensive data possible, an inaccurate model can’t provide meaningful insights into internal pay equity. It’s not clear to me how OFCCP will be able to reliably examine a potential contractor’s compensation data for internal equity without having insight into the “how” and “why” of the company’s compensation.

Notwithstanding this, past performance is not a foolproof predictor of future performance. Even a repeat offender was a non-offender prior to committing his first crime…