The Equal Employment Opportunity Commission (EEOC) recently extracted a multi-million dollar settlement from the Social Security Administration (SSA) for claims of pay disparities based on race. This signals a more aggressive approach to pay equity analysis and claims by the EEOC and other federal enforcement agencies - including the Office of Federal Contract Compliance Programs (OFCCP) which is the US Department of Labor arm charged with the enforcement of affirmative action compliance by federal contractors and their applicable subcontractors. In the EEOC settlement, the alleged racial discrimination claims related to bonus awards and were based upon the calculation of significant statistical differences.

Under federal employment law (for example, Title VII and Executive Order 11246, and their implementing regulations), such statistical differences standing alone will shift the burden going forward to an employer to present credible evidence of legitimate non-discriminatory reasons to justify the differences – but in the absence of such, liability will attach automatically.

This renewed emphasis on pay can be found not only by the EEOC in such actions as the SSA settlement, but also by the OFCCP as evidenced by its recent requirement that federal contractors and their applicable subcontractors annually perform (and document) as part of their Executive Order 11246 affirmative action compliance, a statistical evaluation of pay of females and minorities in their workforces.

Accordingly, employers – not just federal contractors/subcontractors – are cautioned to timely review their pay practices and pay decisions to ensure that appropriate documentation and other support is maintained and accessible to explain any pay differences, particularly any which are statistically significant. Some have suggested that, at a minimum, a coding system (similar to that used in documenting hiring decisions) should be implemented with respect to pay decisions in order to provide this explanation.

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