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Adverse Impact Still an Issue for OFCCP

Web Admin - Tuesday, November 03, 2015

The OFCCP’s “Class Member Locator,” website first unveiled on October 2, allows interested parties to follow the progress of settlements with the agency. It also provides insight into issues the agency is enforcing, including adverse impact in hiring.

The website's listing currently provides information on settlements with 17 federal contractors in 15 states, including the affected group(s), time period, job type of the affected group(s), summary of the case and a link to the conciliation agreement.  Given that the majority of the cases listed included allegations of hiring discrimination, federal contractors should remain focused on the cornerstone of affirmative action, adverse impact analysis, even while adjusting to newer requirements related to Protected Veterans (Section 4212), Individuals with Disabilities (Section 503), and compensation.


The most common questions federal contractors have when conducting adverse impact analyses for their annual Affirmative Action Program (AAP) are, where is the analysis required, and how should it be structured?


Adverse Impact Analysis – Where is it required?

The OFCCP defines adverse impact in the “Technical Assistance Guide for Federal Supply and Service Contractors” (Technical Assistance Guide) according to the Uniform Guidelines for Employee Selection Procedures (Uniform Guidelines) as “a substantially different rate of selection in hiring, promotion, or other employment decision which works to the disadvantage of members of a race, gender, or ethnic group” (41 CFR 60-3.16B).  Federal contractors are required to conduct adverse impact analyses of these selections each year as part of their AAP.


The OFCCP also follows the Uniform Guidelines when it comes to identifying the adverse impact analysis results that are of interest.  A selection rate for any race, sex, or ethnic group which is less than four-fifths (or eighty percent) of the rate for the group with the highest rate will generally be regarded by Federal enforcement agencies as evidence of adverse impact, while a greater than four-fifths rate will generally not be regarded by federal enforcement agencies as evidence of adverse impact.  The OFCCP states that, “the contractor should have available for each component that has an adverse impact, evidence that the procedure has been validated in accordance with the Uniform Guidelines."  If any selection procedures result in adverse impact, federal contractors must either eliminate or explain the procedure.  See the Technical Assistance Guide, Appendix D for a fuller explanation of OFCCP’s “Adverse Impact Determinations.”


Not only do adverse impact analyses play a large role in the AAP, the data used to analyze selections is also required by the OFCCP during an initial desk audit in #18 of the Itemized Listing.  The Listing requests “data on your employment activity (applicants, hires, promotions, and terminations)” organized by either job group or job title, depending in part on how the information was presented in the AAP and in part on the way that decisions are made in your firm.  Here is a link to the current Scheduling Letter and Itemized Listing.  A few things to note with respect to #18 of the Itemized Listing:

 

  • OFCCP references the decision-making process within the firm as a consideration when preparing the data. For example, if applicants can be considered for multiple job titles in a number of job groups, the applicant data can be consolidated.

  • For promotions and terminations, if the data are provided by job title, department and job group should also be provided.

 

Adverse Impact Analysis – How should it be structured?

Given the importance of adverse impact analysis in the AAP, it is not surprising that federal contractors have questions about how to approach it.  In particular, contractors wonder whether the analysis should be structured by job title or job grouping.  While there may be no right or wrong answer, contractors will likely want to structure their AAP and analyze selections in the way that best mirrors the decision-making process used in the day-to-day operations of their company.  Two simple examples illustrate how the choice of job title or job group may affect the results of an adverse impact analysis.


In the first hypothetical example, the organization begins by analyzing hiring decisions by job title. In Table 1-1, the analysis reveals that the hiring decisions for the Warehouse East job title disfavors women and that the Warehouse West job title disfavors men.

 

Table 1-1: Adverse Impact Analysis by Job Title*
  Applicants Hires
Job Title Total # Female % Female Total # Female % Female Expected Difference # Standard Deviations Probability
Warehouse East 289 212 73.4% 201 136 67.7% 147.4 -11.4 -3.30 0.0010**
Warehouse West 209 45 21.5% 156 42 26.9% 33.6 8.4 3.25 0.0012**
*A Hypergeometric statistical test was used.
**Statistically significant

 

Consider the same data if analyzed by job group.  In this instance, Warehouse.  As Table 1-2 shows, the analysis results in no statistically significant gender disparities.

 

Table 1-2: Adverse Impact Analysis by Job Group*
  Applicants Hires
Job Group Total # Female % Female Total # Female % Female Expected Difference # Standard Deviations Probability
Warehouse 498 257 51.6% 357 178 49.9% 184.2 -6.2 -1.24 0.2151
*A Hypergeometric statistical test was used.

 

However, the converse can also be true.  In the second hypothetical example, a company with engineers analyzes hiring decisions by job title and job group.  As shown in Tables 2-1 and 2-2, the organization finds that the analysis by job title shows no statistically significant gender disparities, but when combined into an analysis by job group, the results disfavor women with a disparity of 2.10 standard deviations, which is beyond the widely accepted 1.96 threshold of statistical significance.

 

Table 2-1: Adverse Impact Analysis by Job Title*
  Applicants Hires
Job Title Total # Female % Female Total # Female % Female Expected Difference # Standard Deviations Probability
Mechanical Engineer 94 35 37.2% 12 2 16.7% 4.5 -2.5 -1.57 0.1165
Electrical Engineer 65 25 38.5% 7 1 14.3% 2.7 -1.7 -1.38 0.1673
*A Hypergeometric statistical test was used.


Table 2-2: Adverse Impact Analysis by Job Group*
  Applicants Hires
Job Group Total # Female % Female Total # Female % Female Expected Difference # Standard Deviations Probability
Engineer 159 60 37.7% 19 3 15.8% 7.2 -4.2 -2.10 0.0360**
*A Hypergeometric statistical test was used.
**Statistically significant

 

Which is the correct way to analyze adverse impact in AAPs?  The answer depends on an organization’s policies and processes. If an organization identifies unique applicant pools for each position, then analyses by job title might yield more accurate information about the outcomes of the decisions made. However, if applicants are selected from a common pool, then analysis by job group might be more appropriate.  Furthermore, in some areas of the firm, it may be appropriate to analyze by job groups and in other areas by job titles; organizations have the flexibility to use both.


Still not sure which to use?  Remember that your decision should take into account the organization’s policies, processes, and job classification system.  For example, if your AAP job groups contain jobs subject to different policies and processes, and those jobs additionally differ with respect to the level and type of work performed, then consider organizing your data by job title.

 

For more information on adverse impact and affirmative action, contact our OFCCP Compliance experts.


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