3 ways to lose millions to ofccpOFCCP collected over $11.9 million from Federal contractors in Fiscal Year (FY) 2014. While OFCCP doesn’t levy fines for non-compliance, that is little consolation when writing a big check for back pay to victims of discrimination.

Below are the most common causes of financial remedies – and what you can do to avoid them.

Hiring Discrimination

The majority of financial remedies obtained by OFCCP come from instances of discrimination in the hiring process. Over 80% of FY 2014 remedies came from cases of hiring discrimination. A review of OFCCP’s news archives and enforcement database reveals that this long-established trend continues to this day.

Entry-level jobs are among the easiest targets. With high employee populations and low minimum qualifications, hiring practices for these positions are especially at risk. Many of OFCCP’s multi-million dollar settlements include hiring discrimination for entry-level positions.

Remedies: The first step in avoiding hiring discrimination issues is to conduct annual reviews of all hiring and selection activities. An adverse impact analysis (also known as an impact ratio analysis) will reveal statistically significant hiring disparities. These can be performed at the requisition, job title or job group level to zero in on problem areas. One major benefit of an adverse impact analysis is the ability to discover disparate impact discrimination – cases where a seemingly neutral policy has discriminatory results.

A well-documented hiring process is another key tool in preventing hiring discrimination. Jobs should be filled through a standard process. This allows everyone involved in the hiring process to ensure that discrimination does not enter into the selection process. Training hiring managers and recruiters is simplified and improved through the implementation of a written hiring process.

Compensation Discrimination

In FY 2014, OFCCP recovered nearly $1.5 million in back pay and salary adjustments in cases of pay discrimination. While this represents a small portion of their total recoveries, OFCCP is increasing their focus on pay discrimination. In addition to their proposed Equal Pay Report, OFCCP plans to hire additional staff to focus specifically on gender fair pay in the workplace.

Remedies: Document your compensation philosophy and procedures. Without a well-defined system for paying employees, it will be much harder to defend differences in compensation. This is especially true if job descriptions or classifications are missing or do not form a solid foundation for your compensation practices.

Conduct an internal pay equity analysis. This analysis focuses on pay disparities by race and gender. The ultimate goal is locating pay disparities and determining whether the differences in pay can be explained by non-discriminatory business reasons. Internal equity analyses vary greatly in their level of sophistication. Cohort analysis, multiple-regression analysis, and anecdotal comparisons are among the methods that can be used. The most appropriate method will depend upon the size of the company and kinds of jobs that are under review.

Poor Recordkeeping

Employers do not receive the benefit of the doubt during OFCCP compliance reviews. If OFCCP finds evidence of adverse impact, they can assume discrimination has occurred unless the selection process can be justified (see 41 CFR 60-3.3). Furthermore, if a company fails to keep appropriate records, OFCCP can “draw an inference of adverse impact of the selection process” 41 CFR 60-3.4). This means that a company without the documentation to defend its hiring decisions or pay practices will likely be found guilty of discrimination.

Remedies: An internal or third-party review of processes and documentation is essential to successful recordkeeping. A well-structured review will identify areas for improvement and suggest action plans for addressing them. The key to OFCCP compliance is simple: documentation, documentation, documentation.