January 24, 2020 at 5:00 am ET
The Office of Federal Contract Compliance Programs is the Department of Labor agency tasked to enforce Executive Order 11246, which lays out the affirmative action and anti-discrimination requirements imposed on government contractors. And given the size and scope of the government, that includes companies employing almost a quarter of the U.S. workforce. Thus, its actions can have a profound impact on the economy.
Unfortunately, OFCCP has long been accused of allowing its auditors to run wild and abuse their authority at the expense of due process. Now, it is also pursuing enforcement actions based on statistical analysis that is fundamentally flawed. Consider the case of Oracle, which is fighting a record claim that it owes over $400 million to its female, Asian American and African American employees for underpayment over a four-year period.
The government’s case against Oracle is built primarily upon the theory of disparate impact, which holds that the presence of unequal outcomes between demographic groups is proof of discrimination even if rules or policies are racially neutral.
There are circumstances where a disparate impact is indicative of a problematic policy, but other times it can be the result of factors beyond a company’s control, such as unequal levels of education, or that aren’t even bad, like average differences resulting from the aggregate of individual choices.
For instance, the fact that the NHL is 93 percent white is less likely to be explained by racial discrimination as the fact that it began as a Canadian sport and has yet to garner as much interest from minority youths as other major sports. It might be argued that the sport is expensive, and that therefore socioeconomic factors contribute to racial disparities. But is it proper to then hold a team or the league liable for society-wide issues?
Likewise, a corporation can’t be held accountable for factors outside its control. Even the government understands this, which is why it tries to control for things like education and experience before using statistics to prove discrimination. In the case of Oracle, the OFCCP simply didn’t do a good job of this task.
Specifically, the government claims that Oracle employees have equivalent levels of experience if they are of similar age and have worked at Oracle for the same length of time, but the particulars of their work are ignored. Likewise, with education, only the degree level is considered, but not its relevant to a particular job.
How can the government honestly say that any compensation differences are evidence of discrimination when using such poor proxies for education and experience? Perhaps the fact that the Oracle case was launched two days before Barack Obama left office should be considered telling.
To be fair, the agency took a first step toward reform in 2018 when it rescinded the vague, open-ended guidelines of the Obama era that led the agency to often rely exclusively on statistical evidence of discrimination, and even to deny contractors opportunity to provide nondiscriminatory explanations for pay differences.
New rules sought to bring transparency for contractors, as well as to move away from the exclusive use of statistical evidence. Changes were made to how OFCCP groups employees to better ensure they are only compared to those of similar circumstances for the purposes of pay analysis. Unfortunately, the Oracle case shows those rules can be skirted simply by using poorly constructed controls.
OFCCP has been repeatedly accused of abusive tactics going back decades, relying on the threat that it may exercise its power to debar contractors and render them ineligible for current or future government contracts to keep objections to a minimum. That, along with lackluster oversight over its auditors, has made for a culture of fear where few companies dare defend themselves.
As one of the few to truly fight back, a victory by Oracle in its case might do much to caution the agency against such overreach in the future, but stricter oversight would be even more useful. Should the Trump administration withdraw the flawed case against Oracle, premised on old guidelines, it would also save taxpayers from continuing to finance an overzealous prosecution.
Brian Garst is vice president of the Center for Freedom and Prosperity.
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