United States: OFCCP Takes Aim At Oracle's Hiring And Compensation Practices

Seyfarth Synopsis: On January 22, 2019, the Office of Federal Contract Compliance Programs ("OFCCP" or "the Agency") filed a motion for leave to file a new amended complaint in connection with its 2017 Compliance Evaluation of Oracle America, Inc.'s ("Oracle" or "the Company") Redwood Shores headquarters. The copy of the amended complaint, which was attached to the motion, alleges discrimination in compensation against female, African American, and Asian employees and in hiring against African American, Hispanic, and White applicants. The complaint further alleges that Oracle has failed to maintain and provide information in accordance with its recordkeeping obligations under Executive Order 11246 ("E.O. 11246"). The complaint is instructive for federal contractors as the allegations detail the Agency's views on certain alleged hiring practices and the methodologies used to analyze data.

The OFCCP's amended complaint contains a wide array of allegations and supporting calculations outlining what it believes to be discrimination in how Oracle hires and pays employees. The complaint further asserts that Oracle has failed to maintain and provide the agency with the records necessary for it to conduct a thorough analysis of the company's compliance with E.O. 11246. While we have heard from only one side in this dispute, the allegations are informative for government contractors as they provide a window into the Agency's views on certain alleged practices along with their statistical methodologies.

There are two main claims at issue: compensation discrimination and hiring discrimination. In those two claims, the OFCCP is pointing to multiple alleged practices including: (1) using prior salary to set compensation, (2) "channeling" of women and minorities into lower paying jobs, (3) college hiring practices that allegedly favored Asians, and (4) record-keeping and applicant tracking practices.

Allegations of Discrimination in Hiring

With regard to hiring discrimination, OFCCP alleges that Oracle engaged in a pattern and practice of race discrimination in its college and university hiring practices. Specifically, it is alleged that Oracle favors Asian applicants, "particularly Asian Indian" individuals for its entry-level Product Development roles through its University hiring program. This preference is purported to have a negative effect on the hiring rates of African American, Hispanic and White applicants as compared to Asian applicants.

The OFCCP based its findings on an analysis of labor market availability rather than relying on Oracle's actual applicant pool because they contend Oracle's college recruiting data was "unreliable" and did not comply with the OFCCP's record-keeping requirements. Among other allegations, the OFCCP contends Oracle failed to appropriately track all applicants who met the basic qualifications for its college recruiting program because it did not capture applicant data until after a subsequent screening had taken place. The applicant data was also deemed unreliable because Oracle purportedly failed to solicit race, ethnicity and gender information from the subset of applicants it did track. In its complaint, the OFCCP additionally alleges that the hiring rates for Asian applicants were skewed further by Oracle's use of "a campus hiring program solely for graduates of colleges in India."

Allegations of Discrimination in Compensation

The OFCCP claims that Oracle engaged in systemic compensation discrimination against qualified women, African Americans and Asians. Specifically, when conducting a multiple regression analysis by job function that controlled for job title, full-time status, exempt status, global career level, job specialty, estimated prior work experience and company tenure, OFCCP found alleged statistically significant pay disparities.

The OFCCP contends that the compensation discrimination was based on Oracle's reliance on prior salary in setting initial pay and their practice of "channeling" (or steering) of women, Black and Asian employees into lower-paid jobs.

What This Means for Employers

While the OFCCP's allegations paint a dismal picture, we have heard only one side of the allegations at this stage in the litigation and we expect to learn more facts as the case progresses. However, the allegations alone are instructive for federal contractors. Regardless of the final outcome of the case, the key takeaways are as follows:

• The OFCCP remains focused on pay issues. The regression methodology outlined in the complaint (e.g, grouping employees by function and controlling for job title) gives a specific example of the methodology the OFCCP uses in its regressions.
• Using prior salary history in making compensation decisions may result in adverse findings.
• The OFCCP remains focused on "steering" or "channeling" allegations to support a claim of discrimination. It is notable that the channeling allegations are not coming up in the hiring or promotion context, but rather are being used to support a claim regarding unequal pay.
• • The OFCCP is focused on hiring preferences or biases in favor of immigrant visa holders. It will also be instructive to understand the basis for the Agency's allegation that Oracle had a preference for "Asian Indians."
  • Record-keeping practices, even as part off-site recruiting activities remain critical for federal contractors.

We will monitor this case on an ongoing basis and provide key updates as they arise.

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