Audit Package Preparation: Best Practices for a Positive Audit Experience

1. Silicon Valley Industry Liaison Group Presents: Audit Package Preparation: Best Practices for a Positive Audit Experience Myra Cars - Applied Materials, Inc. Bonnie Corley - OFCCP Linda Grossman - Consultant Monty Peralta - Synopsys, Inc. Joanne Snow - JSA Consulting, Inc. Eleanor Sue - Sun Microsystems, Inc.

2. Best Practice # 1 • Don’t panic, but don’t ignore the 30-day notice • Alert CEO’s office now re possibility of audit • Take notes of OFCCP phone calls • Prepare and submit the best possible package. • If package will be late, call OFCCP a week before due date • If you are non-responsive, OFCCP will send a show-cause notice • Keep current

3. Best Practice #2 • Make contact and establish a good working relationship with the Compliance Officer at the very beginning

4. Establish the Relationship • Establish the relationship with OFCCP • Set and confirm expectations • Follow-up

5. Establish the Relationship • Call the contact person named at the end of the letter • Confirm he or she is your contact person • Make sure you are talking about the same site • Establish you are his or her contact person

6. Set and Confirm Expectations • Submittal is due 30 days from the receipt of the letter • Confirm when they expect the package • Confirm the address where the package is to be sent

7. Follow Up • Follow up agreements with an email or letter. • Once package is sent, follow up with your contact that they received the package. • Let your contact know you are available to answer any questions they may have about your submittal.

8. Best Practice # 3 • Understand what you are submitting and own it • Company’s responsibility • Work closely with the person who prepares the AAP to understand the data • Few surprises if you know what you are sending • Be the expert

9. Best Practice #4 • Be thorough and complete • Read the scheduling letter carefully, and organize complete answers to each of the requests on the itemized list • Submit the desk audit package with a cover letter explaining what you are providing to make the review as simple and easy as possible

10. Best Practice #5 • Prepare and explain your applicant, hire, promotion and termination data • How you do this can make the difference between an on-site review and closure at desk audit

11. Personnel Activity • Scheduling letter requires: • “Data on your employment activity (applicants, hires, promotions and terminations) for the preceding AAP year. ... These data shall be presented either by job group or by job title.”

12. Personnel Activity • Regulations require: • Analysis of your selection process, • including whether selection process eliminates a significantly higher percentage of minorities or women than non-minorities or men.

13. Analyzing Personnel Activity • Complying with the regulations usually requires Adverse Impact Analyses--a comparison of the rate of selection. [OFCCP calls this Impact Ratio Analysis (IRA).] • An IRA below 80% is considered Adverse Impact • Adverse Impact does not automatically mean there is discrimination. It is simply an indicator there could be a problem.

14. Adverse Impact Analysis Example: 10 female engineer hires 100 female engineer applicants IRA = ____________________________ 80 male engineer hires 400 male engineer applicants IRA = 10% 0.50 = 50% = Adverse Impact 20%

15. Choices for Audit Submission • How will you submit the requested personnel activity data? • Do you send: • summaries by job group? • summaries by job title?

16. Choices for Audit Submission • How will you submit the requested personnel activity data? • Do you send: • summaries only? • summaries along with your complete adverse impact analyses? • summaries, but adverse impact analyses only where IRAs are statistically significant (Two Standard Deviations or Fisher's Exact)?

17. Choices for Audit Submission • Do you send: • adverse impact analyses for total minorities or minority subgroups? • explanations of significant adverse impact? • explanations of all adverse impact? • no explanations?

18. Choices for Audit Submission • Suggestions: • Always know what you're sending • Know what it means • Evaluate whether displaying data in a different manner clarifies apparent "problem areas” • If there's even a hint of a problem, explain it up front in writing and when you deliver the package to assigned compliance officer

19. Choices for Audit Submission Example: (Displaying the data by Job Group) 10 minority engineer promotions 100 minority engineers in feeder Job Group IRA = ____________________________ 80 Anglo engineer promotions 400 Anglo engineers in feeder Job Group IRA = 10% 0.50 = 50% = Adverse Impact 20%

20. Choices for Audit Submission Example: (Displaying the data by title) 10 minorities promoted to Sr. Software Engineers 30 minority entry-level Software Engineers IRA = __________________________________________ 80 Anglos promoted to Sr. Software Engineers 200 Anglo entry-level Software Engineers IRA = 33% 0.83 = 83% = no Adverse Impact 40%

21. How to Decide • Summaries by job group? • Possibly in a very small company with few personnel actions • Summaries by job title? • Then must provide baseline data by job title • Summaries only? • Possibly in a very small company with few personnel actions

22. How to Decide • Summaries along with your complete adverse impact analyses? • Probably • Summaries, but adverse impact analyses only where IRAs are statistically significant (two standard deviations or Fisher's Exact)? • Recommend giving all IRAs or no IRAs • Including relevant tests of statistical significance a good idea

23. What to Explain • Depends on the situation • Explanations of significant adverse impact • Explanations of all adverse impact • No explanations

24. What to Explain • Examples of possible causes of adverse impact to be discussed: • Hiring unusual specialties (e.g., MDs with electrical engineering degrees plus 3-5 years business experience) • Lay-off based on elimination of business unit, company-wide ranking, etc. • Interns returning to college (in future exclude "contract employees" from AAP)

25. What to Explain • Examples of possible causes (cont’d): • Competitive promotions only (provide any written materials explaining program & "applicant" data as baseline) • In-line promotions based on years of education or experience completed (provide written materials and actual baseline data)

26. Best Practice #6 • Analyze and understand what the compensation data mean • Review your compensation data regularly - not just at OFFCP audit time. • For regular internal audit purposes as well as for the the Desk Audit, look at compensation the same way the agency does and go a step further. • Remember Attorney-client privilege when conducting internal audits on sensitive data.

27. Scheduling Letter: Item #11 • Even if you don’t use this compensation report internally, prepare the annualized compensation report as directed in Item #11 of the Scheduling Letter • Even though a third party may have created the report, understand what you are submitting before sending it in

28. Item # 11, Example

29. Item #11, What Does it Mean?

30. Statistical Tests • Let the experts and/or the software do it • If you use them, understand what the data show • Examples of statistical tests: • t-Test and Rank Sum • Multiple Regression Analysis

31. Cohort Salary Analysis • This is an easy test anyone can perform internally using Excel software • It makes good business sense as well as good EEO sense • It is recommended that it be conducted by job title and, if appropriate, by organizational unit – particularly if different organizations pay differently because of non-discriminatory factors

32. Cohort Salary Analysis (cont.)

33. Cohort Salary Analysis (cont.) • Sort by Job Title and, then, by Salary - low to high • Highlight individuals who appear lower- paid and, then, move on to determining Equal Pay Act reasons for the low salaries • Examples: Merit, Seniority, Quality/Quantity of Work and Geographic location of the job

34. Cohort Salary Analysis (cont.)

35. From the Department of Labor • Dol.gov/esa/regs/compliance/ofccp/compdata.htm • Wage differentials are not discriminatory or unlawful when based on neutral job-related factors • Analysis of comp data is a useful tool to ensure fairness in compensation • Problems, where identified, can be corrected • Analysis may be conducted without “expert” or outside assistance

36. From the Department of Labor (cont.) • The OFCCP strongly encourages Federal contractors to conduct analyses of their compensation systems in accordance with the self-audit responsibilities under E.O. 11246, in order to eliminate or prevent discriminatory policies and practices in this very important aspect of employment

37. From your HR Department • We want to attract and retain the best qualified people • We want this to be a great place to work for those people • We want our good employees to refer other highly talented people for employment

38. Conclusion • We may be on the same page in intent even if not always in method or conclusion • If we can do our homework, document our good efforts, and communicate with the other, maybe we can reach the same conclusion (i.e. “fair compensation practices”)

39. Best Practice #7 • Go the extra mile • Company information • Good faith efforts • Postings • Tabs, binders, colors • Detailed cover letter • Hand deliver, if reasonable • Others?

40. Best Practice #8 • Be certain to explain unusual business activity (conditions) • For example • Company is facing bankruptcy, • Closed a product line and laid off all those employees • Acquired another company • Discuss this in the narrative and let the auditor know as well

41. Best Practice #9 • Carefully review and analyze all data submitted for six-month update • If you are more than six months into the new plan year, follow the instructions in the Itemized Listing B • You will need updated reports on your progress towards goals in your current AAP and personnel activity for the most recent six months

42. Possible Other Factors • Review carefully all the differences in summary data between the plan documents and the current data • Explain significant differences - not only in terms of personnel activity, but also in terms of changes made to reporting methodologies, job groups, etc.

43. Other Factors (cont.) • Were there changes in your organizational structure, job groups, organizations included in the plan? • Are all job titles resident in the same job groups as in the Plan at the beginning of the year? • Are there other changes that may make review of your updated data confusing?

44. If the answer is “Yes” • Explain the differences and try to compare apples with apples, or. . . • Simply clarify the reason for changes • In any event, it is recommended that you NOT submit the results without clarifying changes that have occurred that affect the updated reports

45. Best Practice #10 • Formulate goals for individual minority groups as well as total minorities - even if you don’t submit these analyses with the plan documents for Desk Audit • Many attorneys advise against their clients submitting goals for individual minority groups • There are differing views

46. Best Practice #11 • Audience - anything to add?

47. Silicon Valley Industry Liaison Group www.svilg.com Thank you for joining us today.