Who won the Oracle case?

Earlier this month, in what should have been a no-brainer, the Department of Labor decided not to appeal its defeat in the meritless compensation discrimination suit it brought against Oracle. An administrative law judge had smacked down the DOL’s radical theories on proving compensation discrimination, and had ruled that Oracle did not discriminate against women or minorities.

Thus, to answer the question posed in the title of this post, Oracle won the Oracle case.

But in my view, there was another winner in the case — the radical DOL lawyers who brought and prosecuted the case. How so?

Because for virtually the entire Trump administration, the Department of Labor advanced radical theories on how to prove compensation discrimination. Thus, when the Biden administration advances and codifies the same theories, it can defend them on the grounds that these theories, far from being radical, are the same ones advanced by the Trump DOL in the Oracle case. They will have been the position of the DOL for twelve years under both Democratic and Republican leadership.

Let’s flesh this out. During the George W. Bush presidency, the Department of Labor published guidelines in the Federal Register on proving compensation discrimination for purposes of the Executive Order banning such discrimination by federal contractors. Essentially, the Bush DOL adopted the same approach taken by federal courts in compensation discrimination cases brought under Title VII of the Civil Rights Act.

This sensible approach compares the pay of individuals performing the same basic work to see if one group — e.g. women or Blacks — is being paid less than others — e.g. men or Whites. Regression analysis is used to determine whether any pay disparities remain statistically significant after controlling for factors other than gender or race — e.g., seniority, experience, and education.

The Obama administration rescinded the Bush-era guidelines. This enabled it pursue compensation discrimination cases based on pay comparisons unmoored to the work individuals perform. The goal was to bridge the mostly mythical “pay gap” between men and women by circumventing Title VII and, to the considerable extent possible, the judiciary.

The DOL’s end run around established law on compensation discrimination consisted of several elements. One was to compare the pay of people performing vastly dissimilar work.

Let’s take the tech industry, which became a prime target of the Obama DOL. It makes sense to examine whether male and female engineers performing highly complex work (e.g., on the cloud or on artificial intelligence) are paid about the same. If they aren’t, the federal contractor should have to explain why.

But it makes no sense to lump all people holding the title “engineer” together. One would expect engineers performing sophisticated work to be paid significantly more than those performing relatively unsophisticated work, such as tweaking Outlook. Thus, no inference of pay discrimination arises from pay differences within such a broad classification.

Yet, the Obama DOL, and later Trump’s, drew that inference.

Furthermore, it is preposterous to aggregate all “exempt” employees and compare their pay. Of course, the CEO of a tech company will be paid more than engineers, and engineers will be paid more than, say, human resource specialists. Inferring discrimination, or even the hint of it, from gender pay disparities within a group this broad is absurd.

Yet, this is what the Obama DOL, and later Trump’s, did.

And they went further. They adopted something called “human capital” theory. This approach aggregates employees based on the qualifications, skills, and experience they possessed when they first applied for work with the contractor. Everything else that might explain pay differences — e.g., what jobs the employees pursued; what additional skills, qualifications, and experience they went on to obtain; whether at some point they chose to work part time — is deemed irrelevant for purposes of finding pay discrimination.

The notion is that once two comparable individuals apply for work at a company, everything should be the same thereafter. If it isn’t, the theory seems to imply, the federal contractor is accountable. Clearly, this thinking defies reality.

The Obama DOL filed the Oracle case in its final days. That case represented the apotheosis of the radical pay discrimination theories it had been pushing for eight years.

The Trump administration should have nipped the Oracle case in the bud. Instead, Alex Acosta, the new Secretary of Labor allowed it to proceed full steam ahead.

One might have expected Gene Scalia, Acosta’s successor as Senate-confirmed DOL Secretary, to pull the plug on the Oracle case. Scalia didn’t. He tried to settle the case, reportedly for somewhere around $30-40 million. After his settlement efforts failed, the DOL pressed on with the litigation.

Demanding a large settlement amount in a case based on unhinged theories of proving compensation discrimination is a tacit endorsement of those theories. Under a proper statistical analysis — the kind a responsible DOL must apply — Oracle’s liability is zero, as the administrative law judge later found it to be.

In August 2018, the DOL did issue a “Directive” that summarized for federal contractors how the Department uses statistics to test for compensation discrimination. The Directive is consistent with Title VII principles and the Bush administration guidelines.

However, the Directive states:

This Directive is not intended to have any effect on pending litigation, nor would this Directive have altered the agency’s basis for litigating any pending cases.

(Emphasis added)

Thus, by its own terms, the Directive cannot be viewed as a repudiation of the theories pursued by the DOL throughout the Trump administration in the then-pending Oracle litigation. The Biden administration, when it advances and codifies these theories, will be free to argue, correctly, that it is taking positions the DOL embraced, on a bipartisan basis, for twelve years — first under Obama and then under Trump. (After deciding not to appeal the Oracle case, the DOL said it no longer evaluates cases in the way rejected by the administrative law judge. Coming in December of 2020, this statement is an almost comical attempt to cover the tracks. It can’t erase the four-year embrace of the rejected theories by the Trump DOL.)

It’s a disgrace that the DOL devoted virtually all four years of the Trump administration to pursuing a legal action based on an absurd collection of leftist theories of proving compensation discrimination. It’s a disgrace that Oracle had to defend the action — one that, given the 2018 Directive, Gene Scalia and DOL’s Solicitor Kate O’Scannlainan knew was based on meritless theories of proof.

And it’s a disgrace that, as a result of Acosta’s and Scalia’s unwillingness to pull the plug, the Biden DOL will be in a better position than it should be to advance the theories underlying the Oracle case.

That’s why I believe the leftist Obama DOL appointees and the career DOL bureaucrats come out as winners in the Oracle litigation.

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