WASHINGTON — The Consumer Financial Protection Bureau released an internal report on Monday that showed "statistically significant disparities" in employee evaluations based not just on race, but also age, location, tenure, and whether staffers were part of the agency's union. 

As a result, the CFPB said it was scrapping its current system and would pay most agency employees as if they received the highest rating available at the time of their evaluation. Ultimately, the remediation to its staff is expected to cost between $5 million to $5.5 million, a spokesman said.

In an e-mail to all employees, CFPB Director Richard Cordray acknowledged the disparities, saying there "was no single factor that caused this result."

"We have determined that there were broad-based disparities in the way performance ratings were assigned across our employee base in both 2012 and 2013," Cordray wrote. "These differences indicate a systemic disadvantage to various categories of employees that persisted across divisions, offices, and other employee characteristics."

The report's release comes ahead of a hearing Wednesday by a House subcommittee probing allegations of retaliation and discrimination among employees at the CFPB. The Financial Services' oversight subcommittee has subpoenaed two agency officials and one representative of the National Treasury Employees Union to testify.

The ratings disparities were first made public by American Banker in a March 6 article that found African-Americans and other minority employees were far more likely to receive lower evaluations than white employees. The more than 1,100 employees were rated on a scale of 1 to 5; the agency grants greater benefits, including raises and benefits, to those who receive higher scores.

The story relied on an 2013 internal agency report that found 74.6% of whites received ratings of 4 or 5 compared to 65.2% of Hispanics and 57.6% of African-Americans. One-fifth of white employees, or 20.7% received a 5, compared with 10.5% of African-Americans, the report said.

The new report released Monday was a "deeper review," Cordray said. It confirmed there were disparities among employee evaluations by race, but said that the problems were far more extensive than previously known, including additional criteria like age and location.

The report found that "the average ratings for black and Hispanic employees were lower than the average ratings for white and Asian employees. The difference was statistically significant in both instances."

The report said the average white employee received a 3.94 rating, compared with 3.81 for Asian employees, 3.69 for Hispanics and 3.63 for blacks.

Additionally, the report concluded that "ratings for white employees are more concentrated around the 4 and 5 ratings levels than black and Hispanic employees, and ratings for black and Hispanic  employees are concentrated in the 3 rating level."

For the first time, the report also broke down a disparity in evaluations according to age. It found that employees less than 40 years old received an average rating of 3.94, while older employees received an a rating of 3.78 on average.

The disparity was even greater for employees who were part of a union versus those who were not. Nonunionized employees received an average rating of 4.04; unionized employees received an average 3.79 rating.

Disparities were also present depending on whether the employee worked at the CFPB's headquarters versus out in the field or at a regional office. Employees at the agency's D.C. headquarters received an average 3.95 rating, compared with 3.63 for employees outside that area.

Newer staff on average also received worse evaluations: a 3.69 rating for employees with less than one year of tenure, compared with 3.92 for employees who had worked at the agency for one year or longer.

(The report found there was not a statistically significant disparity related to gender. Women employees received an average 3.89 rating compared to 3.83 for men.)

"In sum, our performance ratings system did not meet our own objectives and expectations," the report said. "The analyses we undertook found statistically significant disparities indicating that employees were more likely to receive higher or lower overall performance ratings based on their race, age, pay grade, bargaining unit membership eligibility, tenure or whether they worked within the agency. For these reasons, we have decided to revisit our approach to our performance management program."

As for why its rating system didn't function as planned, the report said that while "well-intentioned," the evaluation system "was too sophisticated for a new agency like the CFPB," which was growing rapidly since it officially opened its doors in 2011. It said many managers did not even use the system until the fall of 2013 and lacked adequate training.

"Although the fiscal year 2013 performance management system included mechanisms to ensure fair and equal treatment of individual employees, it lacked policies and procedures for addressing more systemic problems in real time," the report said.

The CFPB said it would remediate payment to any CFPB employee — except senior leadership — who received a 3 or 4 summary performance rating in fiscal years 2012 or 2013. Such staffers will be paid as if they received a 5 at the time of their evaluation, including merit and lump sum payments.

"We recognize this remediation addresses the outcome of the performance review system rather than the underlying system itself," Cordray wrote in his e-mail. "To accomplish the latter goal will require more time, but we are committed to doing it.  By self-identifying and self-correcting these issues, we are holding ourselves accountable to the same standards of fairness that we expect of our regulated entities."

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