Government Contractor Compliance & Regulatory Update

OFCCP’s First Published Opinion Letter: Pell Grants Do Not Make Universities Federal Contractors

On May 23, 2019, OFCCP issued its first published opinion letter addressing whether universities and other post-secondary higher educational institutions become covered federal contractors by serving as a “conduit” for Pell Grants. According to the OFCCP, “solely serving as a conduit for Pell Grants does not render a post-secondary higher education institution a covered federal contractor…”

The opinion letter’s conclusion is not surprising, but given the dearth of clear guidance it provides institutions of higher education with a welcome definitive statement of the agency’s current view on the matter. As OFCCP explains in its letter, Pell Grants – federal subsidies awarded as financial aid to low income college students in order to defray the cost of attending school – do not make a university a covered federal contractor because “grants do not constitute federal procurement contracts.” OFCCP noted that its implementing regulations define government contracts as “any agreement or modification thereof between any contracting agency and any person for the purchase, sale or use of personal property or nonpersonal services.” The agency concluded that because Pell Grants are issued “to a recipient in order to further ‘a public purpose of support or stimulation[,]’” they do not constitute a government contract that would confer federal contractor status. Therefore, the opinion letter concludes, “solely serving as a conduit for Pell grants” does not render universities, colleges, or other post-secondary higher educational institutions federal contractors for purposes of OFCCP regulations.

In late 2018, OFCCP announced that it would adopt the practice of issuing opinion letters as part of its ongoing efforts to enhance compliance assistance for contractors. As we reported, OFCCP’s stated goal was to “provide additional compliance assistance and guidance regarding OFCCP’s laws and regulations in a manner that employees and employers can easily access and reasonably rely upon, as they seek to understand their rights and obligations under the law.” The OFCCP’s opinion letter directive provides that “[a]s a matter of prosecutorial discretion, OFCCP also would consider whether a contractor acted consistently with an Opinion Letter … when determining whether to cite a violation for related actions.” As such, even though opinion letters are not legally binding, they do provide contractors some comfort as they attempt to discern the scope of their OFCCP obligations.

Even though OFCCP’s first opinion letter has limited applicability to the contractor community as a whole, we expect future opinion letters to address issues applicable to all contractors. As such, our readers are well advised to stay informed of OFCCP’s opinion letters. We will continue to report on note-worthy opinion letters as they become available.

OFCCP Proposes Changes to Audit Scheduling Letters

Quick Hit: OFCCP recently issued a request to the Office of Management and Budget (“OMB”) seeking approval of changes to its “scheduling letter, compliance check letter, [] Section 503 focused review letter… [and] approval for a new VEVRAA focused review letter.” OFCCP states the revised letters will “provide OFCCP an efficient option to monitor contractor compliance by reaching a greater number of contractors with existing resources with a smaller contractor burden imposed during each check.” Each of the proposed compliance letters are available for review here. The public has until June 11, 2019 to submit comments about the proposed changes.

Key Takeaways:

If approved, the new letters will require contractors to submit significant additional information in response to an audit. Notably, the proposed letters do not extend the deadlines for responding to these information requests. These letters reflect a troubling trend emanating from the OFCCP. After an initial “honeymoon” phase, where the agency took steps aimed at improving relations with the contractor community following a rocky period during the Obama Administration, it appears the agency is ratcheting up its focus on enforcement and the burdens its enforcement activities impose on contractors.

For example, if approved, the establishment compliance evaluation scheduling letter will require contractors to provide additional information not included in the current version of the letter. Key among these are: (1) a list of their three largest subcontractors based on contract value; (2) job group analyses that account for specific racial groups (as opposed to simply identifying and grouping together “minorities”); (3) more detailed information about promotions, specifically the pool of candidates from which promotions were selected; and (4) “[r]esults of the most recent analysis of the” contractor’s “compensation system(s).” OFCCP is also bringing back “compliance checks” – limited reviews aimed at quickly determining if the selected contractor is meeting basic compliance requirements. The letter proposed for these evaluations seeks contractors’ EO 11246, Section 503, and VEVRAA Affirmative Action Programs, as well as detailed information concerning reasonable accommodations (i.e., the requests made and whether they were granted or denied), and examples of job advertisements.

Finally, OFCCP has proposed to revise its Section 503 focus review letter, and seeks approval for a VEVRAA focus review letter. Both proposals seek information far beyond what OFCCP proposed when it first announced focused reviews. Most notably, contractors would have to submit employee-level compensation data that is currently required for regular compliance evaluations, and detailed applicant and employee level information for veterans and individuals with disabilities.

Report From OFCCP Legal Industry Town Hall – Law Firms Beware

On April 10, 2019, in New York City, OFCCP hosted a town hall focused on the “legal industry and related fields.” Guy Brenner of Proskauer attended the event, which had far fewer attendees than the financial sector town hall held the previous day.

The purpose of the town hall was to provide government contractors in the legal sector the opportunity to share their views with OFCCP. To that end, participants engaged in a number of brainstorming sessions, sharing their views on what OFCCP can do to help contractors, as well as ideas to improve diversity and inclusion results.

But, like the prior day’s town hall, the most significant aspect of the event was remarks made by OFCCP Director Craig Leen to the attendees. In addition to sharing a number of the new initiatives that he raised during the financial sector town hall the day before , Director Leen made a number of pointed statements about law firms and OFCCP’s planned efforts with regard to the legal sector.

During his opening remarks, Director Leen stated that law firms “need to get their house in order.” He said that law firms should be examples to the rest of the country with regard to legal compliance, but that National Association for Law Placement (“NALP”) statistics suggest that is not the case. He focused primarily on promotions at law firms and his conclusion that law firms have a “systemic” issue with career advancement of women and individuals with disabilities, citing NALP figures showing roughly 22% of equity partners are women, while only 1% are women of color, and less than 1% are individuals with disabilities. It is Director Leen’s view that OFCCP has a role to play in addressing the lack of women in equity partner positions at law firms.

Director Leen believes one reason for the lack of women in equity partner positions at law firms may stem from parental leave programs. He questioned whether generous leave programs offered by law firms adequately address reintegrating women into the firm after their leave has ended, and whether male associates are discouraged from using their leave benefits.

During the town hall, OFCCP asked participants questions regarding disclosure of equity partner data, which led participants to question whether OFCCP viewed equity partners as employees subject to OFCCP regulations. Director Leen acknowledged the “debate” over that question, and said OFCCP would be issuing guidance on that issue. He said that non-equity partners are, in his view, employees. He also said that OFCCP will seek equity partner information in future audits as part of its analysis of promotions and determining whether promotions to partner may reflect discriminatory bias.

Director Leen also addressed why only a few law firms ended up on this year’s CSAL list. He explained that the methodology used for the 2019 list focused on specific industries and did not focus on law firms. He said the methodology will change each year, and suggested that law firms would be a focus for next year’s audits.

The unmistakable feeling at the end of the town hall was that law firms with government contracts are now a focus of the OFCCP. Law firms should anticipate a greater likelihood they will be selected for audit in 2020 and be aware that a focal point of that examination will be partnership promotion decisions.

OFCCP Shares Some News At Financial Industry Town Hall

On April 9, 2019, in New York City, OFCCP hosted a town hall focused on the “financial industry and related fields.” Guy Brenner of Proskauer attended what was an enlightening and informative event.

The purpose of the town hall was to provide government contractors in the financial sector the opportunity to share their views with OFCCP. To that end, participants engaged in a number of brainstorming sessions, sharing their views on what OFCCP can do to help contractors, as well as ideas to improve diversity and inclusion results.

But the key takeaway from the day was the information shared by OFCCP Director Craig Leen regarding upcoming initiatives. Here are the highlights:

  • Focus on promotions. Director Leen started off the day by sharing that OFCCP is trying to increase the number of women in senior roles at companies. He stated that it was an area “where we can make a big impact.” To that end, OFCCP is going to focus more on promotions during audits, and will create new focused reviews on promotions of women and women of color. Leen shared his view that promotions (or lack thereof) impact pay equity. He also noted concern about the role inequitable parental leave policies may have on opportunities for women to advance in the workplace.
  • AAP Verification Initiative. Leen stated that the AAP verification initiative is already in effect, noting that OFCCP has worked AAP compliance into a number of its processes. For example, during Section 503 Focused Reviews OFCCP will require contractors submit their Executive Order 11246 AAPs in part to ensure they have been prepared. In addition, during establishment compliance reviews, contractors must provide their AAPs within 30 days of the issuance of the scheduling letter and no extensions will be provided. Leen shared that compliance officers will also be checking the SAM database to see how contractors under review have answered the annual AAP preparation inquiry and address any discrepancies between answers provided in SAM with what is observed during audits. Finally, OFCCP is currently working on a new collection effort whereby contractors would be required to certify AAP compliance and even submit AAPs annually to OFCCP through a web portal. Such initiatives would go through notice and public comment, and would need approval of the Office of Management and Budget.
  • Additional Pay Guidance. OFCCP is preparing a new guidance document for contractors focused on how to form pay analysis groups. Leen said the guidance should be issued “very soon.”
  • Reducing the length of audits. Leen believes it takes OFCCP “way too long to do audits.” He aims to reduce the length of audits, and shared that he has already achieved some success. The average length of desk audits is now roughly thirty days, down from over 100 days. Leen appears to now be focused on shortening the time devoted to conciliation efforts. He shared that while the agency is committed to the process, it should not take 2 or 3 years to complete. He suggested that conciliation should last no more than six months.
  • Opinion Letters and Online Help Desk. Leen stated that these resources which were announced in December  would be available “soon.”
  • New Awards Programs. Leen shared that OFCCP is considering some new recognition programs, suggesting that the agency might create an award for contractors with Functional Affirmative Action Programs, as well as recognizing contractors that demonstrate a strong commitment to compliance during audits.

No Let Up. As the points above make clear, OFCCP is and will continue to be quite active in the future.

OFCCP Announces 2019 Veteran Hiring Benchmark

On March 27, 2019 the Office of Federal Contract Compliance Programs (“OFCCP”) released its 2019 Vietnam Era Veterans’ Readjustment Assistance Act (“VEVRAA”) Benchmark. Effective March 31, 2019 the new benchmark is 5.9%, a slight decrease from 2018’s 6.4% benchmark. This is OFCCP’s fifth reduction of the benchmark, which has steadily declined since its inception in 2014.

The VEVRAA Benchmark is the figure which federal contractors must use to assess the effectiveness of their outreach programs for the hiring of veterans. Contractors may either use OFCCP’s national benchmark, or establish their own benchmark using applicable statistics and other metrics set forth in OFCCP’s regulations (41 CFR § 60-300.45(b)(2)).

In announcing the revised benchmark, OFCCP also noted that it “plans to incorporate VEVRAA Focused Reviews into the Corporate Scheduling Announcement List” next fiscal year. As we previously reported, focused reviews are compliance evaluations focusing on one element of OFCCP’s jurisdiction. This year OFCCP introduced Section 503 Focused Reviews, which focus on the OFCCP’s requirements with respect to individuals with disabilities. Contractors should review their processes for compliance with VEVRAA and OFCCP’s VEVRAA-related regulations to ensure they are prepared.

BREAKING: OFCCP Selects Contractors For 2019 Audits

On March 25, 2019 OFCCP posted the 2019 CSAL list on its FOIA website, identifying contractors selected for compliance evaluations.

Contractors should check OFCCP’s FOIA website immediately to confirm if they have been scheduled for a compliance review, a Section 503 Focused Review, or an Affirmative Action compliance check. As we have previously reported, contractors will no longer receive notification that they have been selected for a compliance review through the mail.

If you have any questions or concerns regarding any of the above mentioned forms of review, please feel free to contact Guy Brenner at: Gbrenner@proskauer.com.

EEOC Ordered To Provide EEO-1 Pay Data Guidance By April 3

According to published reports, the federal judge who ordered the EEOC to reinstitute the stayed compensation portion of the EEO-1 report (referred to as “Component-2 data”) has given the EEOC until April 3 to provide guidance about if, when and how it will collect Component-2 data from employers.

 

See original post from our Law and the Workplace blog here.

EEOC Opens EEO-1 Portal

As we previously reported, a federal judge has lifted the stay issued by the Office of Management and Budget (“OMB”) that halted implementation of the EEOC’s revised EEO-1 form that would have added compensation data to the annual EEO-1 survey submission (the “Revised EEO-1”). In so ruling, the judge ordered “that the previous approval of the revised EEO-1 form shall be in effect.”

 

See original post from our Law and the Workplace blog here.

OFCCP Announces New York City Town Hall Meetings

On March 11, 2019 OFCCP announced that, “[i]n order to continue to enhance the scope and quality of OFCCP’s compliance assistance materials” and to “to build on the success of [previous] town halls,” it will be holding two town hall meetings in New York City in April 2019. The first meeting will focus on the financial industry, while the second will focus on the legal industry. The meetings will be open to the public.

OFCCP notes that the meetings will “be of particular interest to human resource managers, equal employment opportunity specialists, chief compliance officers, and other personnel in the legal and financial industries who are directly involved with ensuring their company’s compliance with OFCCP’s requirements.”

Each organization is only allowed two tickets to each town hall meeting, and tickets are assigned on a first come, first serve basis. The dates, times and registration links to the town halls are detailed below:

  1. Date: April 9, 2019 Time: 8:30 AM to 1:00 PM City Location: New York, NY Registration Link: https://www.eventbrite.com/e/ofccp-town-hall-financial-industry-related-fields-tickets-58112751805
  2. Date: April 10, 2019 Time: 8:30 AM to 1:00 PM City Location: New York, NY Registration Link: https://www.eventbrite.com/e/ofccp-town-hall-legal-industry-related-fields-tickets-58117930294

OFCCP has also announced, but not yet scheduled, town hall meetings in Phoenix, Arizona and in Washington, DC. The meetings will focus on Native American Outreach and VEVRAA respectively.

OFCCP Provides Anticipated Guidance On Section 503 Focused Reviews

Quick Hit: As we previously reported, OFCCP is about to introduce “focused reviews” – compliance evaluations focused on a particular area of OFCCP enforcement – and its upcoming publication of the 2019 CSAL list will include Section 503 Focused Reviews. In advance of the launch of focused reviews, OFCCP has established a Section 503 Focused Reviews webpage (“Section 503 webpage”). The Section 503 webpage provides contractors with resources aimed at assisting with Section 503 focused reviews, including: a Section 503 FAQ page, a copy of the Section 503 Focused Review Scheduling Letter, and “OFCCP compiled disability related best practices to assist federal contractors with compliance.”

Key Takeaway:

Contractors should familiarize themselves with the contents of Section 503 webpage, which provides some useful guidance.  Of particular note, the FAQ page provides helpful answers for some common questions about the focused reviews as well as new insights.  For example:

  • Although the Section 503 Focused Review Scheduling Letter requests a copy of the contractor’s EO 11246 Affirmative Action Program, the document is not reviewed as part of the focused review; rather, it will be used to help the compliance officer understand the contractor’s organizational structure and compliance efforts.
  • Contractors will not be scheduled for full compliance evaluations while undergoing a Section 503 Focused Review (but will not be immune from investigations into individual complaints alleging violations of the laws OFCCP administers);
  • For now, Section 503 Focused reviews will be conducted only at contractors’ corporate headquarters locations.

OFCCP provides other resources as well, including links to its best practices with regard to recruiting, hiring, and retaining disabled individuals, which should help contractors anticipate the practices that OFCCP will be looking for during a focused review.

More Detail: On March 8, 2018 OFCCP published its Section 503 webpage.  OFCCP intends the Section 503 webpage “to provide contractors with helpful information and assistance in implementing best practices and increasing the employment of individuals with disabilities[]” and to “serve as a resource center for contractors.”  The Section 503 Webpage can be accessed here.

The Section 503 webpage provides a number of resources, including:

  • Directive 2018-04 (which establishes focused reviews);
  •  A sample Section 503 Focused Review Scheduling Letter so contractors can know what OFCCP will request if they are selected for such a review;
  • Section 503 Focused Reviews Frequently Asked Questions where OFCCP has posted 12 questions and answers about Section 503 Focused Reviews;
  • Section 503 regulations
  • OFCCP’s “Best Practices” for Section 503 compliance;
  • Section 503 resources “providing help, assistance, guidance, support and advice”; and
  • The voluntary self-identification form for individuals with disabilities.
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