Government Contractor Compliance & Regulatory Update

Not Even COVID-19 Will Stop OFCCP

On March 20, 2020, OFCCP made clear in an announcement to the contractor community that it will continue operations during the COVID-19 pandemic “while making adjustments to ensure all of its activities are consistent with current public health guidelines.”

Dispelling any thought that audit activities might cease during the pandemic and the turmoil it has unleashed on businesses, OFCCP made clear that it “will continue its compliance reviews, focused reviews, and complaint investigations, but in lieu of physical onsites, OFCCP will maximize use of every alternative resource available, such as WebEx, Skype, and phones to conduct interviews and complete our evaluations.”

OFCCP does recognize that the COVID-19 pandemic may pose challenges for contractors under audit.  To that end, it advises that “[i]f contractors are experiencing difficulty in having their employees accessible during a review or experiencing any other challenges related to the health crisis, OFCCP will remain flexible by coordinating with them and providing reasonable extensions where needed.”

OFCCP has also issued a memorandum announcing “a limited exemption” to the requirements of the laws the agency enforces for contracts entered into to provide Coronavirus relief.  The exemption will be effective for a period of three months, from March 17 to June 17, 2020, subject to extension.  The agency also published FAQs that clarify the scope of the exemption.  The FAQs make clear that this exemption applies narrowly and is available only to “new supply & service and construction contracts solely for the specific purpose of providing Coronavirus relief.”  The exemption will not apply to contractors who have preexisting contracts unrelated to coronavirus, even if the contractor also has a new contract to provide Coronavirus relief. Such contractors must continue to comply with the affirmative action requirements of the laws enforced by OFCCP.

OFCCP Launches Online Contractor Compliance Institute

On February 21, 2020, OFCCP launched an online training platform called the Contractor Compliance Institute (“CCI”). In announcing the release of CCI, the agency stated it “created the CCI curriculum specifically for federal contractors, furthering [OFCCP’s] commitment to provide meaningful compliance assistance.” Contractors can create a CCI account and register for free, on-demand courses.

Currently, only one course is being offered through the site—a two-hour training entitled “The Path to Compliance: Understanding Expectations to Governance.” The training provides a broad overview of OFCCP’s requirements and is made up of four modules. Two of the four modules cover the posting and notice requirements of the laws enforced by OFCCP. The remaining modules cover the OFCCP’s legal authority and OFCCP’s recordkeeping and applicant tracking requirements. Throughout the training, participants are encouraged to contact OFCCP’s toll-free help line with questions or requests for clarification regarding course content. OFCCP states the course is designed for compensation managers, hiring managers, human resources managers, front line supervisors/managers, and recruiters.

OFCCP has announced that it will be releasing additional resources through CCI, including trainings related to Section 503 Focused Reviews and Functional Affirmative Action Programs, and “interactive, online tools for employers and employees to know their rights and responsibilities under Federal employment laws.”

Director Leen Reveals New Directives Are In The Works At OFCCP-NILG Compensation Roundtable

On February 18, 2020, Proskauer attended a Compensation Roundtable held at the Department of Labor put on by the National Industry Liaison Group (NILG) in collaboration with OFCCP. Director Leen spoke at the event, taking the opportunity to address his recent nomination to serve as the Inspector General of the Office of Personnel Management. He shared that, despite the nomination, he has no plans to slow down his work at OFCCP and, if anything, is more motivated to make progress on several initiatives. Among those initiatives are two new directives—one addressing “mediation” and another on “efficiency.” Director Leen did not share specifics about the new directives. Director Leen also noted that in addition to Section 503 focused reviews which are underway and VEVRAA focused reviews which he predicted will commence shortly, the agency still plans to roll out other types of focused reviews, including one addressing promotions.

Proskauer will continue to monitor developments regarding these new directives and report them here.

OFCCP Director Leen Nominated to Serve as OPM Inspector General

On February 3, 2020, the President Trump announced his intent to nominate Craig Edward Leen, the current OFCCP Director, to serve as the Inspector General at the Office of Personnel Management. The Office of the Inspector General has been without a permanent head since Patrick McFarland retired in February 2016. Nominees for Inspector General of the Office of Personnel Management must be confirmed by the Senate.

Leen became OFCCP Director in December 2018 and under his tenure the agency has seen record-breaking monetary recoveries. Additionally, under his leadership, the agency has implemented numerous initiatives aimed at increasing efficiency and improving the agency’s relationship with the federal government contractor community. The Department of Labor has not announced who will take over as OFCCP Director if Leen ultimately is confirmed.

Proskauer Delivers Comprehensive Webinar on OFCCP Developments

On January 15, 2020, Proskauer partner Guy Brenner and Resolution Economics Partner Rick Holt delivered a webinar entitled: OFCCP – The Year That Was and the Year Ahead. The jam-packed presentation provided legal, practical, and econometric insights into the numerous actions taken by the Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) in 2019, and looked ahead at what contractors can expect from the agency in 2020.

If you missed this informative webinar, you can access it using this link.

OFCCP Updates The Federal Contract Compliance Manual

On December 30, 2019, OFCCP updated its Federal Contract Compliance Manual (FCCM) for the first time since 2014.  The FCCM “provides guidance for OFCCP’s compliance officers . . . in conducting compliance evaluations, complaint investigations and providing federal contractors with compliance assistance.” In a press release, OFCCP explained that the updates “reflect revisions to OFCCP’s regulations, changes in practices, and to ensure transparency and provide greater clarity.”

OFCCP has provided a detailed overview of the changes and additions to the FCCM, broken down by Manual section. The changes to the FCCM include:

Contractors can download and review the full updated FCCM here.

Join Our Webinar: OFCCP – The Year That Was and the Year Ahead

Join us for a webinar on Wednesday, January 15, 2020, to review the significant changes and initiatives implemented by the Office of Federal Contract Compliance Programs in 2019, what they mean for federal contractors and what federal contractors can expect in 2020. Partner Guy Brenner and labor economist Dr. Rick Holt, a Director at Resolution Economics, will address topics including:

  • The new Voluntary Enterprise-Wide Review Program
  • Section 503 and VEVRAA Focused Reviews
  • Lessons learned from recent OFCCP settlements
  • Anticipated developments in 2020

To register and for more information click here.

OFCCP Proposes Rules Codifying Procedures for Resolving Alleged Violations and Setting Thresholds For Discrimination Findings

Quick Hit: OFCCP has published a Notice of Proposed Rulemaking (NPRM) it states would “codify the procedures that the agency currently uses to resolve potential discrimination and other material violations” and “clarify definitions to specify the types of evidence OFCCP will use to support its discrimination findings.”  The procedures dictate OFCCP’s use of Predetermination Notices (PDNs) and Notices of Violation (NOVs), and also provide the statistical and non-statistical requirements for discrimination findings.

Key Takeaways:

The proposed rule has a number of important components.  First, it codifies the procedures for two formal notices—PDNs and NOVs—OFCCP uses to notify contractors of findings of employment discrimination.  As such, if adopted, the proposed rule will provide contractors more clarity with regard to this process and make it more difficult for the agency to change the process.  The agency has been criticized for having opaque and inconsistently applied procedures.  For example, much of what occurs during an audit is guided by the Federal Contract Compliance Manual (FCCM), but the document itself makes clear it “does not establish substantive agency policy.”  As such, contractors had little recourse if compliance officers ignored provisions of the FCCM.  Moreover, OFCCP could change the FCCM’s procedures anytime it wished.  For example, OFCCP recently changed the PDN process in the FCCM via a Directive.  If adopted, the new regulations will codify the PDN and NOV process and prevent any changes absent a formal rulemaking with notice and the opportunity for review and comment.

Second, as part of the codification of the PDN and NOV process, OFCCP has proposed that contractors may bypass PDN and NOV procedures when there are preliminary findings of material violations and skip straight to conciliation, even when the violations involve discrimination.  This is consistent with OFCCP’s general effort to streamline the audit process and facilitate the resolution of audits on an expedited basis.

Third, and perhaps most important, the proposed rule defines the statistical thresholds necessary for the issuance of a PDN, providing that a PDN will not be issued when statistical indicators of discrimination are below three standard deviations absent “corroborating nonstatistical evidence” that “demonstrat[es] an intent to discriminate.”  However, “corroborating nonstatistical evidence” is not required to issue a PDN where the statistical indicators of discrimination are at or above three standard deviations.

More Detail:

On December 30, 2019, OFCCP issued the NPRM proposing a number of changes to its regulations.  OFCCP explains that the proposed rules are intended to “provide federal contractors and subcontractors with greater certainty about the procedures that OFCCP follows during compliance evaluations to resolve employment discrimination and other material violations.”  The proposed rules have a number of components.

First, they codify OFCCP’s use of PDNs and NOVs.  Under the proposal, which is similar to current stated practice, if a compliance review “indicates preliminary findings of discrimination,” the agency will send the contractor a PDN to inform it of the agency’s preliminary findings. The contractor will then have 15 calendar days to respond. If the contractor fails to respond “or provide a sufficient response within 15 calendar days of receipt of the notice,” OFCCP may issue an NOV.  Under the proposal, where the violations do not involve discrimination, a PDN is not required before issuing an NOV.

Under the proposed rule,  “[i]f a compliance review or other review by OFCCP indicates preliminary findings of discrimination or other material violations of the equal opportunity clause, OFCCP may issue a [NOV] to provide notice to the contractor requiring corrective action and inviting conciliation through a written agreement.”

In addition to codifying the process of issuing PDNs and NOVs described above, the proposed rules clarify that “[a] contractor may waive the [PDN and NOV] procedures . . . to enter directly into a conciliation agreement.” This bypass option is available even when the material violations involve discrimination. According to the NPRM, allowing contractors to skip the PDN and NOV procedures “would further the agency’s efforts to improve efficiency, codifying an expedited option for resolution that would apply to compliance reviews in their early stages.”

Second, OFCCP has proposed that it will not issue a PDN notifying a contractor of preliminary findings of discrimination unless its statistical analysis shows a disparity of at least two standard deviations.  Importantly, in instances where the statistical indicators of discrimination are between two and three standard deviations, the agency will require “corroborating nonstatistical evidence” demonstrating “an intent to discriminate” before issuing a PDN. The nonstatistical evidence OFCCP may examine includes “testimony about biased statements, remarks, attitudes, or acts based upon membership in a protected class; differential treatment through review of comparators, cohorts, or summary data reflecting differential selections, compensation and/or qualifications; testimony about individuals denied or given misleading or contradictory information about employment or compensation practices; testimony about the extent of discretion or subjectivity involved in making employment decisions; or other anecdotal or supporting evidence.”

However, the proposed rules provide that OFCCP may issue a PDN without any corroborating nonstatistical evidence where the statistical indicators of discrimination are at least three standard deviations.

Finally, the proposed rules update references to OFCCP’s agency head in regulations from “Deputy Assistant Secretary” to the correct title of “Director.”

Comments on the proposed rule are due by January 29, 2020 and can be submitted here. We will continue to advise our readers of developments related to this proposed rule as more details are made available.

OFCCP Will Not Use EEO-1 Component 2 Data In Audits

On November 22, 2019, OFCCP announced it will not “request, accept, or use” EEO-1 Component 2 pay and hours worked data from government contractors in connection with audits (or otherwise).

OFCCP explained that it will not request or use the data because it is “collected in a format that is highly aggregated” and, therefore, is “too broad to provide much utility” to OFCCP. Additionally, OFCCP stated that analyzing EEO-1 Component 2 data would place an unnecessary financial burden on the agency’s limited resources. Finally, OFCCP stated that it is not necessary for the agency to receive EEO-1 Component 2 data because it already “receives up-to-date, employee-level pay data from contractors that are selected for compliance evaluations.” OFCCP will, however, continue to receive EEO-1 Component 1 data, which provides an aggregated snapshot of an employer’s workforce, broken down by race and sex.

OFCCP’s announcement is not surprising. In its proposed revisions to its audit scheduling letters, OFCCP indicated it would seek only EEO-1 Component 1 data. In addition, as OFCCP notes in its announcement, the data it receives from contractors during audits is far more useful for determining pay discrimination issues than the data provided in the EEO-1 Component 2. Indeed, the utility of the EEO-1 Component 2 data has been questioned widely, including by the EEOC.

Although the burden of producing EEO-1 Component 2 reports is minimal, OFCCP’s announcement is welcome news for contractors as OFCCP has made clear that not only will it not request the information, it will not use it. Accordingly, although contractors still must concern themselves with the analysis OFCCP will apply to the robust, employee-level data they must submit during audits, they do not have to worry about OFCCP using the EEO-1 Component 2 data, with all of its limitations, to reach pay discrimination conclusions.


OFCCP Directive: Audits Will Investigate Discrimination Against Spouses Of Protected Veterans

On November 8, 2019, just before Veterans Day, OFCCP issued Directive (2020-01) (the “Directive”), which addresses “Spouses of Protected Veterans.”  Its latest directive is the first of FY2020 and follows up on the agency’s supplemental CSAL identifying contractors selected for VEVRAA Focused Reviews.

The Directive observes that spouses of protected veterans are protected by OFCCP regulations, and directs OFCCP compliance officers to investigate potential discrimination against such individuals during onsite investigations.

Specifically, compliance officers will, among other things:

  • offer Human Resources staff and managers compliance assistance by providing a sample nondiscrimination policy;
  • ensure “the contractor understands its obligation not to discriminate against qualified individuals whom the contractor knows to be spouses or other associates of a protected veteran”; and
  • ask employees interviewed during onsite investigations if they are or have coworkers who are spouses of protected veterans, and request “any observations they have concerning the treatment of spouses of protected veterans.”

Key Takeaway:

Contractors are advised to review and update, if necessary, their nondiscrimination policies to ensure they prohibit discrimination against protected veterans as well as their spouses and others associated with protected veterans.  OFCCP has provided sample policy language contractors may wish to adopt or use to modify their existing policies:

It is [Federal Contractor, Inc.’s] policy not to discriminate because of a person’s relationship or association with a protected veteran. This includes spouses and other family members. Also, [Federal Contractor, Inc.] will safeguard the fair and equitable treatment of protected veteran spouses and family members with regard to all employment actions and prohibit harassment of applicants and employees because of their relationship or association with a protected veteran.

Contractors selected for any compliance evaluation, but particularly VEVRAA Focused Reviews, should be prepared for compliance officers to investigate potential discrimination of protected veterans’ spouses when conducting onsite visits.