Government Contractor Compliance & Regulatory Update

Reports: Craig Leen’s Appointment As OFCCP Director Remains Uncertain

As we previously reported, various media outlets reported earlier this month that Coral Gables City Attorney, Craig Leen, would be appointed Director of the Office of Federal Contractor Compliance Programs (“OFCCP”).  These reports came amid silence by the Trump administration as to the anticipated appointment.

Since our last post, the confusion over Mr. Leen’s role in the Trump administration has only grown as there has still been no official announcement of Mr. Leen’s appointment.  On November 27, 2017, Bloomberg reported that the OFCCP stated that Mr. Leen was working for OFCCP as a “senior advisor.”  No additional details were released regarding his role.

The OFCCP has now been without a Director for thirteen months.  Some have speculated that the difficulty in finding an OFCCP Director may be tied to the efforts to merge the OFCCP into the U.S. Equal Employment Opportunity Commission and/or to cut its budget substantially.  Regardless of the reasoning for the delay, the absence of an OFCCP Director leaves the government contracting community with little guidance regarding the future of the OFCCP’s enforcement efforts and compliance priorities.

Stay tuned for additional developments.

Reports: New OFCCP Director Appointed

According to multiple sources, on November 13, 2017, Craig E. Leen, was appointed the new Director of the Office of Federal Contractor Compliance Programs (“OFCCP”).  Mr. Leen has been the City Attorney for Coral Gables, Florida since 2011.  He has also served as an adjunct professor of law for universities in Florida.  If the published reports are correct, Mr. Leen will replace Thomas M. Dowd, who has been serving as OFCCP Acting Director since November 7, 2016.

There is little in Mr. Leen’s background to gauge how his appointment will impact OFCCP.  Based on publicly available information, it is unclear whether Mr. Leen has much, if any, experience with matters falling within the OFCCP’s jurisdiction.  From published reports, it appears Mr. Leen’s appointment may be due in part to his relationship with Secretary of Labor Alexander Acosta.  According to the Miami Herald, Secretary Acosta called Mr. Leen several months ago and asked him to come and work with him in Washington, DC.  Although we do not know how Secretary Acosta and Mr. Leen know each other, Mr. Leen taught as an adjunct professor at Florida International University College of Law when Secretary Acosta was the Dean.

For nearly 10 months, government contractors have been waiting to see what changes might come to OFCCP as a result of President’s Trump election.  With the appointment of Mr. Leen, the new(ish) Administration will have a new Director to guide OFCCP and presumably institute changes reflecting the Trump Administration’s priorities for the Office.

OFCCP Files Its First Complaint Against A Federal Contractor During the Trump Administration

On October 10, 2017, the U.S. Office of Federal Contractor Compliance Programs (“OFCCP”) filed its first Complaint against a federal contractor since President Trump took office. The Complaint alleges that contractor Advance 2000 Inc. (the “Contractor”) violated a June 2015 conciliation agreement with OFCCP by failing to submit required progress reports and failing to respond to OFCCP’s notice of violation.

The Complaint is significant in that it is the first action brought by the OFCCP against a federal contractor since President Trump took office. That being said, the Complaint does little to illuminate the administrative enforcement priorities of the Trump OFCCP. The Complaint addresses the failure of a contractor to comply with its conciliation agreement obligations – a matter that would likely be pursued no matter who occupied the White House. Thus, it still remains to be seen what the OFCCP’s enforcement priorities will be under the Trump Administration.  Those will likely not be evident until after the new Solicitor of Labor is confirmed. President Trump has nominated Kate O‘Scannlain, a partner at Kirkland & Ellis LLP, for the post, but her nomination is still pending Senate confirmation.

Even so, the Complaint does highlight another common issue in the government contracting sector – namely, the tendency of high compliance costs to discourage small businesses from government contracting. Advance 2000 appears to be a small business, with relatively modest government contracts of approximately $158,000. In an interview with Bloomberg, the CEO of Advance 2000 noted that the Contractor did not intend to seek future government contracts due to the narrow margins and the excessive costs and burdens of compliance.

The government has historically encouraged small businesses, which often include minority- and women-owned businesses, to participate in government contracting. However, the personnel and financial burdens of complying often favor larger institutional government contractors, which already have a substantial compliance program in place. Thus, small contractors are often at a disadvantage when entering the government contracting sector.

The issue is even more acute when considered in light of the low thresholds attaching to various compliance obligations. The most burdensome compliance obligations attach when a contractor with 50 or more employees has a contract of $50,000 or more – with additional obligations attaching when a contractor has a contract of $150,000 or more. Contracts of $50,000 and $150,000 are not significant sums of money, especially given that such contracts often yield narrow profit margins. As such, contractors are forced to incur substantial additional expenses to meet compliance obligations, where the profit margin for those contracts is already slim.

Sanctions Award Strengthens Fight to Protect Confidential Company Records

On October 18, 2017, a federal district judge in Alaska ordered a former employee to pay nearly $170,000 of his ex-employer’s legal fees as sanction for removing nine attorney-client privileged documents prior to his termination. The ruling was based on a decision this summer that the former employee willfully and deliberately disobeyed established norms of litigation conduct when he took, and then used in litigation, the nine privileged documents. In his decision over the summer, however, Judge Holland stopped short of dismissing the former employee’s claims, finding monetary sanctions adequate to address the conduct. Read the full post on Proskauer’s  Whistleblower Defense blog.

OFCCP Issues Compliance Relief to Federal Contractors in Wake of Devastating Hurricanes

In the wake of the devastating series of hurricanes throughout the United States, the Office of Federal Contractor Compliance Programs (“OFCCP”) has provided compliance exemptions to federal contractors providing hurricane relief.  OFCCP has issued three National Interest Exemptions:  one for Hurricane Harvey; one for Hurricane Irma; and one for Hurricane Maria.

The notices provide contractors providing hurricane relief with an exemption from the requirement to develop a written affirmative action program for both women and minorities and veterans and individuals with disabilities.  Contractors are still required to post the “Equal Opportunity is the Law” poster, maintain records as required by federal contracting regulations and post employment listings “with the appropriate employment service delivery system as required by VEVRAA.”

This is strictly a three month exemption for contractors entering into contracts for hurricane relief.  For Hurricane Harvey, the exemption runs from September 1, 2017 to December 1, 2017.  For Hurricane Irma, the exemption runs from September 8, 2017 to December 8, 2017.  For Hurricane Maria, the exemption runs from September 21, 2017 to December 21, 2017.  Each exemption is subject to extension as necessary.

Contractors should note that these exemptions only apply to contracts entered into for hurricane relief during this timeframe.  Thus, contractors that already maintain existing contracts with the federal government must continue to comply with the compliance obligations stemming from those contracts.

As an additional measure of relief, OFCCP has also extended the time for all federal contractors to file the annual VETS-4212 report.  The OFCCP extended the deadline to file this report, which is usually due by September 30, by 45 days.  The report now be filed by November 15, 2017.

We will continue to monitor any further updates or exemptions issued by OFCCP in the wake these natural disasters.

Federal Contractor Minimum Wage Increase Announced – Changes Effective January 1, 2018

On September 15, 2017, the Department of Labor announced an increase in the minimum wage that certain federal contractors must pay to employees.  This comes as part of a planned incremental increase in the federal contractor minimum wage implemented by President Obama’s 2014 Executive Order (the “Order”).

As discussed in a previous blog post on the Order, the minimum wage requirement only applies to certain federal contracts.  Specifically, the Order only applies to:

  • procurement contracts for services or construction;
  • service contracts exceeding $2,500 covered by the Service Contract Act;
  • contracts for concessions; and
  • contracts that are both (a) entered into the with the Federal Government in connection with Federal property or lands and (b) covered by the Fair Labor Standards Act, Service Contract Act, or Davis-Bacon Act.

Beginning January 1, 2018, the minimum wage for covered federal contractors will increase to $10.35 per hour for hourly workers.  For tipped employees, the minimum wage for federal contractors will increase to $7.25 per hour.

OFCCP Holds First of Three Compliance Assistance Town Hall Meetings

As we previously reported, the OFCCP announced in August that it would hold three “compliance assistance” town hall meetings. The first was held on September 19, 2017, at the Department of Labor’s Headquarters in Washington, D.C. Proskauer was at the meeting, which was attended by government contractor representatives from many different sectors of the economy, as well as a number of OFCCP National Office Representatives, Regional Directors, District Directors and Compliance Officers.

Acting OFCCP Director Tom Dowd opened the town hall by welcoming the attendees. He explained that OFCCP is interested in “enhancing compliance assistance,” noting that the OFCCP’s compliance assistance mission is “equally important” to its compliance evaluation program. He lamented the fact that government contractors appear reluctant to seek compliance assistance advice from OFCCP, fearing doing so would make it more likely they would be selected for a compliance evaluation. He assured the attendees that this was not the case.  He explained that the purpose behind the compliance assistance town hall meetings is to “gather input” from government contractors and give “serious consideration to their ideas” about how to improve OFCCP’s compliance assistance efforts.

Over the next three-and-a-half hours, the participants at the town hall worked in small groups to develop ideas for what OFCCP could do to improve compliance assistance efforts and collaboration with federal government contractors. These ideas were then shared and discussed among the participants. Suggestions made over the course of the meeting included improvements to OFCCP’s website, creation of infographics providing easy-to-understand explanations of compliance requirements, creation of an on-line video learning library, and publication by OFCCP of common compliance issues uncovered in contractor audits.

OFCCP officials did not comment on the ideas, but were in attendance to listen to contractors’ concerns and suggestions. Acting Director Dowd did, however, respond to one comment about compliance officer “bullying.”  He told the attendees that if anyone experiences bullying, they should report it to the compliance officer’s superior as such behavior is not tolerated by the OFCCP.

Key Take Away.  The town hall meeting and Acting Director Dowd’s comments reflect the OFCCP’s efforts to improve the dynamic between the agency and the government contractor community. It is clear that after years of cold relations between the OFCCP and government contractors, OFCCP is interested in improving relations. The participants at the Washington, D.C. town hall generated innovative and interesting ideas that would help OFCCP achieve this goal. It remains to be seen if these ideas will be implemented by the OFCCP.

The OFCCP will hold two more town hall meetings: one in San Francisco on September 26, 2017, and one in Chicago on September 28, 2017.

Department Of Labor Challenges ALJ’s Decision On Google’s Obligation To Respond To OFCCP Data Requests

In July, we reported that an Administrative Law Judge (“ALJ”) had ruled on OFCCP’s dispute with Google over the tech giant’s refusal to turn over certain documents in connection with a routine audit of Google’s headquarters. In his Recommended Decision and Order, the ALJ narrowed the scope of what OFCCP could request from Google without identifying additional justification for the information requested. Our prior post on the decision can be found here.

On August 23, 2017, the Department of Labor (“DOL”) filed an appeal  of the ALJ’s decision with the Administrative Review Board (“ARB”). In its filing, the DOL contends that the ALJ failed to “apply the proper Fourth Amendment standard,” and that Google should be ordered to “fully comply with [the] OFCCP’s information requests, which include: employee-level compensation data from 2014, full salary and job history information for those employees listed in the 2014 dataset, and names and contact information for employees listed in the compensation data request.”

The DOL’s arguments reflect an effort to maximize its ability to obtain information from government contractors during compliance audits. In essence, the DOL contends that the ALJ applied too high of a relevance standard in assessing the reasonableness of OFCCP’s requests, and too low of a burden standard when balancing the government’s need for information with the hardship its demands would place on the government contractor. The DOL argues that when the proper standards are applied, all of the information sought by OFCCP from Google should be produced.

Google will have a chance to respond to the arguments made by the DOL prior to a ruling by the ARB. We will continue to report on this case as developments warrant.

Trump Administration Signals Delay in Merger of EEOC and OFCCP

As we previously reported, President Trump, as part of his Fiscal Year 2018 Budget request, proposed a merger of the Office of Federal Contractor Compliance Programs (“OFCCP”) and the Equal Employment Opportunity Commission (“EEOC”) to “promote greater efficiency and effectiveness.”  In an August 24, 2017 letter, Acting Director of the OFCCP, Thomas Dowd, signaled a delay in the proposed merger.

In his letter to The Institute for Workplace Equality – a group opposed to the merger – Acting Director Dowd informed the group that its concerns were being considered by the OFCCP and the Trump Administration. But he also shared “that the consolidation proposal includes several challenging transition issues” which “could delay” the merger.

He explained that such a merger would require congressional amendments to the Vietnam Era Veterans’ Readjustment Assistance Act (“VEVRAA”) and Section 503 of the Rehabilitation Act, laws which govern government contractor obligations relating to individuals with disabilities and veterans. Even with such amendments, Acting Director Dowd noted there would also need to be rulemaking to implement the statutory changes.  In addition, any merger would need to address “different enforcement structures and approaches used by the two agencies.”  Acting Director Dowd noted as one example that the EEOC’s judicially-focused enforcement structure and the OFCCP’s administratively-focused enforcement structure would need to be “bridg[ed].”

Based on these challenges, Acting Director Dowd shared that all of these difficulties “could delay the expected [Fiscal Year] 2019 start for the proposed consolidation, which would result in a concomitant delay in the realization of intended benefits.”

While Acting Director Dowd noted that the merger may be delayed, he emphasized the ability of the two agencies to increase efficiency in the interim through, for example, the existing Memorandum of Understanding between the two agencies. Thus, we may see internal modifications in the near term by the two agencies to “identify operational cost savings by eliminating existing redundancies.”

We will continue to monitor developments on this topic.

BREAKING NEWS: New EEO-1 Form Put On Hold; Employers Have Until March 31, 2018 To Submit Prior Version Of EEO-1 Form

The Office of Management and Budget (“OMB”) has stayed the implementation of the new EEO-1 Form, which added compensation and hours worked components to the annual EEO-1 submission. The OMB’s decision was based in part on concerns about burdens the new form would place on employers and the questionable utility of the new information requirements. Employers who must submit the EEO-1 form will have to submit the prior version of the EEO-1 Form, but will not have to submit 2017 data until March 31, 2018. Read the full summary of the development and key takeaways on Law and the Workplace.

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