Government Contractor Compliance & Regulatory Update

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.

OFCCP Issues Supplemental CSAL – Were You Selected For A New VEVRAA Focused Review?

On November 8, 2019, OFCCP released its Corporate Scheduling Announcement List (“CSAL”) Supplement.  The list identifies 500 establishments selected for the new VEVRAA focused review compliance evaluation.  In 2018, OFCCP announced that it would be conducting focused reviews during which it would target its analysis on contractors’ compliance with  Executive Order 11246 (the “EO”) (equal employment opportunity regardless of race, color, religion, sex, sexual orientation, gender identity, or national origin); Section 503 of the Rehabilitation Act (“Section 503”) (equal employment for individuals with disabilities), or the Vietnam Era Veterans’ Readjustment Assistance Act (“VEVRAA”) (equal employment for protected veterans).

OFCCP has already commenced Section 503 focused reviews, but this is the first time the agency has scheduled VEVRAA focused reviews.  In its November 8, 2019 announcement, OFCCP also shared that it has created a VEVRAA focused review webpage “[t]o help contractors prepare for the upcoming reviews.”  The agency touts the resource as providing “best practices, protected veteran resources, answers to frequently asked questions, and other compliance assistance resources.”

Contractors are advised to review the Supplemental CSAL (available online) to see if they have been selected for a VEVRAA Focused Review and, if so, review the current and proposed VEVRAA Focused Review scheduling letters to prepare for their upcoming compliance evaluation, and consult with counsel as necessary.

OFCCP Sets New Record For Bias Settlements In FY19

Any illusions that OFCCP would disappear during the Trump Administration should have already been put to rest with the nearly non-stop activity of the agency since 2017.  But to the extent there was any remaining doubt, a recent report about the monetary recoveries secured by the agency should put that to rest.

As OFCCP announced, in the recently completed fiscal year, the agency set a new record for monetary recoveries:  over $40 million, obliterating its prior record of $24 million in FY17.  This haul came primarily through settlement agreements with government contractors to resolve allegations of pay and hiring discrimination.

OFCCP may appear to be a more contractor-friendly agency than it was during the Obama Administration due to its initiatives aimed at increasing transparency and fairness, but that should not lull contractors into a false sense of complacency.  The agency has also made significant changes to the way it does business, making it more effective and expanding its reach.

Government contractors that continue to ignore their OFCCP compliance obligations hoping they will not be audited are playing a game where the odds of losing have increased dramatically, as have the financial and public relations consequences.  All government contractors should review their practices and policies to ensure compliance, and consult with experts to ensure they are aware of the latest developments and enforcement trends in order to avoid being part of OFCCP’s recovery tally for FY20.

OFCCP Proposes Changes to the Self-Identification of Disability Form

On October 3, 2019 OFCCP submitted a request to the Office of Management and Budget for approval of proposed changes to its Voluntary Self-Identification of Disability Form.  OFCCP explained that it had proposed the changes “in an effort to increase the response rate on the form.”

The proposed changes include:

  • Removing the reasonable accommodation notice;
  • Expanding the language under the “Why are you being asked to complete this form” section;
  • Revising and alphabetizing the disability example list, including:
    • Adding autoimmune disorders, depression/anxiety, cardiovascular/heart disease, and gastrointestinal disorders to the list;
    • Adding broad categories of disability, such as “psychiatric conditions”, to consolidate previously individually listed disabilities like bipolar disorder and major depression.

OFCCP explains that it removed the reasonable accommodation notice because it was “not necessary to the information collection and created confusion among applicants and employees who thought that completing the form automatically referred them for a reasonable accommodation.” OFCCP described its other changes to the form as “softening the tone…to make the language more positive.”

The proposed voluntary self-identification form can be found here. The current disability self-identification form, which does not expire until January 2020, can be found here. Contractors may submit comments on the proposed changes through December 2, 2019.

Contractors have continually struggled with low response rates to disability self-identification forms, so any effort to encourage higher response rates is welcome.  Even so, it is hard to see how these modest changes will, on their own, have much of an impact on response rates.