Government Contractor Compliance & Regulatory Update

OFCCP Will Start Demanding Contractors’ Internal Pay Equity Audits

On March 15, 2022, the OFCCP issued its first directive since President Biden took office.  Directive 2022-01 (the “Directive”) addresses contractors’ obligations to analyze their compensation systems and to turn over such analyses when under audit.

The Directive begins by highlighting contractors’ obligations under 41 C.F.R. § 2.17(b).  That regulation provides that contractors “must perform in-depth analyses” of their “compensation system(s) to determine whether there are gender-, race-, or ethnicity-based disparities.”  The regulation does not prescribe what such analyses must entail, only that they must “determine whether and where impediments to equal employment opportunity exist.”  Where such impediments exist, contractors are required to “develop and execute action-oriented programs designed to correct any problem areas.”  41 C.F.R. § 217(c).

The Directive then “clarifies OFCCP’s authority to access and review contractors’” compensation system analyses, which it defines as “pay equity audits.”  The Directive indicates OFCCP will request such analyses when a desk audit “reveals disparities in pay or other concerns about the contractor’s compensation practices.”  The Directive asserts OFCCP has the “authority” to obtain such materials “to understand the methodology used and verify compliance with” 41 C.F.R. § 2.17.  OFCCP states that that it

will request that the contractor provide a complete copy of the pay equity audit(s) conducted pursuant to [41 C.F.R. §] 2.17(b)(3) that shows all pay groupings that were evaluated, any variables used, and the results of the analyses, including any disparities found.  For compensation regression or statistical analysis results, OFCCP may request the model statistics (such as b-coefficients, significance tests, R-squared, adjusted R-squared, F-tests, etc.) for all variables or comparisons in the model.  OFCCP may also request information relating to the frequency of pay equity audits, the communication to management, and how the results were used to rectify disparities based on gender, race and/or ethnicity.

(emphases added).  The Directive states the OFCCP may request such analyses “covering a period beginning two years before the date the contractor received the Scheduling Letter.”

The final portion of the Directive anticipates contractors’ assertion of attorney-client privilege over their pay equity audits.  OFCCP essentially rejects any claim that attorney-client privilege shields the production of internal pay equity audits to the agency:

OFCCP notes, however, that federal contractors must maintain and make available to OFCCP documentation of their compliance with OFCCP regulations.  Contractors cannot withhold these documents by invoking attorney-client privilege or the attorney work-product doctrine.  OFCCP has the authority under its regulations to request the analyses the contractor has conducted to comply with OFCCP regulations.

The Directive, after discussing the scope of the attorney-client privilege and contending the privilege does not apply to compensation analyses conducted for the purpose of complying with OFCCP’s regulations, concludes with a warning to contractors who refuse to turn over their internal pay equity analyses:

in cases where the desk audit reveals disparities in pay or other concerns about the contractor’s compensation practices, OFCCP will continue to request the related pay equity audit that a contractor conducts of its employment processes in order to meet the regulatory requirements of 41 CFR 60-2.17(b).  Failure to provide the required pay equity audit will be considered by OFCCP as an admission of noncompliance with these regulatory requirements.

(emphasis added).  The Directive, however, also indicates that where the contractor turns over a pay equity analysis, OFCCP will not seek other privileged pay equity analyses a contractor may have conducted – provided the contractor can establish privilege exists:

Provided that the contractor produces to OFCCP a pay equity audit and compliance records sufficient to comply with 41 CFR 60-2.17(b)(3) in the course of its evaluation, OFCCP generally will not seek additional privileged analyses where the contractor demonstrates that it also conducted a properly privileged pay equity process with an attorney.

The Directive is the first formal declaration that OFCCP under Director Yang will be aggressive in exploring compensation issues during audits.  Contractors have now been warned that OFCCP will not accept assertions of privilege as bases for resisting requests for pay equity analyses and should adapt their processes, with the assistance of counsel, to account for this development and ensure they can demonstrate compliance with regulatory requirements while also protecting privileged compensation analyses.

U.S. Department of Agriculture Proposes Rule Requiring Contractors to Certify Labor Law Compliance

The U.S. Department of Agriculture (“USDA”) recently published a proposed rule that would require all federal contractors to certify compliance with 16 applicable labor laws. The certification requires an affirmative statement attesting compliance and further requires contractors to “promptly report[] to the contracting officer if and when adjudicated evidence of noncompliance occurs.” Under the rule, contractors must further affirm, to the best of their knowledge, that all subcontractors and suppliers are also compliant with all applicable labor laws.

The rule is reminiscent of the Obama Administration’s Fair Pay and Safe Workplaces Executive Order, commonly known as the “Blacklisting Rule,” which required federal contractors to disclose violations of federal and state labor laws as part of the contract bidding process. The Blacklisting Rule and its implementing regulations were short lived, with President Trump revoking the executive order and signing into law a Congressional Joint Resolution of Disapproval that revoked the regulations on March 27, 2017.

While the Blacklisting Rule applied to all federal contractors with contracts above a certain amount, the USDA’s proposed rule would apply exclusively to USDA contracts. Nevertheless, the proposed rule reflects an effort to resurrect the spirit of the Blacklisting Rule, at least in part, and portends the possibility other agencies will implement their own labor law compliance rules for their contracts.

The deadline to provide comments is March 21, 2022. We will continue to monitor and report on any new developments.

Contractors Are Now On The Clock: OFCCP’s Contractor Portal Is Open

As we previously reported, the OFCCP received approval and has launched a “Contractor Portal” which will be used to, among other things, have non-construction contractors annually certify compliance with their affirmative action program (“AAP”) obligations.  On February 1, 2022, the Contractor Portal went live.  In a bulletin issued on the same day, the OFCCP “strongly encouraged” contractors to register with the portal by March 30, 2022 “to avoid any delays with certification.”  Although contractors may register with the portal now, they will only be able to certify compliance beginning March 31, 2022.  Certifications are due June 30, 2022.  Contractors who do not register and certify by the deadline are more likely to be selected for compliance evaluations, but contractors who do certify may still be selected for audits.

The OFCCP also posted a user guide to help contractors register with the portal, and updated its FAQs about the portal.  The new FAQs primarily add questions and answers concerning technical issues related to the registration process.

On February 1, 2022, OFCCP held a webinar explaining the registration process and answering some questions.  Although most of the questions were focused on the registration process itself, OFCCP did answer some questions about AAP certification.  For example, OFCCP clarified contractors will be required to certify whether, at the time of certification, they have developed and maintained an AAP for each establishment or functional unit.  Accordingly, for contractors with AAP years that start during the window in which they can certify AAP compliance (i.e., between March 31, 2022 – June 30, 2022), they have some latitude as to whether to certify compliance when their 2021-2022 plan is in effect, or to wait until their 2022-2023 plan is created.  For example, if a contractor has an AAP year that begins June 1, 2022, they can certify compliance in late May relying on their plan that runs from June 1, 2021 to May 30, 2022.

Contractors planning to register should begin to get familiar with the portal.  It should be pre-populated with data from their 2018 EEO-1 reports, so contractors may need to update the establishments listed.  Contractors will also need to ensure the proper personnel are credentialed to access the portal.

OFCCP plans to host another webinar on March 31, 2022, addressing the certification process.

We will continue to update contractors on developments related to the Contractor Portal and other OFCCP initiatives.

Federal Government Confirms It Is Currently Not Enforcing Contractor COVID-19 Requirements

Following up on two recent federal court decisions (discussed here and here) enjoining the enforcement of the contractor vaccine mandate, the Office of Management and Budget (“OMB”) has issued guidance, posted on the Safer Federal Workforce Task Force’s (“Task Force”) website, regarding the federal government’s response to those decisions.

The guidance provides that “The Government will take no action to enforce the clause implementing requirements of Executive Order 14042, absent further written notice from the agency, where the place of performance identified in the contract is in a U.S. state or outlying area subject to a court order prohibiting the application of requirements pursuant to the Executive Order (hereinafter, “Excluded State or Outlying Area”).”  The guidance further states that currently Excluded States and Outlying Areas include the entire country and all of its territories, but this may change if the injunctions are lifted or modified.

Notably, although the court orders enjoining enforcement focused solely on the vaccine mandate portion of the Task Force’s requirements issued pursuant to Executive Order 14042, OMB’s statement indicates no portion of the contractor requirements (such as the mask requirement) will be enforced.

The full text of the announcement is provided below.

Regarding Applicable Court Orders and Injunctions: The Office of Management and Budget has issued guidance on implementing requirements of Executive Order 14042 while ensuring compliance with applicable court orders and injunctions, including those that are preliminary and may be supplemented, modified, or vacated, depending on the course of ongoing litigation.

  • For existing contracts or contract-like instruments (hereinafter “contracts”) that contain a clause implementing requirements of Executive Order 14042:The Government will take no action to enforce the clause implementing requirements of Executive Order 14042, absent further written notice from the agency, where the place of performance identified in the contract is in a U.S. state or outlying area subject to a court order prohibiting the application of requirements pursuant to the Executive Order (hereinafter, “Excluded State or Outlying Area”). In all other circumstances, the Government will enforce the clause, except for contractor employees who perform substantial work on or in connection with a covered contract in an Excluded State or Outlying Area, or in a covered contractor workplace located in an Excluded State or Outlying Area.
  • Currently Excluded States and Outlying Areas: All of the United States and its outlying areas, including:
    • The fifty States;
    • The District of Columbia;
    • The commonwealths of Puerto Rico and the Northern Mariana Islands;
    • The territories of American Samoa, Guam, and the United States Virgin Islands; and
    • The minor outlying islands of Baker Island, Howland Island, Jarvis Island, Johnston Atoll, Kingman Reef, Midway Islands, Navassa Island, Palmyra Atoll, and Wake Atoll.

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Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns.  Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

Contractor Vaccine Mandate Blocked Nationwide

UPDATE (2/4/22): On February 2, the Eleventh Circuit scheduled oral argument for April 8.

UPDATE (1/27/22): On January 21, 2022, Judge Baker issued an order in response to the federal government’s request for clarification of his order enjoining the federal contractor vaccine mandate nationwide.  Judge Baker’s latest order addressed two inquiries.  First, he declined to answer the question of “whether the preliminary injunction ‘prohibit[s] private federal contractors from mutually agreeing with Defendants to include COVID-19 safety clauses in their federal contracts, thus allowing those federal contractors to voluntarily comply with the Task Force guidelines, including requiring their employees to be vaccinated,” finding such a ruling would constitute an impermissible advisory opinion.  However, in response to a question about the scope of the injunction, specifically whether it is limited to the vaccine mandate contained in the Safer Federal Workforce Task Force’s Guidance, or extends to the masking and social distancing requirements in the Guidance, the Court stated that the injunction is limited to the vaccine requirements.  In so doing, the Court stated that this reading is consistent with the text of the injunction (as well as the guidance in our original blog, below).  The Task Force has yet to update its guidance, issued in the wake of his injunction, stating the federal government will not enforce any aspects of the Guidelines.  We will report if that guidance changes as a result of this new development.

With respect to the federal government’s appeal of the injunction, briefing is set to conclude on February 22 and oral argument has been tentatively set for the week of April 4.

UPDATE (01/04/22): On December 22, a Federal judge in Florida became the latest judge to issue a preliminary injunction halting enforcement of the federal contractor and subcontractor vaccine mandate requirements.  The decision in State of Florida v. Nelson, et al. blocks enforcement only in Florida, but Judge R. Stan Baker’s order (discussed below) in State of Georgia, et al. v. President of the United States, et al. blocking enforcement nationwide remains in effect.  The Federal government has appealed that decision to the Eleventh Circuit and the Eleventh Circuit has declined to stay Judge Baker’s order during that appeal. Briefing on the appeal will not be completed until the end of January.

UPDATE: On December 9, attorneys for the Justice Department appealed the nationwide injunction to the Eleventh Circuit.  We will continue to provide updates as the situation develops.

On December 7, 2021, a federal judge issued a nationwide preliminary injunction halting enforcement of the federal contractor and subcontractor vaccine mandate requirements issued by the Safer Federal Workforce Task Force in response to President Biden’s Executive Order 14042, Ensuring Adequate COVID Safety Protocols for Federal Contractors.  The mandate requires covered contractor employees to be fully vaccinated by January 18, 2022.  On November 30, a federal judge in Kentucky blocked enforcement of the mandate in Kentucky, Ohio, and Tennessee.  We blogged about that decision here.

Judge R. Stan Baker’s decision came in a case originally filed by Georgia, Alabama, Idaho, Kansas, South Carolina, Utah, and West Virginia, the governors of several of those states, and various state agencies, including the Board of Regents of the University System of Georgia.  Later, the Associate Builders and Contractors, Inc. (“ABC”), a trade organization, and one of its chapters in Georgia filed a Motion to Intervene along with their own Motion for Preliminary Injunction.  Judge Baker denied the Motion to Intervene as to the local chapter, but granted the Motion to Intervene as to ABC.  As discussed below, the Judge then found that the inclusion of this additional plaintiff warranted issuing a nationwide injunction (as opposed to the Kentucky judge’s more limited Order).

As in the Kentucky case, Judge Baker found the Plaintiffs would likely be able to show that the mandate exceeds the President’s powers under the Federal Property and Administrative Services Act.  He declined to issue a decision as to whether the mandate likely violated the constitutional non-delegation doctrine or infringed on rights reserved to the states under the Tenth Amendment.

As to why the Court here issued a nationwide injunction, Judge Baker cited the inclusion of ABC, contending that the trade association had members “all over the country” and were awarded “57% of federal contracts exceeding $25 million during fiscal years 2009-2020.”  His injunction does not appear to apply to other aspects of the contractor COVID-19 requirements issued by the Task Force, including those related to masking and social distancing.

It is unclear whether the federal government will seek to have the injunction lifted, and whether such an effort will be successful.  But, effective immediately, covered contractors in any state or territory of the United States of America are no longer mandated to require their covered workers to be vaccinated.

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Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns.  Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

OFCCP Launches Contractor Portal Initiating AAP Verification Program

On December 2, 2021, OFCCP announced the launch of its new “Contractor Portal,” which “[c]overed federal contractors and subcontractors (“contractors”) must use … to certify, on an annual basis, whether they have developed and maintained an affirmative action program for each establishment and/or functional unit, as applicable.”  The Contractor Portal will also serve as a “secure portal for scheduled contractors to submit to OFCCP their Affirmative Action Program(s) during compliance evaluations.”  This development has been years in the making, initiated by a 2016 GAO report criticizing OFCCP for having no process for ensuring contractors were preparing their affirmative action programs (“AAPs”) annually, and comes over three years after former Director Craig Leen announced OFCCP’s intention to create an AAP verification program.

The announcement sets forth key dates for registration and AAP certification:

On Feb. 1, 2022, contractors may begin registering for access to the portal. OFCCP will also send an e-mail to each covered federal contractor in its jurisdiction whose email information is available in its system inviting them to register.

On March 31, 2022, contractors will be able to utilize the certification feature in the portal to certify their AAP compliance.

By June 30, 2022, existing contractors must certify whether they have developed and maintained an affirmative action program for each establishment and/or functional unit, as applicable.

Contractors can access the portal here.  OFCCP has also created a FAQ page regarding the portal.  There, OFCCP explains:

  • Supply and service contractors who meet the thresholds for having AAPs will be required to use the portal: “Specifically, contractors that hold a contract of $50,000 or more and employ 50 or more employees must develop and maintain AAPs pursuant to Executive Order 11246 and Section 503 of the Rehabilitation Act of 1973. If a contractor has at least 50 employees and a contract of $150,000 or more, then it must also develop an AAP pursuant to the Vietnam Era Veterans’ Readjustment Assistance Act of 1974.”
  • At this time, construction contractors who are not also supply and service contractors are not required to use the portal or certify AAP compliance.
  • Certifying AAP compliance will not exempt contractors from OFCCP compliance evaluations.

OFCCP promises more information will come out in the coming months.  Among questions we have are:  (a) what will contractors actually be required to certify with regard to their AAPs?; (b) will failure to certify increase the likelihood of being selected for a compliance evaluation?; and (c) which AAP years will be subject to the June 30, 2022 deadline, and how will OFCCP address contractors who have non-calendar AAP years?

Contractors who have been less than diligent with their AAP preparation should begin now to ensure they have compliant AAPs as soon as possible.

We will continue to monitor and report on this significant development.

Vaccination Deadline for Contractors Extended to January 18, 2022

Federal government contractors and subcontractors have been dealing with a steady stream of new FAQs and details regarding the COVID-19 safety requirements for federal contractors and subcontractors first announced by President Biden’s Executive Order 14042, Ensuring Adequate COVID Safety Protocols for Federal Contractors, and then issued by the Safer Federal Workforce Task Force (the “Task Force”). Our prior postings on all of those developments can be found hereherehere, here, and here.

On November 10, 2021, the Task Force issued updated Guidance and new FAQs regarding the COVID-19 requirements. As previously reported, a White House Fact Sheet issued on November 4, 2021 indicated that the December 8, 2021 deadline for covered contractor and subcontractor employees to be fully vaccinated would be extended. The updated Guidance issued on November 10, 2021 formally extends that deadline providing: “Covered contractor employees must be fully vaccinated no later than January 18, 2022.” This means covered contractor and subcontractor employees must receive their second dose of the Pfizer or Moderna vaccine, or single dose of Johnson & Johnson vaccine by January 4, 2022.

The Task Force also issued new and updated FAQs regarding the requirements. These include:

  • Announcing the availability of sample signage that contractors and subcontractors can post at entrances to announce safety requirements at their worksites.
  • Clarifying that when a covered contractor or subcontractor employee works at a federal government worksite (as opposed to working at home or at the contractor/subcontractor’s facility), the employee must still abide by the Guidance’s requirements.

We will continue to monitor and update our readers on new developments regarding the Task Force’s Guidance.

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Subscribe to Proskauer’s Law and the Workplace blog to stay current on the latest Biden administration developments impacting your business. Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

OFCCP Publishes Proposal to Rescind Religious Exemption Rule

As a follow up to yesterday’s announcement, OFCCP published its proposal to rescind the “Implementing Legal Requirements Regarding the Equal Employment Opportunity Clause’s Religious Exemption” rule (the “Religious Exemption Rule”) today. The Religious Exemption Rule expanded the existing exemption on religious entities’ compliance with the anti-discrimination provisions of Executive Order 11246.

OFCCP contends that the Religious Exemption Rule, which was enacted during the prior administration, “create[d] a lack of clarity regarding the scope and application of the exemption because… it misstate[d] the law in key respects.” In its proposal, OFCCP lists a number of ways in which the Religious Exemption Rule departs from Title VII principles and “long-standing policy” regarding equal employment opportunity. OFCCP reasons that these inconsistencies “likely … increase[d] rather than decrease[d] confusion about the application of the Executive Order 11246 religious exemption.”

The OFCCP further explains that it will not be modifying or replacing the Religious Exemption Rule because it “has no effect on the overwhelming majority of federal contractors” – only impacting those that meet the statutory definition of a “religious corporation, association, educational institution, or society” – and therefore, in the agency’s view, “is unnecessary.” Instead, the agency will revert to its previous approach of interpreting applicable “Title VII principles and applicable law.” OFCCP acknowledged that while there is a lack of uniformity among courts in the approach they use in religious exemption cases, relevant Title VII factors are clearly identified and should be weighed as a balancing test on a case-by-case basis.

Comments on the proposal can be submitted through December 9, 2021.

OFCCP Announces Proposal to Rescind Religious Exemption Rule

The Office of Federal Contract Compliance Programs (“OFCCP”) announced today a proposal to rescind the rule titled “Implementing Legal Requirements Regarding the Equal Opportunity Clause’s Religious Exemption,” which has been in effect since January 8, 2021 (the “Religious Exemption Rule”).  The Religious Exemption Rule clarified the scope and application of the religious exemption contained in Executive Order 11246, which is enforced by OFCCP.  Our summary of the Religious Exemption Rule can be found here.

In a news release, OFCCP Director Jenny Yang explained the proposed rescission will preserve the Executive Order’s religious exemption, and result in a “return to [the] policy and practice of considering the facts of each case and applying Title VII principles and case law and other applicable law.” OFCCP justified the rescission of the Religious Exemption Rule because it “departed from OFCCP’s long-standing policy and practice of applying Title VII principles and case law to interpret the exemption.”

The proposal will be published on November 9, 2021.

Contractor Vaccine Mandate Deadline Will Be Extended to January 4, 2022

Today, the Biden Administration issued a Fact Sheet related to the new OSHA emergency temporary standard (“ETS”) requiring vaccination or masking for employers with more than 100 employees and the new Centers for Medicare and Medicaid Services requirement that health care workers at facilities participating in Medicare and Medicaid are fully vaccinated (the “CMS rule”).  In that statement, the Administration indicated that to assist contractors who may be subject to the contractor vaccine mandate (which has no testing option) and the new OSHA ETS and/or CMS rule standard at different facilities, it will be extending the vaccine mandate previously issued for federal contractors to January 4, 2022.  The Safer Federal Workforce Task Force (“Task Force”) Guidelines had previously set a December 8, 2021 deadline for employees to be vaccinated.

The Fact Sheet states:

Federal contractors may have some workplaces subject to requirements for federal contractors and other workplaces subject to the newly-released COVID-19 Vaccination and Testing ETS. To make it easy for all employers to comply with the requirements, the deadline for the federal contractor vaccination requirement will be aligned with those for the CMS rule and the ETS. Employees falling under the ETS, CMS, or federal contractor rules will need to have their final vaccination dose – either their second dose of Pfizer or Moderna, or single dose of Johnson & Johnson – by January 4, 2022. This will make it easier for employers to ensure their workforce is vaccinated, safe, and healthy, and ensure that federal contractors implement their requirements on the same timeline as other employers in their industries. And, the newly-released ETS will not be applied to workplaces subject to the federal contractor requirement or CMS rule, so employers will not have to track multiple vaccination requirements for the same employees.

Our prior discussion of the Task Force’s Guidelines are available herehere, here, and here.

We will continue to monitor and update our readers on these critical issues.

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Subscribe to Proskauer’s Law and the Workplace blog to stay current on the latest Biden administration developments impacting your business. Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

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