The Office of Federal Contract Compliance Programs (OFCCP) recently released a notice that the 2006-2010 census data must be used for all affirmative action plans for plan years beginning on January 1, 2014, and OFCCP will begin using 2006-2010 census data to evaluate affirmative action plans and efforts as of that same date. Keep in mind that, since the data was released in late November 2012, federal contractors were permitted to voluntarily begin using the census data, which is based on a compilation of 2006-2010 American Community Survey (ACS) data. Contractors should keep in mind that the data is coded and categorized differently than the 2000 census data and should plan accordingly regarding the preparation of any 2014 affirmative action plans.
Federal contractors and subcontractors should take notice that, in the last couple of years, the Office of Federal Contract Compliance Programs (OFCCP) has been pursuing a much more aggressive enforcement and regulatory agenda. Final revised rules on disability and veterans affirmative action are expected soon. Later in 2013, proposed new rules for construction contractors and gender discrimination are expected. We will post to this blog when these are available.
As we are awaiting these new regulatory frameworks, it should be noted that OFCCP has also been conducting more in depth and more aggressive compliance evaluations of federal contractors and subcontractors. Of note, OFCCP recently abandoned its prior framework for analyzing pay discrimination in favor of a much more flexible approach that permits it greater latitude in analyzing potential discrimination and in requesting documentation and data. [INSERT (See our recent post: OFCCP Signals Formal Change of Course on Pay Discrimination.)
Also of note, OFCCP’s planned compliance evaluations for fiscal year 2013 (October 1, 2012 – September 30, 2013) represent a significant 12% increase from fiscal year 2012. Consider this data on the number of compliance evaluations conducted or planned:
|FY2011||FY2012||FY2013 (Planned)||FY2014 (Planned)|
Also, OFCCP is boasting that the compliance evaluations it conducts today are much more in depth. From 2010 to 2011, OFCCP reported a 36.7% increase in audits closed with a financial remedy. For example, OFCCP recently released a press release regarding a $439,538 back pay settlement for nearly 2,000 female job applicants involving a subsidiary of Hormel Food Corp. (Clougherty Packing Co. – “Dodger Dog” hot dogs). The Company must also offer positions to 700 affected women applicants as positions become available.
With most contractors finalizing their calendar year 2013 Affirmative Action Plans and executing recruiting and outreach efforts for 2013 at this time, it becomes more important than ever to pay critical attention to affirmative action given the OFCCP’s recent activity.
On February 28, 2013, the Office of Federal Contract Compliance Programs (OFCCP) rescinded two Bush-era enforcement guidance documents on pay discrimination from 2006—the “Compensation Standards” and “Voluntary Guidelines.” This is consistent with OFCCP’s stated focus on pay discrimination since the beginning of the Obama administration.
OFCCP’s Director, Patricia Shiu, issued a press release and authored a blog article, stating that OFCCP intended to align its analysis of pay discrimination with the principles used to enforce Title VII. She stated that OFCCP intended to no longer limit its pay discrimination focus to equal pay in the same job but to expand its focus to more tacit practices like discrimination in assigning sales territories or departments or in promotion or bonus, overtime, or commission opportunities. She also signaled that OFCCP would no longer take a “narrowly defined, cookie-cutter approach” to evaluating contractor pay practices but that pay analysis would be tailored to the individual contractor, industry, types of jobs, and pay practices.
It is important to note that prior guidelines were rescinded immediately, and new procedures are in place for all compliance evaluations going forward. Employers using the 2%/$2,000 rule, screening by job title, are no longer safe using this simple rule of thumb, which was rescinded as part of the prior guidance.
OFCCP will now use a flexible, fact-based approach, similar to what courts use for Title VII and not restrict itself to any formula or framework. Briefly, the new approach will involve:
• OFCCP investigators working with government statisticians and attorneys to determine the appropriate analytical methods for use in each investigation;
• Analyzing comparative compensation data using both large and small groups to determine if discrimination has occurred;
• Reviewing and testing of all factors (such as experience, tenure in position, performance ratings, etc.) provided by the contractor as an explanation for employee compensation disparities to determine if they are relevant to compensation and whether they were consistently applied;
• Not requiring statistical analysis to prove pay discrimination in all cases; and
• Not requiring anecdotal evidence (statements by workers about pay discrimination) to prove systemic pay discrimination.
“Compensation discrimination” will not be limited to base pay, but could include other earnings (e.g., bonuses, overtime, and commissions) and benefits, job assignments, training and advancement opportunities, differences in opportunities for increased compensation, or other unexplained differences.
During a desk audit, OFCCP will:
- Gather summary data for pay comparison (average compensation by sex and race by pay grade or job group);
- Assess quantitative factors, such as:
- The size of overall average pay differences based on race or sex,
- The number of job groups/pay grades where average pay differences exceed an unstated certain threshold, and
- The number of employees negatively affected within job groups/pay grades;
- Assess qualitative factors, such as:
- Compliance history (prior violations),
- OFCCP or EEOC complaints,
- Anecdotal evidence,
- Potential violations found during the audit involving other employment practices, and
- Inaccurate or incomplete initial data submitted;
- Gather individual data after gathering summary data or at the same time as the summary data;
- Review policies and practices;
- Interview HR personnel and employees; and
- Examine payroll and human resource information systems.
If satisfied with a preliminary analysis of summary data, OFCCP may (but is not required to) stop its analysis and not conduct individual or more in depth review. The analytical methods to be used include pooled regression analysis (large groups) or non-pooled regression analysis (small groups), using a 2-standard deviation standard, and cohort analysis, comparing similarly-situated individuals.
Information on this new directive is available here.
While OFCCP states that the new approach is intended to make the process more clear, the information released thus far does not provide a new “OFCCP-sanctioned” roadmap for contractors to follow in conducting their yearly compensation analysis as part of their affirmative action plan preparation or in preparing for a desk audit. OFCCP has indicated that it will be releasing further guidance documents and conducting webinars on this topic in the near future. We will update this blog post as more information is provided by OFCCP.
(More specifically, the two guidance documents rescinded were: (1) Interpreting Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination (“Compensation Standards”), 71 FR 35124, and (2) Voluntary Guidelines for Self-Evaluation of Compensation Practices for Compliance with Nondiscrimination Requirements of Executive Order 11246 (“Voluntary Guidelines”), 71 FR 35114.)
Employers in the healthcare industry may find that they no longer have affirmative action obligations as of 2012 as a result of the National Defense Authorization Act, signed into law on December 31, 2011.
TRICARE is the Department of Defense healthcare program for active duty and retired military personnel and their families. Prior to the National Defense Authorization Act, the Office of Federal Contract Compliance Programs (OFCCP) took the position that hospitals, pharmacies, and other healthcare providers providing care under TRICARE contracts had affirmative action obligations as “subcontractors” pursuant to Executive Order 11246, Section 503 of the Rehabilitation Act, and the Vietnam Era Veterans’ Readjustment Assistance Act. The National Defense Authorization Act expressly excludes hospitals, pharmacies, and other healthcare providers providing healthcare services to TRICARE participants from OFCCP jurisdiction, effectively overruling a 2010 Department of Labor decision holding that a hospital providing services under TRICARE was a federal subcontractor and related OFCCP guidance.
However, healthcare providers should not immediately abandon their federal affirmative action obligations without any other review of their contracts. It is possible that other contracts could subject them to affirmative action obligations (and OFCCP jurisdiction) as federal contractors or subcontractors, including those regarding contracts with the Veterans Administration, healthcare benefits for other federal workers, and receipt of Medicare Part C or D funds, which were not addressed by this legislation and which OFCCP has already asserted create affirmative action obligations.
Many federal contractors and subcontractors use a calendar year for their written affirmative action plans (AAP's). That means their AAP's are typically being reviewed and revised shortly after January 1. Working with companies over the years to help them develop and revise AAP's and advising companies during OFCCP audits, we have come to appreciate the challenges for contractors in the process. Here are a few tips to keep in mind as you revise your AAP's:
- It's Not Just "Boilerplate"
Too often, contractors revising AAP's simply "run the numbers" for the required statistical analysis and then put the plan back on the shelf. The narrative portions of the plan, sometimes referred to as "boilerplate," which include the contractor's good faith efforts to achieve goals and action plans for the coming year, are often given little or no attention. In fact, in an audit by the OFCCP, the agency is often more focused on these narrative portions of the plan than on the statistical analysis. Time should be taken to carefully review the narrative portions, especially the action plans. The narrative should reflect what has worked and what has not worked in good faith affirmative action efforts in the previous year. Where you have had success, make sure to mention that. Where efforts did not work as well as anticipated, draft the narrative to show the good faith efforts that were made. Most important, draft action plans that are specific, rather than general commitments.
- Don't Forget the 12-Month Review
Contractors often put their primary focus on the required availability analysis which looks at the workforce as it exists at the beginning of the plan year. Don't forget that you are also required to analyze the personnel activity (hires, promotions, terminations, and compensation) for the 12-month period preceding the beginning of the plan year. The written AAP should include a brief analysis of that activity, making sure to reflect positive results and where results have not been positive, to reflect good faith efforts that have been made.
- Don't Forget The AAP's for Protected Veterans and Disabled Persons
Too often, the AAP's for disabled persons and protected veterans are given very little attention in the annual review because they do not require any specific statistical analysis. However, note that the OFCCP has now proposed a rule that would require a statistical goal for disabled persons. Even though current regulations do not require a statistical analysis for veterans or disabled persons, the OFCCP has clearly shifted greater emphasis in compliance reviews to the AAP's covering those groups. Each annual revision of the AAP should include a review and revision of the AAP's for covered veterans and disabled persons. Include a discussion of any particular successes during the previous years and, to the extent possible, be specific in describing affirmative efforts to be taken in the following year.
- Develop an AAP Calendar
When revising the narrative portions of your AAP's, be sure to calendar each specific commitment made, such as periodic reports to management, contacts to recruitment sources, etc. It is too often the case that the AAP is looked at only annually when it is revised, and the various commitments in the AAP for steps taken during the year are overlooked.
A carefully-prepared AAP can go a long way in an audit by the OFCCP. Making sure that the required statistical analysis is defensible and realistic is of key importance. But, the narrative portions of the AAP should be drafted carefully to reflect a genuine and realistic commitment to good faith efforts over the course of the following year. Doing that will reflect positively on the Company if the AAP is audited by the OFCCP. By contrast, if the OFCCP has the impression that the AAP is looked at only once a year when it is revised and the action plans and policies are not taken seriously, it will put your company in a poor light during an audit.
The U.S. Department of Labor Office of Federal Contracts Compliance Programs (OFCCP) has proposed a new rule requiring federal contractors and subcontractors to set a goal to have 7% of their workforce be individuals with disabilities. Presently, federal contractors and subcontractors are only required to set percentage numerical goals for areas of their workforces where women and minorities are found to be underrepresented based on an "Availability Analysis" conducted under OFCCP regulations. The 7% goal for persons with disabilities proposed by OFCCP would apply to each job group in the contractor’s workforce. It is not based on any calculation by the contractor of availability but is rather based simply on OFCCP's estimate of the percentage of the overall workforce that is disabled.
The proposed rule also imposes a requirement that contractors invite applicants to voluntarily self-identify as an individual with a disability at the hiring stage and the pre-offer stage, and to conduct an annual anonymous survey of its employee's inviting them to identify themselves as a person with a disability. The rule would also require contractors to maintain recruiting and hiring data concerning persons with disabilities.
The proposed rule also requires contractors to develop and implement written programs for handling requests for reasonable accommodation and to engage in specific types of outreach and recruitment efforts to recruit individuals with disabilities, and to make mandatory job opening listings with the nearest One Stop Career Center as is currently required for recruiting veterans.
A link to the the OFCCP's related FAQ's can be found here.
The proposed rule is open for comment until February 7, 2012.
Speaking on July 27 to the Industry Liaison Group’s 29th Annual National Conference to an audience of human resources professionals for the nation’s top companies, the Office of Contract Compliance Director Patricia Shiu emphasized the OFCCP’s top initiatives. She stated that the OFCCP will focus on pay equity and compensation discrimination and affirmative action for military veterans and persons with disabilities. The OFCCP issued proposed rule-making establishing “benchmarks” for recruiting and hiring of veterans in April 2011 and is presently evaluating the comments it received. Shiu characterized those as benchmarks rather than quotas or ceilings.
She also emphasized that there has been unprecedented cooperation between the Justice Department, the EEOC, and the OFCCP regarding a unified civil rights agenda and an end to the turf wars of the past between the three agencies.
In addition, the OFCCP is nearing completion of a revised agency compliance manual and proposed revisions to Rehabilitation Act regulations that have not been changed in decades. The new proposed Rehabilitation Act regulations will “put some teeth” in the regulations for affirmative action for the disabled, and Shiu called them a “game-changer.” There is also a plan for revised regulations for affirmative action standards for women in the construction industry. The OFCCP also plans to issue a new proposal for a compensation data collection tool after rescinding the Bush-era guidelines.
It is notable that, under President Obama, the OFCCP has seen a 35% increase in its staffing, including 200 new compliance officers. We will continue to keep you up to date on new regulations and proposed regulations and other agency action by the OFCCP.
On April 25, 2011, the Department of Labor's Office of Federal Contract Compliance Programs announced a proposed rule to increase the affirmative action obligations federal contractors and subcontractors owe to veterans. It was published in the Federal Register on April 26 to allow for a 60-day comment period and will likely generate significant discussion among both contractor and veterans groups.
Some of the changes simply clean up regulatory language which is no longer accurate and others clarify existing obligations. The most controversial changes, however, add some rather significant data collection, monitoring, recruitment and hiring obligations. As the DOL's news release summarized:
"The rule proposes requiring contractors to engage in at least three specified types of outreach and recruitment efforts each year. In addition, the proposed rule would require that all applicants be invited to self-identify as a "protected veteran" before they are offered a job. Increasing data collection on job referrals, applicants and hires, and requiring contractors to establish hiring benchmarks to assist in measuring the effectiveness of their affirmative action efforts also are proposed."
As we have previously reported, this Agency has become much more active under the Obama administration and previously indicated that this rule would be forthcoming. Unfortunately, even those businesses who are making substantial, good faith efforts to employ veterans may find the proposed recordkeeping and goal setting obligations unwieldy.
Those wanting a copy of the proposed rule can find it in the April 26, 2011 Federal Register or by going to this link. Porter Wright intends to file comments as an interested party in response to the proposed rule, so please let us know if you have any positive or negative input regarding the rule.
The OFCCP has released a new directive – the Active Case Enforcement Directive (ACE) – to replace the Active Case Management directive (ACM) which was rescinded by OFCCP in December 2010. The ACE procedures will result in more in-depth OFCCP audits and will greatly increase the chances of OFCCP making findings that are adverse to the companies they audit.
Under the ACE Directive, the OFCCP will conduct full desk audits of every contractor selected for a compliance evaluation. This is in contrast to the previous ACM procedure that required full desk audits only for every 25th contractor audited or for any contractor for which an abbreviated desk audit revealed indicators of potential class-wide, systemic discrimination. Under the ACE Directive, every 25th contractor audited will be selected for a full compliance review – desk audit, onsite review, and possible offsite analysis – regardless of the findings of the initial desk audit. This will generate far more full reviews than the old procedures, which required a full compliance review only of every 50th contractor or when there were indicators of class-wide or systemic discrimination.
At the beginning of every audit , OFCCP will contact the EEOC and State fair employment practices agencies to determine the nature, status, and outcome of any complaints filed against the contractor. The directive says OFCCP will expand this effort to also include gathering information from other federal enforcement agencies, such as OSHA and the Wage Hour Division, to determine if the employer has a history of violating other employment statutes that might be looked to as a possible indicator of discrimination.
Perhaps of greatest significance is the fact that OFCCP will now proceed to an onsite review where there are any "indicators of discrimination." In the past, other than doing an onsite of every 50th contractor, the agency did an onsite only where there were indicators in the desk audit of systemic or class-wide discrimination. Under the ACE Directive, an onsite will be triggered by indicators of any sort of discrimination. The Directive says that discrimination can be indicated by statistical indicators, anecdotal evidence, patterns of individual discrimination, patterns of systemic discrimination, patterns of major technical violations involving recordkeeping or failure to maintain an AAP, and indications of noncompliance with other labor and employment laws administered by other federal agencies. Stating that discrimination may be indicated by patterns of "major" recordkeeping violations or by non-compliance with other laws that have nothing to do with discrimination is a very aggressive and some might argue unfair approach. For example, the ACE directive says that a contractor's violation of wage hour laws can be an indicator of possible discrimination.
OFCCP has said that it intends to conduct fewer audits in the future but that those it does conduct will be more detailed and thorough. The procedures adopted in the ACE directive certainly confirm that when OFCCP calls on you for an audit in the future there is a far greater likelihood of a longer, more aggressive encounter with the agency.
The Office of Contract Compliance (OFCCP), which enforces federal contractors’ and subcontractors’ affirmative action obligations, recently rescinded its 2003 ACM directive. The 2003 ACM or "Active Case Management" directive allowed for abbreviated desk audits where only the affirmative action plan and personnel data were reviewed. If no evidence of systemic discrimination was revealed (defined as discrimination affecting at least 10 employees or applicants), the evaluation would be closed. If such evidence was indicated, a full desk audit and possible onsite review would be launched. The ACM also mandated that a full desk audit be performed for every 25 contractors and a full onsite review for every 50 contractors.
Rescinding the ACM directive signals that desk audits may be more expansive in the future and that onsite reviews may become more common. However, the rescission may be just a formality. Many contractors found that some regional and local OFCCP offices had not been following the ACM directive for some time, but formally rescinding the ACM directive does signal that the agency intends to be more aggressive in its enforcement activity. The OFCCP has yet to issue new procedures for desk audits and onsite reviews.
With a renewed focus on onsite reviews, the OFCCP will be able to expand its enforcement efforts to other areas of affirmative action, rather than just focus on what the statistics reveal. For example, in an onsite review, the OFCCP can look at disabled accessibility issues, posting requirements, and interview workers.
We will update you if a new directive replacing the ACM is issued.
If your company has federal contracts or subcontracts, you should be preparing to comply with Executive Order 13496 by June 21, 2010. The Executive Order, which was signed by President Obama in January, 2009, requires that all companies with federal contracts or subcontracts post a detailed notice to employees informing them of their rights to engage in union organizing. The notice must be posted in “conspicuous places in and about the company’s plants and offices so that it is prominent and readily seen by employees.” “Conspicuous placement” includes, but is not limited to, areas in which the employer posts other notices to employees about terms and conditions of employment. If employers customarily give notices to employees electronically, this notice must be given in a similar format. Copies of the notice are available at the following link: www.dol.gove/olms/regs/compliance/EO13496.htm.
Critics of the required notice say that it is unbalanced. They claim that the notice is designed more to encourage and support union organizing than to make employees aware of their rights. The required notice informs employees of their rights to: organize a union; join or assist a union; bargain collectively; discuss unions with co-workers; take action with co-workers to improve working conditions by, among other things, raising work-related complaints and seeking help from a union; strike and picket. After reciting all of those rights, the required notice states also that employees may “choose not to do any of these activities.”
The notice also includes the following list of illegal actions by an employer: prohibiting employees from soliciting for a union during non-work time; questioning employees about union support or activities; taking adverse action against a person because of union activities or threatening to do so; threatening to close a business in response to union activity; promising raises, promotions, or other benefits to discourage union activity; prohibiting employees from wearing union hats, buttons, or other insignia in the workplace “except under special circumstances.” The notice also includes certain things illegal for unions to do: threatening that jobs will be lost unless employees supporting a union; refusing to process a grievance because an employee has criticized the union; discriminatory practices in hiring hall referrals; causing an employer to discriminate against an employee because of union activity; taking other adverse action against an employee based on refusal to support a union.
The posting requirement will be enforced by the Office of Federal Contracts Compliance Programs (“OFCCP”), the same federal agency that enforces affirmative action obligations of federal contractors and subcontractors. The sanctions for failure to post can include: termination or cancellation of a federal contract and debarment from future federal contracts.
Do not make the mistake of viewing this as “just another poster requirement.” Organized labor will use this required posting as a head-start for organizing workers of federal contractors and subcontractors. The companies required to post this notice should be evaluating their readiness to respond to union organizing activity. This should include at least the following steps:
- Reviewing existing policies concerning solicitation, distribution, posting, and other actions in the workplace that could impact union organizing to be certain that they are effective and legal.
- Reviewing management training efforts to be sure that all managers are aware of the company’s position on unions, familiar with early signs of union organizing, and confident about how to respond.
- Taking stock of company efforts to provide competitive wages and benefits, meaningful communication with employees, and fair treatment. These are among the most important ways to defeat union organizing.
- Considering a specific message to employees at or near the time of first posting the required notice so that workers know the company’s position on union organizing.