The Department of Labor (DOL) Office of Federal Contract Compliance Programs (OFCCP) has taken several actions during the past six months that signal it will adopt a more forceful posture in ensuring that federal contractors meet their affirmative action and non-discrimination obligations toward their workforce. To prepare themselves for heightened scrutiny and tighter deadlines, government contractors should take steps now to set up their records for quick retrieval during OFCCP audits and rectify any unjustified pay disparities among their employees.
Below is a brief summary of some actions the agency has taken that signal a heightened enforcement posture:
- AAP Certification Portal: In December 2021, the OFCCP launched its Affirmative Action Program Verification Interface, and on February 1, 2022, the agency launched an online portal through which covered contractors and subcontractors must certify by June 30, 2022, that they have an affirmative action program that complies with the regulations. As the deadline is fast-approaching, covered contractors should ensure that they are prepared for certification and have taken all necessary steps to do so.
- Pay Equity Directive: On March 15, 2022, OFCCP issued a directive about pay equity audits that makes clear that federal contractors must analyze their compensation practices each year to identify and correct any pay disparities based on gender, race, or ethnicity. The directive also clarified that the OFCCP may request not only a copy of the contractors’ pay equity analysis but also additional information related to pay, including employees’ education or experience and assignments or promotions. Contractors that conduct internal pay analyses under the direction of their attorneys generally have objected to turning them over to OFCCP, arguing that attorney-client privilege protects them from disclosure. However, the directive notes that the OFCCP can now obtain copies of federal contractors’ pay equity audits that are done to comply with the OFCCP regulations. Nevertheless, communications with counsel may remain privileged because of the attorney-client privilege. Therefore, contractors should continue to consider engaging legal counsel to lead the effort and provide legal advice because confidentiality attaches to communications with counsel involving corrective actions taken, the process underlying the analysis, and any strategic decisions. Additionally, nothing prevents a contractor from conducting a proactive, preliminary analysis with legal counsel for the sole purpose of obtaining legal advice, which the directive makes clear may remain privileged.
- Proposed Revisions of the 2020 Predetermination Notice Rule: OFCCP continued its activist streak on March 22, 2022, when it issued a proposed rule that would make it easier for the agency to issue predetermination notices. DOL explained that the proposed rule seeks to revise a final rule titled “Nondiscrimination Obligations of Federal Contractors and Subcontractors: Procedures to Resolve Potential Employment Discrimination” that took effect in 2020. DOL said the Trump administration rule imposed rigid evidentiary standards that forced the agency to spend its time arguing with contractors over definitions instead of conducting more compliance evaluations. According to DOL, OFCCP’s proposed rule would rescind the rigid evidentiary standards for providing employers with notice of discrimination concerns while retaining the required use of the predetermination notice and the notice of violation, with modified procedures that allow the agency to consider the facts and circumstances of each case. DOL said the proposed rule would promote early resolution of violations by continuing to allow contractors to waive notice procedures and enter directly into a conciliation agreement. The proposed rule also decreases the amount of time that contractors have to respond to a predetermination notice from 30 to 15 days. The proposed rule would generally give the agency more flexibility and allow it more access to contractors’ records during an audit, to the contractor’s detriment.
- Effective Compliance Evaluations and Enforcement Directive: Finally, on March 31, 2022, OFCCP issued its second directive of the year, which clarified its policies for scheduling contractors for compliance evaluations. The directive, titled “Effective Compliance Evaluations and Enforcement,” imposes tighter timelines on the audit process. It eliminates the 45-day lag time between OFCCP’s publication of its scheduling list and its auditing of the contractors on the list. It also repeals the automatic 30-day extension for contractors to produce requested data even though some contractors may have trouble quickly compiling information that is kept at various places within their company. Furthermore, the directive requires contractors to submit all affirmative action plans and itemized data within 30 days of receiving a scheduling letter. OFCCP may grant extensions, but they will be given on a case-by-case basis and only for extraordinary circumstances. In addition to increasing the time pressure and production burdens on contractors, the directive also could lead to larger investigations. The directive indicates that for employers with multiple establishments, OFCCP will coordinate its evaluations of common policies and patterns across all the contractor’s establishments. Such multi-establishment compliance reviews are likely to result in expanded investigations. Moreover, the directive states the agency’s goal of reaching a broader group of federal contractors and subcontractors. The directive’s explicit mention of subcontractors is noteworthy because OFCCP traditionally has not paid much attention to subcontractors.
Taken together, these developments show that the OFCCP is poised to undertake heightened scrutiny of federal contractors and subcontractors and assume a more aggressive enforcement attitude. Therefore, government contractors should take steps now to better position themselves in the event of an OFCCP audit.
If you have any questions about these requirements or how to prepare for a potential audit, please contact Sara Nasseri, the author of this blog, who is a member of PilieroMazza’s Labor & Employment Group. For further guidance, please join Sara for her webinar June 8, 2022, at 2 PM, where she will further discuss these actions and best practices moving forward. To register, click here.