As we reported last month, the Office of Federal Contract Compliance Programs (“OFCCP”) has significantly revamped its enforcement strategies. As part of that effort, OFCCP recently adopted new procedures for conducting compliance evaluations and developed a new method of screening contractors’ compensation data.
Active Case Enforcement
Last week, the OFCCP published Directive Number 295 (“Directive”) outlining new procedures, also known as Active Case Enforcement (“ACE”), for conducting compliance evaluations for supply and service contracts. According to the Directive, ACE, which replaced the Active Case Management (“ACM”) process adopted by the Bush Administration, will allow OFCCP to “more effectively utilize its resources and strengthen its enforcement efforts.” Although the Directive was signed on December 16, 2010, it was not published until last week. The enforcement procedures outlined in the Directive will be applied retroactively to all establishments that were scheduled for an audit as of January 1, 2011.
OFCCP will continue to select contractors’ establishments for compliance evaluations using the Federal Contractor Selection System (“FCCS”). A “quality control” review will be conducted for every 25th contractor establishment scheduled for a compliance evaluation where the OFCCP will conduct a full compliance review that includes an onsite audit. Moreover, a full desk audit will be performed in every compliance evaluation to ensure the contractor’s compliance with OFCCP’s laws and regulations. Establishments that have completed a compliance evaluation will not be scheduled for another evaluation for at least twenty-four months after the evaluation was completed.
In conducting compliance evaluations, OFCCP may use any one or combination of the following investigative procedures during an audit:
- Compliance review: a comprehensive analysis and evaluation of the contractor’s hiring and employment practices, written affirmative action plan (“AAP”), and the results of the affirmative action efforts undertaken by the contractor;
- Compliance check: a determination of whether the contactor has maintained appropriate records;
- Off-site review of records: an analysis and evaluation of the AAP (or any part thereof) and supporting documentation, and other documents related to the contractor’s personnel policies and employment actions that may be relevant in determining whether the contractor has complied with OFCCP’s regulations; or
- Focused review: an onsite review that focuses on one or more components of the contractor’s organization or one or more aspects of the contractor’s employment practices.
Once a contractor’s establishment is selected for a review, the FCCS notice will designate which of the four investigative methods will be used for the establishment review.
It appears that OFCCP will be expanding the scope of information it will consider during compliance reviews. According to the Directive, OFCCP will review the contractor’s compliance history for the past three years to determine if there are any patterns of non-compliance. During this review, the OFCCP will contact the EEOC and state and local agencies to determine the nature, status, and outcome of any complaints that have been filed against the contractor and review information it receives from other employment agencies, such as the Department of Labor’s Veterans’ Employment and Training Service and Wage and Hour Division.
OFCCP also lowered the threshold for conducting onsite reviews. Under ACM, OFCCP generally only conducted an onsite review if it found indicators of discrimination impacting a class of ten or more employees/candidates or found technical violations. Although the OFCCP will still need to identify indicators of potential discrimination or technical violations before coming onsite, a single instance of alleged discrimination may be sufficient to trigger the onsite review.
Moreover, if the compliance review is designated as a “quality control” review or a focused review, the OFCCP must conduct an onsite review even if there are no indicators of discrimination. Once onsite, the OFFCP’s review can be much broader because it is not limited to the indicators that triggered the onsite review. The OFCCP also indicated that while onsite, it will review the contractor’s compliance with EO 13496, which requires contractors to post a notice in the workplace informing employees of their rights under National Labor Relations Act.
New Compensation Screening Method
OFFCP has silently adopted a new method for analyzing contractor’s compensation data. For the last several years, many of the regions within OFCCP have used a “Trigger Test” when analyzing compensation data submitted by contractors in response to Item 11 on the scheduling letter. Item 11 requires contractors to submit compensation data by the total number of employees and total compensation by race and gender. Contractors are free to aggregate this information by job title or a Similarly Situated Employee Group, such as a job group. After receiving the contractor’s response to Item 11, OFCCP often employed the “Trigger Test” to determine if there were any indicators of discrimination.
Under the “Trigger Test,” the OFCCP would find indicators of discrimination where there was (1) a five percent or larger difference in pay between groups in the same job title; (2) at least thirty females across all job titles where males were favored; (3) at least ten percent of the total females in the AAP were in job titles where males were favored; and (4) the number of females in job titles where males are favored is at least three times more than the number of males in job titles where females are favored. This same method was used to determine if there was disparity in compensation between minorities and Caucasians. If the “Trigger Test” revealed discriminatory indicators, then OFCCP would send a 12 or 14 point letter to the contractor requesting additional compensation data. Because this test proved to be a poor predictor of discriminatory compensation practices, many compliance officers have either ignored the results of the “Trigger Test” or decided to discontinue its use.
Under the new test, the OFCCP is finding statistically significant disparity where there is a 2% or $2,000 difference between the average compensation for females/minorities versus males/non-minorities in any job group or job title. Because it is common to find a 2% or $2,000 disparity in compensation, there will likely be a drastic increase in the number of contractors receiving follow-up letters from OFCCP requesting additional compensation data. Moreover, under the new test, it is possible for contractors to be flagged for compensation disparity in a single job title or job group.