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OFCCP Announces Timeline for Issuing Proposed Rules on President Obama’s Compensation Agenda

The Office of Federal Contract Compliance Programs (“OFCCP”) plans to issue proposed rules implementing President Obama’s recent executive actions on the compensation practices of federal contractors. As we reported last month, President Obama took two executive actions to further his pay equity agenda: (1) he signed Executive Order 13665 prohibiting federal contractors from discriminating and retaliating against employees or applicants for discussing their compensation with one another; and (2) he issued a memorandum (“Memorandum”) directing OFCCP to publish regulations requiring federal contractors and subcontractors to submit pay data by race and gender for their employees.

According to the Department of Labor’s spring 2014 regulatory agenda, OFCCP intends to publish its proposed rules on the Memorandum in August 2014 and the proposed rules under EO 13665 in September 2014. OFCCP also revealed that it was pushing back dates for two key regulatory changes, presumably to accommodate the presidential mandate for OFCCP to publish rules on EO 13665 and the Memorandum. In its 2014 regulatory agenda for the year, OFCCP indicated that it would be issuing proposed rules on its regulations for construction contractors in April 2014 and on its Sex Discrimination Guidelines in May 2014. Now, OFCCP has announced that it will not be issuing the proposed updates to the Sex Discrimination Guidelines until September 2014 and moved the date for the proposed overhaul of its regulations for construction contractors until January 2015.

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Filed under Department of Labor, OFCCP

President Obama Takes Executive Action Reinforcing the Regulatory Agenda on Investigating Federal Contractors’ Compensation Practices

In recognition of National Pay Equity Day, President Obama took two executive actions on April 8, 2014 to continue his pay equity agenda: (1) President Obama signed Executive Order on Non-Retaliation for Disclosure of Compensation Information (“Executive Order”) amending Executive Order 11246 to prohibit federal contractors from discriminating or retaliating against employees or applicants for discussing their compensation with one another; and (2) President Obama issued a memorandum directing the Department of Labor (“DOL”) to publish regulations requiring federal contractors and subcontractors to submit pay data, by race and gender, for their employees (“Compensation Memorandum”). These executive actions, along with President Obama’s Executive Order to increase the minimum wage for employees working on federal contracts, mark another significant step in this Administration’s push for increasing enforcement and oversight over federal contractors’ compensation practices.

Executive Order

The Executive Order mandates that federal contractors cannot “discharge or in any manner discriminate against” employees and applicants who have “inquired about, discussed, or disclosed” their own or another employee’s or applicant’s compensation information. The Executive Order explains that the reason for this change is that it will “enhance the ability of Federal contractors and their employees to detect and remediate unlawful discriminatory practices, which will contribute to a more efficient market in Federal contracting.”

The Executive Order excludes from this protection unauthorized disclosures by employees who learn of the compensation information as part of their essential job functions (e.g., HR and compensation managers) unless (1) they are disclosing compensation information to someone who already has access to that information; or (2) they are disclosing that in response to a formal complaint or charge in furtherance of an investigation. DOL will be required to issue regulations implementing this requirement by September 15, 2014.

Compensation Memorandum

The Compensation Memorandum is premised on a claim that the pay gap between men and women is a direct result of a “lack of sufficiently robust and reliable data on employee compensation.” It directs DOL to propose regulations requiring federal contractors and subcontractors to submit data on the compensation paid to their employees, including data by sex and race.

When creating the proposed regulations, the Executive Order instructs DOL to consider:

  • “maximiz[ing] efficiency and effectiveness” by focusing efforts on contractors where the reported data shows pay violations;
  • using the data to “encourage greater voluntary compliance” with compensation laws by federal contractors and “analyz[ing] industry trends”;
  • minimizing the burden on federal contractors, particularly small businesses; and
  • “avoid[ing] new record-keeping requirements” by relying on “existing reporting frameworks to collect the summary data.”

Despite DOL’s announcement in its current regulatory agenda that OFCCP planned to publish a Notice of Proposed Rulemaking (“NPRM”) on the compensation data collection tool in January 2014, no proposal has yet been published. The Presidential Memorandum will expedite the publication of NPRM because it directs the DOL to propose regulations by August 6, 2014.

Impact on Federal Contractors

The Executive Order prohibiting discrimination and retaliation against employees and applicants does not change much for federal contractors. Sections 7 and 8 of the National Labor Relations Act already provide employees and applicants the right to discuss their compensation information.

The effect of the Compensation Memorandum’s requirement that contractors to disclose their compensation information could be significant, but the precise impact will depend on the details of the regulations. As of now, it is unclear whether OFCCP will develop new or additional compensation reporting requirements and how OFCCP will use the compensation tool to store and analyze compensation data.

We expect OFCCP to continue to ratchet-up its investigation of contractors’ compensation information during audits. This means that contractors should be vigilant about reviewing their compensation practices now and proactively addressing pay disparities before an audit. Now is the time for contractors to consider undertaking pay equity studies and reviews of their compensation policies and practices under the protection of the attorney-client privilege.

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Filed under Compensation, Department of Labor, OFCCP

OFCCP’s Final Rules for Veterans and Disabled Become Effective

On March 24, 2014, the Office of Federal Contract Compliance Programs’ (“OFCCP’s”) final rules for individuals with disabilities under Section 503 of the Rehabilitation Act and for veterans under the Vietnam Era Veterans’ Readjustment Assistance Act (“VEVRAA”) went into effect. There are two effective dates under the final rules:

  • The requirements that are not specific to affirmative action plans must be implemented by March 24, 2014; and
  • The affirmative action plan requirements under Subpart C in the final rules must be in place by the contractor’s next affirmative action plan cycle following March 24, 2014.  This means, if a contractor’s affirmative action plan begins on January 1 every year, the contractor would not have to implement the affirmative action plan requirements until January 1, 2015.

Our previous alert on these new rules explains in detail the requirements flowing from these rules and the timing of those changes.

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Filed under OFCCP, Rehabilitation Act, Veterans

OFCCP Corrects Proposed Changes to Its Complaint Form

On February 19, 2014, OFCCP published a correction to its notice seeking comments on its form for individuals to file discrimination and retaliation complaints.  The complaint form, which is designated as Form CC-4, requests information from individuals making complaints of discrimination and retaliation against federal contractors and subcontractors, including whether the complainant believes the contractor has discriminated or retaliated against others.  OFCCP has shown an increasing interest in pursuing individual complaints of discrimination and retaliation over the last few years, and these proposed changes suggests that it plans to continue the trend.

The original notice published in the Federal Register on February 5, 2014 provided a slightly revised version of the Form CC-4 and sought comments on:

  • Whether the proposed collection of information is useful or necessary for OFCCP to perform its functions;
  • Whether OFCCP accurately estimated the burden of collecting this information; 
  • Whether any improvements needed to be made to the quality, utility and clarity of the information requested in the form; and
  • How to minimize the burden on those who are completing the form, such as permitting electronic submissions.

 In the correction notice, OFCCP made several revisions to its notice and proposed complaint form, including:

  • Revising the statement in the notice that incorrectly indicated that the proposed complaint form was currently available on OFCCP’s website; and
  • Updating several fields that were left blank in the proposed complaint form, including the three fields located in the left-hand column and the third and bottom rows of the form.

 Interested parties will still have until April 7, 2014 to submit comments on the proposed complaint form.

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Filed under Department of Labor, Discrimination, OFCCP

Cargill Agrees to Pay $2.2 Million to Settle Hiring Discrimination Charges By OFCCP

On January 22, 2014, the Office of Federal Contract Compliance Programs (“OFCCP”) announced that it was settling a case with Cargill Meat Solutions (“Cargill”) for $2.2 million relating to allegations of hiring discrimination based on race and gender.  The settlement stemmed from OFCCP’s investigation of multiple Cargill facilities between 2005 and 2009.  During these reviews, OFCCP alleged that Cargill’s hiring practices for production jobs at several of its facilities discriminated against 2,959 females, African-American, Hispanic, and Caucasian applicants.  OFCCP also allegedly found a number of record-keeping violations at Cargill.

In addition to paying $2,236,218 in back wages, Cargill also agreed to extend job offers to 354 former applicants who were rejected for positions and to undertake extensive self-monitoring measures to ensure full compliance with OFCCP’s laws.

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Filed under Department of Labor, Discrimination, OFCCP

OFCCP Receives Final Approval of New Voluntary Self-Identification Form for the Disabled

On January 22, 2014, the Office of Management and Budget (“OMB”) approved the Office of Federal Contract Compliance Program’s (“OFCCP’s”) new self-identification form for individuals with disabilities.  According to OFCCP’s new regulations under Section 503 of the Rehabilitation Act (“Disability Regulations”), federal contractors and subcontractors will be required to use this new form to offer all applicants and employees an opportunity to self-identify as individuals with disabilities. 

After receiving thoughtful comments from the contractor community, there were number of improvements that were made to proposed version.  For example, the final form now includes a section for applicants to indicate that they do not have a disability and allows candidates to identify their name and the date the form was completed.  Significantly, however, the form still asks individuals to disclose if they “ever had a disability.”  This is problematic because this may increase the number of candidates who self-identify as disabled thereby (1) increasing the chance of there being statistically significant adverse impact on unselected applicants who self-identified as disabled; and (2) increasing contractors exposure to failure to hire claims under the “regarded as” prong of the ADA because employers will be on notice that these candidates are disabled.

Despite some of the lingering concerns with the form, contractors must prepare to put this in place by their first affirmative action plan cycle following the March 24, 2014 effective date of the Disability Regulations.  Contractors will be required to use this exact form without modification, but they can create an electronically fillable copy of the form that displays the OMB number and expiration date, contains the text of the form without alteration, use a sans-serif font (such as Arial or Calibri), and at least 11-pitch font size (with the exception of the footnote and burden statement, which must be at least 10-pitch in size).  Contractors will also be required to provide this form to applicants both pre and post-offer, and the form must be provided to employees at least once every five years.

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Filed under Affirmative Action Plan (AAP), Department of Labor, Discrimination, OFCCP, Rehabilitation Act

OFCCP Unveils Its 2014 Regulatory Agenda

On November 26, 2013, the Office of Federal Contract Compliance Programs (“OFCCP”) released its semiannual regulatory agenda revealing that it plans to introduce several new regulatory initiatives in 2014.  Among those initiatives are:

Updating Affirmative Action Requirements for Construction Contractors: OFCCP intends to issue a proposed rule by April 2014 overhauling the affirmative action regulations for construction contractors.  The last revision of these regulations was in 1980.  OFCCP indicated that the dated rules for construction contractors “have proven ineffective at making meaningful progress in the employment of women and certain minorities in the construction industry.”  OFCCP intends for the new rules to implement a “new method for establishing affirmative action goals” and implement new requirements that “reflect the realities of the labor market and employment practices in the construction industry today.”

• Developing a New Compensation Tool: Over the last several years, OFCCP has expressed its intent to develop a new tool that it could use to analyze contractors’ compensation practices.  OFCCP released an Advanced Notice of Public Rulemaking in August 2011 asking for contractors to provide input on a potential compensation tool.  In the 2014 regulatory agenda, OFCCP indicated that it would be developing the new compensation tool to “identify contractors likely to violate” OFCCP’s laws and for OFCCP’s “establishment-specific, contractor-wide, and industry-wide analyses.”

• Overhauling the Sex Discrimination Guidelines: OFCCP plans to issue a proposed rule revising its sex discrimination guidelines in May 2014.  These guidelines have not been revised in more than 30 years.  OFCCP indicated that, because the current guidelines are outdated, they warrant a “regulatory lookback” so that OFCCP can “create sex discrimination regulations that reflect the current state of the law in this area.”

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Filed under Affirmative Action Plan (AAP), OFCCP

OFCCP Concedes ALJ Ruling that “Non-Asian” Is Not a Proper Class

The Office of Federal Contract Compliance Programs (“OFCCP”) filed a notice on September 19, 2013 with the Department of Labor’s Administrative Review Board (“ARB”) indicating that it will not appeal the Administrative Law Judge’s (“ALJ’s”) ruling in OFCCP v VF Jeanswear Ltd Partnership, (ALJ Case No 2011-OFC-00006, Krantz, K), that “non-Asian” does not constitute a “race” for the purposes of Executive Order 11246 enforcement.

ALJ Ruling

On August 5, 2013, the ALJ ruled that OFCCP could not pursue a finding of discrimination against a contractor on behalf of “non-Asians.”  In that case, OFCCP alleged that VF Jeansware discriminated against 288 “non-Asian” applicants for positions in its Operative job group at its Winston-Salem, North Carolina establishment.   OFCCP alleged there was statistically significant adverse impact against “non-Asians” based on VF Jeansware hiring only sixteen percent of the incumbents for Operative positions from its non-Asian applicant pool as compared to hiring nearly forty-four percent of the Asian applicant pool for positions in that same job group. 

Upon review, the ALJ held that OFCCP could not establish a discrimination claim against “non-Asians” because “non-Asians” were not a protected class.  Although the ALJ acknowledged there was disparate impact on “non-Asians”, he found that “non-Asian” is not a term defined in the regulations and was an aggregate of three ethnic groups (i.e., Whites, African-Americans, and Hispanics).  The ALJ noted that while Whites were underrepresented, African Americans were close to the percentage of African-Americans available in the regional data and Hispanics were actually “overrepresented.”  The ALJ also explained that the only accepted “race” and “ethnic group” classifications for both EEOC and OFCCP purposes are African-American, Native American/Alaskan Native, Asian/Pacific Islander, Hispanic, and White.  Although “non-whites” can constitute a protected class of “minorities”, the regulations do not recognize other “non-” classifications for the purposes of analysis and enforcement. 

OFCCP had thirty days to appeal the ALJ’s ruling to the ARB.  OFCCP filed a notice with the ARB on September 19, 2013 waiving its right to appeal the ALJ’s ruling, and, on September 25, 2013, the ARB issued an order closing the case.

Impact of Ruling

Over the last several years, OFCCP has moved away from conducting adverse impact and disparity analyses at the aggregate level of comparing minorities to non-minorities (i.e., White).  Instead, OFCCP has increasingly been comparing sub-minority and ethnic groups to find cases of disparate impact.  In some instances, such as the VF Jeanswear case, OFCCP has been aggregating certain ethnic and minority groups to increase their odds of finding disparate impact.  Many in the contractor community believed that this type of analysis was unsound and unsupported by the Title VII principles that apply to OFCCP discrimination cases.

The ALJ’s ruling along with OFCCP’s decision not to challenge it emphasizes that OFCCP cannot base discrimination claims on these aggregate ethnic and racial groups.  Contractors, however, should still be prepared during audits for OFCCP to analyze their selection decisions by comparing the highest group selected against each sub-minority or ethnic group that was not selected.

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Filed under ALJ, ARB, Department of Labor, Discrimination, OFCCP

DOD Issues Interim Rule with Significant New Protections for Whistleblowers

On September 30, 2013, the Department of Defense (“DoD”) released an Interim Rule that adds robust protections for whistleblower employees of certain federal contractors and subcontractors.  The Interim Rule was passed to implement portions of Section 827 of the National Defense Authorization Act for Fiscal Year 2013 (“NDAA”), which significantly expanded whistleblower protections for employees of DoD contractors and subcontractors.  According to the DoD Inspector General, Section 827 of the NDAA expanded the DoD whistleblower protections for the first time to:

  • Cover employees of subcontractors, not just prime contractor employees;
  • Protect reports of violations of law, rule or regulation (rather than just violations of law) related to a DoD contract or grant;
  • Include reports of abuses of authority that undermine contract performance; and
  • Prohibit reprisals taken at the request of a contracting agency.

Who Is Covered

The Interim Rule will protect all employees of contractors and subcontractors who were awarded contracts or grants with the DoD on or after July 1, 2013.  The Interim Rule, however, does not apply to disclosures by employees of contractors and subcontractors of any element of the intelligence community if the disclosure (1) relates to the intelligence community; or (2) was discovered during contract or subcontract services provided to an element of the intelligence community. 

The intelligence community is broadly defined to include, among others, the Central Intelligence Agency; the National Security Agency; the Defense Intelligence Agency; the National Geospatial-Intelligence Agency; the National Reconnaissance Office; other offices within the DoD for the collection of specialized national intelligence through reconnaissance programs; and the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Coast Guard, the Federal Bureau of Investigation, the Drug Enforcement Administration, and the Department of Energy.

Protected Disclosures

The Interim Rule specifically prohibits DoD contractors and subcontractors from retaliating against employees who disclose what they reasonably believe to be:

  • Gross mismanagement of a DoD contract;
  • Gross waste of DoD funds;
  • An abuse of authority relating to a DoD contract;
  • A substantial and specific danger to public health or safety; or
  • A violation of law, rule or regulation related to a DoD contract (including the competition or negotiation of a DoD contract).

Entities to Whom Disclosures May be Made

The Interim Rule also expands the persons or entities to whom a protected disclosure can be made to include:

  • A Member of Congress or a representative from a committee of Congress;
  • An Inspector General that has oversight or receives funding for a DoD contract;
  • The Government Accountability Office;
  • A DoD employee responsible for contract oversight or management;
  • An authorized official of the Department of Justice or other law enforcement agency;
  • A court or grand jury; or
  • A management official or other employee of the contractor or subcontractor who has the responsibility to investigate, discover, or address the misconduct.

Other Protections

The Interim Rule contains several other protections for employees.  These include:

  • Written Notice of Protections: Contractors and subcontracts must provide a written notice (in the predominate native language of their workforce) informing their employees of their whistleblower rights under the Interim Rule.
  • No Waiver of Protections: Employees cannot waive their whistleblower rights through agreement, policy, or condition of employment, including in a non-disclosure or release agreement.

Statute of Limitations

Whistleblowers seeking to enforce the protections under the Interim Rule will have three years after the date on which the alleged retaliation took place to file their claim.

Remedies

The Interim Rule requires whistleblowers to first seek relief by filing a complaint with the Inspector General of the DoD.  The DoD Inspector General will have thirty days to review the complaint and determine whether to dismiss it or impose certain remedies against the contractor.  The DoD Inspector General’s remedies for violations of the retaliation provisions in the Interim Rule include issuing an order:

  • Requiring the contractor or subcontractor to undertake affirmative action to abate the retaliation;
  • Reinstating the whistleblower to a position he or she held before the retaliation, including any compensatory damages and employment benefits the whistleblower is entitled to;
  • Requiring the contractor or subcontractor to pay all costs and expenses (including attorneys’ fees and expert witness fees) the whistleblower incurred in connection with bringing his or her complaint.

The DoD Inspector General’s order can be appealed to the United States Court of Appeals for the circuit in which the alleged retaliation occurred.  Appeals must be filed within sixty days of issuance of the order.

Effective Date of Interim Rule

The Interim Rule took effect on the date of its publication in the Federal Register, September 30, 2013.  Interested contractors, however, may still submit comments to the Interim Rule by November 29, 2013.

Implications of Interim Rule

The significant expansion of whistleblower protections under the Interim Rule will likely increase the already escalating number of whistleblower claims.  In fact, the Senate Report that preceded Section 827 of the NDAA indicated that the reason for the whistleblower expansions was that many of the complaints the DoD Inspector General received were outside the scope of DoD’s previous whistleblower provisions.  Given that the Interim Rule expands the scope of whistleblower protections, including to employees of DoD subcontractors, contractors can expect to see an uptick in the number of whistleblower claims.  In addition, plaintiffs’ attorneys are more likely to pursue these cases considering that successful whistleblowers will be able to recover attorneys’ fees and legal costs.

Covered contractors and subcontractors should review their whistleblower policies to make sure they provide adequate complaint and investigation procedures in light of the Interim Rule.  In particular, considering that whistleblower employees of subcontractors are now protected, contractors should strongly consider having proper reporting and investigation procedures for complaints from employees of subcontractors. 

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Filed under Department of Defense, Whistleblower

Compliance Challenges for Federal Contractors During the Government Shutdown

The government shutdown announced yesterday is already making an impact on how companies comply with their obligations as federal contractors.  Congress’ failure to agree on a new budget for the 2014 Fiscal Year has resulted in a furlough of over 800,000 federal workers, temporary closing of numerous federal agencies, and suspension of many services federal contractors rely upon to fulfill their compliance obligations. 

E-Verify

Those effects are already being felt by contractors who use E-Verify.  E-Verify is the internet-based system that federal contractors must use to verify the employment eligibility of their new hires and employees.  The Department of Homeland Security (“DHS”), who oversee the E-Verify program, announced yesterday that E-Verify will be unavailable during the government shutdown.  This means that contractors will not be able to enroll in E-Verify, verify employment eligibility of any new hires or existing employees, or take any administrative actions relating to their E-Verify accounts. 

In addition, employees who receive Tentative Non-confirmations (“TNCs”), indicating that their employment eligibility could not be verified through the E-Verify system, will not be able to resolve those TNCs during the government shutdown.  The time for employees to resolve TNCs, however, will be extended by the days that the government is closed.  DHS has also warned that contractors cannot take any adverse action against an employee because of an E-Verify interim case status during the government shutdown.

Contractors will still need to timely and accurately complete I-9 forms for all new hires within three business days of hiring any employee.  Contractors must use the new I-9 form that was issued earlier this year. 

OFCCP Closed for Business

Contractors who have open audits with OFCCP may also experience difficulties due to the government shutdown.  OFCCP has announced that it will be completely closed during the shutdown because it has been declared as part of the “non-essential” government staff.  Contractors who have recently received a scheduling letter or who have an open OFCCP audit with a pending request will need to carefully consider whether they should respond to OFCCP’s during the shutdown. 

We recommend that contractors conduct “business as usual” and timely submit all submissions in order to ensure full compliance.  Contractors should acknowledge the government shutdown in their submissions and request OFCCP contact them after it resumes normal operations.  There may be situations, however, where contractors are concerned about submitting materials by mail to OFCCP that contain confidential and sensitive information since there is no staff at OFCCP to receive the submission.  In that situation, contractors should consider e-mailing the compliance officer to inform him or her that the contractor will send the submission once the government shutdown is over.

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Filed under E-Verify, OFCCP