Tag Archives: Department of Labor

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 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

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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OFCCP Unveils Its Game-Changing Final Rules for Veterans and Individuals with Disabilities

On August 27, 2013, the Office of Federal Contract Compliance Programs (“OFCCP”) released the long awaited final rules increasing protections for veterans under the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (“VEVRAA”) and individuals with disabilities under Section 503 of the Rehabilitation Act of 1973 (“Section 503”).  These new rules will require federal contractors to engage in a number of additional affirmative action and other requirements related to the hiring and retention of veterans and individuals with disabilities. 

As expected, the final rules deviate little from the rules OFCCP proposed for veterans and individuals with disabilities in 2011.  We will be providing additional analyses of these final rules in the coming weeks, but we have provided a brief summary of some of the highlights of the final rules below.  Hold on to your hats as OFCCP continues its game-changing year.

Highlights of Changes to the Veterans Regulations

  •  Hiring Benchmarks: Under VEVRAA, contractors will now be required to set annual hiring benchmarks for protected veterans.  Contractors can establish benchmarks either (1) equal to the national percentage of veterans in the civilian labor force, which will be provided by OFCCP annually; or (2) establish their own benchmarks using certain data from the Bureau of Labor Statistics and the Veterans’ Employment and Training Service/Employment and Training Administration that will also be published by OFCCP, as well other factors that are unique to the contractor’s hiring circumstances.
  •  New Data Collection and Analyses Requirements:  Contractors will be required for the first time to “document and update annually several quantitative comparisons” analyzing the number of veterans hired by the contractor.  Contractors must maintain this data for at least three years.
  • Revised Procedures for Self-Identification: Before these final rules were issued, contractors were required to offer applicants an opportunity to self-identify their veteran status after being offered employment with the contractor.  Under the new rules, contractors are now required to offer candidates an opportunity to self-identify as covered veterans both before and after the offer phase in the application process.
  • Mandatory Flow-Down Language: OFCCP is now mandating that contractors use specific language to flow down the veteran requirements to covered subcontractors.
  • Required Forms: Contractors will now be required to implement certain formats for listing job openings with State or local job services.

Highlight to Changes to the Disability Regulations

  • Mandatory Utilization Goal:  The final rule for Section 503 mandates contractors set hiring benchmarks for individuals with disabilities.  Contractors will be required to establish a nationwide seven percent utilization goal and conduct annual utilization analyses for individuals with disabilities.  The goal will apply to each job group in the contractor’s affirmative action plan or, for contractors with 100 or fewer employees, their entire workforce. 
  • New Data Collection and Analyses Requirements: Similar to the requirements relating veterans, contractors will also for the first time be required to “document and update annually several quantitative comparisons” analyzing the number of individuals with disabilities hired by the contractor.  Contractors will also be required to maintain this data for at least three years.
  • Revised Procedures for Self-Identification: Prior to the final rules on Section 503, contractors only invited candidates to self-identify their disability status after they were offered employment.  The new rules change that requirement to now obligate contractors to offer candidates an opportunity to self-identify as individuals with disabilities both before and after the offer phase in the application process.  In addition, contractors must use specific language proscribed by OFCCP and offer employees an opportunity to self-identify as individuals with disabilities every five years.
  • Mandatory Flow-Down Language:  Contractors will be required to use OFCCP’s specific language to flow down Section 503 requirements to covered subcontractors.

OFCCP Provides Guidance and Training on Final Rules

For both of the final rules, OFCCP has provided webpages with additional information, including the text of the final rules, fact sheets, and frequently asked questions.  OFCCP will also be holding webinars explaining the final rules on August 30 and September 18 for Section 503 and on August 29 and September 11 for VEVRAA.  You can sign up for these webinars and find the additional information by following these links: Section 503 and VEVRAA

Effective Date of Final Rules

The final rules are expected to be published in the Federal Register within the next two weeks and will take effect 180 days after publication.  This means that contractors will have to implement many of these requirements by the spring of 2014.

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Filed under Affirmative Action Plan (AAP), Department of Labor, Disability Discrimination and Accommodation, OFCCP, Veterans

OFCCP Moves Closer to Finalizing Game-Changing Regulations for Individuals with Disabilities and Veterans

On July 31, 2013, the Office of Federal Contract Compliance Programs (“OFCCP”) submitted to the Office of Management and Budget (“OMB”) for approval its final regulations for individuals with disabilities under Section 503 of the Rehabilitation Act.  This comes on the heels of OFCCP submitting the final regulations for covered veterans under the Vietnam Era Veterans Readjustment Assistance Act (“VEVRAA”) to OMB on Tuesday.  OMB will have sixty (60) days to approve or reject these final regulations.

As we previously reported, if passed in their final form, these regulations will usher in game-changing requirements for federal contractors and subcontractors subject to OFCCP’s jurisdiction.  In April 2011, OFCCP released its proposed changes to VEVRAA.  Under OFCCP’s proposed changes, contractors would be required to engage in a number of additional recordkeeping and other obligations designed to increase protections for covered veterans.  See our prior post for a complete list of the proposed changes under VEVRAA.

In December 2012, OFCCP also released proposed changes to Section 503 of the Rehabilitation Act.  The proposed rules contemplate requiring contractors to undertake a number of additional affirmative action obligations for individuals with disabilities, including establishing a seven percent goal in each job group at the contractors’ establishments for disabled individuals. The complete details concerning the proposed changes to Section 503 can be found here

Now that the new Department of Labor Secretary Perez has finally been confirmed, OFCCP will move very quickly to put these and other backlogged items on its regulatory agenda into action.   We will continue to monitor these developments and inform you of any further changes.

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Filed under Affirmative Action Plan (AAP), Department of Labor, Disability Discrimination and Accommodation, OFCCP, Veterans

OFCCP Signals Its Continuing Aggressive Enforcement Posture with a New Directive on Calculating Back Pay

On July 22, 2013, the Office of Federal Contract Compliance Programs (“OFCCP” or the “Agency”) released Directive 310 to provide guidance on how the Agency will calculate back pay in discrimination cases.  This new Directive is just one in a string of directives OFCCP has released over the last several years revealing the Agency’s aggressive posture for ferreting out discriminatory practices during audits. 

Back Pay under the New Directive

Back pay is generally awarded to an individual or class of individuals whenever there is a finding that discrimination resulted in loss of compensation or benefits to that individual or class of individuals.  According to the new Directive, OFCCP will be using two models to calculate back pay: the formula and individual relief models.  The Agency will have complete discretion on which model to apply to a particular discrimination charge.

Formula Relief Method

OFCCP will generally use the formula relief model whenever it is “unrealistic to attempt to compute individual losses with accuracy.”  Generally, this will be used whenever there is alleged discrimination against a class of five or more individuals.  In formula relief cases, OFCCP will include individuals in a class based on them being similarly-situated to one another even if there is no “evidence they were specifically discriminated against.” 

OFCCP will use either the shortfall method or the averaging method for calculating the appropriate amount of back pay in formula relief cases.  The shortfall method will be employed in instances where the number of individuals in the class exceeds the number of job opportunities, such as in hiring or promotion situations.  OFCCP will determine the back pay award under the shortfall method by calculating the “difference between the actual number of persons in the non-favored group that were selected” for the employment opportunity and “the number expected to have been selected” for that opportunity. 

For example, XYZ Contractor has 20 software engineer openings.  100 qualified individuals apply for those 20 vacancies, and 50 of the applicants are male and 50 of the applicants are female.  XYZ Contractor hires 19 males and only 1 female.  OFCCP determines that the selections were the result of discrimination and that each female lost $100,000 in back pay earnings.  Using the shortfall method, OFCCP will calculate back pay as follows:

  • Expected number of hires: 10 males, 10 females
  • Actual number of hires: 19 males, 1 female
  • Shortfall: 9 (10 expected female hires minus 1 actual hire)
  • Monetary relief: $900,000 (9 females times $100,000 in back pay)

OFCCP will use the averaging method in compensation discrimination or glass ceiling cases.  Under this method, OFCCP will determine the back pay amount by the average or typical difference in pay between the favored and non-favored group.  For example, the OFCCP will compare the average salary of men to the average salary of women in a given position.  The difference between the salary disparities is the back pay to be awarded to each female in the class.  OFCCP indicated that it would use regression models and other tools to calculate the average or typical estimate of pay disparities for the total class.

Individual Relief Method

OFCCP will use the individual relief model when the class size is small (e.g., five members or less), the duration of the liability period is short (e.g., less than six months), and there is sufficient documentation to trace the lost earnings for each class member.  The Agency will calculate back pay using the individual relief method by tracing the pay history of the favored individuals and comparing it to the lost pay and benefits of the alleged victim(s).

Period of Back Pay

Back pay can be collected from the time when the discriminatory act occurred or two years prior to the date of the scheduling later, whichever occurs later, to the date when the “discriminatory action(s) is ended by the contractor or stopped as a result of a signed Conciliation Agreement, Consent Decree, or Final Court/Administrative Order.”  This means that a company could be liable for back pay even if it no longer holds any federal contracts if the discriminatory act occurred at the time when the company was a federal contractor.

Interest and Taxes

Contractors saddled with back pay awards will also have to pay interest and taxes related to those awards.  Interest on back pay is calculated at the IRS underpayment rate and is compounded quarterly.  Contractors are also responsible for paying their share of taxes on the settlement amount and providing tax withholding and reporting in accordance with IRS laws.

Other Forms of Monetary and Non-Monetary Relief

In addition to back pay, OFCCP warned that contractors can be subject to various other forms of monetary and nonmonetary relief if their practices are determined to be discriminatory.  According to the new Directive, other forms of monetary relief include “front pay or salary adjustments,” and nonmonetary relief can include “preferential hiring, preferential promotions, special training programs, reasonable accommodation, systemic injunctive relief, and EEO counseling for supervisors.”

Implications

The new Directive sends a strong signal that OFCCP intends to continue aggressively pursuing monetary penalties against contractors whenever contractors’ practices reveal potential indicators of discrimination.  Over the last several years, OFCCP has issued a string of initiatives focused on the Agency conducting in-depth audits of contractors’ practices to ferret out potential discrimination or compliance violations.  Most recently, OFCCP issued a directive in February announcing that it will be intensely reviewing contractors’ compensation practices during audits. 

As a result of these initiatives, it is imperative for contractors to analyze their selection and compensation practices to make certain they are free of indicators of discrimination.  If contractors uncover indicators of discrimination during their internal assessments, they should immediately take action to eliminate the discriminatory practices or procedures or thoroughly document the legitimate, nondiscriminatory reasons explaining those indicators.

In addition, it is yet to be seen whether compliance officers at OFCCP will consistently adhere to these methodologies.  Compliance officers at OFCCP will sometimes demand back pay for all qualified applicants who were not hired even if there are more applicants than openings.  In essence, OFCCP is seeking back pay for individuals even though there was no way for all of the applicants to have been selected, which is inconsistent with any of the methodologies outlined in the new Directive.

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OFCCP Mandates Contractors Use Most Recent Census Data for AAPs created by 2014

On May 15, 2013, the Office of Federal Contract Compliance Programs (“OFCCP”) posted a notice informing federal contractors that they must begin using the 2006-2010 EEO Tabulation (“2010 Census Data”) for affirmative action plans (“AAPs”) created after January 1, 2014.

Federal contractors with fifty or more employees and a covered federal contract or subcontract of $50,000 or more are required to create and maintain AAPs annually.  One key requirement of an AAP is the determination of the availability of qualified minorities and women for the contractor’s job openings.  Contractors use availability numbers to establish benchmarks to determine if they have any underrepresentation of females or minorities in their current workforce.  OFCCP requires contractors to “use the most current and discrete statistical information available” to determine their external availability estimates for their AAPs.

As we previously reported, the Census Bureau began releasing the 2010 Census Data last November. This data is the most current statistical information available for contractors to determine availability. The 2010 Census Data is set of over 100 tables that break down the labor force in the United States by sex, race, and ethnicity that is searchable by various variables, such as geography and occupation.

In its notice, OFCCP indicated that it solicited input from contractors about transitioning to the 2010 Census Data. Although it found that some contractors had already implemented the 2010 Census Data, it realized that, for many contractors, “converting their IT systems and availability calculations to the new data will take time due to changes in the coding and categorization” of the 2010 Census Data.  As a result, the OFCCP is allowing contractors until January 1, 2014 to use the 2010 Census Data in their AAPs, but noted that contractors could use it earlier if they wished to do so.

In light of this notice, contractors should start assessing how they can incorporate the 2010 Census Data into their availability analysis for their 2014 plans.  In addition, contractors who establish goals for their 2013 plans using old census data should consider rerunning their availability analysis using the 2010 Census Data to see if it eliminates or reduces goals.

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Filed under Affirmative Action Plan (AAP), Census Bureau, Department of Labor, OFCCP

Federal Court Finds That Certain Healthcare Providers Are Covered By OFCCP’s Jurisdiction

On March 30, 2013, the U.S. District Court for the District of Columbia held that the Office of Federal Contract Compliance Programs (“OFCCP”) has jurisdiction over three University of Pittsburgh Medical Center hospitals (“UPMC”).  UPMC Braddock v. Harris, No. 09-1210 (D.D.C. Mar. 30, 2013).  As we previously reported, the Administrative Review Board (“ARB”) found that OFCCP did not have jurisdiction over UPMC based solely on its participation in TRICARE.  Despite the ARB’s decision, OFCCP appealed the decision to the U.S. District Court for the District of Columbia.

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Filed under Department of Labor, OFCCP, TRICARE

OFCCP Significantly Overhauls Its Compensation Standards

On February 26, 2013, the Office of Federal Contract Compliance Programs (“OFCCP”) announced a significant shift in its approach to analyzing contractors’ compensation decisions during audits.  In the press release, OFCCP stated that it was rescinding its “Voluntary Guidelines” and “Compensation Standards” from 2006 because they “limited OFCCP’s ability to conduct full investigations and use every enforcement tool at its disposal to combat pay discrimination.”  In its place, OFCCP issued Directive 307, which establishes many new practices and procedures OFCCP will follow when investigating contractors’ compensation practices during audits. The new procedures took effect on February 28, 2013.

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OFCCP Continues to Assert Jurisdiction over TRICARE Contractors

On November 13, 2012, the Office of Federal Contract Compliance Programs (“OFCCP”) filed a motion before the Department of Labor’s Administrative Review Board (“ARB”) asking it to reconsider its decision in OFCCP v. Florida Hospital of Orlando.  As we previously reported, on October 19, 2012, the ARB found that the OFCCP did not have jurisdiction over a federal contractor based solely on its participation in TRICARE, but the ARB left open whether certain TRICARE arrangements could be covered by OFCCP’s jurisdiction under the first prong of the subcontractor definition.

In its motion for reconsideration, the OFCCP argued that the ARB left unanswered the “critical issue” of whether the National Defense Administration Act (“NDAA”) precluded OFCCP from asserting jurisdiction over TRICARE subcontractors on the basis of the first prong of the subcontractor definition (i.e., whether the TRICARE subcontractor’s services were “necessary” to the performance of the contract).  The OFCCP announced in its briefing its intent to continue to serve audit notices on TRICARE subcontractors until ARB rules on this issue.  The OFCCP specifically stated that “the only way OFCCP can obtain a ruling on the [open] issue[s] is to continue to notice TRICARE network providers for compliance reviews where” the first prong of the definition of subcontractor is at issue.  It also indicated that it would be “forced to bring another enforcement action against one or more TRICARE” contractors in order to have this issue answered.

In short, if the ARB denies OFCCP’s motion, OFCCP will aggressively seek a test case that requires ARB directly to address whether TRICARE subcontractors are covered by OFCCP’s jurisdiction if their services are necessary for the performance of the prime contract.  TRICARE contractors should prepare for pending OFCCP audits of their establishments, which had been placed on hold until the resolution of the Florida Hospital case, to be reopened in the near future.

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Filed under ARB, Department of Labor, OFCCP, TRICARE