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OFCCP’s Enforcement Priorities and New Compliance Evaluation Procedures

Labor & Employment Alert Pamela M. Ploor, Ely A. Leichtling, Adrianne C. Mazura

On February 14, 2011, Department of Labor ("DOL") Secretary Hilda L. Solis and Director Patricia Shiu of the Office of Federal Contract Compliance Programs ("OFCCP") participated in a web chat regarding OFCCP's priorities and fiscal year 2012 budget justification. Those priorities include modifying the procedures for compliance evaluations; changing the nature of compliance evaluations; revising regulations regarding veterans, construction contractors, and disabled persons; affirming the importance of compensation analysis by OFCCP; analyzing whether a contractor is misclassifying a worker as an independent contractor; and considering online submission of contractors' data to OFCCP via a web portal. OFCCP's priorities should interest federal contractors because they may use the priorities to determine where to emphasize their compliance efforts. This article summarizes OFCCP's enforcement priorities.

Director Shiu indicated that the 2012 budget reflected an increase of $3.6 million, and she did not foresee any staff cuts. The Director indicated that even though OFCCP's FY 2012 budget has not yet been approved, she does not believe the uncertainty of future funding will impact the release dates of any of OFCCP's proposed regulations.

OFCCP indicated in its budget justification that it would expand its investigation strategy and adopt a more comprehensive effort to ensure thoroughness of compliance audits, case quality, and consistency in case audit procedures. The reviews will be more complex, resulting in more in-depth, detailed and thorough investigations with additional on-site verification and numerous in-depth interviews of witnesses - all of which require increased staff time and attention.

During the web chat, the Director said that the agency would continue to increase compliance evaluations. OFCCP issued a new directive, dated December 16, 2010, concerning compliance evaluations entitled Active Case Enforcement ("ACE") Procedures. Under the new directive, which is effective now, OFCCP will continue to use "neutral selection criteria" under the Federal Contractor Selection System ("FCCS") to select contractor establishments for one of a number of different forms of audit - either a compliance review, an off-site review of records, a compliance check, or a focused review.

When OFCCP selects a contractor for a compliance review, it will conduct a full desk audit and evaluate a contractor's compliance with all obligations. OFCCP will contact the Equal Employment Opportunity Commission ("EEOC") and the local state fair employment practice agency to determine the nature, status and outcome of any filed charges at the establishment under audit. OFCCP will review a contractor's compliance history with OFCCP by reviewing an internal OFCCP database and analyzing the EEOC's information and information from other agencies like Veterans Employment and Training Service and DOL's Wage and Hour Division.

OFCCP may close the audit if there are no indicators of potential discrimination unless the audit is a "quality control" review or a focused review, which requires an on-site review. A potential indicator of discrimination of a class is two or more victims. The former directive identified a class as involving at least 10 persons. While on-site, OFCCP will check a contractor's posting of the notification of employee rights under federal labor laws (not all federal contractors have to post that notice, see Quarles & Brady's alert from August 2009). As a quality control measure to ensure compliance, OFCCP will conduct a compliance review, including an on-site review, of every 25th contractor establishment selected for audit.

During the web chat, Director Shiu stated the proposed changes to the veterans' regulations will be published "soon." The budget justification indicates OFCCP plans to publish those regulations in the fourth quarter of fiscal year 2011 (July 1, 2011-September 30, 2011). The justification also indicates that OFCCP is scheduled to finalize its revision of the obligations of federal construction contractors and the regulations related to disabled individuals in fiscal year 2012.

OFCCP will also continue to examine the pay gap between men and women. OFCCP plans to issue an advance notice of proposed rulemaking soliciting information on how it might collect and use appropriate data to identify compensation discrimination. This is identified as a priority issue for OFCCP. OFCCP stated that it plans to develop and implement a web-based compensation data collection tool that would enable the agency to identify indicators of pay disparity among federal contractors. This description sounds like the compensation portion of the former Equal Opportunity Survey. In the meantime, it has been reported that since mid-2010, OFCCP has directed its compliance officers to seek more detailed compensation information from a contractor under audit if (in even one of the contractor's job groups) there exists pay differences of either $2,000 or 2% between the average compensation of women and men or minorities and non-minorities. Our experience is that such requests are not limited to just the job group or the type of category (gender or race/ethnicity) in which the disparity exists, but often extends to all employees in all job groups instead.

OFCCP's budget justification reflects that the agency will expand its investigative process to include an analysis of workers' potential misclassification as independent contractors during compliance evaluations. This expansion of OFCCP's regulatory authority is consistent with a push by the DOL to ensure workers are appropriately classified and receive compensation and benefits associated with employment status.

In the budget justification, OFCCP also discusses the potential requirement for contractors to submit their affirmative action plans electronically. In particular, it states that the FCCS will automate the affirmative action plan ("AAP") process by enabling OFCCP to electronically collect and analyze data submitted directly by the federal contractor community in a more timely and efficient manner. Such data would include EEO, hiring, and promotion activities and compensation information. The agency envisions collecting affirmative action plan data via a secure web portal.

Director Shiu indicated the functional AAP program is alive and well. She stated OFCCP will be accepting and reviewing new functional AAP requests after it issues its new directive. Director Shiu also indicated that OFCCP will continue to focus on investigating claims of discrimination on behalf of people with disabilities and protected veterans.

Practical Advice for Contractors

Contractors should devote time and energy to review their AAPs. They should critically assess their goals, good faith efforts, adverse impact analyses, and whether their actions are effective and appropriate. They should be prepared to allocate resources to analyze their compensation from a discrimination standpoint and give careful thought to how compensation information is presented to the OFCCP at the time of the initial desk audit request to minimize the chance of receiving a broad and burdensome follow-up request concerning compensation. They should examine their use of workers who are not classified as employees to ensure that they are not misclassifying workers as independent contractors. They should assess the integrity of their data and, if applicable, human resource information systems. Contractors should evaluate their outreach toward disabled persons and covered veterans. Construction contractors need to devote resources to understand OFCCP's requirements, assess their own actions, and realize the ground rules will seismically shift in the near future - likely in ways similar to non-construction contractors.

If you have any questions about OFCCP's enforcement priorities or protocol for compliance evaluations, please contact Pam Ploor at (414) 277-5661 / pamela.ploor@quarles.com, Ely Leichtling at (414) 277-5681 / ely.leichtling@quarles.com, Adrianne Mazura at (312) 715-5213 / adrianne.mazura@quarles.com or your Quarles & Brady attorney.