Late last week Patricia A. Shiu, Director, Office of Federal Contract Compliance Programs (OFCCP) issued a draft Strategic Plan for the agency (available here) and followed it up this week with a live Web chat. Introducing the topic of increased enforcement activities at the agency, Director Shiu advised contractors to:

Be proactive by evaluating your workforce by gender, race, national origin, religion, ethnicity, disability and veteran status; examine who is being hired, promoted, and terminated; look closely at wages for similarly situated jobs; and develop a culture where equal opportunity and diversity is valued.

In the April 5, 2010 Web chat , Director Shiu claimed she would provide greater transparency and invited comments about the Strategic Plan saying, “ [I]t's a new day at the OFCCP, and I am ready for your feedback on our proposed goals and outcomes.” Contractors should be aware of the OFCCP’s Strategic Plan as it is quite clear that the burden to demonstrate compliance will be greater than ever before.

The OFCCP’s Strategic Goals

The OFCCP’s plan, which lays out its strategic direction through fiscal year 2016, is centered specifically on two of the DOL’s strategic goals. The first goal is: Prepare workers for good jobs and ensure fair compensation. To do so, the OFCCP’s outcome goals are:

  • Increase workers’ incomes and narrow wage and income inequality; and
  • Help workers who are in low-wage jobs or out of the labor market find a path into middle class jobs.

These outcome goals clearly signal that an increased focus on pay equity is on the horizon for federal contractors. While the OFCCP regulations have required contractors to conduct self-audits of their compensation for a number of years, the agency’s enforcement of the regulations in the audits it conducts has been uneven. With the Obama Administration’s consistent message that it will aggressively seek to eliminate gender and race pay gaps for the same or similar jobs, contractors should get serious about conducting meaningful pay analysis and implementing pay adjustments where pay disparities are not justified by legitimate, job-related reasons.

Contractors can expect, in addition to scrutiny of compensation by race and gender, a closer examination of hiring and promotion decisions for disparate treatment as well as disparate impact by race and gender. The outcome goals’ focus on low-wage and entry-level jobs suggests that contractors should be especially careful that their applicant screening processes for these jobs are defensible; that basic qualifications for such jobs are articulated and actually used to screen candidates; and that the contractor’s screening process, including the reason each candidate is rejected for employment, is well and accurately documented. Many of the significant OFCCP settlements of recent years have resulted from contractors’ inability to defend their selection of entry level and low-wage hires as non-discriminatory. The OFCCP views contractors’ weak applicant screening processes for such jobs as fertile ground for it to find evidence of discrimination or an absence of documentation that it can use to infer discrimination.

The OFCCP’s second strategic goal is: Assure fair and high-quality work-life environments. The outcome goals are:

  • Break down barriers to fair and diverse workplaces so that every worker’s contribution is respected; and
  • Ensure worker voice in the workplace.

These goals outline the OFCCP’s continued focus on ensuring that federal contractors provide non-discriminatory work environments. During the Web chat, Director Shiu reminded participants that the OFCCP is charged with providing “equal opportunity for all employees and job applicants of federal contractors and subcontractors,” using the same standards set forth by the Equal Employment Opportunity Commission (EEOC) and that it will seek “make-whole relief for victims of discrimination.” Director Shiu dismissed concerns regarding duplicate investigations by the EEOC and the OFCCP by noting that if the OFCCP conducts an investigation of individualized complaints, it does so on behalf of the EEOC.

We already have seen an increase in the number of individual complaints investigated by the OFCCP. We further note that the OFCCP’s compliance officers generally have very little, if any, experience conducting investigations of such individual complaints. Moreover, because there are so many new investigators on board at the OFCCP, and the investigation process may be mishandled by investigators who are not properly trained, we are advising contractors to prepare very carefully for any investigations by the OFCCP and strongly consider having legal representation for these onsite visits by the agency.

OFCCP Strategies For Meeting Its Stated Goals

The strategic plan lays out new approaches that the OFCCP will undertake in order to meet its established goals. For instance, the OFCCP states that it will “broaden its enforcement efforts and will investigate and resolve cases of both individual and systemic discrimination” in the years to come. Without question, the agency’s resources have been increased. In 2010, the OFCCP received a budgetary increase of 28% (currently at $105.4 million as compared to $82.1 million in 2009) with a commensurate increase in staffing of 203 additional FTE’s authorized for 2010. The additional resources will allow the agency to aggressively pursue its enforcement efforts.

In addition, the OFCCP promises to target recidivism of discrimination by contractors. During the Web chat, Director Shiu acknowledged that contractors who were found to be non-compliant would face a follow-up evaluation to “assess the impact of the initial evaluation, and if the compliance assistance given during the initial evaluation was effective.” Thus, contractors with past noncompliance findings should be prepared for a tougher review during their conciliation agreement progress reporting and in future audits, especially if there are any continuing indications of adverse impact or pay disparities.

Importantly, the strategic plan sets forth the agency’s newly articulated intent to conduct corporate wide multi-establishment reviews as well as industry-specific reviews. The OFCCP has not yet communicated how it will decide which contractors will have multi-establishment reviews or how it will conduct such reviews. Also unknown are which industries the agency intends to target for industry-wide review, with the notable exception of the construction industry. The OFCCP specifically emphasized that it would increase its compliance evaluations of the construction industry—an industry that has historically been left largely unaudited.

The OFCCP’s plan provides for continued, increased emphasis on outreach to, and hiring, training, and promotion of, veterans and individuals with disabilities. In the past several months, the agency has stepped up its expectations of contractors, generally requiring active relationships with external recruiting and other resources for contractors to find qualified candidates who are veterans and individuals with disabilities.

Significantly, the OFCCP’s draft strategic plan also provides that the agency will increase its monitoring of problems identified by contractors during their self-audit and self-correction processes. Until now, the agency has not regularly reviewed contractor self-audit results of pay equity analyses or adverse impact analyses; the OFCCP typically has been content to run its own analysis of pay and adverse impact. If OFCCP follows through on its plan to ask contractors to reveal the results of their own self-audits and corrections such as pay adjustments, this request will create a host of issues for contractors. For example, because the OFCCP has very broad authority to request compliance documentation, including evidence of self-audits and corrections, it will be very difficult for contractors to shelter information about identified pay disparities from disclosure to the agency. Contractors can address this issue by conducting their self-audits under attorney-client privilege. Another concern about the OFCCP reviewing self-audit and correction information is that when a contractor addresses an identified pay disparity by modifying employees’ pay prospectively, the OFCCP could assert that such modification was a remedy for discrimination and that back pay must also be provided for those individuals. Contractors should work with counsel to determine the best approach for remedying any identified pay disparities to minimize this risk.

OFCCP’s Measurement of Results

The draft strategic plan promises to “use a robust sampling model which will allow the Agency to better focus its resources.” This suggests that the OFCCP will be developing a more targeted method for choosing contractors to audit. During the Web chat, Director Shiu elaborated only that OFCCP was in the “process of developing a sampling method to encompass its entire universe” and that “details are in development.” The agency’s previous effort to develop a more refined tool to target contractors (the EO Survey) was much criticized and ultimately discontinued, but it seems quite clear that a new targeting tool will rise from the EO Survey’s ashes. The current targeting method uses the contractors’ EEO-1 Report data upon which to base its selections for audit. The data submitted in the EEO-1 Report, however, does not reveal which contractors have adverse impact or pay disparities. If the OFCCP develops a targeting tool that requests applicant flow, hiring, and pay data by job group and job title, and it develops an analysis to identify adverse impact and pay disparities from this data, contractors with these significant issues will be the first ones audited. We believe this is the magic bullet the OFCCP would like to see and that it would likely allow the agency to exponentially increase the number of discrimination allegations, the value of the backpay remedies demanded and hence the number of settlements between OFCCP and contractors.

The OFCCP also plans to enhance the methods by which it measures and reports its results in the future. In the past, the agency has been criticized for its lack of transparency in informing the public of the outcomes of its enforcement efforts. In response, the OFCCP has committed to reporting information on the compliance rate, discrimination rate, and the recidivism rate of the contractor universe. To do so, the OFCCP is proposing two basic indicators as measurements of its success:

  • Compliance. Percent of federal contractors found to be compliant with the requirements of OFCCP’s governing federal laws and executive order; and
  • Recidivism of discrimination. Percent of contractor evaluations with discrimination findings when discrimination had been found in previous evaluations. During the Web chat, Director Shiu further commented that the percentages would be based on past performance and that a new baseline would be developed to determine the percentage rate for the goal.

Currently, the agency measures the results of its efforts by the financial remedies it has obtained, the number of workers compensated, and the number of audits it has conducted. Since 2001, we have seen significant increases in each of the agency’s measures. The OFCCP’s focus on additional metrics clearly signals its intention for even more compliance evaluations which will allow it to show that it is active in meeting its goals.

What Contractors Should Do

  • When you finish developing your affirmative action plans and supporting analyses each year, review any areas of adverse impact and pay disparity to ensure that discrimination is not occurring and that you can articulate a solid defense.
  • In reviewing areas of adverse impact, investigate and determine if impact is caused by inaccurate applicant flow or other data collection problems, or if the screening and selection process needs improvement, or both.
  • Unless your application process is entirely a paper process, ensure that your applicant data conforms with the OFCCP’s definition of an Internet applicant. Remember that applicants are those who: 1) seek employment using the internet or other electronic-related technologies; 2) are considered for a particular position; 3) have the basic qualifications for that position; AND 4) do not withdraw from consideration. Fix the applicant process if it is over-counting or under-counting applicants, for example, by reviewing and adjusting disposition codes to distinguish those who lack basic qualifications, training recruiters on the proper use of disposition codes and identifying applicants who were not in the applicant data.
  • Consider conducting a multiple regression analysis of pay in order to determine if compensation systems are non-discriminatory.
  • Conduct all self-audits and self-corrections, especially of compensation, under attorney-client privilege.
  • Ensure you have an active relationship with external recruiting sources who can provide qualified candidates who are veterans and individuals with disabilities.
  • Ensure your Careers website provides that individuals with disabilities who require an accommodation in order to apply may seek such accommodations via a specific telephone number or email address.
  • If selected for a compliance evaluation, carefully review your affirmative action plan and supporting data prior to submission. In particular, review any areas of adverse impact in hiring, promotion and termination to ensure that the underlying data is correct, especially applicant flow. Prior to submission, correct inaccurate data and ensure that you can defend any areas of adverse impact with legitimate, non-discriminatory job-related reasons. If you have areas of adverse impact or significant pay disparities, consider involving counsel in the audit, preferably before the affirmative action plan and supporting materials are forwarded to the OFCCP for audit.
  • If contacted by the OFCCP regarding investigation of an individual complaint, prepare carefully for the onsite investigation and consider representation by counsel.
  • If you are in the construction industry, ensure that you are in compliance with the OFCCP’s construction regulations found at 41 CFR 60-4 and ensure that you are prepared for an audit of your compliance.

The agency is seeking feedback from the contractor community on its Strategic Plan and the measurements it proposes. Seyfarth Shaw will be submitting comments and, we invite any of our clients who would like to contribute to our submission to forward your thoughts to us at either vhoffman@seyfarth.com or lsolondz@seyfarth.com. Please indicate if you would like your comments attributed to your organization or if you prefer to remain anonymous to the OFCCP.

The OFCCP’s draft strategic plan can be found at http://www.dol.gov/_sec/stratplan/2010/ofccp/.