In a move that could affect all employers, and significantly change the handling of discrimination charges and federal contractors’ affirmative action requirements, the Trump administration’s draft budget proposes a merger between the Equal Employment Opportunity Commission (EEOC) and the Office of Federal Contract Compliance Programs (OFCCP). Initial reactions to the May 23 proposal, including employer reactions, have been almost uniformly negative. Here is what we know now.

Some Background

Last week the White House floated a trial balloon, essentially confirming rumors that the Trump administration‎ wanted to merge the OFCCP, which administers affirmative action and nondiscrimination compliance of federal contractors, into the EEOC, the chief federal agency enforcing nondiscrimination laws. The rationale behind the proposal is government efficiency, as the two agencies have many overlapping responsibilities.

While they do overlap, the operations and jurisdiction of the two agencies differ in some respects. In general, the EEOC has the broader reach because it makes the initial determination about discrimination complaints filed against employers with as few as 1, 15, or 20 employees in various cases. The OFCCP has jurisdiction only over federal contractors but it enforces a wide swath of laws and regulations, including Executive Order 11246 (and related orders), Section 503 of the Rehabilitation Act, and the Vietnam Era Veterans Readjustment Assistance Act, which taken together, require contractors to take affirmative action in employment and not to discriminate on the basis of race, color, sex, religion, national origin, disability, protected veteran status, sexual orientation, or gender identity. The OFCCP does not deal with age discrimination or genetic information as does the EEOC, while the EEOC does not have any involvement with protected veterans. There are specific protections for sexual orientation and gender identity enforced by the OFCCP. Although the EEOC now considers these categories protected and within its jurisdiction, the courts have not resolved that issue.

The EEOC primarily investigates complaints. It is not empowered to decide cases, but only to determine if “reasonable cause” exists to believe discrimination occurred. Absent a conciliation agreement to settle such cases, the EEOC must file suit in a federal court to obtain relief against an employer. Although the OFCCP also investigates complaints, it more often commences an investigation on its authority, which usually consists of a facility-wide “audit” of the employer’s employment practices and compliance with affirmative action and nondiscrimination requirements. If violations are found, the OFCCP can seek conciliation. Absent settlement, the OFCCP files a complaint before a Department of Labor administrative law judge, which can result in a trial before the judge. The OFCCP can seek back and front pay, like the EEOC, but importantly also can seek “debarment” of a contractor from federal projects. Appeal rights to federal courts are limited in OFCCP cases.

Merger Proposal

The budget says the administration wishes to merge the OFCCP into the EEOC, essentially to eliminate duplication and achieve efficiencies by eliminating the regulatory overlap. Similar proposals have failed in the past. The new budget cuts OFCCP’s funding from about $105 million to $88 million in FY 18 that will result in a significant reduction in OFCCP employment. The EEOC budget is not changed materially and is essentially flat at about $364 million. ‎ The budget proposal provides no details on how the merger is to be accomplished, although the target for completion appears to be sometime during Fiscal Year 2019. Equally unknown is how the powers of the two agencies will be distributed and exercised after any merger.

However, the current acting chair of the EEOC, Victoria Lipnic, also headed the Employment Standards Administration of the Department of Labor, which oversaw the work of OFCCP during her tenure. Lipnic, who has been at the EEOC for seven years‎, is intimately familiar with operations at both agencies and is in a unique position to control the absorption of the OFCCP into the EEOC.

Merger Opposition and Implications

Initial reactions to a merger have been broadly negative across all groups of stakeholders, including the agencies themselves. These reactions may be a function of the general fear that any changes to affirmative action programs will be their death knell. It is also clear that there is a large “support group” for contractors’ affirmative action compliance efforts consisting of HR specialists, vendors, and advocates‎ who are heavily invested in the status quo. The OFCCP’s takeover by the EEOC could result in changes to the existing rules, requiring a massive reboot by the affirmative action community or even eliminating much of the need for affirmative action specialists. Many other unknowns exist and could have negative implications for employers. For example, the EEOC’s unique subpoena power could be a nightmare for employers caught in the agencies’ sights if used in conjunction with the OFCCP’s broad rights to certain contractor information.

Although the president could abolish many of the OFCCP’s operations by simply revoking several executive orders (although some operations are governed by statutes), he did not do so. Presumably, the political consequences of effectively killing an anti-discrimination agency are deemed too severe.

Contractors and employee-focused groups also appear to be mostly opposed to the merger. Given the animosity to the OFCCP by some members of Congress, it is hard to predict whether the pro- or anti-merger forces will prevail. What is certain is that this budget is only a draft and that there are going to be bitter battles over much larger budget issues before any final budget is adopted. Thus, it is too soon to predict what changes a merger would bring to contractors and other employers.

We will keep you up to date as this matter evolves.