In an opaquely worded entry in the Federal Register on May 12, 2011, the Office of Federal Contract Compliance Programs (OFCCP) requested comment on far-reaching revisions to its model “Itemized Listing” by July 11, 2011. When initiating a compliance review of a government contractor’s affirmative action efforts, the OFCCP sends the employer a Scheduling Letter requesting its affirmative action plan (AAP) and a number of materials enumerated in an attached Itemized Listing, such as data on its workforce’s demographic breakdown and detailed information on compensation. According to anecdotal evidence, the OFCCP began applying the information collection requirements in the proposed Itemized Listing some months ago, but this is the first time the public has been able to comment on the new reporting obligations.
Although the OFCCP asserts in a separate, explanatory document that the proposed Itemized Listing will lessen the burden on employers, this seems highly unlikely given the detailed nature of the requests. While the Itemized Listing is only a proposal in the public comment stage of promulgation, the fact that the OFCCP already expects government contractors to have the information on hand means employers need to ensure that they have processes in place now to regularly prepare and collect the information, so that they are not caught off guard when a Scheduling Letter arrives in the mail demanding the materials within thirty days.
Background: A Government Contractor’s Affirmative Action Obligations and the Compliance Review Process
While federal civil rights laws prohibit employment discrimination on the basis of race, gender, disability and veteran status (among other categories), government contractors are subject to a set of additional obligations under Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974. These laws and their implementing regulations also require “affirmative action” to ensure that “over time a contractor's workforce, generally, will reflect the gender, racial and ethnic profile of the labor pools from which the contractor recruits and selects.”
To that end, a government contractor meeting certain coverage thresholds must develop, maintain and execute an AAP to provide for affirmative action for minorities, women, disabled people and veterans. Regarding women and minorities, the AAP must provide for certain processes implementing the government contractor’s affirmative action obligations, including the collection of data on the racial and gender composition of the employer’s workforce; the combination of job titles with similar content, wage rates and opportunities into “job groups;” the regular comparison of the percentage of incumbents who are minorities or women in a job group with the available population of qualified people in the reasonable recruitment area and within the company; a mechanism to establish placement goals for job groups in which minorities or women are being underutilized based on the comparison of incumbency to availability; internal processes to identify impediments to equal opportunity; action oriented programs to eliminate such impediments and areas of underutilization; and internal auditing systems to evaluate the effectiveness of the government contractor’s affirmative action program.
The OFCCP enforces these and other affirmative action obligations through a variety of mechanisms, including compliance reviews. The first stage of a compliance review is typically a desk audit, wherein the OFCCP requires the government contractor to submit a copy of its AAP and of specified “support data” listed in an enclosed “Itemized Listing” within 30 days. The OFCCP’s request for comments focuses on changes it has made to the model Itemized Listing that it will send to government contractors when initiating compliance reviews in the future.
Proposed Changes to the Itemized Listing
Specifically, in addition to the items of information previously listed, the OFCCP would for the first time in an Itemized Listing require government contractors to provide copies of “employment leave policies including, but not limited to, policies related to implementing the Family Medical Leave Act, pregnancy leave, and accommodations for religious observances and practices.” If these policies are part of an employee handbook or manual, the government contractor would have to submit those documents. The OFCCP explains that this submission would assist it in investigating possible gender or religious discrimination in the organization. Also, the OFCCP would demand copies of the government contractor’s VETS-100 and/or VETS-100A forms for the last three years, and copies of accommodations policies and accommodations granted to disabled employees.
Separately, in the prior Itemized Listing, the OFCCP required a copy of any collective bargaining agreements and “any other information [the government contractor has] already prepared that would assist [the OFCCP] in understanding [the government contractor’s] mobility system(s).” The OFCCP has clarified that “any other information” would mean documents “such as policy statements, employee notices or handbooks, etc. that implement, explain, or elaborate on the provisions of the collective bargaining agreement.”
The changes also impact the completion of the employee demographic and compensation data sections. In general, a government contractor must keep track of the demographic breakdown of certain employment decisions: how many people apply for positions, how many people are hired, how many people are terminated, how many people are promoted, and how many people are terminated. The OFCCP’s regulations further require that the data show how many of these people are white or a minority, and male or female.
In the prior Itemized Listing, the OFCCP required such data, but accepted it broken down either by job title or job group. The proposed Itemized Listing, however, would require the data to be presented by both job group and job title, because the OFCCP believes this will allow it to obtain “more accurate reporting data for its analyses related to identifying sex and race discrimination indicators.” Further, although the OFCCP is not entirely clear on this point, it appears that the OFCPP would require that the minority demographic data be further separated into the following minority groups (whereas before the government contractor only had to report the total number of minorities): African-American/Black, Asian/Pacific Islander, Hispanic and American Indian/Alaskan Native. Regarding promotions, the OFCCP would expect to see data on “the actual pool of candidates who applied or were considered for promotion by gender and race/ethnicity” and the government contractor’s definition(s) of “promotion,” even if it varies for different segments of the workforce. Regarding terminations, government contractors would have to submit data on “the actual pool of candidates who were considered for terminations by gender and race/ethnicity” and identification of terminations as either voluntary or involuntary (if such data are available).
But the greatest expansion in terms of data collection regards employee compensation. The previous Itemized Listing was rather straightforward: a government contractor need only report the total compensation of employees by either salary range, rate, grade or level and the total number of employees. Now, the government contractor would have to provide this data on an individual basis. This means that the government contractor must collect, store and report the following information for each employee: the employee’s gender, race/ethnicity, compensation, job title, EEO-1 category, job group and hire date.
The proposed Itemized Listing explains that compensation includes “base salary, wage rate, and hours worked,” and that “other compensation or adjustments to salary such as bonuses, incentives, commissions, merit increases, locality pay or overtime should be identified separately for each employee.” While the OFCCP had already asked contractors to provide any other information that would assist the OFCCP in understanding the government contractor’s compensation system, the new Itemized Listing specifies what that information might include, such as “education, past experience, duty location, performance ratings, department or function, and salary level/band/range/grade.” Finally, the new Itemized Listing advises that “[d]ocumentation and policies related to compensation practices of the contractor should also be included in the submission, particularly those that explain the factors and reasoning used to determine compensation.”
The Employer Response
Despite the array of changes and additional information requested, the OFCCP asserts that the alterations to the Itemized Listing will lessen the burden on employers by over two hours of working time. The OFCCP contends that most of the additional information will require minimal or no time to prepare (such as the collective bargaining documents and breaking down demographic data into the four minority categories) or consists of materials that the government contractor should be compiling anyway (such as the VETS-100 or VETS-100A reports). Even though the compensation data collection would require employers to report much more information in response to the Itemized Listing than before, the OFCCP explains that it normally asks for this information in a follow-up request anyway. By collapsing these initial and follow-up requests into one request at the outset, the OFCCP claims that government contractors will spend at least three and a half hours less working on compensation data alone.
How should employers respond to the proposed Itemized Listing? First, employers may participate in the public comment period by responding to the following specific requests for information from the OFCCP:
- Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
- The accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
- The quality, utility and clarity of the information to be collected; and
- Suggestions for how to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical or other technological collection techniques or other forms of information technology, e.g., permitting electronic submissions of responses.
Although the proposed Itemized Listing is likely to be adopted without substantial alteration, registering concerns about the additional burden that the changes will produce may prompt the OFCCP to revise the Itemized Listing to ease its requirements. Comments can be collected and submitted via trade associations and law firms to preserve anonymity.
Second, because the OFCCP has expressed its expectation that government contractors are, in general, already compiling the newly requested information, it is essential that companies put policies into effect to collect the additional information in the proposed Itemized Listing. In particular, government contractors should check to make sure they have Family and Medical Leave Act and religious non-discrimination and accommodation policies. One critical measure is to ensure that the government contractor clearly understands and can articulate all of the factors affecting compensation practices, including those that are informal or unwritten—these may explain compensation variances that may initially indicate racial or gender discrimination but in fact arise from non-discriminatory policies. Finally, involving counsel early on in the process of drafting and implementing the government contractor’s AAP will undoubtedly save time and money when it is audited.