In late November, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) submitted a request to the Office of Management and Budget (OMB) for reauthorization of its compliance review scheduling letter and accompanying itemized listing, i.e., the documents that initiate OFCCP audits. The proposed changes, which OFCCP maintains will better facilitate its review of contractor establishments, would substantially increase the initial response burden on contractors selected for audit in a number of areas. The changes also reflect OFCCP’s continued heightened focus on enforcement nearly two years into the Biden administration, particularly with respect to contractor compensation, personnel selection decisions, and outreach and recruitment. This Alert summarizes the key proposed changes and the impact on contractors.
Expanded Compensation Submission
The proposed revisions to the itemized listing substantially expand the compensation-related data and information that contractors would be required to provide at the outset of an audit, as follows:
Prior Year Compensation Data
Currently, contractors are required only to provide current year compensation data. The revised itemized listing would also require submission of prior year compensation data. In its Justification for the changes, OFCCP notes that while the agency has the authority to review employment activity data covering the two years preceding the initiation of the compliance review, its existing practice is to request this data only after a desk audit reveals a potential disparity. The agency perceives the current practice as an “inefficient” approach and asserts that “reviewing more data during the desk audit will allow OFCCP to better identify whether there is systemic pay discrimination happening at a contractor’s workforce and whether the potential discrimination was ongoing prior to the first snapshot.”
Compensation Data for Staffing Agency Employees
The proposed revisions would require contractors to provide two years of compensation data for “temporary employees, including those provided by staffing agencies” (emphasis added). This would also include data regarding factors that impact compensation of such employees. This expansion should be of concern to contractors who use temporary staffing agencies to augment their workforce, particularly since in many (if not most) cases, contractors do not determine compensation for staffing agency employees and may not even know the wage rates for such employees.
Expanded Compensation Factor Data and Supporting Documentation
The itemized listing would be expanded to identify additional compensation factors and supporting documentation for contractors to produce with their initial submission. Among the items that contractors would now be expected to provide the agency are expanded factors used to determine employee compensation (such as education, experience, location and time in current position) as well as policies that outline and explain compensation practices, listing as examples “policies, guidance, or trainings regarding initial compensation decisions, compensation adjustments, the use of salary history in setting pay, job architecture, salary calibration, salary benchmarking, compensation review and approval.”
Proof of Compliance with Obligation to Analyze Compensation
In a prior Alert, we discussed OFCCP’s revised Directive 2022-01, which addressed contractors’ obligation to comply with 41 CFR 60-2.17(b)(3) and its requirement that contractors perform an annual in-depth analysis of their compensation systems, and included a list of the minimum documentation the agency would require from contractors to demonstrate compliance. The revised itemized listing would require contractors to produce that documentation at the outset of an OFCCP audit.
Augmented Personnel Activity Data Requests
OFCCP also proposes to collect expanded data from contractors relating to personnel activity, in particular promotions and terminations. This indicates a clear shift from the agency using high-level data at the outset of the audit to identify potential areas for follow-up relating to personnel activity, to conducting a “deep dive” analysis from the start. If OMB approves this expansion, contractors would be required to, among other things: (1) break out competitive and noncompetitive promotions (whose definitions OFCCP invites the public to comment on); (2) provide employee-level promotion data, including race/ethnicity, gender, previous and current supervisors, previous and current compensation, department and job title; and (3) employee-level termination data, including race/ethnicity, gender and termination reason.
Enhanced Documentation of Outreach and Recruitment Efforts
If adopted, the updated itemized listing also would require contractors to provide extensive documentation regarding their outreach and recruitment efforts to individuals with disabilities and protected veterans, as well as documentation of actions to address any determination that those outreach and recruitment efforts were not effective. These requirements would be in addition to the current itemized listing requirement to submit the contractor’s required assessment of the effectiveness of these efforts.
New Requests for Employment Policies
OFCCP also is asking OMB to approve its new requests for employment documents, most notably to include:
- Policies regarding recruiting, screening and hiring, “including the use of artificial intelligence, algorithms, automated systems or other technology-based selection procedures”;
- Employment policies concerning EEO, anti-harassment and complaint procedures; and
- Agreements (e.g., arbitration agreements) that “impact employees’ equal opportunity rights and complaint processes.”
The request for policies relating to the use of AI and other technology-based selection procedures is particularly noteworthy, though not surprising given OFCCP Director Jenny R. Yang’s previous statements making clear that contractors’ use of AI would be a focus for the agency moving forward.
Multiple AAP Submission for Contractors with Multiple AAPs in Campus-like Settings
The proposed revised scheduling letter would require contractors, including post-secondary institutions, with a “campus-like” setting to submit the information for all affirmative action plans (AAPs) maintained by the contractor for establishments located in the city and state identified in the scheduling letter. Capturing multiple establishments in campus settings in one audit has long been an OFCCP objective, but current OFCCP regulations arguably do not support such an expansion of audit scope.
What This Mean for Contractors
Overall, OFCCP’s substantial overhaul of its scheduling letter and itemized listing for the first time in years highlights the agency’s increasingly aggressive enforcement posture and signals a return (which many contractors already have experienced) to a more granular/deep-dive approach to most OFCCP audits that was common in the Obama administration but had abated somewhat during the Trump administration.
If approved, the new scheduling letter and itemized listing will represent a substantial increase in the initial response burden on contractors selected by OFCCP for audit. Contractors have only 30 days to submit documents and information responsive to the scheduling letter and itemized listing, and as we discussed in a prior Alert, the agency no longer is providing deadline extensions, absent “extraordinary circumstances.” Accordingly, it will be even more important for contractors to ensure that they keep up-to-date with their affirmative action compliance obligations, including the maintenance and preparation of any required documentation that will need to be submitted to OFCCP at the outset of an audit.
Finally, contractors should note that they have until January 20, 2023, to submit comments to OFCCP’s proposed changes to the scheduling letter and itemized listing.