2021: The Year Ahead for Employers

Affirmative Action, OFCCP and Government Contract Compliance As with any incoming administration, significant changes in federal contractor obligations and Office of Federal Compliance Programs (OFCCP) enforcement priorities in 2021 can be expected. However, implementation will take time. In the meantime, OFCCP and its career officials will continue to implement the many initiatives of outgoing Director Craig E. Leen. Combating Race and Sex Stereotyping – Executive Order 13950 President Trump issued an executive order (EO) “On Combating Race and Sex Stereotyping” on September 22, 2020, covering government contractors and certain grant recipients and prohibiting the use of divisive concepts in diversity training. The EO triggered multiple First Amendment lawsuits, including one by the NAACP and another by LGBTQ+ rights advocates. A federal district court entered a nationwide preliminary injunction stopping the administration from enforcing EO 13950. The district court ruled that the EO violates the Free Speech Clause of the First Amendment “because it impermissibly chills the exercise of the Plaintiffs’ constitutionally protected speech, based on the content and viewpoint of their speech.” The court also ruled that parts of the EO are so vague that they violate the Fifth Amendment Due Process Clause because “it is impossible for Plaintiffs to determine what conduct is prohibited.” Prior to the court’s preliminary order, the OFCCP had taken action to enforce the EO through the advent of a hotline to accept complaints and also issued a voluntary information collection. While the court order is preliminary in nature and may be reversed, for now, OFCCP and other federal government agencies will not enforce the EO, as stated on OFCCP’s website. In addition, rescission of EO 13950 may be high on President-elect Joe Biden’s priority list, but that too will take time. Religious Exemption – Executive Order 11246 In August 2018, OFCCP issued a directive to incorporate into its practices recent U.S. Supreme Court decisions regarding religious freedoms and their impact on exemptions from the anti-discrimination provisions of EO 11246. A year later, OFCCP published a proposed rule regarding the scope of the religious exemption contained in section 204(c) of EO 11246 and codified in OFCCP’s regulations. On December 7, 2020, OFCCP published the 156-page final rule clarifying that the religious exemption allows both a preference for religious federal contractors to employ individuals who share their religion but also to condition employment on acceptance of or adherence to religious tenets as understood by the employing contractor. The final rule likely will have a significant impact on which employers may be entitled to a religious exemption, and how the exemption impacts EO 11246’s prohibitions of employment discrimination based on sexual orientation and gender identity. Procedures to Resolve Potential Employment Discrimination The OFCCP published a detailed final rule on November 11, 2020, codifying the procedures the agency must follow to resolve potential discrimination and other material violations of EO 11246, Section 503 of the Rehabilitation Act and Vietnam Era Veterans’ Readjustment Assistance Act. It also clarified the types of evidence OFCCP must have to support disparate treatment (including pattern and practice) and disparate impact discrimination allegations. This rule codifies procedures the agency previously published as directives, making it harder for any subsequent administration to change them. In summary, the final rule: • Defines and establishes the terms qualitative and quantitative evidence to describe the type of evidence OFCCP must identify in support of a Pre-Determination Notice (PDN) or Notice of Violation (NOV) replacing the previous references to nonstatistical and statistical evidence; • Codifies the agency’s required consideration of practical significance in assessing potential violations; Jackson Lewis P.C. • jacksonlewis.com 2021: The Year Ahead for Employers 5 • Identifies and differentiates the procedures and burdens for disparate treatment versus disparate impact cases, requiring OFCCP to provide qualitative evidence for all disparate treatment cases and identify a specific policy or practice causing the impact with factual support for disparate impact cases. Previously, qualitative (or anecdotal) evidence was required only in cases where the standard deviation was less than three. The final rule removes that threshold; • Requires OFCCP to explain the basis for its discrimination findings (including pay discrimination), and upon request of the contractor, to provide the model, variables used and an explanation for why variables were excluded from its pay analysis; • Provides the framework for contractors and OFCCP to explore early resolution procedures currently in use by OFCCP; and • Clarifies the evidentiary standards OFCCP must meet for issuance of a PDN. In effect, these amendments provide federal contractors with a clear understanding of OFCCP procedures related to, and a roadmap for responding to, allegations of discrimination. Annual AAP Certification The OFCCP may require the annual certification of AAP development — and potentially the upload of some portion of the AAPs for Agency review — of federal contractors. OFCCP’s September 2020 notice seeking approval for annual certification is short on details but has been on OFCCP’s radar since at least 2016. If approved, the certification process may compel federal contractors to dedicate more attention to promptly completing their AAPs each year. Promotion and Accommodation Focused Reviews During fiscal year 2020, OFCCP’s audit focus turned to evaluating compliance efforts for protected veterans and individuals with disabilities. In its most recent Courtesy Scheduling Announcement Lists (CSAL), OFCCP initiated the focused review for promotions, which despite its title appears to be broad. Although the agency has yet to initiate any of these audits, OFCCP has stated it will pay close attention to analysis of federal contractor promotional activity to identify significant disparities in promotional opportunities and pay raises for women and minorities. According to OFCCP’s website: “Each promotions focused review will consist of a desk audit followed by an on-site investigation which will include, but is not limited to, a review of policies and procedures, employee personnel files and interviews with managers responsible for promotions decisions as well as affected employees. For example, OFCCP may evaluate hiring and compensation data, as appropriate, to help determine if women of color are being limited from advancing professionally.” OFCCP also intends to conduct reviews focused on accommodation practices. While the accommodation focused reviews appear, to an extent, duplicative of the Section 503 focused reviews, the accommodation reviews also will include religious beliefs and practices, including undue hardship defenses. OFCCP will “review documentation relating to accommodation requests and dispositions, with a particular emphasis on denial(s) of accommodation. The review also will include interviews with managers responsible for or involved in the accommodation process as well as with affected employees and applicants.” Federal contractors should take a closer look at both their competitive and non-competitive promotion policies, practices and data as well as accommodation policies, procedures and records to prepare. Pre-Referral Mediation Program The OFCCP issued Directive 2020-03 in April 2020 dictating or suggesting the nuts and bolts for a voluntary OFCCP/contractor mediation process. The directive’s objective is “to provide the best opportunity for resolving matters before significant time and resources are spent in the enforcement process” and before referring the case for enforcement to the Office of the Solicitor. The Pre-Referral Mediation Program has proven to be a useful avenue for some federal contractors, primarily because it fosters open and frank discussions of the merits of discrimination allegations. Pay Data Reporting and Analysis While the Equal Employment Opportunity Commission (EEOC) will not be collecting federal contractor pay data for the immediate future, the prospect of pay data reporting is not dead, especially for California employers. The EEOC has announced that it will continue an independent study of the quality and utility of the 2017 Jackson Lewis P.C. • jacksonlewis.com 2021: The Year Ahead for Employers 6 and 2018 EEO-1 Component 2 data it collected in 2019 as the result of a court order. The agency expects the study to be complete by the close of 2021. The EEOC has also continued its efforts to modernize its EEO data. In December 2018, the EEOC created the Office of Enterprise Data and Analytics (OEDA). Since its inception, the OEDA has been working on modernizing EEO data availability. On December 2, 2020, the EEOC launched “EEOC Explore,” a data analytics tool that aggregates publicly available EEO-1 data into a series of interactive dashboards, and public portal that allows users to download the EEOC’s complete EEO-1 data sets for 2017 and 2018. EEOC Explore represents a significant first step toward the agency’s vision of building “a 21st century data and analytics organization” and demonstrates the EEOC’s commitment to data analytics. It also signals the importance employment data and data analytics will have on the EEOC’s investigative and enforcement activities. In the meantime, California’s Senate Bill 973 has stepped into the void by requiring resident employers to provide similar pay data by March 31, 2021. The California Department of Fair Employment and Housing (CDFEH), which will oversee the data collection, recently issued guidance stating that it is “endeavoring to create a system that closely resembles the EEOC’s system.” The guidance details many of the requirements, but it also leaves open key questions for future explanation. Senate Bill 973 requires employers with 100 or more employees to report to CDFEH pay and hours-worked data by job category and by sex, race and ethnicity. When determining the 100-employee threshold, employers must include both employees residing/working in California as well as employees outside California. However, for pay reporting, employers need only include employees assigned to a California establishment, including any employees outside of California, whether teleworking, and any other California employee, including those teleworking from California but assigned to an establishment outside of California. The guidance says employers “may” but are not required to report other employees. CDFEH will regularly update this guidance. An administrative law judge (ALJ) issued a lengthy decision in an OFCCP pay discrimination case in September 2020. The case was initiated in early 2017 under the prior OFCCP administration, and the decision is a significant setback to OFCCP’s approach to pay analyses. In summary, the ALJ ruled that OFCCP had not established a disparate treatment (pattern or practice) pay discrimination claim because: • The statistical evidence, alone, was insufficient to establish a case; • The agency had not met its burden to provide anecdotal evidence of intentional discrimination; and • The agency did not identify a specific pay practice or policy sufficient to support a disparate impact claim. Notably, these holdings follow the Final Rule discrimination regulations discussed above. Because OFCCP has elected not to appeal, a new OFCCP administration will need to reconcile this decision with its efforts to address allegations of systemic pay discrimination. Class Actions and Complex Litigation COVID-19 Class and collective action litigation continues to evolve alongside the ever-changing workplace. Although companies have faced an onslaught of employment claims related to COVID-19 and its operational and financial impact, relatively few of these were class filings. As November 2020 drew to a close, 1,073 COVID-related employment complaints were filed in federal and state courts; 59 of those complaints were class or collective actions. However, multi-plaintiff lawsuits will likely pick up steam in early 2021 as the nation contends with the most recent surge and the continuing economic fallout. The logistical challenges of initiating litigation in the middle of a pandemic resulted in a measurable drop-off in both class action and single-plaintiff employment claims in 2020, according to Lex Machina (along with other types of lawsuits), the emergence of practical workarounds should hasten the queue once COVID-19 vaccines restore a sense of normalcy. Jackson Lewis P.C. • jacksonlewis.com 2021: The Year Ahead for Employers 7 Colleges and Universities Colleges and universities, however, have been inundated with class action complaints directly related to COVID-19. Last spring, institutions of higher education were forced to abruptly shutter their residence halls and transition to online instruction for the safety of students, faculty and staff. Students filed suit alleging they were entitled to partial reimbursement of tuition, room and board. These lawsuits typically assert claims of breach of contract and/or unjust enrichment, arguing that the schools improperly benefited by retaining their full tuition and housing costs despite shutting down mid-semester. New class action cases are being filed almost daily, with novel theories of liability continuing to emerge, and some of the initial suits have avoided early dismissal. As the state of the pandemic and on-campus instruction are likely to remain in flex, at least through the remainder of this academic year, it is virtually certain that new pandemic-related tuition claims will be filed well into 2021. Wage and Hour We anticipate an uptick in wage and hour class actions arising in part from the dramatic spike in telecommuting in 2020. We can also expect an increase in off-the-clock claims by nonexempt employees as well as suits seeking expense reimbursements for their home office costs. It is critical for employers to mitigate the risk by revisiting their timekeeping practices and policies, including strict prohibitions against working off the clock without prior approval, and ensuring compliance with state law reimbursement mandates, particularly for employees in California and Illinois. Healthcare, hospitality/restaurant and retail employers will be particularly vulnerable to wage and hour class actions by onsite employees. Employers may face the prospect of class-wide overtime or off-the-clock suits by nonexempt essential workers who must wait in line for temperature scans, exempt managers who perform a disproportionate amount of nonexempt work in an effort to control payroll costs and healthcare staff working extended shifts. In addition, the U.S. Supreme Court may grant certiorari to weigh in on a critical issue related to the conditional certification of collective actions under the Fair Labor Standards Act (FLSA), perhaps fundamentally reshaping how these cases are litigated. Imminently, the Court will decide whether it will provide guidance this term on the standard required to establish that a putative class of workers are “similarly situated” for purposes of proceeding as a collective under the FLSA. Some federal courts have applied a comparatively low bar in granting conditional certification under FLSA, Section 216(b), as compared to the more rigorous showing required to proceed as a class under Rule 23 of the Federal Rules of Civil Procedure. The modest threshold to establish that potential opt-in plaintiffs are “similarly situated” often forces employers to settle meritle