Back in April of this year the OFCCP submitted for public comment revised scheduling letters for 11246 compliance evaluations (full audits), compliance checks, and Section 503 (disability) focused reviews, along with a new scheduling letter for VEVRAA focused reviews. As expected, the reaction in the federal contracting community was one of alarm. OFCCP proposed several notable changes to the documents and information the agency proposes to collect at the outset of every compliance review, including:
- A copy of the contractor’s review/analysis of compensation systems;
- Availability analyses and placement-goal setting by specific race/ethnicity categories;
- Submission of promotion “pools;”
- Requiring “update” information regarding placement goals and employment transactions for each completed month of the current AAP year when the scheduling letter is received six months or more into the AAP year;
- Information on the contractor’s three largest subcontractors based on contract value;
- Employee-level compensation data and activity “logs” (for focused reviews); and,
- Requiring the electronic submission of data and documents.
The OFCCP received public comments from at least 17 individuals and organizations expressing a range of concerns regarding OFCCP’s authority and burden estimates. In response to those comments, the agency significantly revised the proposed scheduling letters and has now sent those revised documents to the White House Office of Management and Budget (OMB) for final approval.
Notably, the OFCCP pulled back on requiring contractors to provide a copy of the most recent analysis of their organization’s compensation system(s). The agency recognizes that such analyses are often done under attorney-client privilege and requiring contractors to turn over the analyses themselves would require contractors to forgo that privilege. However, the OFCCP also notes that the agency is not entirely convinced that the privilege would prevent the agency from obtaining such analyses if they chose to request them, leaving open the possibility that the OFCCP might still request that information during the course of an audit, if necessary.
The OFCCP also retreated from requiring contractors to provide availability calculations and placement goals by specific race/ethnicity category. The regulations require contractors to calculate availability and set placement goals for people of color in the aggregate, but it also explicitly allows contractors to set race/ethnicity-specific placement goals if circumstances warrant. The regulations also provide the OFCCP with the authority to require contractors to set race/ethnicity-specific placement goals, if necessary. The regulations, however, do not provide any guidelines for determining when/if circumstances require race/ethnicity-specific goals. The OFCCP strongly encourages contractors to set such placement goals when appropriate but will not require submission of race/ethnicity-specific availability and goals in every audit.
Regarding promotion “pools,” the OFCCP notes that the agency may still request such information during the course of an audit but has withdrawn the proposal to require submission of promotion pools at the outset of every review. This highlights a fundamental issue that has existed in the OFCCP’s affirmative action regulations since their inception. The regulations do not define common terms such as “promotion” (or “hire”), providing contractors with considerable latitude to define those terms in the way that best reflects each organization’s specific practices. This also leaves contractors with little guidance regarding how to properly analyze different types of promotions under the Uniform Guidelines on Employee Selection Procedures. For sure, identifying “pools” for meaningful statistical analyses of promotions is an issue, but that issue requires more than a tweak to the OFCCP’s scheduling letters.
When an Executive Order (E.O.) 11246 audit scheduling letter is received six or more months into the contractor’s current AAP year, the letter requires that contractor to submit summary data regarding applicants, hires, promotions, and terminations for the prior AAP year and “at least” six months into the current AAP year. The OFCCP proposed to revise this request to require contractors to provide “update” data for every complete month. In other words, if a contractor on a calendar-year AAP cycle received a scheduling letter on September 12, that contractor would be required to provide updated data for January through August of the current AAP cycle, not January through June. The OFCCP has withdrawn this proposal, however, nothing prevents the OFCCP from requesting information regarding employment transactions beyond the six-month mark during the course of the audit.
In an effort to ease the burden on federal contractors, the OFCCP modified the request as it relates to subcontractors. Instead of providing information on the three “largest” federal subcontractors (by contract value), contractors will now be required to provide information on the three most recent subcontracts valued at $150,000 or more. Unfortunately, the OFCCP’s revisions only demonstrate the agency’s lack of understanding of the underlying issues that make this requirement so burdensome for many federal contractor employers. While one may sympathize with the OFCCP’s desire to better identify federal subcontractors for audits, one would hope that the agency would make better use of information already in the federal government’s possession before laying such a burden on contractors. In fact, one could argue that the Paperwork Reduction Act requires it. Regardless, whether and to what extent a particular contract for goods or services constitutes a qualifying federal subcontract is highly fact-specific and the opinion of any particular contractor is not dispositive. While this requirement will allow the OFCCP to develop a database of potential qualifying federal subcontractors, it is unlikely to be as useful as the agency hopes, nor useful enough to justify the burden. For now, assuming the OMB approves the current revised scheduling letters without change, contractors should begin preparing to provide information on subcontractors in near-future audits.
With respect to employee-level compensation, transaction, and disability and veteran self-identification data, the OFCCP is retaining the proposed requirement despite assurances from the previous administration that the agency would not perform statistical analyses of disability and veteran employment decisions. As is often the case when administrations change, so do policy directions, and this is no exception. However, that does not necessarily mean that statistical analyses based on disability and/or veteran self-identification information are meaningful. Contractors might want to consider submitting self-ID response rate information up front to prime a conversation about the utility of such analyses.
Finally, the OFCCP retreated from requiring contractors to submit documents and information regarding their E.O. 11246 AAP electronically, due to a rather complicated reading and legal analysis of the regulations. Notably, the OFCCP states that the agency is currently developing a secure, online “portal” for the transmission of data and documents to address contractors’ concerns regarding confidentiality and data security.
The Federal Register notice regarding the OFCCP’s submission of final revised materials to OMB can be found here. Comments to OMB are due by July 29, 2019. The materials submitted to OMB, along with the OFCCP’s Supporting Statement, can be found here.