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OFCCP Publishes Final Rule Revising Religious Exemptions

December 10, 2020 By Matt Nusbaum

Well over a year since the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) published its proposed rule updating regulations implementing the religious exemptions from certain nondiscrimination prohibitions under Executive Order (E.O.) 11246, the agency is finally publishing the final rule in the waning days of the Trump administration.

The OFCCP indicates that the agency received almost 110,000 comments on the proposed rule. Further noting that over 90,000 of those were “generated by organized comment-writing efforts,” implying that most comments did not raise significantly different substantive issues, that still left the agency with around 20,000 comments to parse and consider before formulating the final rule. And those comments had some effect.

In many instances the OFCCP stuck to its guns, but in many others the agency made modifications to the proposed rule in direct response to public comment. This is a very good thing, by the way, and indicates that whatever politics of the day that might have inspired the rulemaking are not necessarily dominating the process.

The rule itself is fairly straightforward, but the notice of the rule contains a wealth of detail akin to legislative history often cited when interpreting statutes. This information can be extremely valuable for interpreting the final rule and anticipating how the OFCCP will (and won’t) enforce it.

While we highly recommend reading the full notice, below we will highlight some of the key revisions to the final rule.

Definitions

The proposed rule would add regulatory definitions for the terms, “religion,” “particular religion,” “sincere,” and “religious corporation, association, educational institution, or society.” In response to public comment the agency made some modifications to some of the proposed definitions, dropped the proposed addition of the term “exercise of religion” entirely, and provided more examples for the definition of “religious corporation, association,” etc.

The definition of “religion” does not change from the original proposal. The agency notes commenters’ concerns that the definition does not address the employer’s duty to provide religious accommodation, noting that accommodations are already addressed in a separate section of existing regulations and that accommodation requirements are not being revised.

Threshold Test

Perhaps the largest revision to the proposed rule involves the definition of “religious corporation, association, educational institution, or society” (hereinafter referred to simply as “religious organizations”). The final rule provides a four-prong test to determine whether or not an organization is a religious one for these purposes.

To claim a religious exemption, the organization must show that it:

Was organized for a religious purpose;
Holds itself out to the public as carrying out a religious purpose;
Engages in activity consistent with, and in furtherance of, that religious purpose; and
Either:
- Operates on a not-for-profit basis; or
- Presents other strong evidence that its purpose is substantially religious.

With regard to the fourth prong, many commenters feared that the agency was broadening the definition of a religious organization too much by allowing for-profit organizations to potentially benefit from the exemption. The final rule notes, however, that while the fourth prong does allow for this in certain circumstances, the agency does not anticipate that many for-profit organizations will claim the exemption in the first place and that most will find it difficult to do so successfully. Whether or not that provides assurance to commenters with expansionist concerns remains to be seen.

The final rule now addresses particular evidence required to establish each prong, as well as more examples with accompanying explanation. For instance, with regard to the first prong, the final rule clarifies that document evidence in the form of either corporate formation documents (such as articles of incorporation) or “documents that are central to the organization’s identity and purpose” in the case of corporate forms that do not require formation documents such as unincorporated proprietorships or partnerships.

Scope

The final rule directly addresses concerns about the potential scope of religious exemptions and reiterates that the exemptions are limited to discrimination on the basis of religion alone. In other words, claiming a religious exemption is not an excuse to discriminate against applicants or employees on the basis of other protected characteristics like race/ethnicity or sex.

Note here that, unlike Title VII of the Civil Rights Act, the OFCCP’s regulations explicitly list sexual orientation and gender identity as protected characteristics. The recent Supreme Court decision in Bostock affirmed that Title VII also protects against LGBTQ+ discrimination, just not directly. Rather, the Court concluded that LGBTQ+ discrimination (impliedly legal) is not possible without engaging in prohibited sex discrimination. Regardless of the legal gymnastics there, Title VII and E.O. 11246 are effectively aligned on the matter and when/if a religious organization discriminates against an applicant or employee based on their LGBTQ+ status, the exemption does not necessarily provide the employer safe harbor.

The Supreme Court’s reasoning in Bostock may also play a role in evaluating the extent to which things like refusing to cover reproductive services in company health plans would be allowed under a religious exemption. It is difficult to imagine, under a Bostock framework, how that sort of policy could be enacted without running afoul of prohibited sex discrimination, even if reproductive issues are “central” to a particular religion espoused by the employer.

The “Devil” in the Details

Overall, the OFCCP’s final rule could be characterized as a “win” or a “loss” across the political spectrum, depending on interpretation and actual enforcement practices and circumstances. Undoubtedly there will be instances when religious rights organizations are disappointed in its application and times when civil rights advocates will be equally disappointed.

This may actually be the mark of good policy-making, though. At the end of the day, the OFCCP and courts must weigh competing interests and try to strike a reasonable balance. In any such exercise both opposing parties should, ideally, be partially vindicated and required to partially compromise.

The final rule does not necessarily put a “thumb on the scale” for one group or another. Rather, it appears to be a sincere effort to provide the regulator and the contractor community with clearer rules and guidelines for more consistent enforcement. That is a strong foundation for future inquiries into whether and to what extent those rules and guidelines are the right ones, or if further tinkering is required.

The fact remains, though, that claims of religious exemption have historically been and, according to the OFCCP, still are exceedingly rare. While reporting bias may give the impression that religious exemption claims are rampant, that simply does not match up with reality.

But if your organization is interested in a potential religious exemption claim, be sure to read through the OFCCP’s final rule in detail and share with your legal team. Because as with so many things, “the devil is in the details.” Please forgive the pun.

As always, if you have questions, feel free to contact us at bcgi@biddle.com.

OFCCP Publishes New Technical Assistance Guide for Supply and Service Contractors

November 6, 2020 By Matt Nusbaum

The Office of Federal Contract Compliance Programs (OFCCP) has recently published a new and extensive technical assistance guide (TAG) for “supply and service” (non-construction) contractors regarding their equal employment opportunity (EEO) and affirmative action (AA) requirements under Executive Order (E.O.) 11246, Section 503 of the Rehabilitation Act, and Section 4212 of the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA). The OFCCP has previously published new guides for educational institutions and construction contractors, as well as a new guide for “small businesses” that are not large enough to trigger the OFCCP’s formal affirmative action requirements. The OFCCP maintains a “landing page” for all technical assistance materials here.

The new TAG runs 74 pages plus another 83 pages of appendices and we recommend giving it a good read. However, there are some notable oddities and, in some cases, flat-out inaccuracies that you should be aware of as you do.

Affirmative Action Clarification

Right off the bat, the agency gets its own regulations wrong by stating in the “two general rules” that contractors are required to take affirmative action “to ensure equal employment opportunity without regard to race, color, religion, sex, sexual orientation, gender identity, or national origin.” That statement is true insofar as it goes, but ignores the plain fact that the OFCCP’s regulations implementing E.O. 11246 explicitly requires affirmative action only on behalf of women and people of color.

Affirmative action efforts on behalf of men or Whites* is permitted, should circumstances warrant, but that is generally left up to the individual contractor to decide. In an audit, the OFCCP could determine that such efforts are warranted and require the contractor to engage in affirmative action for men or Whites on a going-forward basis, but it would not be a violation of the agency’s regulations to have not done so up to that point.

*Note that BCGi capitalizes all official EEO-1 race/ethnicity designations in accordance with longstanding EEOC practice; capitalization is not meant to denote importance.

Contradictory Self-Identification Guidance

The TAG notes that contractors covered by E.O. 11246 are required to invite applicants to self-identify their sex and race/ethnicity, which is true. Although the OFCCP’s regulations do not require it specifically, it is necessary to meet the contractor’s affirmative action plan (AAP) and EEO-1 reporting obligations. Past agency guidance has noted that the OFCCP’s “Internet Applicant” rule generally allows contractors to screen-out jobseekers who do not meet the basic qualifications for the job and therefore do not “count” for AAP analysis purposes. Accordingly, contractors are allowed to perform this screen before inviting the remaining applicants to self-identify.

The new TAG, however, notes that although the OFCCP does not mandate a specific time in the selection process by which the self-ID invitation must happen, the agency suggests that “[c]ontractors should not wait until after assessing basic qualifications” to solicit self-identification. Note that the agency’s past guidance linked to above gets the law right here and the rest is unenforceable guidance. In other words, contractors are still permitted to wait until after screening for basic qualifications to solicit self-identification information.

Workforce Analysis Guidance

When preparing AAPs for women and people of color (POC), contractors have the option of preparing either an “organizational display” or a “workforce analysis” to meet the “organizational profile” requirement. The organizational display is basically an extremely complicated org chart while the workforce analysis is more like an EEO-1 report and is much easier to create and maintain. Accordingly, almost all contractors opt for the workforce analysis. But here is where the OFCCP gets confused.

If a contractor chooses to create an organizational display, the org chart has to identify and provide demographics for each unit’s “supervisor.” The workforce analysis, on the other hand, is described as “a listing of each job title as appears in applicable collective bargaining agreements or payroll records ranked from the lowest paid to the highest paid within each department or other similar organizational unit including departmental or unit supervision” (emphasis added).

Historically, the phrase “including departmental or unit supervision” was interpreted to describe what the agency meant by “department,” and contractors were not required to annotate the workforce analysis to identify each department’s supervisor. The TAG, however, offers a new interpretation under which “including departmental or unit supervision” means to identify the supervisor as one would if preparing an organizational display.

This is new, and it is unclear whether and to what extent it is enforceable. The TAG is clearly sub-regulatory guidance that is expressly not enforceable, but that the OFCCP’s regulations are. To the extent that the agency has changed its interpretation, this could very well become a requirement. If the agency pushes the point in an audit, a contractor will likely have to choose between updating the workforce analysis to satisfy the agency, or strapping in for a court fight. My guess is that most will opt to avoid the court fight as the return on investment there is unlikely to justify the expense.

The TAG also runs counter to decades of agency guidance regarding the sort order on the workforce analysis. The regulations clearly state that the job titles in each department must be ordered by “wage rate” from lowest to highest; that is not in dispute. But for generations, the OFCCP has allowed contractors to sort the opposite way—from high to low—so long as they are consistent, and the agency has published guidance to that effect. Here, the TAG sticks to the regulatory language. It is unclear whether or not the agency intends to enforce the order in which contractors sort their job titles on the workforce analysis. If you currently sort high to low, switching the sort order might avoid an unnecessary conversation with an OFCCP compliance officer in an audit.

New Guidance on AAP Job Group Size

The OFCCP’s regulations are completely silent on the issue of what is and is not an appropriate “size” for an AAP job group. Contractors are instructed to form groups of jobs “with similar content, wage rates, and opportunities,” but that is the extent of the guidance provided in the regulations. For years, the OFCCP has strongly encouraged contractors to ensure that their AAP job groups are “large enough for statistical analysis,” but has not required it.

For example, let’s say the AAP for my facility in Emporia, KS has just one HR professional in a sea of warehouse workers and supervisors. Since it is unlikely that the HR professional would be combined with any of the other jobs at this facility for availability purposes (because the demographics of available HR professionals, and the skills and experience necessary for that job, are likely too different from the rest of the positions at the facility), I end up with an AAP job group comprised of just 1 person. . The OFCCP will balk at forming AAP job groups for every job title as a matter of course, but where the contractor has made a legitimate decision to not combine job titles, the agency has little authority to challenge those decisions.

On the other hand, the new TAG states, “At a minimum, the job group should be large enough that when assessing underutilization in that group, a goal of at least one whole person can be established.” While that provides more detailed guidance than “large enough for statistical analysis,” the key word in there is “should.” Should is not must and there is no violation for forming an AAP job group with “too few” people in it.

External Availability

The new TAG is a bit misleading regarding the source(s) of information contractors are allowed vs. required to use when calculating the demographics of the external labor force for availability purposes. The OFCCP’s regulations state that contractors must use “the most current and discrete statistical information available to derive availability figures,” and provides examples such as U.S. Census data, data from local job service offices, and data from colleges or other training institutions.

The Department of Labor actually contracts with the U.S. Census Bureau about every 10 years to create “Special EEO Files” (referred to in the TAG as the “EEO Tab”) for contractors to use when calculating external availability. Historically, if that is the data source a contractor used, the agency has treated it as de facto “current and discrete” under the agency’s regulations. However, U.S. Census data is typically two years old before it is released to the public for these purposes. Because files are now created from a 5-year survey (not the decennial census), some of the data contractors are using today is as much as 15 years old!

When the Census data is too far out of date or otherwise does not accurately reflect the availability “pool,” contractors have the option of selecting a different data source that might provide more accurate and up-to-date information, such as the examples provided in the regulations. But the new TAG states that contractors “must use the EEO Tab for external availability data,” and that contractors “may supplement the EEO Tab with other external data sources” if they so choose (emphases added). That is just flat wrong. Contractors are not required to use any particular data source, and can use a non-Census source exclusively.

In practical terms, this is unlikely to be much of an issue for most contractors. But if you are using data other than the Census “EEO Tab,” be prepared to justify that in an audit if necessary. As long as your rationale is reasonable, the OFCCP should not press the issue.

More Goal-Setting Elbow Room

When the Federal Contract Compliance Manual (FCCM), used to train OFCCP compliance officers, was revised several years ago, language was added noting that contractors should choose one method for determining whether or not a placement goal must be set. Acceptable methods are the “any difference” rule; the “whole person” rule; the “80%” or “4/5ths” rule; or a more refined test of statistical significance.

Many contractors used a combined method, typically either the 80% rule or a test of statistical significance coupled with the whole person rule. The idea is that, regardless of the apparent size of the delta between incumbency and availability in percentage terms, if that difference does not at least equal one whole person, you do not set a goal. This comes into play particularly with very small AAP job groups where one person might represent a relatively large percentage of the overall group. It is a backstop to avoid setting placement goals for very small real differences and concentrate efforts where the difference is meaningful.

But the revised FCCM gave many OFCCP compliance officers the impression that a combined method was unacceptable—that contractors had to choose “one” method. The agency has been slow to clarify but typically does not push very hard on that point in audits. The new TAG finally clarifies that the agency’s edict is not so strict as some originally thought.

The TAG states that contractors “must uniformly apply the same method to all job groups, as appropriate, and contractors should not use more than one method to mask underutilization” (emphasis added). So as long as a combined test is not being used for nefarious purposes, the OFCCP should accept it.

The TAG goes on to note that, “in rare cases contractors may use more than one method in an AAP, such as when there is a single job group that is too small for a statistical method to provide a reasonable result.” In other words, for extremely small AAP job groups, the agency understands that a statistical test might be inappropriate, so rather than sacrificing the value of statistical results for all the larger AAP job groups, the contractor can use statistical tests when appropriate and otherwise use simpler tests, like the any difference or whole person rule.

In such circumstances, the OFCCP suggests, and BCGi agrees, that contractors should note the method(s) and reasoning in the body of the AAP narrative. Providing the OFCCP with an explanation up front will likely lead to a smoother audit experience.

Finally, the TAG suggests that contractors can deploy different methods for determining placement goals from AAP to AAP. For example, I can use the 80% test at one location and the whole person rule at another, and that would not violate the OFCCP’s regulations. However, BCGi does not recommend that practice. The OFCCP has, over the past several years, engaged in more “cross-office staffing” and has increased the ease and accuracy of sharing information across OFCCP regional and district offices. That means that the compliance officer handling the audit at your location in Boulder, CO will likely see the audit files of past audits at your locations in Nebraska and Pennsylvania. If the compliance officer notices that different methods are being used at different AAP locations, even though that is technically “compliant,” they may get the impression that the contractor is “cherry-picking” methods to minimize placement goals and wonder whether the contractor is trying to “game the system.” That is not a very good look in an audit and will likely lead to unnecessary conversations.

Personnel Process Review

The OFCCP’s regulations regarding the requirement to review “personnel processes” has always been vague. As an overarching matter, contractors are required to ensure that their “personnel processes provide for careful, thorough, and systematic consideration of the job qualifications of applicants and employees,” that they do not stereotype people with disabilities or veterans, and that only relevant portions of a veteran’s service record are considered when making employment decisions. Past that, the content and format of these periodic (not annual) reviews are largely up to the individual contractor.

The new TAG, however, provides a bulleted list of personnel processes to review, some of which contain words like “should” (recommended) and others that use the word “must” (mandatory). Unfortunately, the agency appears to be playing fast and loose with some of the “musts.”

For example, the TAG states that contractors “must” periodically review their reasonable accommodation practices and procedures. Please email and let us know if we are wrong on this point, but this commentator was unable to find any such requirement in the OFCCP’s regulations for federal contractor employers.

The TAG also states that contractors “must periodically review the accessibility of their online or electronic application systems to applicants and employees with disabilities and ensure that necessary reasonable accommodations can be easily requested and are readily provided when requested.” That is not entirely true. Contractors are required to provide assistance in completing online applications and must provide information on their career pages regarding how to request that help. Contractors must provide such accommodations in a reasonable amount of time, but not necessarily “readily.” And while BCGi recommends testing these accommodation procedures, nowhere in the OFCCP’s regulations is that actually required.

Parting Thoughts

The OFCCP has done a tremendous job in attempting to overhaul and improve the agency’s technical assistance offered to federal contractor employers and should be commended. The new TAGs are generally well-organized and thorough and can be useful.

But keep in mind that the TAGs are guidance. They cannot be “relied upon” in a legal sense by contractors, meaning that the OFCCP can’t be held to anything in the guidance. However, that goes both ways in that the OFCCP also cannot enforce anything in their guidance that is not rooted in regulations that have the force and effect of law. So, to the extent that the guidance strays from the agency’s regulations, the regs control.

That goes for definitions. The TAG provides definitions of terms that are not defined in the agency’s regulations, such as “applicant” and “promotion.” Unless and until the agency updates its regulations with official definitions of those terms, those definitions are still up to reasonable debate. If you have questions about this or any other OFCCP guidance, feel free to contact us at bcgi@biddle.com.

OFCCP Surprises With Thoughtful Interpretation of E.O. 13950, “Combatting Race and Sex Stereotyping”

October 21, 2020 By Matt Nusbaum

As previously reported, the OFCCP is currently grappling with how to implement Executive Order (E.O.) 13950 entitled, “Combatting Race and Sex Stereotyping.”

The agency quickly set up a hotline for employees and the general public to submit complaints regarding workplace training that “promotes” race or sex stereotyping or scapegoating, and announced that the OFCCP can investigate such complaints and pursue remedies through existing authority under E.O. 11246 (which largely mirrors Title VII of the Civil Rights Act). This has prompted many federal contractor employers to effectively suspend all diversity training for the foreseeable future.

E.O. 13950 also requires the OFCCP to publish a notice in the Federal Register no later than October 22, 2020 “seeking information from Federal contractors, Federal subcontractors, and employees of Federal contractors and subcontractors regarding the training, workshops, or similar programming provided to employees.”

Much speculation has been flying about regarding the practical implementation of this provision. As BCGi noted, this is an “information collection” subject to the Paperwork Reduction Act that requires the OFCCP to obtain approval from the White House Office of Management and Budget (OMB) through a process that includes public notice of a proposal followed by an opportunity for public comment. And, sure enough, the agency will publish just such a notice in tomorrow’s Federal Register.

The wording of the E.O. implies that the OFCCP is required to collect information regarding all diversity training programs to review for potential violations. However, the agency has interpreted the E.O. slightly differently, and in a way that the federal contracting community is more likely to accept.

Information Collection Request

Rather than require all federal contractors and subcontractors to submit all training materials for presentations that might be impacted by the E.O., the OFCCP is allowing contractors to voluntarily submit materials that they suspect might be violative if they so choose. If a contractor submits materials that are found to violate the new E.O., they will be given an opportunity to “cure” these materials after receiving compliance assistance from the OFCCP.

Most importantly, the OFCCP has committed to exercising the agency’s enforcement discretion and will not pursue enforcement action against contractors who submit materials found to be in violation so long as the contractor “promptly” comes into compliance. This is true even if the agency receives the same (or substantially the same) materials from another source, such as a formal complaint or a hotline tip.

The agency’s notice expressly states that there will be “no adverse legal consequences for choosing not to participate in this request for information.”

Practical Implications

The OFCCP’s approach to implementing this particular provision of E.O. 13950 should allow federal contractor employers some measure of relief.

The voluntary nature of the information request means that the “burden” of the requirement is entirely dependent on whether and to what extent any particular contractor believes their diversity training materials are in need of review. Contractors that are confident their materials do not violate the prohibitions in the E.O. are not required to submit anything to the OFCCP and will not be “punished” for making that choice.

It also provides federal contractors with a way to “get ahead” of potential complaints regarding the content of their diversity trainings. If an employee complains internally, or the contractor is concerned that an employee might lodge a complaint externally, that employer can effectively “get a ruling” from the OFCCP and enjoy a safe harbor while doing so. If the materials are found to violate the E.O., the agency will consult with the contractor regarding necessary changes to the materials or other actions required to come into compliance.

Just as importantly, if the agency does not find any issues with a contractor’s training materials, that should work as a pseudo approval or certification, effectively insulating the company against future complaints regarding those materials under the laws and regulations enforced by the OFCCP, provided that they were not materially altered after the agency’s review.

An OFCCP Stamp of Approval?

The information request is limited to federal contractors, subcontractors, and their employees. To the extent that an organization that provides diversity training fits the bill, nothing would prevent them from submitting the materials used in their commercially offered trainings to the OFCCP for approval, effectively potentially earning an agency “seal of approval.”

To say that is unique would be an understatement of gigantic proportions. As a federal law enforcement agency, the OFCCP has historically steadfastly avoided “approving” commercial products and services, and it is unlikely that the agency intends to start doing so now. In order to “opt for” the safe harbor described in the notice, the OFCCP is quite clear that it is the federal contractor employer who must submit materials to the agency for review.

So, for example, assume Company A, a diversity training provider, submits materials to the OFCCP and the agency does not find any violations of the E.O., then sells that “approved” training to Company B. If a Company B employee then subsequently complains to the OFCCP and, on re-examination the agency does find that the materials (or the way they were used) violate the E.O., there is no safe harbor from enforcement for Company B.

Public Comment

The OFCCP is soliciting public comment on the proposed information collection and all are invited to participate. Comments are due on or before Tuesday, December 1, 2020. Comments can be submitted a variety of ways, the easiest being the online “eRulemaking portal” at www.regulations.gov.