Takeaways

DOL’s Office of Federal Contract Compliance Programs (OFCCP) has made several high-profile pro-contractor changes in the last 18 months.
As relationships with technology industry firms do not always reflect a “kinder and gentler” OFCCP, OFCCP held a town hall “listening session” in Silicon Valley for tech contractors to express their concerns.
Notwithstanding the outreach and public relations effort, speaking points were weighted between enforcement and voluntary compliance, and attendees had mixed reactions to OFCCP comments.

In September 2017, OFCCP held three nationwide town hall meetings. The well-attended events provided a forum for contractors to express concerns and challenges with compliance with the rules and regulations OFCCP enforces, including Executive Order 11246 (Equal Employment Opportunity), Section 503 of the Rehabilitation Act, and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA). Since then, OFCCP has seen leadership changes and has issued a number of pro-contractor directives and changes that can be traced back to feedback received at the town halls and elsewhere from the contractor community.

Most recently, in response to contractor requests for incentive measures to increase compliance, the OFCCP instituted a Voluntary Enterprise-wide Review Program (VERP) directive on February 13, 2019, to “officially recognize the outstanding efforts of its top‐performing contractor participants, and remove VERP participants from the pool of contractors scheduled for compliance evaluation.” Top contractors with comprehensive, corporate‐wide model diversity and inclusion programs would volunteer for compliance reviews of their headquarters’ offices and some of their satellite establishments. They would have to demonstrate not only basic compliance with OFCCP’s requirements, but also show evidence of their commitment to and application of successful equal employment opportunity programs on a corporate‐wide basis. In exchange, the contractor would receive VERP recognition and could enter into a five-year agreement with the OFCCP that would remove the contractor from OFCCP’s neutral scheduling process for the duration of the agreement.

OFCCP has also adopted several measures to increase transparency. OFCCP adopted Directive 2018-01 last year, extending its use of Pre-Determination Notices (PDNs) to individual discrimination cases prior to issuance of a Notice of Violation. Previously, PDNs were primarily issued in systemic discrimination cases. The issuance of a PDN provides the contractor 15 additional calendar days to rebut OFCCP’s proposed findings that sufficient evidence exists of discrimination. In other transparency initiatives, OFCCP implemented a 45-day scheduling delay to provide contractors more time to prepare for audits; published OFCCP’s supply and service scheduling methodology on the agency’s public web site; and publicly released “What Federal Contractors Can Expect,” outlining OFCCP’s commitment to clear, accurate and professional interactions with OFCCP staff in carrying out compliance assistance, compliance evaluation, and complaint investigation activities. Capping these initiatives, OFCCP issued Directive 2018-08, articulating the policy that “transparency should guide OFCCP staff during every stage of a compliance evaluation, from beginning to end,” clarifying extension policies, and providing timeframe guidelines for OFCCP communications with contractors during a desk audit.

OFCCP has also implemented an ombudsman, enhanced its Help Desk resources, announced plans to issue opinion letters as guidance documents, and issued Directive 2018-05, outlining standard procedures for reviewing contractor compensation practices during a compliance evaluation.

OFCCP previously prepared a detailed action plan which we discussed in a May 2018 Alert.

Despite these numerous and largely pro-contractor changes, OFCCP’s relationship with tech firms in Silicon Valley and elsewhere remains complicated. Several lawsuits and high profile and contentious audits have garnered significant media attention. Further, OFCCP specifically targeted information technology companies in its fiscal year 2018 planning. Compensation discrimination and hiring discrimination charges against large Silicon Valley based employers (including reverse discrimination claims), as well as aggressive document production requests, have HR and compliance managers in the industry skeptical of OFCCP’s statement that “OFCCP Wants to Help.” The town hall provided an open forum for tech industry representatives to express their concerns.

At a Silicon Valley town hall on February 26, 2019, representatives of some tech industry firms expressed frustration with several dimensions of the OFCCP-contractor interface. Noting that they are all competing for the same limited talent pool, contractors pointed to the difficulty with compliance with certain OFCCP directives. Others complained about OFCCP’s patterns and practices with regards to pay analysis groups. While OFCCP specifically denied that it targets or retaliates against contractors, OFCCP’s representatives stated that the agency will focus its audit letters on “certain industries” where they perceive past trends.

OFCCP representatives promised to take back suggestions to improve operations and relations between OFCCP and industry, but it also made it clear that enforcement will remain a key priority. In fact, in the keynote to the “listening session,” recently appointed OFCCP director Craig Leen noted the following:

  • Retrospective financial recoveries for employees in 2017-2018 rose to $44,955,798, a significant increase over the prior two-year period when OFCCP only recovered $16,744,000.
  • Overall audit “findings” have increased by 6% in the past year.
  • At relevant times during the Bush administration OFCCP conducted 5,000 audits annually, which fell to 1,000 in the Obama administration. Across both administrations, OFCCP consistently found about 2% of cases that had actual evidence of discrimination, so they are reverting to a system of “more audits in less time” rather than spending more time auditing fewer contractors in deeper detail. OFCCP is targeting 3,500 audits for FY 2019.
  • Director Leen noted that five-to-seven-year audits were impractical and that OFCCP was trying to move to a pattern where issues were resolved more quickly—either through dismissal, conciliation agreements or litigation.
  • The target for the completion of desk audits is 45 days.
  • Early Resolution Procedures (ERP), which are voluntary, are being encouraged as a mechanism for exemptions from future audit selections.
  • Transparency continues to be a key component of OFCCP’s objectives and is one of the four pillars of “CERT” goals—standing for Certainty, Efficiency, Recognition and Transparency.

Director Leen expressed his view that transparency expedites audits, and contractors should expect transparency to continue to factor in to any new initiatives from OFCCP. Unfortunately for contractors, one interpretation of the Government’s definition of “transparency” is for contractors to turn over large amounts of data, and to do so quickly. Contractors should also expect the aggregate number of contractor establishments selected for audit to continue to increase. An optimistic view of the messaging is that OFCCP is “listening” to industry’s suggestions, and is seeking to be more efficient and quicker, and to accomplish more audits with its resources. Conversely, the OFCCP’s remarks were open to a cynical interpretation of the message: “the sooner you settle, the sooner we will move on to audit another contractor.”

The first series of Town Halls unquestionably resulted in some positive changes for contractors. Time will tell whether this week’s tech industry town halls will result in similar practical and beneficial improvements for contractors in the technology sector.

If you have any questions about the content of this Alert, please contact the authors, or the Pillsbury attorney with whom you regularly work.