About Us  |  About Cheetah®  |  Contact Us

Reversing ALJ ruling, DOL ARB orders contractor to submit AAP data to OFCCP for two years beyond receipt date of scheduling letter

May 31st, 2012  |  Cynthia L. Hackerott

The temporal scope of the desk audit phase of an OFCCP compliance review can be extended beyond the date that the contractor received its audit scheduling letter, ruled the Labor Department’s Administrative Review Board (ARB), reversing an 2010 ruling by an Administrative Law Judge (ALJ) in favor of federal contractor Frito-Lay, Inc (OFCCP v Frito-Lay, Inc, ARB Case No 2010, May 8, 2010). Finding that “Frito-Lay’s procedural arguments based on an inference from internal guidelines and comments to regulatory amendments cannot overcome the discretion provided by the regulations themselves,” the ARB ordered the contractor to comply with the OFCCP request seeking affirmative action plan (AAP) data for two years beyond the receipt of the audit scheduling letter . 

Factual background. On July 13, 2007, the OFCCP sent Frito-Lay a scheduling letter stating that the agency had selected Frito-Lay’s Dallas Baked Snack facility for a compliance review, pursuant to Executive Order (EO) 11246. In the scheduling letter , the OFCCP requested that Frito-Lay submit data for the 2006 affirmative action plan year and for the first half of 2007. Subsequently, the OFCCP requested data for the remainder of 2007 and back to July 13, 2005. Frito-Lay supplied OFCCP with this requested data. Relying on the information Frito-Lay provided, OFCCP conducted an analysis of hiring at the Dallas facility. According to the OFCCP, this analysis revealed an adverse impact in hiring of women for the period June 13, 2006, through December 31, 2007. Based on this finding, the OFCCP asserted that it needed to determine if the adverse impact continued beyond December 31, 2007. Consequently, on November 10, 2009, the OFCCP requested that Frito-Lay submit additional data for applicants and hires for the period January 1, 2008, through October 31, 2009. When Frito-Lay refused to provide the 2008 and 2009 data, the OFCCP filed an administrative complaint alleging this refusal violated EO 11246 and its implementing regulations.

Compliance review stages. Compliance reviews generally proceed in three stages (see 41 CFR § 60-1.20(a)(1)). First, the OFCCP may conduct a desk audit at its offices of the written Affirmative Action Program (AAP) and supporting documentation. If the desk audit of the AAP and supporting documentation reveal “unresolved problem areas,” the OFCCP may then conduct an on-site review of the contractor’s establishment. Finally, the OFCCP, where necessary, may conduct an off-site analysis of information supplied by the contractor or otherwise gathered during, or pursuant to, the on-site review. If the contractor refuses to submit to a compliance evaluation, the OFCCP may bring an enforcement action.

ALJ ruling. Although initiated in July 2007, the compliance review was still in the desk audit phase at the time the ALJ issued his Recommended Decision and Order on July 23, 2010 (ALJ Case No 2010-OFC-002). Frito-Lay argued that the OFCCP impermissibly attempted to extend the timeframe for review of the Dallas facility beyond the July 2007 date on which the compliance review was initiated. Thus, the issue before the ALJ was whether the temporal scope of information sought by the OFCCP, during the desk audit phase of a compliance review, can be extended beyond the date that the contractor received its scheduling letter. The ALJ ruled that EO 11246, its implementing regulations, the relevant case law, and the Federal Contract Compliance Manual (FCCM) contemplate that the temporal scope of the desk audit phase of a compliance review cannot be extended beyond the date that the contractor received its scheduling letter.

On September 1, 2010, the OFCCP filed exceptions to the ALJ’s ruling with the ARB. In its exceptions, the OFCCP sought only the reversal of the ALJ’s decision and an order requiring Frito-Lay to produce the 2008 and 2009 AAP data.

Dismissal request. Before addressing the merits, the ARB first addressed Frito-Lay’s dismissal request. The contractor moved for issuance of a notice of case closure, asserting that the time in which the ARB had to issue a decision had passed. The regulations at 41 C.F.R. § 60-1.26(b)(2) provide that the ARB issue a final order within one year of either the ALJ’s recommended decision or the submission of exceptions and responses to exceptions, whichever occurs first. Frito-Lay asserted that since the last filing was its October 1, 2010 response brief, the ARB had until October 1, 2011 to act. In support, Frito-Lay pointed to OFCCP v United Space Alliance, LLC, in which the ARB, on April 11, 2011, issued a “Notice of Case Closing” because  the ARB did not issue a “Final Decision and Order” within 30 days after the time for filing exceptions under the expedited hearing procedures. Thus, by operation of the expedited hearing procedures, the ALJ’s February 28 order in United Space Alliance, LLC became the ARB’s the “Final Administrative Order.”

In this case, however, the expedited hearing procedures (at 41 C.F.R. §60-30.37) were not at play, the ARB pointed out. It explained that the regulation at 41 C.F.R. §60-1.26(b)(2) does not specify a consequence for failure to comply with the one-year time period and thus, such period is directory, not jurisdictional. Consequently, the ARB denied Frito-Lay’s dismissal motion.  

Merits. On the merits, the ARB noted that Frito-Lay raised “objectively good faith reasons for its refusal to produce the 2008 and 2009 AAP data.”  Frito-Lay argued that the relevant regulations and OFCCP’s internal procedures intend for desk audits to be a quick and limited compliance review of the contractor’s activities during the time period specified in the scheduling letter. Frito-Lay cited to various FCCM provisions to argue that compliance reviews allow the OFCCP only to look backwards two or more years from the scheduling letter, depending on whether a continuing violation is alleged. According to the ARB, Frito-Lay’s arguments ultimately boiled down to a proposition that the OFCCP has no discretion to request data beyond the date of the scheduling letter in cases where OFCCP discovers a potential violation during a desk audit.  

Disagreeing, the ARB found that the OFCCP “clearly has discretion to request AAP data covering activity occurring after the scheduling letter in the specific circumstances of this case.” The ARB noted that Frito-Lay had an ongoing duty from 2007 through 2009 to comply with EO 11246, the equal opportunity clause in the federal contracts, and the implementing regulations. To enable OFCCP in its mission, the regulations empower it with discretion to conduct various types of compliance reviews. These regulations focus on federal contractors’ AAPs and specifically require federal contractors, through their AAPs, to monitor and examine the impact that their employment decisions may have on women and minorities. Requesting statistical data is common in determining whether a disparate impact occurred, and a significant statistical disparity can indicate compliance issues such as a discriminatory disparate impact.

The OFCCP has regulatory authority to request the 2008 and 2009 AAP data in furtherance of its 2007 desk audit, the ARB concluded.  First, the agency was pursuing a concern about a statistically significant disparity in hiring women, specifically finding “’a disparity in the hiring rates of females as compared to males that was statistically significant at 3.26 standard deviations . . . .’”  A statistical showing of two standard deviations has long been accepted as significant in adverse impact analysis, the ARB stated. In addition, case precedent makes clear that a sustained duration of a statistically significant disparity can further demonstrate discrimination.  As such, a request for two subsequent years is consistent with a proper disparate impact analysis. Consequently, the OFCCP’s impetus in making further inquiries and the reason for its requesting two additional years’ AAP data was reasonable and consistent with OFCCP’s duty to ensure Frito-Lay’s compliance with EO 11246, the ARB concluded.  The agency’s request for 2008 and 2009 AAP data was narrow and motivated by the objective deficiency discovered during the 2007 desk audit, and focused only on AAP plans and data for two years. Contrary to the focus of the ALJ and Frito-Lay, this was not a case where the OFCCP simply extended a desk audit; rather, it was a case where a deficiency motivated the request for more information.    

The ARB also rejected Frito-Lay’s other procedural arguments suggesting that OFCCP desk audits have an inflexible temporal limitation. The parties acknowledged that the OFCCP’s regulations were amended to remove the 60-day limitation on desk audits, clearly implying that they might last longer. Frito-Lay’s reliance on the FCCM as placing inflexible restrictions on OFCCP was also unpersuasive. Although the FCCM provides internal guidance to OFCCP, the ARB wrote that it viewed the FCCM “as an internal manual that courts generally consider ‘non-binding statements of general policy’ that do not provide due process rights in the public, except in unusual circumstances.” The ARB also found it ironic that Frito-Lay implicitly recognized that these same guidelines provide that a new desk audit could have been performed in 2009, which presumably would have involved production of the exact same data being withheld in this case.

Thus, the ARB concluded that the EO 11246 and implementing regulations required Frito-Lay to produce to OFCCP the 2008 and 2009 AAP data.