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Federal magistrate recommends court grant DOL/OFCCP’s motion to remand Frito-Lay, Inc’s challenge to ARB ruling

March 5th, 2014  |  Cynthia L. Hackerott

A federal magistrate has issued an order recommending that a district court in Texas grant the U.S. Department of Labor’s (DOL) and OFCCP’s motion to remand back to the department’s Administrative Review Board (ARB) a case in which federal contractor Frito-Lay, Inc is challenging a 2012 ARB ruling in favor of the OFCCP on the contractor’s objection to an OFCCP data request. The magistrate also recommended that the DOL/OFCCP’s pending motion to dismiss and that Frito-Lay’s pending motion for summary judgment be denied without prejudice as moot. (Frito-Lay, Inc v US Dep’t of Labor, NDTex, No 3:12-cv-1747-B-BN, February 11, 2014, released March 3, 2014)

Those closely following OFCCP developments may have noticed that the ARB decision at issue in this case was cited in the preamble portions of the OFCCP’s final rules revising the agency’s regulations on protected veterans and workers with disabilities as part of the justification behind revising the sections of those regulations regarding compliance reviews.

Frito-Lay’s complaint. On June 5, 2012, Frito-Lay, Inc filed a complaint in the U.S. District Court for the Northern District of Texas challenging the ARB’s ruling that the temporal scope of the desk audit phase of an OFCCP compliance review could be extended beyond the date that the contractor received its audit scheduling letter. Specifically, the ARB found that the temporal scope could be extended because a deficiency in Frito-Lay’s data motivated the OFCCP’s request for more information. The challenged ruling, a “Final Administrative Order” issued by the ARB on May 8, 2012 (OFCCP v Frito-Lay, Inc, ARB Case No 2010-132), reversed a 2010 ruling by an Administrative Law Judge (ALJ Case No 2010-OFC-002) in favor of Frito-Lay. The contractor’s complaint asserts that the ARB’s decision ordering the company to comply with the OFCCP’s data requests violated the Administrative Procedure Act (APA) and the Fourth and Fifth Amendments to the U.S. Constitution. The case was referred to the magistrate judge for pretrial management.

Motions. The defendants — the DOL and the OFCCP — filed a motion to dismiss or, in the alternative, for summary judgment based on the administrative record. Frito-Lay then filed a motion for leave to obtain discovery, which the court granted in part. The parties then resumed briefing on the DOL/OFCCP’s motion to dismiss, and the contractor filed its own motion for summary judgment. Shortly thereafter, the DOL/OFCCP filed their motion for remand based on errors in the ARB record.

DOL’s remand request. Both sides agreed that the ARB decision at issue was made based on a record that contained an error in the description of an alleged disparity in hiring of male and female candidates at Frito-Lay’s “Dallas Baked” facility in Dallas, Texas. However, the DOL/OFCCP and the contractor disagreed on the extent of errors in the record.

In their memorandum in support of the remand motion, the defendants explained that the challenged ARB decision was based on the ARB’s reliance on an allegation in the OFCCP’s administrative complaint that an initial analysis of certain “full-time entry-level” positions at one of Frito-Lay’s facilities “showed a disparity in the hiring rates of females as compared to males that was statistically significant at 3.26 standard deviations with a shortfall of 9 females.” However, in a declaration filed with the federal court, Aida Collins, Acting Deputy Regional Director of the Southwest and Rocky Mountain Region of OFCCP, stated that the 3.26 standard deviations applied to a combined analysis of both full-time and part time positions, not just full-time positions. This error was also identified in Frito-Lay’s motion for summary judgment.

The contractor further contended there were other errors in the initial analysis, including the scope of the analysis – it represented two warehouses, not one as the agency claimed – and the job titles – both material handlers and packers were covered. In addition, Frito-Lay asserted that the OFCCP miscounted the total number of applicants, the number of male and female applicants, and the number of new hires for the full-time material handler position at the Dallas Baked Snack facility.

In any event, the DOL/OFCCP argued that the case must be remanded to the ARB to give the OFCCP the opportunity to correct the record and to determine whether the corrected record alters the ARB’s decision.

Frito-Lay’s response. The contractor responded that the DOL/OFCCP did not articulate any legally-supportable grounds for remand. In addition, Frito-Lay argued that the ARB’s decision should be vacated due to the undisputed deficiencies contained therein, that a court-ordered remand would be either arbitrary and capricious or futile, and that a remand at this stage would be premature.

Remand standards. After reviewing applicable case law, the magistrate concluded that “the true issue with respect to remand is whether voluntary remand is appropriate under the circumstances” and that “there are no hard and fast rules as to when voluntary remand is appropriate.” Nevertheless, “it is somewhat clear that granting a voluntary remand is only appropriate when such an action would not be arbitrary and capricious and occurs within a reasonable time,” the magistrate observed.

Arbitrary and capricious? With respect to whether a voluntary remand would be arbitrary, capricious, or an abuse of discretion, courts appear to focus on whether the agency’s request for remand has been made in bad faith, the magistrate noted. In this case, the ARB relied on admittedly incorrect evidentiary allegations. Although the corrected evidence was not new, it appears that the ARB did not consider it for a variety of reasons that did not involve bad faith on the part of the DOL/OFCCP. The department and the agency did not stall in recognizing the merits of Frito-Lay’s challenges and admitted the alleged errors once they were discovered, the magistrate pointed out, adding that there has been no evidence of a pattern of legal tactics to avoid judicial review on the DOL/OFCCP’s part. As such, there was nothing to suggest that the DOL’s remand request was made in bad faith, the magistrate found. Moreover, as explained in more detail below, even if Frito-Lay prevailed on its summary judgment motion, it is likely the case would be remanded, even taking into consideration the contractor’s constitutional and other claims, he reasoned.

Reasonable time frame? Further review of the relevant case law led the magistrate to conclude that “apparently no true rules exist” as to what constitutes a reasonable time frame in which a remand is appropriate. Federal court rulings on this issue have been inconstant, he noted, citing various examples. “The only guideline to be gleaned from the cases is that courts analyze the facts of each case in an effort to reach an equitable outcome,” he wrote.

Here, the magistrate found that the amount of time that has passed – 20 months – was reasonable in light of the circumstances. While the period of time that elapsed between the ARB’s findings and the magistrate’s recommendations was “substantial,” it was not unreasonable because, once the DOL/OFCCP became aware of the error, they moved to remand the case and there was no indication that the defendants failed, or delayed, to inform Frito-Lay of the potential error, or their intention to seek remand, once it became known to them.

Vacatur not appropriate. The magistrate also recommended that the DOL/OFCCP’s motion for voluntary remand should be granted, without the court addressing the merits of the ARB’s ruling. In the absence of a finding that the ARB’s decision was arbitrary and capricious, or otherwise unlawful, a ruling vacating or setting aside the ARB’s final order would premature. Further, because the DOL/OFCCP conceded that the foundation of the ARB’s ruling must be reexamined, the court should not consider how it would rule if the record that was before the ARB were different from what it actually was, the magistrate reasoned. As such, the ARB’s ruling should not be set aside or vacated at this juncture.

Thus, he recommended that the court remand the case “for the limited purpose of examining the alleged error related to the allegation that the ‘disparity in the hiring rates of females as compared to males that was statistically significant at 3.26 standard deviations.’”  The ARB relied on that allegation in deciding to order Frito-Lay to produce the contested information, and the parties agree that the allegation, as stated, is incorrect. Accordingly, the court should order that, on remand, the ARB is only to reconsider this allegation and surrounding facts, the magistrate concluded.

He also disagreed with Frito-Lay’s assertion that any finding on remand would be arbitrary and capricious as a matter of law because a raw data analysis can never support a finding of discrimination. Such a finding would be premature, the magistrate explained, because the ARB’s ruling related only to whether additional discovery was permissible, rather than any ultimate determination regarding discrimination that may be rendered by the OFCCP. If the agency should ultimately determine that the contractor has discriminated, that determination could be challenged by Frito-Lay if it is not supported by substantial evidence, including the raw data analysis.

Remand not premature. Finally, the magistrate rejected Frito-Lay’s assertion that a remand at this stage would be premature. To begin with, to the extent that the constitutional claims alleged by the contractor relate to the ARB’s reliance on the error which is the subject of remand, any such claims will be mooted by the remand, he pointed out.

Further, Frito-Lay’s constitutional challenge is unripe for judicial review because, in light of the recommended remand, any claims that the procedure undertaken by the DOL/OFCCP was unconstitutional will not yet be ripe because the agency ruling is not yet final insofar as it is remanded for reconsideration of a limited portion of the ARB’s final order. Moreover, future uncertainties exist because there is no guarantee what the OFCCP’s and the DOL’s decisions will ultimately be. It is possible that the OFCCP could decide not to pursue their investigation on remand, the magistrate noted.

Therefore, the magistrate recommended that: (1) the DOL/OFCCP’s motion for voluntary remand be granted for the limited purpose articulated in his recommendation, (2) the remaining motions should be denied without prejudice in light of the administrative remand, (3) Frito-Lay’s claims should be dismissed without prejudice to them being refiled, if appropriate, at a later date, and (4) the case should be closed.

ARB ruling cited in newly revised regulations. Notably, the ruling at issue in this case the ARB’s May 8, 2012 decision was cited by the OFCCP in the preamble portions of the September 24, 2013 Federal Register notices on the agency’s final rules revising its regulations that implement the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA) and Section 503 of the Rehabilitation Act of 1973 (Section 503). The preambles of both notices (78 FR 58614–58679 at 58641 and 78 FR 58682-58752 at 58711- 58712) state the OFCCP’s position that the ARB’s ruling in Frito-Lay, Inc, which applied to the regulations that implement Executive Order 1126, is equally applicable to desk audits conducted under VEVRAA and Section 503 authority. Accordingly, the provisions of both regulations that cover compliance reviews (41 CFR Parts 60-300.60(a)(1) and 60–741.60(a)(1)) have been revised to reflect the “OFCCP’s longstanding position that the agency has authority to obtain information pertinent to the review for periods after the date of the letter scheduling the review, including during the desk audit,” the agency writes in both preambles.

In a September 13, 2013 webinar, Naomi Levin, who serves in the OFCCP’s Division of Policy, Planning and Program Development as the Branch Chief for Policy Development and Procedures, said that the revised VEVRAA and Section 503 regulations now “clarify” that the OFCCP may need to examine information after the date of the audit scheduling letter. Levin echoed the assertion made in the preambles that these provisions are not a new policy, but rather clarify existing policy.