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In this election year, OFCCP and federal contractor community at war, says expert John Fox

The OFCCP is on a war footing with federal contractors, OFCCP expert John C. Fox stated during an OFCCP update webinar presented on April 19 by the National Employment Law Institute (NELI). Fox is President and a founder of Fox, Wang & Morgan P.C. and is a former Executive Assistant to the Director of the OFCCP. He noted that he has not seen the federal contractor community at war with the OFCCP to such an extent since the late 1970s. The “battle stations” in this war include the agency’s pending regulatory revisions, litigation, audits, and action on Capital Hill.

According to Fox, the OFCCP is no longer solely an independent investigatory agency but is now also a political operative drawn up into national politics, and this transformation is fundamental to the agency and impacts everything it does.

Regulatory revisions. Fox described the current OFCCP regulatory agenda as one of the “most aggressive” of any administration. Whether the OFCCP will publish any given one of its pending regulatory proposals before the November election will be a political decision that the White House will make based on whether publication will win or lose votes in swing states. “Every regulation issued or not has a target audience in mind,” Fox said.

Under the Administrative Procedure Act, Fox explained, generally final regulations don’t take effect until 30 days after their Federal Register publication date. Consequently, an outgoing administration has to publish final regulations within 30 days prior to leaving office to ensure those regulations won’t be stopped by the incoming administration. Therefore, even if President Obama is not re-elected, his administration still has until December 19, 2012, to publish finalized regulations and have them take effect.

Regulatory proposal regarding workers with disabilities. One of the OFCCP’s regulatory proposals of deep concern in the contractor community is a proposal that would require federal contractors (and subcontractors) to set a 7 percent hiring goal for workers with disabilities and would impose increased data collection, recordkeeping, recruitment, training, and policy dissemination requirements. The OFCCP’s Notice of Proposed Rulemaking (NPRM) containing these and other proposed amendments to its regulations implementing Sec. 503 of the Rehabilitation Act of 1973 was published in the Federal Register (76 FR 77056-77105).

The comment period on this proposal closed on February 21, 2012, and Fox said approximately 400 comments were submitted. Those stakeholders opposing the proposal generally focused on their assertions that the regulations would not be effective as a practical matter and on the extraordinary cost burden of compliance. The OFCCP estimates the cost of compliance to be around $400 per contractor for the first year, yet many contractors estimate that cost to be around $40,000 to $50,000, he noted. Many people who had been supporters of OFCCP are critics now due to these regulations and OFCCP’s gross underestimate of compliance burden, Fox observed. The OFCCP were “stunned” by the contractor community’s reaction to the proposal, and the good news is that they are “very much listening and taking to heart your comments,” he reported.

These proposed regulatory revisions probably won’t go final in prior to the election, Fox predicted, noting that the proposal is both complicated and controversial. He said that employer groups are spending a lot of money on Capital Hill to challenge the proposal, and some disability rights groups have expressed doubts about its utility.

Veterans’ employment regulatory proposal. Another pending initiative receiving a lot of attention is the proposal to revise the OFCCP’s regulations at 41 CFR Parts 60-250 and 60-300 that implement the Vietnam Era Veterans Readjustment Assistance Act (VEVRAA). This NPRM was published in the Federal Register on April 26, 2011 (76 FR 23358-23425), and the comment period ended on July 11, 2011. The proposed changes would require contractors, for the first time ever, to establish annual hiring benchmarks (i.e. numerical targets) to assist in measuring the effectiveness of their affirmative action efforts, and it would increase data collection requirement on job referrals, applicants and hires.

Fox predicted that the proposed VEVRAA regulatory revisions will finalized prior to the election, likely in September or October 2012, stating that the Obama administration probably considers them to be a top priority. It is “absolutely impossible to be against veterans during an election year,” he said. Both the Clinton and Bush administrations published election-eve regulations related to veterans, he noted, adding that the veterans vote is an area in which the Democrats see President Obama as weak. Thus, veterans regulations are a favorite “to do” item on the political agenda.

Audits. Many contractors are reporting that the OFCCP is “bullying” them during audits, Fox said. Audits are now “long marathons, not sprints” with almost half of all audits involving discrimination findings still open after two years. Moreover, in conciliation meetings, the agency is not willing to talk about liability but rather only wants to talk about damages. He pointed out that under the Obama administration, the OFCCP has issued about ten times more Notices to Show Cause than in either the Bush or Clinton administrations. In addition, OFCCP conciliation agreements are up to over 20 percent from the 5 percent of Clinton and Bush administrations.

In addition to concerns about changes in the agency’s tone, contractors are concerned about lack of transparency on the part of the OFCCP. Fox is hearing from some defense lawyers that OFCCP is not providing its audit databases and analyses in audits, despite a promise on the OFCCP’s website promise to do so. On June 4, 2010, the OFCCP issued a secret, internal written directive (No 289) that changed the way desk audits are done, and the agency is not disclosing compliance officer training manual information. On a related note, Fox reported that long-anticipated revisions to the OFCCP’s Federal Contract Compliance Manual have been awaiting Director Shiu’s signature since late November 2011. However, they still have not been issued.

Scheduling letter/itemized listing changes. One of the OFCCP’s pending initiatives is the a proposal that would allow the agency to seek more, and more detailed, information from federal contractors during the desk audit phase of compliance evaluations. Notice of a revised proposal in this regard was published in the September 28, 2011 edition of the Federal Register (76 FR 60083-60084). The revised proposal addressed comments received regarding the OFCCP’s initial proposal issued in May of this year (76 FR 27670-27671) and, in response to those comments, contains several changes to the original proposal. However, neither of the Federal Register notices contained the content of the proposed revisions. Rather, the content of these revisions is revealed in supporting documentation for the notice provided to the Office of Management and Budget (OMB) by the OFCCP (posted on the Regulations.gov website). The comment period on the revised proposal closed on October 28, 2011.

Under changes proposed by the OFCCP, the agency would be allowed to seek more, and more detailed, information from federal contractors during the desk audit phase of compliance evaluations, including information on FMLA, pregnancy leave and religious accommodation policies, more specific demographic information on employment decisions, more precise data for compensation analysis (aggregate data rather than the disaggregate data), and VETS-100/VETS-100A forms.

Because the Office of Management and Budget (OMB) has not yet approved the proposed new scheduling letter, the OMB is approving the current scheduling letter (which has been in use for the last three and a half years) in one-month increments, Fox reported. He believes the new scheduling letter will get approved, but not prior to the election.

Construction contractors. In its regulatory agenda, the OFCCP states that it plans to revise the regulations in 41 CFR Parts 60-1 and 60-4 implementing the affirmative action requirements of Executive Order 11246 that are applicable to federal and federally assisted construction contractors. However, a proposed rule has not yet been published, and Fox predicted it will not be published before the election because of the large number of pending OFCCP initiatives — “too many airplanes trying to land on the runway,” Fox said.

Although there was no public notice, the OMB has approved a new construction contractor scheduling letter authority, Fox reported, meaning that the OMB has not approved a new standardized scheduling letter, but rather has simply told the OFCCP that they had authority to go ahead with construction contractor audits. As a result, each of the OFCCP’s six regions has its own version of a construction contractor scheduling letter, and within some regions, there is more than one version.

House subcommittee hearing. The OFCCP is “on a collision course” with Congressman John Kline, Chairman of the House’s Committee on Education and the Workforce, Fox said. On April 18, the Committee’s Subcommittee on Health, Employment, Labor and Pensions (HELP), led by Congressman Phil Roe (R-TN), held an oversight hearing regarding the OFCCP, which, according to Fox, represents a de facto declaration of a loss of confidence in the agency. And, “a lot more heat is coming,” Fox noted, saying that $4 – 5 million dollars of federal contractor money is now being paid to lobbyists.

TRICARE. The National Defense Authorization Act of 2012 (NDAA) signed into law by President Obama on December 31, 2011, excludes TRICARE Management Activity providers from OFCCP jurisdiction for the 2012 fiscal year (FY). TRICARE is a Department of Defense (DOD) Field Activity tasked with administering the TRICARE program, the DOD’s worldwide health care program for active duty and retired military service members and their families. The new law overrides an OFCCP directive issued in December 2010 (No 293) that maintained that TRICARE providers can be subject to OFCCP jurisdiction, and this issue is the subject of pending litigation.

The NDAA creates an exemption only for TRICARE participation; thus, health care providers may still fall under OFCCP jurisdiction for other reasons. For example, health care providers that provide health services to federal employees and their families covered by federal health coverage or to those that provide services pursuant to Medicare’s Advantage (Part C) and Part D programs are apparently still subject to OFCCP jurisdiction, unless an exemption applies.

Fox emphasized that, since the NDAA is a budget bill, the immunity from OFCCP jurisdiction over TRICARE providers is only effective as long as the FY 2012 budget is in effect. When a new budget bill is passed for 2013 (which starts on October 1, 2013), the TRICARE immunity provision may or may not be extended.