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Trio of new OFCCP directives released; one creates a path to 5-year audit hiatus

By Pamela Wolf, J.D.

On November 30, the OFCCP released three new directives, all of which are immediately effective. One of these directives would give federal contractors a path to a five-year audit hiatus under the agency’s new early dispute resolution procedures (ERP). The other directives establish an opinion letter process, enhance the OFCCP’s Help Desk, and clarify the agency’s compliance review procedures.

New ERP. The agency said that its new ERP process is aimed at resolving supply and service compliance evaluations at the earliest stage possible with corporate-wide compliance. Directive 2019-2 establishes the new ERP and outlines general guidelines for implementation. The agency expects that these procedures will help contractors and the OFCCP achieve their mutual goal of equal employment opportunity in federal contracting and reduce the length of compliance evaluations by resolving problems expeditiously. The ERP also allows the OFCCP and contractors with multiple establishments to more efficiently promote corporate-wide compliance with the OFCCP’s requirements.

In order to understand the impact of these new procedures, Employment Law Daily reached out to Polsinelli shareholder Connie Bertram.

Frustrating audit structure. The ERP Directive appears to be designed to address a long-standing frustration of the OFCCP regarding the structure of the audit process: that it is generally limited to a single establishment or functional unit, according to Bertram. “Through OFCCP audits, the OFCCP audits a single establishment of a contractor, focusing on its technical compliance, progress towards goals, and hiring, promotion, termination, and compensation data. When the OFCCP identified a technical violation or a discriminatory practice, it did not have a mechanism for addressing similar violations at other establishments or functional units,” she observed.

“The ERP Directive offers the OFCCP and contractors a mechanism for undertaking a mini-audit focused on specific technical violations or findings of discrimination after the desk audit phase,” Bertram explained. “After the desk audit (for technical violations), or a truncated on-site (conducted off-site by phone or video) (for potential findings of discrimination), the OFCCP would propose an Early Resolution Conciliation Agreement (ERCA) that resolved the violation at both the establishment under audit and at other establishments of the contractor covered by the ERCA. The OFCCP would not issue a Notice of Violation if the OFCCP and the contractor entered into an ERCA.”

Five-year audit hiatus. This new ERP offers a nice upside for contractors. The contractor would not be subject to audit at the original establishment and the establishments covered by the agreement for five years after the entry of the ERCA, Bertram pointed out. “However, during this period, the contractor would be required to provide periodic reports to the OFCCP consistent with the terms of the ERCA,” she noted.

Also, the OFCCP would have the right to investigate individual claims of discrimination and suspected violations of the ERCA, and reserve the right to initiate an enforcement action and void the EFCA if a contractor violated it. “The five-year moratorium on audits also would not relieve the contractor of its ongoing obligation to comply with OFCCP affirmative action and nondiscrimination obligations,” Bertram noted.

Practice tips. Bertram offered a few suggestions in response to the ERP Directive. Contractors should take advantage of the ERP to try to resolve potential violations early in the audit process, she said. “In addition to conserving resources, the contactor avoids the disruption of on-site inspections, employee interviews, and responding to extensive document and data requests,” she explained. “Contractors will likely find that their interest and ability to resolve the OFCCP’s concerns through the ERP will depend on the nature of the violation claimed and the number of establishments impacted by it. If the OFCCP identifies a technical violation, like the failure properly to collect applicant flow data, a contractor should have an interest in resolving the issue quickly through an ERCA and addressing the compliance problem at all of its establishments.”

Nature of violations matters. Allegations that a contractor has engaged in discriminatory practices present a more challenging situation though, according to Bertram. “In many situations, the finding will stem from a fundamental dispute between the contractor and the OFCCP regarding the methodology used by the OFCCP,” she explained. “For instance, for compensation discrimination, the contractor may object to the factors or analytical tools (such as the “Rule of Five”) used by the OFCCP in its multiple regression analysis. It would be a tough pill for a contractor to swallow to require it to make compensation adjustments or changes in its policies at all or a portion of its establishments in that situation.”

But if the alleged violation involves a policy or practice that the contractor is willing to abandon (or perhaps already has), such as a pre-employment test, resolving the audit and entering into a five-year EFCA may be a desirable option, Bertram suggested.

Opinion letters and Help Desk. Directive 2019-03 outlines steps that the OFCCP will take to enhance its existing Help Desk, which allows contractors to make inquiries by phone or email about a variety of topics. The agency plans to enhance its Help Desk by making certain Help Desk inquiries and responses dynamically available and searchable as a self-service option on its website. This self-service option would allow stakeholders to benefit from prior inquiries and lead to greater efficiencies in the OFCCP Help Desk operations.

Consistent with practices at other federal agencies, the OFCCP also plans to incorporate the use of opinion letters as part of its guidance to employers, employees, and the public. Fact-specific guidance in opinion letters about the OFCCP’s jurisdictional coverage, or application of regulations or guidance, will provide more certainty about how the OFCCP exercises its authority, according to the agency.

Compliance Review Procedures. Directive 2019-01 emphasizes that compliance reviews will be governed by the OFCCP’s Federal Contract Compliance Manual and other recent directives that shorten full desk audits and conciliate violations more efficiently. This directive rescinds Directive 2011-01, Active Case Enforcement (ACE) Procedures, which established procedures to replace abbreviated desk audits with full desk audits. The ACE procedures replaced the former Active Case Management (ACM) procedures, which focused enforcement efforts on cases with indicators of systemic discrimination under Executive Order 11246, through abbreviated and generally shorter desk audits. Since the OFCCP issued DIR 2011-01, it has embedded the most effective parts of ACE and ACM into its standard operating policies and procedures, and so the ACE directive no longer needs to be a freestanding guidance document, the agency said.

“When we find violations, we want to remedy matters expeditiously to benefit Americans,” OFCCP Acting Director Craig E. Leen said in a release. “At OFCCP, today’s directives show our commitment to preventing violations from occurring by working with federal contractors to ensure they understand the compliance evaluation process, receive clear answers to their inquiries, and have the necessary tools and resources to comply with their obligations.”