In another trifecta Friday, the Office of Federal Contract Compliance Programs issued three Directives that, for the most part, are good news for federal contractors. The first rescinds the Obama Administration’s Active Case Enforcement Directive. The second establishes procedures for the early resolution of violations for contractors with multiple establishments, and the third provides for the issuance of opinion letters by the agency.
Compliance Review Procedures – Directive 2019-01
As hoped for and anticipated, the OFCCP rescinded the Active Case Enforcement procedures put into place by prior Director Patricia Shiu. The ACE procedures required full desk audits in all compliance evaluations, and onsite reviews in every 25th establishment under audit. This resulted in a decrease in the number of compliance evaluations that the agency had the resources to conduct and an increase in the time required to process compliance evaluations.
With this new Directive, the OFCCP states that it will conduct compliance evaluations in accordance with the Federal Contractor Compliance Manual and its other recent Directives, which we have discussed here and here. This eliminates full desk audits in each review and allows the OFCCP to proceed with focused reviews to evaluate compliance with one of the laws it enforces instead of all three (Executive Order 11246, Section 503 of the Rehabilitation Act, and the Vietnam Era Veterans’ Readjustment Assistance Act). The Directive also permits the OFCCP discretion to conduct onsite reviews only when necessitated by issues discovered during the desk audit. In addition, the change will allow the agency to increase the number of compliance evaluations that it conducts each year by using its resources more effectively.
Early Resolution Procedures – Directive 2019-02
In a significant change to resolving areas of potential non-compliance, the OFCCP established Early Resolution Procedures to allow the “OFCCP and contractors with multiple establishments to cooperatively develop corporate-wide compliance with OFCCP’s requirements.” The new procedures apply to all compliance evaluations in which a Predetermination Notice, a Notice of Violation, or a Show Cause Notice have not been issued as of November 30, 2018.
It appears that the OFCCP will premise applicability of the ERP on information provided solely during the desk audit. Thus, if indicators of discrimination are discovered (even if explainable or rebuttable), the OFCCP will proceed with these procedures. (The ERP may also apply to violations that do not involve discrimination, and those procedures are outlined in the Directive). First, the agency will “schedule essential interviews with appropriate company employees, rejected applicants, and human resources staff. . . .” The agency will also request “electronically available information to refine the indicators, identify potential affected applicants and/or employees, and calculate the estimated monetary remedy.” If the OFCCP still concludes that discrimination occurred, the ERP option will be offered to the contractor.
The contractor may either accept or reject participation in the ERP. If proceeding under the ERP, the contractor must meet with the OFCCP within 14 calendar days to attempt conciliation. Unless the contractor can convince the OFCCP that its analyses are incorrect, the OFCCP will seek make-whole relief for the affected class members at the establishment under review and “will require the contractor to review all, or a negotiated subset of, its remaining establishments for the similar violation(s) during the [five year] progress report-monitoring period, and if necessary, implement corrective actions at those establishments. . . .” The contractor would then also be required to submit semi-annual reports for five years for all of its establishments (or the negotiated subset), including “the results of its analysis, findings, any corrective actions, and will provide OFCCP with all supporting documents and information reasonably related to such a review.”
Depending on the size of the contractor and the type of violation at issue, this could be a monumental undertaking. For example, if the OFCCP contends that a selection criterion for an entry-level position at most of the contractor’s facilities had a discriminatory impact, the contractor would have to eliminate that criterion and then report its applicant and hiring data for a five-year period at all of those locations.
If conciliation fails and the contractor does not reach an agreement with the OFCCP, the compliance evaluation would continue under the normal procedures.
The primary upside for contractors in engaging in the ERP is that the OFCCP will not schedule a compliance evaluation of any establishment covered by the agreement during the five-year monitoring period. Considering that the establishment is effectively being audited every six months during that five-year period, that’s not much enticement, is it?
Opinion Letters and Help Desk – Directive 2019-03
Finally, the OFCCP announced that it will begin issuing opinion letters on issues such as jurisdictional coverage or how it exercises its regulatory authority. In addition to accepting direct requests for opinion letters, the agency will monitor questions received by its Help Desk and publish those as anonymous opinion letters with the consent of the individual posing the inquiry. Although the agency still needs to develop procedures to implement this Directive, it notes that opinion letters will not be provided to resolve issues that are the subject of ongoing or expected litigation, or during the pendency of a requestor’s compliance evaluation.
The OFCCP also stated that it will make some Help Desk inquiries and responses “dynamically available and searchable as a self-service option on OFCCP’s website.”
As contractors and companies striving to determine whether they are contractors often have difficulty determining whether and how the OFCCP’s regulations apply in specific circumstances, these resources may be of great benefit. We look forward to reviewing the results and sharing interesting or significant developments with readers.
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