It’s never a happy day when your company receives a letter from the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) informing you that your company will be undergoing an affirmative action compliance review. However, there are some common mistakes that companies make at the start of a compliance review that can have major implications for how the review will close. We’re going to use this article to outline some of these mistakes.
For those readers who have never been through an OFCCP compliance review, the process begins when the agency sends what it refers to as a “scheduling letter” to a company. The scheduling letter informs the company which location will be undergoing the compliance review and gives the company 30 days to submit certain information. An itemized listing is attached to the scheduling letter, and the itemized listing has 22 separate items that must be part of the submission to OFCCP. Until October of 2014, the itemized listing only included 11 items, but it was subsequently changed in part to accommodate OFCCP’s revisions to its regulations regarding veterans and individuals with disabilities and, in part, to accommodate other OFCCP initiatives.
Does OFCCP Have the Right to Conduct a Review of Your Company?
Common Mistake No. 1: Failing to Determine Whether OFCCP Has the Right to Conduct a Review at Your Company
Companies tend to assume that if they’ve received a scheduling letter from OFCCP, that the agency has a right to conduct a review of their company. However, OFCCP only has the right to conduct reviews of federal contractors and subcontractors. Even then, there are certain dollar thresholds in the federal regulations that limit the number of companies that are proper targets for OFCCP review. It is not unusual for OFCCP to improperly send a company a scheduling letter because OFCCP is looking at old or inaccurate data on a company. Companies that are not federal contractors or subcontractors do not help themselves when they incorrectly check the box on the federal EEO-1 report that indicates they are covered by the federal affirmative action regulations. Before submitting information to OFCCP, companies should determine whether they are, in fact, currently covered by the federal affirmative action regulations. If a company believes it is not covered, the company should consider challenging OFCCP’s right to conduct a review.
Examine the Affirmative Action Plans That Will Be Submitted to OFCCP
Common Mistake No. 2: Failing to Review Statistical Reports That Are Part of Your Company’s Affirmative Action Plans
Once a company determines that it is covered by OFCCP’s regulations, it is time to review the affirmative action plans (AAPs) the company has prepared and the other information that must be submitted to OFCCP. Since the statistical reports in the Executive Order 11246 AAP (i.e. the AAP for minorities and females) are going to form much of the basis of OFCCP’s compliance review, it is important to carefully review each statistical report that will be submitted. The statistical reports should be accurate and complete. Missing or inaccurate statistical reports that are requested in the itemized listing will lead to problems during a compliance review. It is important to avoid making assumptions about the quality of statistical reports that come out of your company’s HR information system or that are provided by a vendor. A thorough review of all statistical reports is a necessary step to a successful OFCCP review.
Common Mistake No. 3: Creating Job Groups That Correspond to EEO-1 Categories
The job group analysis is a foundational statistical report in an affirmative action plan. It is used to establish placement goals for minorities and females, and it is now used to create a utilization analysis for individuals with disabilities. OFCCP also tends to analyze other kinds of data, including personnel activity data and compensation data, by job group, regardless of whether this is the best or most appropriate way to analyze this data.
Many companies create job groups by using EEO-1 categories as a substitute for job groups. In light of the importance of job groups in OFCCP analyses of various pieces of statistical information, this can be a grave mistake. EEO-1 categories tend to combine dissimilar jobs. For instance, EEO-1 category 2 includes engineers, accountants, and teachers. These three types of jobs have very different qualifications and tend to attract applicant pools that have very different demographics. As another example, EEO-1 category 7 includes assemblers and welders. Again, these jobs have very different qualifications and attract applicant pools that have very different demographics. In fact, while it may be quite easy to build large pools of applicants for many types of assembler positions, it is often difficult to find candidates for any kind of open welder positions. Creating a job group that includes both engineers and accountants, or a job group that includes both assemblers and welders, tends to dramatically skew the data associated with these job groups. Companies should carefully consider the types of positions contained in any one job group and ensure that job groups contain jobs that truly have similar qualifications and similar applicant pools.
Even when many employees are in the same type of position, using EEO-1 categories as a substitute for job groups can lead to inappropriate evaluations of data. For example, a company employing many engineers may have entry-level engineers, mid-level engineers, and senior engineers. If mid-level engineering and senior engineering positions are filled through promotion while entry-level engineering positions are filled through hire, combining all engineers into one job group again dramatically skews the data associated with these positions. OFCCP may make assumptions about hiring and the availability of candidates for all engineering positions that are only applicable to entry-level engineering positions. In such a situation a company should consider creating separate job groups for each level.
Common Mistake No. 4: Failing to Review Narrative Information in Your Company’s Affirmative Action Plans
While OFCCP is notorious for not reading the narrative sections of affirmative action plans, the agency is likely to take much more interest in the narrative components of the AAP for veterans and individuals with disabilities than it has in the past. This is true in part because certain narratives that should be in that AAP are requested in OFCCP’s revised itemized listing. Companies should carefully review any narratives found in the Executive Order AAP or the AAP for veterans and individuals with disabilities to ensure these narratives are accurate and understandable. Narrative sections of an AAP should be used to discuss situations that naturally require an explanation, such as a recent reduction in the total number of employees at a company site. AAP narratives should also be used to present the company in as positive a light as possible to OFCCP.
Do Not Submit More Information Than Is Required
Common Mistake No. 5: Submitting Information on More Than One “Establishment” to OFCCP
When OFCCP sends a scheduling letter to a company, the letter is generally sent to an “establishment.” (The exceptions here involve situations where OFCCP is conducting a review of a functional unit that is part of a functional AAP agreement, or when OFCCP is conducting a review of a corporate headquarters.) The language on the scheduling letter reads as follows:
The U.S. Department of Labor, Office of Federal Contract Compliance Programs (OFCCP), has selected your establishment located at [specific address] for a compliance evaluation.
The scheduling letter does not ask for information on the entire company (unless the company has only one facility), nor does it ask for information on all facilities in one city or all facilities in a particular business unit. It asks for information on an “establishment,” which OFCCP has typically considered to be a building at a particular address. Companies should generally NOT submit information on employees and personnel activity outside of the establishment identified in the scheduling letter unless one of the following is true:
- Employees are included because they are chosen by managers at the establishment selected for a compliance review.
- Employees are included because they work alone in a sales or service territory and report into managers at the establishment selected for a compliance review.
OFCCP allows companies to include employees and personnel activity for establishments of less than 50 employees in the affirmative action plans for a larger, related establishment. However, from a strategic perspective, it may make sense to prepare separate affirmative action plans for these smaller establishments in order to limit the information that is submitted to OFCCP.
Common Mistake No. 6: Submitting an Applicant Log Rather Than Summary Data on Applicants
OFCCP has had a long-standing interest in determining whether there are disparities involving the hire of applicants of one particular race or gender. In order to begin its investigation into whether such disparities exist, item 18 in the itemized listing requests “the total number of applicants and the total number of hires” at the relevant establishment by job group or job title, including the race and gender breakdown of these applicants and hires. What the itemized listing does NOT request is an “applicant log,” and companies are not required to provide detailed data on what happened to each candidate when information is initially submitted to OFCCP. While OFCCP has the right to request additional information on applicants, especially if it finds a statistical disparity in information originally submitted, the submission of an applicant log at the initial stage of the compliance review can raise more questions than it may resolve.
Common Mistake No. 7: Submitting an Impact Ratio Analysis or Other Information Pointing to a Statistical Disparity
The itemized listing requires the submission of summary data on applicants, hires, promotions, and terminations. While federal contractors and subcontractors are required to do analyses of personnel activity, neither the itemized listing nor the federal regulations require the submission of impact ratio analyses or other reports that might show some kind of statistically significant disparity. There is value to a company in knowing where such disparities exist and where OFCCP might ask questions. However, there is little to no value in submitting a report to OFCCP that might point the agency to an area worthy of investigation. Submitting an impact ratio analysis or other statistical report to OFCCP that clearly shows a disparity may demonstrate that a company is doing an effective analysis of its data, but it may also lead OFCCP to investigate areas that the agency may otherwise have ignored during a compliance review.
Avoid Making Admissions About Significant Problems That Have Occurred
Common Mistake No. 8: Confessing Your Sins
The submission of an impact ratio analysis showing a statistical disparity is one form of a larger mistake that federal contractors and subcontractors make. Companies are required to assess their efforts and discuss actions they have taken to implement the affirmative action regulations in their AAPs. However, companies are NOT required to make statements or otherwise provide information that may suggest a significant failure to provide equal opportunity or otherwise meet the affirmative action regulations. AAPs should not include statements like “Statistics suggest there was discrimination against female applicants” or “A review of our personnel practices suggests that the company has failed to appropriately pay male employees.” Confessing one’s sins to OFCCP is more likely to be met with a conciliation agreement demanding action than a pardon for past transgressions. If statistics clearly suggest that a problem exists, any AAP narrative that is written about this problem should focus on the solution to the problem or why statistics may not present an accurate picture of the situation.
Pay Attention to the Itemized Listing
Common Mistake No. 9: Failing to Submit All Items Found on the Itemized Listing
With its expansion from 11 to 22 items, it will be easy for federal contractors and subcontractors to inadvertently forget to submit information that responds to every item on the itemized listing. Unfortunately, OFCCP will be expecting that companies have a response for all 22 items, even if that response is “This item is inapplicable for the following reason…” For example, during 2015, there will be a number of companies that are going through affirmative action compliance reviews that will not have collected the data on veteran and disability status for the prior year that are required in items 9 and 13. Rather than ignoring these items, OFCCP should be informed about whatever action the company is currently taking to meet the provisions of each item in the itemized listing.
Some of the changes to the itemized listing require more information from every company going through an affirmative action compliance review than what was submitted in past compliance reviews. This is especially the case with the submission of compensation information. While the previous version of the itemized listing only required the submission of summary data on compensation, the current version of the itemized listing requires detailed information on each employee found in the workforce analysis in the Executive Order 11246 AAP. It will not be sufficient to submit summary data or to otherwise omit the information that is explicitly required by the itemized listing.
Common Mistake No. 10: Failing to Tell OFCCP How to Find the Items Required in the Itemized Listing
Many companies will do an effective job at providing all of the information requested in the itemized listing. However, with so many items now being requested, and with those items likely scattered in the AAPs and other information being submitted to OFCCP, it may be difficult for OFCCP to find all 22 items. Companies will help themselves during compliance reviews by providing OFCCP compliance officers with some kind of roadmap as to where to find these 22 items.
With all the changes occurring in the affirmative action realm, OFCCP compliance reviews have become very complicated endeavors. Federal contractors and subcontractors can greatly help themselves by avoiding some of the common mistakes noted above that companies routinely make at the start of a compliance review. By avoiding these mistakes, a company undergoing review can demonstrate an understanding of the federal affirmative action regulations to OFCCP and may move the review more quickly to closure.
Please note: Nothing in this article is intended as legal advice or as a substitute for any professional advice about your organization’s particular circumstances. All original materials copyright © HR Analytical Services Inc. 2015