How to Set Priorities for an OFCCP Review

Part 1 – Understanding How OFCCP’s Focus Areas Affect Setting Priorities

This article is the first of a two-part series. In this article, we’ll provide some general information on how to set priorities in preparation for an OFCCP review. In the follow-up article, we’ll discuss a number of specific items that should be priorities for all federal contractors and subcontractors.

The letter from the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) that opens an affirmative action compliance review sends many companies into a panic. There is concern over what must be submitted and when, how to prepare for questions that may occur, and how to deal with unexpected inquiries that may be part of the review. Many of these issues can be dealt with prior to the time a review actually begins if a company gives priority to the items that may be most important during a compliance review.

Priorities Should Relate to OFCCP Focus Areas

With so many new initiatives at OFCCP, and so many potential subjects of inquiry during OFCCP reviews, how should companies set priorities in preparing for a compliance review? There is a simple answer to this question: determine what OFCCP’s current focus areas are, and set priorities accordingly. Not surprisingly, this answer is complicated by the fact that OFCCP may, at any given time, have a variety of focus areas. For example, at the moment, OFCCP is focused on all of the following:

  • Compensation
  • Issues regarding veterans covered by the affirmative action regulations
  • Issues regarding persons with disabilities
  • Outreach efforts and documentation of these efforts

Even in a time when OFCCP has many different focus areas, the agency provides clues as to the areas that it believes are most critical. These clues can be found in formal actions by the agency such as the release of new regulations or new directives. They can also be found in public statements by OFCCP officials, press releases from the agency, and agency trends as found in an examination of compliance reviews closed and conciliation agreements issued.

Affirmative Action Issues and Discrimination Issues

In setting priorities for a compliance review, federal contractors and subcontractors should understand that there are two fundamental components of an affirmative action compliance review. There is the affirmative action component of the review, in which the government attempts to determine whether a company has made sufficient efforts to recruit, hire, promote, and retain the classes that OFCCP’s regulations protect (i.e. minorities, females, certain classes of veterans, and persons with disabilities). This is the part of the review in which OFCCP will ask questions about outreach efforts, programs meant to assist and support OFCCP’s protected classes, and progress made towards meeting placement goals and other positive objectives.

The other component of an affirmative action compliance review is the discrimination component of the review. Here, OFCCP attempts to determine whether there has been discrimination against any applicants or employees based on race/ethnicity, gender, veteran status, or disability status. OFCCP will examine data regarding hiring, promotions, terminations, and compensation in an effort to find anything that suggests certain individuals or a class of individuals seem to have been victims of discrimination. Traditionally, OFCCP focused on whether minorities and females had been victims of discrimination, and the agency primarily looked for situations involving a class of applicants or employees who statistics suggested were potential victims of discrimination. However, OFCCP will now look for discrimination involving individuals, small groups, or large groups of applicants or employees. The agency will also investigate possible discrimination involving any race/ethnicity or gender, including whites and males, and will investigate possible discrimination involving veterans or persons with disabilities.

Understanding OFCCP Sanctions and How They Should Affect Contractor Priorities

Many OFCCP compliance reviews end with a notice indicating that the company under review is in compliance with the agency’s regulations. While the percentage of companies receiving a notice of compliance has decreased during the last few years, a significant majority of companies still receive such a notice at the end of a compliance review. The companies that do not receive a notice of compliance generally are issued a conciliation agreement by OFCCP. Such an agreement may require the company to take a variety of actions depending on the problems discovered during the OFCCP review. On very rare occasions, OFCCP may act to suspend a company’s current federal contracts and/or the company’s ability to engage in future federal work. This sanction, referred to as debarment, is generally left for only the most recalcitrant federal contractors and subcontractors.

While it is rare for OFCCP to attempt to debar a company, it is not unusual for the agency to require a company to enter into a conciliation agreement. Just as an affirmative action compliance review has two basic components, conciliation agreements contain two basic types of actions that companies may be required to do.

  • Companies may be required to make certain affirmative action-related efforts. For example, a company may be required to make additional outreach efforts, or it may be required to develop training programs for certain classes of employees.
  • Companies may be required to take certain actions to rectify what OFCCP considers to be discrimination. For example, a company may be required to provide back pay and employment offers to certain groups of applicants who are the alleged victims of hiring discrimination, or a company may be required to provide salary adjustments and back pay to particular employees who are the alleged victims of compensation discrimination.

In considering how to set priorities for an affirmative action review, it is clear that companies should give priority to dealing with those situations where there may be a finding of discrimination. The number of dollars and the damage associated with press releases and other publicity from a finding of discrimination are a far greater sanction than anything that could be associated with a failure to make sufficient affirmative action efforts.

There are a variety of areas where OFCCP may suggest that discrimination has occurred. OFCCP may suggest there has been discrimination in:

  • hiring when applicants of a particular race/ethnicity or gender have been hired at a lower rate than other applicants.
  • promotions when employees of a particular race/ethnicity or gender have been promoted at a lower rate than other employees in the same or comparable jobs.
  • terminations when employees of a particular race/ethnicity or gender have been terminated at a higher rate than other employees in the same or comparable jobs.
  • compensation when employees of a particular race/ethnicity or gender are paid less than other employees in the same or comparable jobs.

OFCCP may also suggest there has been discrimination when veterans or persons with disabilities are being treated differently than other employees.

The Highest Priority: Issues Involving Hiring

Based on OFCCP’s recent pronouncements concerning what the agency believes is extensive discrimination in regard to how employees are paid, it would be logical to assume that federal contractors and subcontractors should give their greatest attention to compensation issues. However, a careful reading of OFCCP’s recent and historical actions and announcements make it clear that a company’s processes and decisions concerning who is hired should generally be the highest priority in preparing for an OFCCP review.

Evidence that suggests companies should give special attention to issues involving hiring includes the following facts:

  • Every year, a huge majority of the dollars associated with back pay settlements involve alleged hiring discrimination. This includes the last few years, even when OFCCP has specifically stated its desire to find and address compensation discrimination.
  • OFCCP’s website routinely includes announcements concerning settlements that the agency has gained on behalf of applicants following compliance reviews. For example, as of the writing of this article, two of the four links under “Latest News and Events” involve such settlements.
  • Conciliation agreements as catalogued on the Department of Labor’s data enforcement website show that there are numerous citations regarding record-keeping issues. It appears that many of these record-keeping citations involved problems providing acceptable applicant information to OFCCP.

As OFCCP continues to build a case for more aggressive investigation of compensation disparities, federal contractors and subcontractors should not lose sight of the fact that finding hiring discrimination is the true “bread and butter” of OFCCP compliance reviews.

In part two of this series, we’ll discuss some of the specific parts of the hiring process that should be priorities for federal contractors and subcontractors, and we’ll look at other priorities outside of the hiring process that are important for federal contractors and subcontractors.

For more thoughts on how to establish priorities in preparation for an affirmative action compliance review, contact Bill Osterndorf at wosterndorf@hranalytical.com.

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. 2013