Raising the Stakes in Compliance Reviews and Complicating Conciliation Efforts
The vast majority of contractors that have been cited by OFCCP for violations involving discrimination have been willing to enter into voluntary conciliation agreements to resolve their compliance reviews. OFCCP’s statistics bear that out. Out of thousands of compliance reviews every year, most of them are resolved with a Notice of Compliance. Very few of them are resolved with a Notice of Violations, and of those, the vast and overwhelming majority are resolved with the contractor entering into a conciliation agreement. Entering into conciliation agreements avoid the cost, time, resources, reputational harm, and risks associated with litigation. Except perhaps in response to Freedom of Information Act (FOIA) requests, the terms of those agreements largely have not been public.
The lack of publicity was a good thing because a large proportion of contractors who received notices of violations with discrimination “findings” hotly contested OFCCP’s conclusions. It was a lot less painful to sell a settlement internally if there was no fanfare. OFCCP’s findings may have been severely flawed, as they frequently are. The contractor may have not meant to say what it said in interviews; it may not have intended to do anything that it was accused of doing by OFCCP. And not infrequently, it may not have had counsel represent it during the audit. The outcome was what it was. What’s done is done. Move past it. Contractors were willing to put money on the table if they could resolve the findings, change course, and come into compliance going forward. Quietly.
But with the introduction of OFCCP’s new Class Member Locator database, the publicity considerations involved in entering into a voluntary conciliation agreement to resolve a compliance review with OFCCP are substantially raised. We believe that OFCCP’s decision to publish all contractor conciliation agreements involving monetary remedies will complicate the conciliation process and lead more contractors to opt to fight OFCCP’s findings. If OFCCP is going to impugn the company’s reputation, it should at least do so with solid evidence and proven facts, not unproven allegations and borderline defamatory rhetoric.
This is the same theme we saw with the Department of Labor’s Fair Pay and Safe Workplaces Guidance. Large contractors bidding $500,000 or more no longer will be able to avoid the publicity of Administrative Merits Determinations when bidding for a contract, if the Proposed Rule and Guidance are finalized in their current form. All Administrative Merits Determinations – proven or not – will be identified and disclosed in the System for Award Management database (“SAM”). That information is not private; it is not confidential.
How do you approach this internally?
- BEFORE: OFCCP’s discrimination findings are wrong. We disagree with them. But if we pay remedies to the affected victims, we get a non-admissions clause, it doesn’t get reported in any contract bidding database, and there’s no press release. It’s not so terrible. Settle.
- AFTER: OFCCP’s discrimination findings are wrong. We disagree with them, and we’re about to bid on a $500,000 contract.
- If we agree to settle the Notice of Violations with a Conciliation Agreement, every one of its irresponsible findings will be publicized for our employees, shareholders, plaintiff’s lawyers, and organizing unions to read about forever. The non-admissions clause is worthless, for all intents and purposes. Once on the Internet; always on the Internet. Our opponents and business competitors will download our settlement, re-publicize it in business competition and bid protests, and it will live on in perpetuity. But we would not have to reveal the existence of the conciliation agreement in the SAM, so maybe we can still be awarded the contract, unless our competitors raise it in their RFP response, which they very well may do.
- If we do not agree to settle, and OFCCP issues a Show Cause Notice, we have to report this in the SAM, and we might not be awarded the contract. So we would lose the new business, but we could possibly clear our business name and reputation if OFCCP is unable to prove the allegations in its notice of violations or the administrative complaint.
Damned if you do; damned if you don’t.
This is a significant change from past practice. Previously, it was the rare occasion that a settlement involving less than $100,000 in remedies would be publicized. Now, settlements involving smaller dollar amounts are published. Moreover, we now are seeing some instances where OFCCP officials appear to be less willing to adapt template paragraphs to fit the particular nuances of individual audit situations and are placing more emphasis on uniformity and consistency of terms. Previously negotiable terms are being advocated as “take it or leave it.”
What is the New Class Member Locator Database?
On Friday September 25, 2015, during its celebration of the 50th anniversary of signing Executive Order 11246, OFCCP revealed its new Class Member Locator database. The database contains an alphabetical list of contractors that have entered into relatively recent conciliation agreements with OFCCP, which agreements include monetary remedies to an affected class, and the time for which class members can claim their relief that has not yet passed. Agreements on the database were signed as early as March 2015, with the time frame for claiming relief on the oldest of the signed agreements set to expire this month in November 2015.
For each contractor listed there, the database identifies:
- the city and state of the contractor’s facility that underwent the compliance review,
- the time period that OFCCP was investigating,
- the affected group (for example, Black Applicants, Female Applicants, Female Former Employees, etc.),
- the job title(s) for which OFCCP alleges discrimination,
- the deadline for the contractor to receive all claim forms, and
- a column for the reader to learn more
In the “learn more” column, there are hyperlinks to the conciliation agreement itself, a case summary, a “contact us” link to an OFCCP email address, and in some cases, but not all, a link to a DOL press release.
As of the writing of this article, there are two (2) conciliation agreements arising out of the Northeast Region, four (4) from the Mid-Atlantic Region, three (3) from the Midwest Region, six (6) from the Southeast Region, and one (1) from the Pacific Region. One of the agreements resolves an audit that dates back to July 1, 2005 through June 30, 2006.
OFCCP attempts to redact important pieces of information that contractors might not want disclosed, but its redaction efforts are inconsistent from agreement to agreement, and the Case Summary contains the major data points, anyway.
For contractors and their representatives who were familiar with the major data points, the shortfall often was an indicator of the magnitude of the problem. Often – but not always. In some instances, contractors and OFCCP would negotiate over that multiplier. In some instances, OFCCP and the contractor would agree to raise the number of preferential hires and decrease the amount of remedies to the non-hired applicants.
If OFCCP was concerned about past discriminatory behavior and lack of hiring opportunities, the meaningful remedy is to ask the employer to hire more. That preferential hiring number did not have to match the shortfall, and employers appreciated that flexibility in negotiations. We have no window into whether such flexibility will continue now that the data points are largely going to be visible.
Moreover, employers may become less willing to agree to a higher number for purposes of preferential hiring, knowing that external parties who see the agreement may now read that number as the measure of the degree of the problem being resolved by the parties rather than perhaps part of a trade being made between the employer and OFCCP in exchange for a lower monetary settlement that is more in line with the employer’s view of the matter being resolved.
Not every OFCCP settlement gets posted here. If the OFCCP finds minor, technical record keeping obligations, for example, the settlement is not listed. Just the ones where OFCCP has found discrimination, negotiated monetary remedies, and intends for the contractor to locate the affected class to which the back pay and interest will be distributed.
According to various OFCCP officials with whom we’ve spoken, it is their understanding that once the deadline ends for class members to claim a share of the settlement and/or notify the employer about the class member’s interest in future employment, the information about that settlement will be removed from this website page. But, there is nothing to stop other individuals or organizations from downloading copies of these agreements and putting them on their own websites forever.
According to OFCCP’s Frequently Asked Questions and responses, OFCCP will not negotiate with a contractor over whether a conciliation agreement will be listed. “In support of President Obama’s Transparency and Open Government initiative, OFCCP is making its Conciliation Agreements involving financial remedies for discrimination available online in the Department of Labor’s FOIA Reading Room. In addition, the Class Member Locator supports efforts to locate as many class members as possible.”
The Published Conciliation Agreements Reveal OFCCP’s One-Sided Conclusions and Raise the Stakes for Contractors in Early Audit Phases
If you read through the sample conciliation agreements that are posted in hiring discrimination cases, they reveal a pattern. (Any time the column for “affected groups” uses the words “applicants,” it’s a hiring discrimination case). OFCCP uses statistical evidence to assert a pattern and practice of hiring discrimination, and there is no mention, ever, of any of the contractor's responses, evidence, or rebuttal arguments. There is no summary of witness testimony. OFCCP presents the violations as its findings of fact and law. It doesn’t matter whether there was evidence to rebut the statistical inference, or not. Only the OFCCP’s one-sided findings are included in the violation notice.
The articulated purpose behind the database is for there to be a place on the Internet where class members can obtain more information about OFCCP settlements involving monetary remedies for discrimination. We do not suspect that it will be a useful tool for OFCCP to find alleged victims of contractor discrimination. We do think that it will be effective as a way to publicly shame companies that OFCCP has alleged engaged in unlawful discrimination based on gender, race, or ethnicity. This is highly concerning.
It is quite rare that OFCCP’s findings are ones for which the employer does not believe it has a legitimate defense. In the vast majority of instances, the decision to conciliate or settle is based either on the desire to avoid the cost of litigation or the fact that the employer lacks the records to defend its practices.
Indeed, historically a majority of OFCCP cases with discrimination findings were ones where the employer kept bad applicant records and thus could not defend its hiring decisions. One could argue that many settlements simply were de facto punitive resolutions of poor recordkeeping practices. We wonder if contractors will bring a different perspective on resolving such matters with OFCCP’s recent policy decision to enhance how it publicizes its cases via the Class Member Locator Database and the DOL’s pending reporting requirements under its proposed Fair Pay and Safe Workplaces Guidance.
Regardless, the publication of the conciliation agreements on the Internet makes it even more important that contractors have representation during any OFCCP onsite visit and places a premium on the need to ensure that the original desk audit submission is as strategically thought out as possible. If the original audit submission contains statistical indicators of discrimination, it leads to information requests. If the contractor cannot explain its data during the information request phase, it leads to an onsite.
OFCCP’s interest during the onsite is to develop anecdotal evidence (testimony) that the contractor’s policies and practices are discriminatory. In the absence of counsel’s presence, OFCCP is more likely to reach that conclusion than if counsel is there to present the contractor’s evidence. OFCCP’s compliance officers devote a substantial amount of investigatory time identifying every step of the contractor’s hiring process in a case involving allegations of discrimination in hiring, but OFCCP does not ask the contractor’s hiring managers to explain why they chose the person who was hired.
Compliance officers do not engage in fact finding to ask why individual applicants were rejected. It is not part of their case. And all too often, the compliance officers are not approaching their “audit” from an objective perspective but instead are one-sidedly looking to build their case.
During the onsite, the OFCCP will interview managers and employees. When OFCCP interviews managers who are responsible for making decisions on behalf of the employer, an attorney may be present (should be present, in our opinion). OFCCP will not allow the employer to have a representative in the interview with employees.
If employees have completely misrepresented the truth or recall the past falsely, or if OFCCP asks employees open-ended factual questions that are completely outside the time frame of the audit, or we dare say, go on a complete factual fishing expedition, the employer will never know that unless it pursues the matter into administrative enforcement. OFCCP builds its case during the onsite and does not disclose any of the information it gathered from non-manager employees to the employer at all.
Once OFCCP issues its Notice of Violations without obtaining evidence of the basis for the employer’s actual decisions, the employer faces a dilemma:
(1) spend the time and money through an administrative trial and hearing to clear its name and reputation, or
(2) enter into a conciliation agreement and move on
We are aware of one instance where a representative from the Solicitor’s Office even told one contractor that the Notice of Violations is like a parking ticket. OFCCP was not interested in explanations. “You can either pay the ticket or go to court and fight it.”
The Potential Effect of the Blacklisting DOL Guidance on Larger Contractors and Subcontractors
If the contractor does not enter into a conciliation agreement, and the matter proceeds to the Show Cause phase of OFCCP’s process (the last step at OFCCP before the case is referred to the Solicitor’s Office for enforcement), or onto administrative enforcement proceedings before a Department of Labor Administrative Law Judge, large contractors in particular (bidding $500,000 or more per contract) risk being blacklisted in their ability to bid for future contracts if the proposed Fair Pay & Safe Workplaces regulation is enacted as drafted.
If a large contractor (bidding $500,000 or more per contract) resolves an audit in conciliation, not the Show Cause Phase, the violations set forth in the conciliation agreement do not have to be proactively identified in the System for Award Management (SAM) when the large contractor bids for its next contract. It just faces the eternal possibility of public accusation that it discriminated in hiring, which its competitors are sure to use in competition and bid protests, and unions are sure to use in corporate campaigns. It is perpetual evidence for plaintiffs’ lawyers to use in litigation.
If the large contractor needs to defend itself against unproven allegations, and it draws the Show Cause Notice, future bids in the System for Award Management become significantly more complicated. An OFCCP Show Cause Notice is one of the many types of administrative merits determinations that have to be disclosed and explained during the RFP bidding process.
Correct. You’re damned if you do and you’re damned if you don’t.