October 2013

What It All Means: Where Is OFCCP Taking You: Carter to Clinton to Obama

Punch line: It’s all about documentation, just when you have fired and transferred all of your document clerks.

Weldon Rougeau, the Carter Administration OFCCP Director, forever changed OFCCP and laid the foundation bricks for the building Pat Shiu and the Obama Administration are now constructing on Director Rougeau’s foundation.

Before Director Rougeau, OFCCP was a federal contractor agency requiring Affirmative Action. While Executive Order 11246 (but not Section 503 or VEVRAA) had non-discrimination authority to be sure, the agency rarely pursued discrimination investigations. Moreover, it lacked regulations allowing it to file Administrative Complaints before Administrative Law Judges seeking back pay. This was not an early oversight – the Congress had specifically declined to grant OFCCP such authority, or the right to issue self-enforcing subpoenas. Director Rougeau’s regulations purported to create that authority for the first time. It was thereafter that federal contractors then began to count – they counted Applicants; they counted Offers, Hires, and who was in the pool for promotion; and they counted who was an “Applicant” for Involuntary Termination. The bricks were laid for the coming 30 years of OFCCP “failure to hire entry-level production labor” investigations and prosecutions (which to this day still account for well over 95% of all of OFCCP’s back pay collections). The EEOC did not pursue failure to hire cases since few Applicants filed Complaints and the EEOC, of course, was/is Complaint driven.

The era of “contractors as document clerks” began as we began to catalogue race, sex and ethnicity, and Xerox (through its Business Services Division) created “carbon paper” “tear-away sheets” to help contractors cause Applicants to self-identify race, sex and ethnicity…to help federal contractors count…how many Black Applicants, how many (what we in those days called) “Caucasian” Applicants and, Hispanic and Asian and Native American Applicants there were and how many male and female Applicants, etc.

But in the 1970s and 1980s and through the early 1990s, large companies signing federal contracts had many, many low paid HR clerks in every plant who completed and typed long and tedious HR forms (before computers and software took those tasks away)…and their time could be diverted to count…the Applicants, the Offers and the Hires while they filed away all those “Tear-Away” sheets.

But then, two important things happened in the 1990s and in 2000 which set OFCCP and federal contractors on the path all federal contractors now walk:

  1. contractors began to computerize the Human Resources function and most of the clerks who used to carefully count, document and file began to disappear and;
  2. OFCCP Director Shirley Wilcher’s 2000 Clinton Administration regulations both required for the first time Disparity Analyses – see 41 CFR Section 60-2.17 (b) (2) & (4)…(not “Adverse Impact Analyses”) and first ever recordkeeping requirements (see 41 CFR Section 60-1.12).

And then Director Wilcher in the Clinton Administration, taking a page from the Bush (the father) OFCCP, started showing comprehensive interest in compensation issues, and not just an interest to count Applicants, Offers and Hires. Director Wilcher’s effort to cause contractors to start counting and reporting compensation – called “The EEO Survey” – sent contractors into a frenzy of opposition. When the Bush Administration’s (the son) OFCCP Director Charles James announced at a National Employment Law Institute Affirmative Action Briefing that he was withdrawing the OFCCP’s EEO Survey proposal, he got the first and only spontaneous (and sustained) standing ovation I have ever seen the contractor community give an OFCCP Director. So, the Bush Administration spared the contractor community from having to count compensation pools and to comprehensively report compensation data to OFCCP.

The result, of course, of Director Wilcher’s 2000 reform regulations caused federal contractors to not only count Applicants, Offers and Hires, but to keep those records for OFCCP to later find, examine and use in prosecutions against contractors. The era of the numerous failure-to-hire entry-level production laborer back pay collection audits was on…in the absence of all those contractor HR clerks which had previously been in place to count and file all the needed paperwork.

So now, OFCCP Director Pat Shiu in the Obama Administration has grabbed the baton and has been forcing employee-level compensation analyses since June 6, 2010 (via secret OFCCP Directive 289) and is now on the threshold of requiring contractors to count the Disabled and Protected Veterans. (Have you counted and sourced and documented 7% Disabled Applicants? Have you counted and sourced and documented 8% Protected Veterans?)

So, what choices are contractors now making? (While we have discussions with our kids all the time about “Making Good Choices”, it is no different down at the shop around the water-cooler – “What are the choices we are making, and are they good choices for us at this point in time?”) Here are some choices I observe my clients debating as we look forward to a 2014 with substantially increased counting and documentation requirements.

  1. A Business Beyond Reproach (No head-knocking or anxious OFCCP audits and no unflattering news headlines about corporate failure and “discrimination” unlawfully against women, men, Blacks, Whites, Hispanics, Asians, Native Americans, Hawaiians, the Disabled or Protected Veterans (note OFCCP still lacks non-discrimination authority pursuant to VEVRAA, although the Congress patched that hole in the fabric as to Section 503 in 1992) based on hiring, promotions, and/or involuntary terminations.) So, here’s how – re-hire the HR clerks to document the reason(s) for every adverse action based on a protected status (so you will have proof to offer when OFCCP comes knocking next year or the year after). Your clerks would want to count every person who expresses interest, their race, sex, ethnicity, whether they are Disabled and/or a Protected Veteran, whether Offered or Hired, whether an “Applicant” (as the law defines that difficult term) and MOST IMPORTANTLY the Reason(s) Rejected and the reasons supporting their compensation relative to all other “similarly situated” employees. (Do you know who is “similarly situated” and is that information recorded in digital form?) REMEMBER, OFCCP estimates federal contractors should be spending an ADDITIONAL half Billion Dollars per year beginning in the Winter of 2014 just to implement its new VEVRAA regulations and over a Billion Dollars per year to comply with its new Section 503 regulations. (All that additional money is for the clerks!) You don’t need more high priced Affirmative Action Managers. You need clerks – low paid (but well trained and attentive-to-detail) clerks who document and electronically file, sort and organize all that documentation.
  2. A Calculated Risk-Management Approach (Meaning: figure out where you have economic risk beyond your company’s tolerance for/appetite for risk and budget for compliance.) Perhaps most of your employees are unionized in most of your plants and the Collective Bargaining Agreement governs pay, promotion and involuntary termination (other than for cause)…so you have almost no legal risk of a compensation or failure-to-promote or Reduction In Force wrangle with OFCCP within the Bargaining Unit. On the other hand, perhaps you have high-turnover entry-level production labor jobs with thousands of Applicants per year where the risk of an OFCCP allegation of unlawful discrimination in hiring is VERY high absent careful documentation and recordkeeping. Let’s get out the clerks! By the way, what’s the risk of not counting and documenting the Reason for Rejection of Protected Veterans? And, is it any different for the Disabled? What is the risk of not counting and documenting the Reason for Rejection of Disabled Applicants? (See below)
  3. You Gotta Be Kidding Me Approach (Meaning you conclude your profit margin on federal contract business is only equal to or below that of private sector work and there is no way the Executive Suite is going to increase the HR budget to hire a flock of clerks (which you spent the 90s firing or transferring to other work duties) to start counting, organizing and filing to make OFCCP happy in the occasional audit which may or may not ever come. A subset of that point of view is that it is cheaper to drive 100 miles an hour down the freeway (since you rarely get caught speeding – OFCCP cannot have a cop on every corner) and it is simply cheaper to “send out the ambulance” to periodically clean up the big messy accident which happens every once in a while or when OFCCP suddenly jumps out from behind the bushes (like the proverbial motorcycle cop on Southern highways), races out onto the freeway and turns its sirens on in hot pursuit of the lawbreaker it has in its sights.)

NOTE: As a lawyer and officer of the court, I always recommend the contractor comply. But, it is not lost on me either that the market place has spoken, and has been speaking for many years – recordkeeping violations have been OFCCP’s # 1 violation over the decades (although it is currently the third most popular citation in this Administration due to OFCCP’s currently great appetite to cite contractors for highly technical “outreach” violations under VEVRAA and/or Section 503 – despite the fact that OFCCP has not changed its outreach regulations since 2000 and the outreach OFCCP found in compliance in the Clinton and Bush Administrations somehow suddenly fails muster in this Administration).

But, pick your poison Ladies and Gentlemen – What do you value and what do you fear? Please don’t shoot the messenger, but the message is simply this: OFCCP has steadily and continually been mounting ever increasing counting, documentation and analyses requirements for the last 35 years. If you are not documenting the reason for every adverse action concerning a member of a protected group, you will have a more difficult time in OFCCP audits than those who have good libraries cataloguing the reasons for adverse action for every person you denied employment, denied a promotion, terminated from employment or did not pay fairly based on race, color, sex, religion, national origin, disability or Protected Veteran status.

So, what does your HR clerk budget look like for calendar year 2014? Up bubble? Flat? Down bubble? Depending on the answer to that question, I can come pretty close to predicting the outcome of your future OFCCP audits. Less documentation, more audit headaches. More documentation, smoother OFCCP audits.

Be careful out there! Enjoy! John

THIS COLUMN IS MEANT TO ASSIST IN A GENERAL UNDERSTANDING OF THE CURRENT LAW AND PRACTICE RELATING TO OFCCP. IT IS NOT TO BE REGARDED AS LEGAL ADVICE. COMPANIES OR INDIVIDUALS WITH PARTICULAR QUESTIONS SHOULD SEEK ADVICE OF COUNSEL.