With Office of Federal Contract Compliance Programs’ (OFCCP) latest fiscal year closing on September 30, the agency and federal contractors are looking forward to 2015. This article summarizes some of the most important enforcement trends and policy developments federal contractors can expect to see from OFCCP in 2015. Buckle your seat belts—it’s going to be a busy year!
What to Expect During Compliance Reviews
If there was an OFCCP enforcement buzz word for 2014, that word might be “steering.” Steering is a placement practice, whereby intentionally or otherwise, particular genders or minorities are placed, or “steered,” into certain jobs or career paths, leading to lower overall pay and opportunity. OFCCP considers steering as a compensation discrimination issue, but most practitioners consider it a placement issue. Regardless of how you characterize it, I expect the agency’s focus on this issue will continue in 2015.
Contractors need to think about this issue broadly. It is important to realize there could be a potential steering issue even if a contractor’s placement analysis does not show underutilization, and there is no identified adverse impact in any personnel activity. OFCCP also has made clear it is looking at this issue beyond the job group level. If your organization has multiple audits open at once, you should consider what the big picture looks like. Auditors are comparing results and talking across regions to look for systemic issues. The issue of steering seems particularly likely to arise for sales and account management positions with territory assignments, low level laborer positions with different rates of pay based on shifts, amount of manual labor, etc., and other entry level or junior level positions. Contractors should examine these issues now before receiving an audit letter.
Contractors also should expect the agency will continue to focus on other types of compensation discrimination, and requests for additional compensation data by individual employee will continue in 2015. The Administration has made clear “fair pay” is its number one enforcement priority, and OFCCP has clearly been placed in the driver’s seat on this issue. The agency will examine a contractor’s compensation practices beyond base pay, including looking at bonus and other incentive payments, the availability of overtime hours, and the assignment of particular territories or markets. Contractors should keep in mind the regulations require an annual self-evaluation of compensation practices. As part of that process in 2015, contractors would be wise to consider the types of records your organization maintains regarding pay decisions and to evaluate proactively the factors that actually influence pay at your organization.
With the revised Section 503 and VEVRAA regulations only becoming effective March 24, 2014, the agency has just begun to review affirmative action plans (AAPs) that are subject to the revised requirements. As promised, the agency’s focus in current audits has been on understanding the progress contractors have made in complying with some of the paperwork components of the revised regulations. For example, during recent compliance reviews, contractors were asked about:
- the date the workforce survey for disability status was conducted;
- the review schedule for physical and mental job qualifications standards, and documentation to demonstrate that the contractor adhered to the schedule;
- a summary of the steps the contractor has taken or plans to take to come into compliance with the review and assessment of its outreach and recruitment efforts;
- a summary of the steps the contractor has taken or plans to take to come into compliance with the data collection requirements set forth in 60-741.44(k) and 60-300.44(k);
- documentation to show the “EEO is the Law” poster was made available to applicants, including in electronic format; and
- documentation to show the required Equal Opportunity (EO) clauses were incorporated into subcontracts and purchase orders.
OFCCP also is expected to continue to focus on a contractor’s outreach and recruitment efforts during compliance reviews, particularly for Individuals with Disabilities (IWD) and Protected Veterans (PV). In recent audits, OFCCP has asked contractors to produce evidence beyond a listing of diversity websites used by the company, which suggests the agency may be beginning to more heavily scrutinize contractor outreach efforts. OFCCP also is consistently checking to confirm whether a contractor listed all required job vacancies with the appropriate employment service delivery system, or state job bank. While contractors previously were able to satisfy this requirement by providing several examples, the agency is more consistently checking to see if there is a listing for every hire listed in the AAP. The agency also regularly requests a contractor’s Family and Medical Leave Act and reasonable accommodation policies, and reasonable accommodation logs for both applicants and employees. We expect the agency will continue to examine these issues in 2015, and full enforcement of the revised Section 503 and VEVRAA regulations will not begin until mid-2015, when the “early adopter” contractors will complete their transition AAP year and begin their first full AAP year under the new regulations. Now is the time for contractors to complete implementation plans for the new regulations and to prepare for more detailed questions about how employment practices impact IWD and PV.
Another recent change that will impact compliance reviews is OFCCP’s newly approved Scheduling Letter. The new letter includes a major change to how compensation data is collected, while taking into account revisions to the Individuals with Disabilities and Veterans AAPs. There are several updates contractors need to be aware of. To learn more, click here.
New Policies on the Horizon
The agency’s regulatory agenda is full with the President continuing to add new initiatives to the agency’s plate with the stroke of his pen at a rate that has surprised the regulated community.
Already pending are proposed regulations to implement Executive Order 13665, aimed at ensuring “pay transparency” by prohibiting federal contractors and subcontractors from discharging or otherwise discriminating against their employees and job applicants for discussing, disclosing, or inquiring about compensation. Comments on the proposed regulations are due by December 16, 2014. A final rule is expected in 2015.
On August 6, 2014, the agency also announced a proposal that would require the filing of an annual “Equal Pay Report” by companies, including construction companies, that file EEO-1 reports, have more than 100 employees, and hold federal contracts or subcontracts worth $50,000 or more for at least 30 days. Under the terms of the proposal, contractors would submit an annual Equal Pay Report to OFCCP using an electronic web-based system. The report would require contractors to provide summary data on the compensation paid to employees using a report that is similar in format to the EEO-1 Report currently filed by contractors with the Equal Employment Opportunity Commission (EEOC). As proposed, contractors would report the total W-2 compensation paid to all employees in a calendar year by sex, race, and ethnicity under each of the existing ten EEO-1 job categories:
- Executive/Senior Level Officials and Managers
- First/Mid-Level Officials and Managers
- Sales Workers
- Administrative Support Workers
- Craft Workers
- Laborers and Helpers
- Service Workers
Contractors also would report the total number of employees and total hours worked by all employees in each EEO-1 job category by race, sex, and ethnicity. The proposal was expected, as it was issued in response to a Presidential Memorandum signed by President Obama on April 8, 2014, which required the Department of Labor to propose a rule to collect summary compensation data from federal contractors and subcontractors. Public comments will be received until January 5, 2015. Even if a final rule is issued in 2015, report filing is not anticipated to begin before 2016.
Contractors also should expect regulatory actions to implement the following recent Executive Orders:
- Executive Order 13658, which requires contractors pay a minimum of $10.10 per hour to non-exempt employees working on covered government contracts;
- Executive Order 13672, which amends Executive Order 11246 to add protections for applicants and employees of federal contractors because of their sexual orientation and gender identity; and
- Executive Order 13673, which requires, among other things, that companies seeking federal contracts disclose violations over the previous three years involving pay, safety, health, collective bargaining, and civil rights on a centralized government website.
OFCCP’s regulatory agenda also indicates it may issue revised sex discrimination guidelines and revise the Executive Order 11246 requirements for construction contractors before the end of 2015. Whether the agency is able to complete these proposals, given the large number of other pending regulatory, items remains to be seen.
2015 should be quite a year for OFCCP and federal contractors.