A new report by economists from The University of Chicago (“Chicago”) and the University of California, Berkeley (“Berkeley”) is grabbing headlines for claiming it will show a number of Fortune 500 companies discriminate based upon whether names on applications are more traditionally associated with white applicants or with black applicants. While that claim may catch the headlines, the real point of this study is that it finds those employers with centralized control of application review do not tend to have the problem. A centralized review allows the company’s procedures and guidelines for application reviews to be applied consistently. Once the review of applications becomes something done by many individuals at the local level, the quality control on application reviews starts to slip.
The issue with the loss of control over the application process is important for all companies but even more so now for government contractors. The current administration has the employment practices of government contractors in its sights, which it can regulate through executive orders or agency regulations without the need for congressional approval. Reports on the universities’ audit state that some of those companies found to discriminate based upon the names of the applicants are government contractors. Government contractors have affirmative action obligations, including the obligation to keep applicant flow logs. The Office of Federal Contract Compliance Programs (“OFCCP”) usually requests to review those logs during an audit. No doubt this study may open a new line of inquiry for the OFCCP when reviewing applicant flow logs.
This does not mean that only a few HR representatives in one office of a large employer need to review all of the thousands of applications that employer receives. It does mean that the company needs to control how many are of its employees are involved in the process to make sure it can maintain quality control of the process. This starts with the question of how many employees can the company fully train to properly handle incoming applications. The company also needs to consider how many locations and groups of employees it can audit on a regular basis to ensure they follow its application review procedures and guidelines. The smaller the number of those involved in such reviews, the better, but the company also needs to be realistic in the need to be able to review the numbers of applications it receives.
There will be more lessons learned from this audit report done by Chicago and Berkeley. However, this first lesson demonstrating the need to have good control over who reviews applications is a valuable one. It is particularly important for government contractors who wish to avoid stepping into the crosshairs of the OFCCP on the issue of discrimination in review of applications.