On February 13, the Office of Federal Contract Compliance Programs (“OFCCP”) issued Directive 2019-04 which establishes a framework for the Voluntary Enterprise-wide Review Program (“VERP”). Under this new program, OFCCP will work with “high-performing” contractors to achieve sustained, corporate-wide compliance with the laws and regulations OFCCP administers and enforces requiring nondiscrimination and equal employment opportunity. Notably, participating contractors are removed from the pool of contractors scheduled for compliance evaluations.
Eligibility for Participation
Contractors can apply to the program beginning in fiscal year 2020. As part of the application, OFCCP will conduct compliance reviews of the contractor’s headquarters location as well as a sample or subset of establishments. Contractors must meet established criteria verifying basic compliance with OFCCP’s requirements and must further demonstrate their commitment to and application of successful equal employment opportunity programs on a corporate-wide basis.
Two tiers of contractors are eligible to participate in VERP. The “top tier” includes top-performing contractors with corporate-wide model diversity and inclusion programs. Contractors in this tier are eligible to participate in the program for five years and will be re-evaluated at the five-year mark for further participation. The second tier includes OFCCP-compliant contractors who are “close to excellence” and are looking to receive individualized compliance assistance with the goal of becoming top performers. These contractors may remain in the program for three years.
To remain eligible, contractors in both tiers must maintain a workplace free of discrimination and provide periodic reports and information to OFCCP to allow the agency to monitor compliance. If a contractor no longer qualifies for the program, it will be returned to the pool of contractors subject to scheduled compliance evaluations.
Benefits of VERP
VERP offers the obvious benefit of exemption from compliance evaluations. Although OFCCP has recently increased transparency as to its scheduling methodology and compliance activities, companies still face the uncertainty and expense associated with an evaluation. Indeed, many contractors will soon receive a Corporate Scheduling Announcement Letter, requiring them to prepare and submit Affirmative Action Plans within 75 days. Contractors enrolled in VERP would not need to worry about these evaluations. Moreover, participating contractors would receive the additional benefit of individualized compliance assistance from OFCCP.
Potential Drawbacks
Although VERP exempts a contractor from time-consuming and costly compliance reviews, companies must still incur the costs associated with the VERP application, which involves compliance reviews, proof of compliance with OFCCP’s requirements, and evidence of successful implementation of equal employment opportunity programs. Even after clearing the application process, contractors must provide periodic reports to OFCCP to demonstrate continued compliance. However, given that VERP is intended to provide cost-saving compliance incentives to participants, presumably these reports would not be unduly burdensome. Contractors should also be aware that participation in VERP does not shield against investigations related to individual and/or third-party complaints.
Whether the benefits of VERP ultimately outweigh the risk and cost of a compliance evaluation will largely depend on OFCCP’s implementation of the program. Those contractors willing to give it a try should, at a minimum, be confident that they are already in compliance with applicable nondiscrimination laws. Although OFCCP has stated that rejected applicants will not automatically be placed on the scheduling list, there is no guarantee that the agency will refrain from enforcement action.
