Friday, September 8, 2023: 1,000 Compliance Evaluations Slated in Second FY 2023 Corporate Scheduling Announcement List
List Focused on Low-Wage Industries & Infrastructure Contracts
OFCCP Also Casually Announced (via FAQ) a Change Upsetting a 50-Year-old OFCCP Rule, Policy and Practice
With OFCCP’s latest, controversial revisions to its audit Scheduling Letter and Itemized Listing in place as of August 24, the agency published its second FY 2023 Corporate Scheduling Announcement List (“CSAL”) for Supply & Service (“S&S”) contractors on its Scheduling List Resources webpage. (See our stories here and here for details on the changes to the Scheduling Letter and Itemized Listing). In contrast to the audit Scheduling Letter, the CSAL is a courtesy advance notification to an establishment selected for audit.
OFCCP also announced the publication of the new CSAL via an email to stakeholders. The agency published its first FY 2023 CSAL for S&S contractors in January (see our story here). If a contractor believes it should not have been selected for evaluation, the contractor must send an email to the OFCCP Scheduling Mailbox at ofccp-dpo-scheduling@dol.gov.
We estimate that this CSAL will supply enough Supply & Service audit targets at OFCCP’s current level of staffing to carry OFCCP through for about 12 months to about the beginning of FY 2025 (beginning October 1, 2024). We wrote about OFCCP’s January first CSAL Release for 500 S&S contractors in 2023 estimating that OFCCP’s then CSAL would carry it through to about the beginning of OFCCP’s new Fiscal Year (beginning in about three weeks on October 1, 2023).
OFCCP was thus successful this year in wrenching its CSAL list for S&S contractors to coincide, approximately, with OFCCP’s Fiscal Year. Fiscal Year coincidence with OFCCP’s publication of its coming audit list had been the tradition soon after OFCCP first began publication of its CSALs in the second-term Bush (the son) OFCCP Administration under OFCCP Director Charles James.
Latest Audit Selection Methodology Focused on Low-Wage Industries & Non-Construction Contractors with the Most Bipartisan Infrastructure Bill Contracts
As it has done for various CSALs going back to November 2019, OFCCP published a corresponding methodology explaining how it developed this latest CSAL. This latest, two-page methodology notes that the new CSAL contains 1,000 compliance evaluations for federal contractors and subcontractors covering establishment-based reviews, Corporate Management Compliance Evaluation (“CMCE”) reviews, and Functional Affirmative Action Program (“FAAP”) reviews. Establishment-based reviews for this list include reviews for financial institutions, universities, and colleges.
In its first FY 2023 S&S CSAL (published January 20, 2023), OFCCP targeted contractors the agency believed were required to maintain Affirmative Action Programs (“AAPs”) but that did not complete their assertedly “mandatory” annual certification in the OFCCP Contractor Portal as of December 1, 2022. For its methodology statement as to this second FY 2023 S&S CSAL published Friday, OFCCP makes no mention of the Portal or selecting for audit those contractors OFCCP believes should have certified their AAPs in the agency’s Portal but did not.
Instead, OFCCP reported that it selected covered federal Government contractors and subcontractors engaged in low-wage industries.
Editorial Note: This will position OFCCP to take it back to its “glory days” of “failure-to-hire” cases for entry-level production laborers and farther away from compensation claims made in audits. Failure-to-hire cases have historically been OFCCP’s “meat and potatoes” work generating the “lion’s share” of its back pay collections.
The agency also identified non-construction industries that received the highest frequency of contracts awarded through the bipartisan Infrastructure Investment and Jobs Act. OFCCP further refined the pool by retaining in the pool for potential selection for audit those contractor and subcontractor establishments with the highest employee headcount located within the span of control of each OFCCP District Office, based on employee counts in contractors’ 2021 EEO‐1 filings.
For each parent company with at least one contract of $50,000 anywhere in the organization, OFCCP included all establishments that meet the scheduling list’s criteria in the eligible pool of contractors. The agency created its pool of eligible financial institutions by downloading FDIC-insured banks, addresses, and employee counts from the FDIC online data tools. NOTE: Legal controversy continues to exist as to whether OFCCP has jurisdiction over banks and financial institutions as “covered” federal “Government” contractors by virtue of FDIC and related federal government insurances of deposit accounts which most believe are “Federal Financial Assistance” and not “Government contracts” Although rare, “direct deposit” of federal funds into banking institutions is the only other federal “contract” giving rise to OFCCP jurisdiction over banks. (The U.S. Department of the Treasury ceased selling savings bonds and notes on January 1, 2012 “over the counter” at banks and credit unions. The Department of the Treasury has for the over the past decade sold savings bond and notes only via online sales transactions the Department manages.)
Then, OFCCP cross-referenced all eligible establishments and functional units with the agency’s compliance management system to remove those establishments from the pool that were: (1) currently under review; (2) currently in a monitoring period pursuant to a conciliation agreement; (3) currently within the exemption period following a closed review; (4) currently pending scheduling for review from a prior scheduling list; or (5) have an active separate facilities waiver.
To finalize the selections, OFCCP used the following criteria to select:
- five CMCE reviews per region with the highest employee count in a district office. So, six OFCCP Regions x five CMCEs per Region = 30 CMCEs nationwide;
- establishments with the highest employee count within the span of control of an OFCCP District Office for establishment reviews, but OFCCP did not include more than two establishments on its CSAL of any parent company;
- six FAAP Establishments per OFCCP Region (so 36 FAAP Establishment audits nationwide) selected from among those FAAPS that had the highest employee counts between 200 and 400 within the span of control of the OFCCP District Offices responsible to undertake the audits, but did not select more than three FAAP Establishments of any parent company;
- two financial institutions per OFCCP Region (2 x 6 =12 financial institution OFCCP audits nationwide) with the highest employee counts in each Region; and
- two colleges/universities per OFCCP Region (2 x 6 = 12 college/university audits nationwide) with the highest employee counts in each OFCCP Region.
Editorial Note: These 12 audits will “sink OFCCP’s boat” because they will likely be the 12 largest audits OFCCP will start (not complete) in the next 12 months.
Revamped CSAL FAQ Section Purports to Overrule OFCCP’s Rules and 50+ Years of OFCCP Policy and Practice
Also on Friday, OFCCP made extensive updates to its Frequently Asked Questions (FAQs) section covering CSALs. The last time OFCCP revised this FAQ section was on June 5, 2023, when it published a CSAL identifying 250 “Construction Contractors” for audit (see our story on that CSAL here). Important highlights of Friday’s FAQ revisions include:
OFCCP formally recognized that the agency is changing its half-century-long position on the compliance obligations of companies with both S&S and Construction contracts by auditing “contracts,” not contractor type. (See new FAQ #1.) Accordingly, a Supply and Service contractor with a Supply & Service contract that is also signatory to a covered federal Government Construction contract could be subject to an audit of its Supply & Service contract and separately of its construction contract, in OFCCP’s new view. Here is what OFCCP has now written:
“1. My company traditionally performs work under non-construction, or supply & service contracts. If my company also performs work under a construction contract, and my company is scheduled for a review under said construction contract, will OFCCP administratively close the construction compliance review?
No. OFCCP will no longer (emphases added) administratively close the construction compliance reviews in this instance.
Contractors and subcontractors with a covered construction contract are required to fulfill all applicable obligations under 41 CFR part 60-4 as to its workers that are engaged in on-site construction work and functions incidental to the actual construction (e.g., supervision or inspection of construction work), and including those construction employees who work on a non-Federal or non-federally assisted construction site. Thus, a company that holds a covered non-construction (supply and service) contract and a covered construction contract may be scheduled and reviewed by OFCCP under 41 CFR part 60-2 or 41 CFR part 60-4, depending on the establishment or worksite that is scheduled.”
Editorial Note: OFCCP’s new “podium policy” is quite different from the way in which OFCCP’s Rules are written at 41 CFR Section 60-2.1 and at 60-4, even though there has been no OFCCP proposal to change its Rules, let alone to publish a legally effective Final Rule. OFCCP’s forced transition away from the clear language of OFCCP’s Rules and OFCCP’s longstanding (51-year) policy and practice to audit “contractors” (not “contracts signed”) violates the Administrative Procedure Act (“APA”) and is unenforceable once properly resisted and OFCCP seeks to enforce its casually accomplished policy change in the courts.
What OFCCP’s newly announced “podium policy” means to any Supply and Service Contractors that choose to comply with it is that the company would have to carve out of its Affirmative Action Programs and supporting analyses, and from OFCCP’s Supply & Service audits, all its employees who work on or under the company’s federal government construction contract or subcontract. And, the “hybrid” federal contractor signatory to both construction and Supply & Service covered federal Government contracts that chooses to submit to OFCCP’s pressure to comply will also have to comply with OFCCP’s construction contractor affirmative action policies and compliance requirements set out in 41 CFR Section 60-4 (including, notably, the “16 Affirmative Action Steps” for federal construction contractors). And, vice versa for construction contractors that also sign Supply & Service contracts.
And, of course, absent formal Rulemaking, neither the contractor nor OFCCP will know how to treat “hybrid” support personnel, like the CEO, CFO, CHRO, General Counsel, etc., who support both of the company’s federal Supply & Service and Construction contracts. Unless a contractor that is signatory to both Supply & Service and Construction contracts resists audit and forces OFCCP to sue it to enforce this new questionable practice as a departure from OFCCP’s Rules (and thus violative of the APA), OFCCP’s forced “hybrid audits” of “hybrid contractors” are going to be very confused affairs.
- The agency eliminated, formally, references to “Focused Reviews” and “Compliance Checks” (which the Biden OFCCP ceased undertaking at the beginning of this Administration); and
- The audit limit per company is now three, not four. (See new FAQ #8).