The Office of Federal Contract Compliance Programs (OFFCP) has recently announced a number of reforms – and all companies with federal contracts should take notice. In part 1 of this series, learn about five non-discrimination and liability-based reforms. Then, stay tuned for part two to learn about Affirmative Action-related reforms.
In early January 2021, the Office of Federal Contract Compliance Programs (OFCCP) added a focus on fringe benefits, including parental and family friendly leave, for supply and service compliance reviews. They added this to the SCER (Standard Compliance Evaluation Report), a tool used by compliance officers to conduct and document desk audits. Contractors should be aware that in every review, the agency will be looking at parental leave and family-friendly leave policies to ensure they are equitable and sufficient.
To be equitable, the policy needs to treat men and women equally. To be sufficient, the policy needs to ensure it doesn’t have an adverse impact, such as on the promotion of women. An example of inequitable is a company that offers parental leave to both men and women but discourages men from taking leave due to stereotypes that men have less need for leave. An example of insufficient is a company who steers women who take the leave into a non-advancement path. Another example is when a woman finds herself ineligible for a bonus or raise because she didn’t work the full year having taking parental leave – as opposed to having this bonus being prorated.
OFCCP indicated that it will start looking more intently at intersectional and compound discrimination on page 21 of the Supply and Service Technical Assistance Guide. Companies need to examine the intersection of race and gender in their annual self-audits, as well as take note of employees who identify as multiethnic or multiracial. If you look exclusively at only race and only sex, you may not see a disparity and miss the two standard deviations that could be indicative of intersectional discrimination.
For example, women of color are more likely to suffer compound intersectional discrimination. At a particular company, Black employees may be paid less than other groups and women may be paid less than other groups. If you don’t look at those two groups together, you won’t see that Black women are paid much less and you may not fully remedy their situation, which leads to inequity and exposes the company to liability.
This point was also made on the Promotions Focused Reviews landing page. OFCCP has also started entering into Conciliation Agreements with intersectional classes.
OFCCP’s website and the Supply & Service Contractors Technical Assistance Guide indicate that it will start moving towards a larger focus on hiring, compensation and promotion discrimination for individuals with disabilities (IWD) and veterans. Because companies have largely focused on the utilization/hiring goals in these areas, they may not be fully prepared for systemic reviews in these areas.
There is a recognized pay gap for individuals with disabilities that is more than 30 cents on the dollar and OFCCP receives numerous complaints about failures to accommodate or pay them appropriately. While many companies evaluate compensation and promotion based on race and gender, they need to also examine the impact on veterans and people with disabilities.
Finally, even though OFCCP announced it would not be scheduling more focused reviews in future lists, the agency also indicated it would be incorporating what was learned from the Section 503 and VEVRAA focused reviews into every compliance reviews.
When I was OFCCP Director, I issued Directive 2018-07, which committed OFCCP to the Affirmative Action Verification Initiative. It is evident by its name that this initiative will seek to positively impact affirmative action compliance. What is less evident is the impact this initiative will have on OFCCP compliance reviews and potential liability. OFCCP recently posted a “coming soon” webpage for the interface. Assuming the agency proceeds with verification, whether in the form of certifications or AAP data collection (or both), the agency will be able to use the information it obtains to focus upcoming scheduling lists on companies that do not verify they have AAPs in place.
The idea is that companies that do not take the time to develop AAPs and certify compliance are also likely not taking the time to conduct a yearly review of hiring and compensation practices as required by OFCCP regulations. I would predict that OFCCP will focus the bulk of its time, attention, and audit scheduling for the next couple years on companies that do not verify compliance. This non-verification is also likely to be sited by the agency as indicative of knowledge of non-compliance.
Indeed, as OFCCP publicly reported to the Government Accountability Office, “[t]hose contractors who fail to certify, or who certify that they do not have compliant AAPs for each of their establishments or business/functional units, will be more likely to be scheduled for compliance evaluations.”
The point is clear: companies that are not in compliance should start getting in compliance now or face a compliance review and potentially substantial liability down the line.
Companies should engage the Ombuds early so they can vigorously explore early resolutions. The Ombuds Service has been remarkably successful and should be engaged anytime there is a significant disagreement in an audit, or when the Transparency and Efficiency Directives need to be raised or enforced. Companies should learn when to engage the Ombuds and how to do so most effectively. The new Nondiscrimination Obligations/PDN Rulemaking expressly allows for early resolutions prior to a preliminary finding and does not require them to be Early Resolution Conciliation Agreement (ERCA).
Ten Recent Reforms You May Haven’t Heard About
Part 2: Affirmative Action-Related Reforms