Compliance Alert to Federal Contractors – OFCCP August 2018 Directive
Carol Keough September 7, 2018The Office of Federal Contract Compliance (OFCCP) is tasked with ensuring that Executive Order 11246 is enforced prohibiting federal contractors and federally–assisted construction contractors and subcontractors, who do over $10,000 in Government business in one year from discriminating in employment decisions on the basis of race, color, religion, sex, sexual orientation, gender identity or national origin. In accordance with this Executive Order, Government contractors must take affirmative action to ensure that equal opportunity is provided in all aspects of their employment including compensation. On August 24, 2018, out of concern that contractors lack clear guidance, the OFCCP published a Directive in an effort to accomplish these main goals:
- To further clarify and provide additional transparency to contractors about OFCCP’s approach to conducting compensation evaluations by providing an outline of standard procedures for reviewing contractor compensation practices during a compliance evaluation,
- To support compliance and compensation self-analyses by contractors under applicable law, and OFCCP regulations and practices, and
- To generally improve compensation analysis consistency and efficiency during compliance evaluations.
The Directive makes clear that it is not creating new legal rights or requirements but merely providing clarification and that this Directive will apply to all OFCCP reviews scheduled on or after August 24, 2018. All federal contractors or contractors and subcontractors that work under federally-assisted contracts and fall under the oversight of the OFCCP should make sure they are in compliance and are familiar with the guidelines in this Directive. Some highlights are as follows:
- OFCCP considers a variety of employment practices that can lead to compensation disparities among similarly-situated employees including, (i) monetary compensation in the form of salary or pay rates, bonuses, commissions, pay additions, or other forms of incentive pay, (ii) training or advancement opportunities, and (iii) assignment outcomes such as placement into particular jobs or differential access to earnings opportunities such as assignment to preferred contracts or territories.
- Where there are indicators of systematic discrimination, this Directive is stating the OFCCP wants to work in a collaborative effort with the contractor to fully understand the contractor’s compensation system, policies and practices through interviews with the contractor’s subject matter experts and employees, reviewing the contractor’s EEO and diversity and inclusion policies and any supporting evidence the contractor can provide regarding its defense that a policy or practice that caused the disparate impact is job-related and consistent with business necessity. While this sounds promising, the contractor should be wary that this Directive indicates the OFCCP is expecting the contractor to have real evidence to counter any issues that arise in the statistical data.
- The OFCCP relies heavily in this directive on how it will use statistical data to make its determinations although it is important to note that this will be done without compensating for different types of contractor workforce. OFFCP indicates it will perform statistical analyses during its compliance evaluation using the documentation and interviews of managers and workers as well as other factors. If there is a need to facilitate resolution through conciliation, OFCCP will include representatives from OFCCP’s Branch of Expert Services (professional labor economists or statisticians) in the conciliation process to clarify OFCCP variable coding, statistical methods and findings.
- The Directive emphasizes that contractor data is subject to the Freedom of Information Act (FOIA) and does not highlight the options the contractor may have to object to a FOIA request.
- Self Audits – The OFCCP Directive indicates that they will be looking for a more formal process from contractors as to their regulatory compliance program in the form of “self audits” and there may be requests for documentation to show the procedures to conduct such regular “self audits.”
- Desk Audit Submissions – The OFCCP ephasizes that this is not a a final indicator of discrimination but a screening procedure. Either way, after the contractor submits its desk audit submission, the OFCCP now has to respond within seven days for need of additional materials and information related to the audit. This should prevent some delay in obtaining feedback from the OFCCP.
- In response to their efforts to be transparent with contractors, the OFCCP will likely be expecting Contractors to be fully aware and prepared to provide evidence of their affirmative action efforts through regulatory self-audits to ensure that equal opportunity is provided in all aspects of their employment including compensation no matter the industry or workplace.
To read the Directive in full click here.