On the Legal Front: What to Expect from OFCCP and EEOC in 2019

Within the Department of Labor’s (DOL) Office of Federal Contract Compliance Programs (OFCCP) and the Equal Employment Opportunity Commission (EEOC), there have been important policy, enforcement, and leadership changes.  This article provides insight into how new leadership within EEOC and OFCCP has impacted the design, implementation, and monitoring of EEO enforcement.  Specifically, we will review EEOC leadership changes and policy updates as well as OFCCP leadership changes and directives, with a focus on pay equity enforcement, outreach, and a forecast for 2019.

EEOC: Recent Updates
 

EEOC enforces eight laws.  Five politically appointed members, including the chair, vice chair, and three commissioners, lead the agency and provide strategic direction.  At the time of this submission, EEOC continues to be led by (in an acting capacity) long-time Commissioner Victoria Lipnic.  Charlotte Burrows, who was nominated by President Obama in 2014, is currently an active EEOC commissioner, with her term set to expire July 2019.  However, there are currently three vacant EEOC commissioner positions.¹ In January 2019, President Trump resigned documents for the nomination of Janet Dhillon to be the EEOC chair for a term expiring July 1, 2022, to replace former Chair Jenny R. Yang. Dhillon most recently served as general counsel of Burlington Stores, Inc., until July 2017. She served in a similar role at three Fortune 500 companies and practiced law at Skadden, Arps, Slate, Meagher & Flom LLP for 13 years.  Her nomination is pending appointment at the time of this article submission.  EEOC Commissioner Chai Feldblum, who was nominated by President Obama in 2009, was renominated by President Trump but not reappointed.  Her reappointment was blocked by Senator Mike Lee of Utah.  Ms. Feldblum was a former law professor and a well-known activist for disability and LGBTQ rights.  With Feldblum’s departure from EEOC, the agency is currently operating with only two of the five commissioners, with three positions technically vacant or pending appointment.  With no quorum, EEOC may now be limited in undertaking new actions or creating new policies (Fitzsimons, 2018). 

In addition, the President also renominated Sharon Fast Gustafson to be the EEOC’s General Counsel for a term of 4 years. If confirmed, she will replace P. David Lopez, who resigned at the end of 2016. Gustafson was counsel for Peggy Young in the U.S. Supreme Court’s 2014 ruling in Young v. United Parcel Service, which involved light duty policies and pregnant employees.  At the time of this article submission, the general counsel appointment is also pending.

Although the current commission has a total of four vacant positions (three Commissioners and the general counsel), EEOC continues to consider sexual harassment a policy priority. Employers and regulators alike have been challenged to strategically respond to the emergent issues in the #metoo era, with increased emphasis on swiftly addressing individual complaints of harassment or discrimination based on sex, tackling systemic or cultural issues that perpetuate this behavior, and enacting consequences for organizations and individuals who are commensurate with the offenses.  Although these issues are far from new, the level of scrutiny is at an all-time high.  In fiscal year 2018, EEOC received an increased budget and restored staffing levels to address harassment complaints (Ogrysko, 2018).  Additionally, in 2017, EEOC rolled out its first employer training initiatives, “Respect in the Workplace” and “Leading for Respect,” which are specifically aimed at addressing civility and sexual harassment/assault in business environments.  This training has been well received and will continue to be a focus in the agency’s outreach efforts. According to the 2019 EEOC Budget report, EEOC will continue to utilize their YouTube Channel to provide educational videos and a new “Newsflash” series. EEOC plans to increase outreach by 20% in 2019 overall (EEOC Congressional Budget Justification, FY 2019), with many of the outreach efforts focused on antiharassment.

OFCCP: Recent Updates
 

OFCCP is an office within the Department of Labor that enforces Executive Order 11246, Section 503 of the Rehabilitation Act of 1973 and the Vietnam Era Veterans Readjustment Assistance Act (VEVRRA).²

In December 2017, Ondray Harris, a former Deputy Chief of Employment Litigation at the Department of Justice, was appointed by the Trump administration to lead the Department of Labor’s OFCCP.  By August 2018, he was no longer the director and was replaced in an acting capacity by Senior Advisor Craig Leen, a former city attorney for Coral Gables, FL.  On December 26, 2018, as anticipated, Craig Leen officially became the director of OFCCP.

As director, Leen has prioritized enhanced transparency and the need for change in the way the agency monitors and enforces contractor compliance.   In the beginning of 2018, he announced four pillars, or pinnacles, that the agency would address: transparency, certainty, efficiency and recognition.   By the end of 2018, nine new directives had been released in light of OFCCP’s new vision.  It is important to note that a directive is subregulatory and nonbinding; directives only provide general guidance.

 As of the date of this article, OFCCP had released 13 new directives. The table below provides a brief description of each directive.  To review each directive in full, visit the OFCCP Directives webpage.³

 

Directives	Summary
2018-01 – Use of Predetermine Notices (PDNs)	Requires OFCCP to issue a Predetermination Notice (PDN) prior to the issuance of a Notice of Violation (NOV).
2018-02 – TRICARE Enforcement Activities	OFCCP issued a 2-year extension of the 5-year moratorium on enforcement of the affirmative obligations of TRICARE providers. Moratorium will now expire on May 7, 2021. Also applies to Veterans Affairs Health Benefits Program providers.
2018-03 – Religious Directive	Instructed Staff to Respect Contractors’ Religious Beliefs in Enforcing Executive Order 11246 and incorporates recent developments in the law regarding religion-exercising organizations and individuals.
2018-04 – Focused 503 and VEVRAA Reviews	Details below.
2018-05 – New Compensation Directive	Details below.
2018-06 – Contractor Recognition Program	Details below.
2018-07 – AAP Verification Initiative	Details below.
2018-08 – Transparency in OFCCP Compliance Activities	Encouraged and explained how OFCCP agents and officials can conduct fair and transparent OFCCP compliance evaluations, with a focus on efficiency and consistency.
2018-09 – OmBud Service	Announced a planned implementation of an OmBud Service in the national office to facilitate the fair and equitable resolution of specific types of concerns raised by OFCCP external stakeholders in coordination with regional and district offices.
2019-01 – Compliance Review Procedures (rescinds 2011-01)	Provided notice that OFCCP will conduct compliance reviews in accordance with the Federal Contract Compliance Manual and recent directives, and is rescinding DIR 2011‐01, Active Case Enforcement (ACE) Procedures.
2019-02 – Early Resolution Procedures (ERP)	ERP provides a mechanism for OFCCP to maximize its resources for the benefit of the agency, federal contractors, and workers. For all compliance evaluations in which a Pre-Determination Notice (PDN), Notice of Violation (NOV), or Show Cause Notice (SCN) has not been issued as of the effective date of this directive, OFCCP staff may seek to resolve violations through the ERP and work with the contractor to develop corporate-wide corrective actions
2019-03 – Opinion Letters and Help Desk	Announced that OFCCP will provide additional compliance assistance and guidance regarding OFCCP’s laws and regulations in a manner that employees and employers can easily access and reasonably rely upon, as they seek to understand their rights and obligations under the law.
2019-04 – Voluntary Enterprise-wide Review Program (VERP)	Communicated that OFCCP will pursue a VERP that facilitates and confirms enterprise‐wide (corporate‐wide) compliance by high‐performing federal contractors and those aspiring to reach the top through individualized, corporate‐wide compliance assistance. The VERP will officially recognize the outstanding efforts of its top‐performing contractor participants and remove VERP participants from the pool of contractors scheduled for compliance evaluations.

 

There are four directives in particular that will drive OFCCP’s efforts in 2019.  These four directives were discussed by Director Leen in November 2018 during the testimony to the U.S. Commission on Civil Rights during their public briefing: Are Rights a Reality? Evaluating Federal Civil Rights Enforcement.⁴  

1. Directive 2018-07 – Affirmative Action Program Verification Initiative

Currently, OFCCP audits only 1-2% of contractor establishments per year1 and often times the agency audits the same contractor multiple times across establishments.  According to OFCCP, of the roughly 120,000 establishments across 25,000 federal contractors under OFCCP jurisdiction, many contractors are not fulfilling their affirmative action and compliance obligations.  On the contrary, OFCCP believes that many federal contractors are not conducting the basic compliance requirements unless they receive an audit scheduling letter. 

OFCCP is working with the General Services Administration (GSA) to gain access to the System for Award Management (SAM) database.2 Contractors are currently required to certify that they have prepared an Affirmative Action Plan (AAP) in the SAM system at the time of obtaining or renewing a federal contract.  Once accessed, OFCCP would likely use that same database to require contractors to certify annually that they have completed their AAP.  Those organizations who mark “No” or “Not applicable” in the SAM database will be considered as a priority for an OFCCP audit.   If a contractor marks “Yes,” they may be neutrally audited or receive a “compliance check,” which is a truncated and less burdensome audit of compliance practices.  The longer term goal of OFCCP is to create a database to collect an AAP from every contractor in the U.S. and determine a more effective way to review the contractor establishments each year.

2. Directive 2018-04 - Focused reviews of Contractor Compliance with 11246, 503 & VEVRRA

OFCCP currently covers 10 protected classes, of which only women, minorities, protected veterans, and individuals with disabilities (IwD) are currently reviewed together in a combined audit process. In addition to these “full” audits, in 2019, OFCCP would like to begin conducting focused reviews that evaluate a single protected group, starting with IwDs. In fiscal year 2019, OFCCP will conduct 500 focused reviews of contractor headquarter locations. OFCCP Director Leen has stated that “because of the way we collect data we can only do statistical audits on sex and race.”  The principal goal here is to increase IwD employment.  Director Leen hopes that, through these focused reviews and the education that comes from them, employers will seek to go above and beyond legal requirements in granting accommodations and hiring in order to better support the IwD population.  He said that “when an employer is adversarial, people will not disclose, essentially indicating that individuals with disabilities are less likely to self-disclose their status to their employer.”  When on site at an employer establishment for focused audits, OFCCP will interview ADA coordinators, EEO officials, and employees with disabilities who are willing to be interviewed.  Contractors who are showing progress and showcasing best practices could be recognized by an awards program. 

3. Directive 2018-06 – Contractor Recognition Program

For those in the federal contractor community, many remember the old “EVE” award where contractors could apply for recognition and, if selected, receive an award and a moratorium on audits for a 2-year period.  Under the leadership of Director Leen, OFCCP is revisiting contractor awards.  Although there is little information regarding the specifics of this program, the purpose of the program is:               

To recognize contractors with high-quality and high-performing compliance programs and initiatives. These programs should have a record of accomplishment related to nondiscrimination and providing applicants and employees with equal employment opportunity under the laws enforced by OFCCP. To highlight specific contractor programs and initiatives that are innovative, have achieved demonstrable results, and that could be taught or incorporated into contractor peer mentoring programs.3   

This directive shows the willingness of the new OFCCP leadership to recognize and reward contractors for their work, which we have not seen for a long time. 

4. Directive 2018-05 – Analysis of Contractor Compensation Practices During a Compliance Evaluation

On August 24, 2018, OFCCP released the much-anticipated new compensation guidance via Directive 2018-05.⁵  The highlights of this directive include:

• An emphasis on one set of rules across regions and compliance officers;
• That employees will be grouped based on a “similarly situated” standard, consistent with Title VII, although there are concerns with the use of pooled regressions via what is known as a pay analysis group;
• A clarification that market data can be a variable in a regression model, and that age can be a proxy for prior experience (both of which are “wins” for employers);
• The standard for both statistical and anecdotal evidence will be the norm but not an absolute requirement;
• A reiteration that all forms of compensation (e.g., base pay, bonus, overtime earnings) can be analyzed by OFCCP and that training/advancement opportunities and steering/placement issues will be investigated;
• A clarification of OFCCP’s analysis protocol;
• An attempt to increase transparency during OFCCP audits.

This new directive is both helpful and reasonable in a variety of ways.  However, some entities in the federal contractor community have particular concerns related to how OFCCP will approach pay groupings and regression modeling. The directive favors broad groupings, pooled regression techniques, and the use of structural variables to similarity situate employees. Although these approaches may be appropriate in some circumstances, similarly situated employee groupings may be more appropriate in other circumstances, particularly when a pooled regression is incorrectly specified. 

An additional concern is that the directive suggests and supports OFCCP analyzing multiple years of compensation data by stating, “OFCCP may have other reasons (such as similar patterns of disparity in multiple years or multiple establishments) to pursue a particular case without anecdotal evidence^.”6  Examining multiple years of compensation data is a complicated analysis and may be a heavy burden for federal contractors to anticipate proactively, as the requirement for a contractor is to conduct an annual evaluation of compensation.⁵ The regulations do not require federal contractors to examine salary trends over multiple snapshots or on a longitudinal basis.

A final concern is that OFCCP states that they will control for job title and other structural variables in the model but only for job titles that have 5 or more employees.  The agency will then take those titles representing fewer than five people and assign them to an “other job” group. How similar these jobs might be and whether it is appropriate to compare them is an open question. 

OFCCP’s Directive 2018-05, if nothing else, brings transparency to OFCCP’s approach during a desk audit review of compensation information.  Although the directive and relevant FAQs still allow and encourage the use of pay analysis groups and pooled regression, contractors now have a glimpse into how OFCCP is conducting compensation evaluations, even if contractors may choose different approaches for proactive pay equity programs for their own organization’s assessment of compensation related decisions. 

Although both of these agencies have an enforcement responsibility, OFCCP and EEOC have stated that 2019 will be a year for employer outreach.  EEOC has highlighted initiatives to increase outreach by 20% this fiscal year.  OFCCP in particular recognizes the importance of striking the right balance between compliance evaluations and enforcement, and offering contractors assistance to promote voluntary compliance with nondiscrimination and equal employment opportunity requirements. Compliance assistance will take various forms including; formal training webinars and seminars, and the use of infographics that demonstrate compliance concepts, procedures, and processes. Additional ways that OFCCP will deliver assistance include providing access to a toll-free help desk phone line for one-on-one assistance; developing various tools, templates and samples; publishing technical assistance guides; creating a larger digital outreach presence; sponsoring various regional and district office events for contractors; and routinely participating in contractor events and conferences (OFCCP Congressional Budget Justification, FY 2019).

Forecasting 2019
 

In summary, what can employers expect for 2019?  EEOC may see a confirmation on Janet Dhillon to head the agency, pending a vote in the U.S. Senate at the time of this article submission.  It is also reasonable to expect more outreach from EEOC related to harassment and civility in the workplace.

With regards to OFCCP, we can expect more directives and policies in an effort to enhance transparency.  Federal contractors can likely expect more audits from OFCCP.  Specifically, OFCCP is planning on scheduling 3,500 total audit this fiscal year, which is the first time OFCCP has had more than 3,000 compliance evaluations since fiscal year 2014.  The 3,500 scheduled audits include 500 focused reviews for individuals with disabilities (Avila & Bowman, 2019).  OFCCP will also likely continue to focus on pay equity enforcement, with more transparency around their analysis methodology than before in light of their new compensation directive.

Notes
 

[1] U.S. Equal Employment Opportunity Commission. https://www.eeoc.gov/eeoc/commission.cfm

2 Office of Federal Contract Compliance Programs. https://www.dol.gov/ofccp/aboutof.html

3 Office of Federal Contract Compliance Programs. https://www.dol.gov/ofccp/regs/compliance/directives/dirindex.htm

4 Are Rights a Reality? Evaluating Federal Civil Rights Enforcement.  November 2, 2018, U.S. Commission on Civil Rights.  Washington, DC. https://www.usccr.gov/press/2018/09-27-Evaluating-Enforcement.pdf

5 The OFCCP audits establishments using a neutral selection process

6 https://www.sam.gov/SAM/

7 United States Department of Labor. (August 24, 2018).  Directive (DIR) 2018-06.  Washington, D.C. https://www.dol.gov/ofccp/regs/compliance/directives/Dir2018-06-ESQA508c.pdf

8 United States Department of Labor. (August 24, 2018). Directive (DIR) 2018-05. Washington, D.C. https://www.dol.gov/ofccp/regs/compliance/directives/dir2018_05.html

9 United States Department of Labor. (August 24, 2018). Directive (DIR) 2018-05. Footnote 7. Washington, D.C. https://www.dol.gov/ofccp/regs/compliance/directives/dir2018_05.html

¹⁰ 41 CFR §60-2.10 (a) (2)

References
 

Achieve Pay Equity Law, State of New York Labor Law, provision to Equal Pay Act, N.Y Labor Law § 194 (2015).

Avila, Y. & Bowman, A. (2019, February 11).  The gift of time: CSAL.  Blog post. https://blog.dciconsult.com/the-gift-of-time-csal

Equal Employment Opportunity Commission. (2016). Agency information collection activities: Notice of submission for omb review, final comment request: Revision of the Employer Information Report (EEO-1).  Federal Register, 16692.

Equal Employment Opportunity Commission. (2018). Fiscal 2019 Congressional budget justification (February 2018).

Fitzsimons, Tim (2018, December 19).  GOP senator blocks reappointment of EEOC’s only LGBTQ commissioner.   News article:  https://www.nbcnews.com/feature/nbc-out/gop-senator-holding-reappointment-eeoc-s-only-lgbtq-commissioner-n949611

Office of Federal Contract Compliance Programs (2018).  Directive (DIR) 2018-06: Contractor Recognition Program. Directive 2018-06 (August 24, 2018).

Office of Federal Contract Compliance Programs (2018).  Directive (DIR) 2018-05: Analysis of contractor compensation practices during a compliance evaluation. Directive 2018-05 (August 24, 2018).

Office of Federal Contract Compliance Programs (2018).  FY 2019 Congressional budget justification (February 2018).

Ogrysko, W. (2018, March 27). #MeToo movement prompts long-awaited budget boost for EEOC in 2018. Federal News Radio.  Retrieved from https://federalnewsradio.com/budget/2018/03/metoo-movement-prompts-long-awaited-budget-boost-for-eeoc-in-2018/

Rao, N. (2017). EEO-1 Form; Review and Stay.  Memorandum from Executive Office of the

        President, Office of Management and Budget, Office of Information and Regulatory Affairs to Victoria Lipnic, Equal Employment Opportunity Commission.  Retrieved from https://www.reginfo.gov/public/jsp/Utilities/Review_and_Stay_Memo_for_EEOC.pdf              

Requirement to Report Summary Data on Employee Compensation, 79 Fed. Reg. 46562 (August 8, 2014).