Legal Update
Dec 12, 2018
OFCCP Kicks Off FY2019 with New Directives on Contractor Compliance and Assistance
Seyfarth Synopsis: After closing FY2018 by issuing a string of directives which changed various aspects of its compliance enforcement process, the Office of Federal Contract Compliance Programs (“OFCCP”) issued three new directives on November 30th which implement further changes. Directive 2019-01 rescinds the agency’s Active Case Enforcement (“ACE”) process and instead requires OFCCP staff to conduct compliance evaluations according to the Federal Contractor Compliance Manual (“FCCM”) and the supplemental guidance that the agency has issued. Directive 2019-02 establishes a process for concluding compliance evaluations using Early Resolution Procedures (“ERP”) in order to reduce the length of compliance evaluations. Directive 2019-03 implements procedures for the agency to issue opinion letters and FAQs in order to offer clarity around specific compliance questions that contractors may have.
On November 30th, the OFCCP issued a series of new directives as part of Acting Director Craig Leen’s continuing efforts to increase the transparency and efficiency of the compliance review process. The first two of these new directives rescind the often criticized ACE process and outline procedures for utilizing ERP in order to shorten the overly lengthy compliance evaluation process. The third directive summarizes the agency’s process for issuing opinion letters and FAQs to address compliance questions from the contractor community.
Directive 2019-01: Compliance Review Procedures (rescinds DIR 2011-01)
This directive explicitly rescinds the ACE procedures which “required full OFCCP desk audits under all three legal authorities” and “increased the frequency of mandatory onsite review” for supply and service audits. This focus on a more all-encompassing audit process ultimately caused “the number of OFCCP compliance reviews” to gradually decline and “overall processing time” to increase. In contrast, the Active Case Management (“ACM”) process which the ACE replaced, “focused enforcement efforts on cases with indicators of systemic discrimination under the Executive Order, through abbreviated and generally shorter desk audits.” The directive notes that in the time since Directive 2011-01 established the ACE procedures, the agency has adopted “valuable components” of the ACE and the ACM into various operating policies and that “there is no longer the need for the ACE directive as a freestanding guidance document.”
The directive instructs OFCCP staff to follow the compliance evaluation procedures outlined in the FCCM and subsequent guidance and policies issued by the agency. The directive specifically mentions that the agency will continue to publish its scheduling methodology, that establishments which have undergone a compliance review in the prior 24 months will be exempted from further review[1], and that compliance officers should prioritize proactive correction of perceived deficiencies at the desk audit phase rather than proceeding to onsite review when it identifies “non-material violations with no additional indicators of discrimination.”
Directive 2019-02: Early Resolution Procedures
Like the directive rescinding the ACE procedures, this directive is aimed at continuing Acting Director Leen’s mission of making OFCCP a more efficient and transparent agency. The Directive notes that OFCCP intends to use “innovative approaches to increase contractor compliance, reach more establishments, and remedy violations more quickly for the benefit of employees, applicants and contractors.” The directive further explains that the goal of the ERP is to ensure “equal employment opportunity in federal contracting and reduce the length of compliance evaluations through early and efficient resolutions.” Finally, it is important to note that the ERP will only be used in situations where the contractor agrees to utilize the procedures.
The directive explains how the ERP applies to three different types of situations: non-material violations, material violations: non-discrimination, and material violations: discrimination.
Non-Material Violations
The ERP for non-material violations follows OFCCP’s current practice of working with the contractor to immediately correct the deficiency where no other indicators of discrimination exist as part of the desk audit review and then issuing a closure letter identifying the problem and how it was addressed. The example given for this type of violation is a non-conforming element of the affirmative action plan.
Material Violations: Non-Discrimination
The ERP for material violations: non-discrimination states that if, upon completing a desk audit review, OFCCP finds some kind of material violation by a contractor with multiple establishments, such as recordkeeping problems or failures to implement an audit and reporting system, it will seek to resolve these problems through an Early Resolution Conciliation Agreement (“ERCA”) which requires the contractor to review all of its establishments and ensure that the deficiency found during the desk audit is corrected. As part of the ERCA, the contractor will submit progress reports outlining corrective action taken at each establishment that it reviews, as well as any additional progress reporting required for the establishment originally scheduled for review. The original scheduled establishment will be under progress report monitoring for a portion of the five year period for which the ERCA is in place. During that five year period, the OFCCP will not schedule a compliance evaluation for the original establishment though all other establishments, including those on whom the contractor reports as part of the ERCA, will be open to review. While this seems to offer extended relief from audits, in fact the only relief falls upon the actual facility being audited and it offers the OFCCP data and review of all other included facilities to which it would not otherwise have access without a scheduled audit.
Material Violations: Discrimination
Similar to the ERP for material violations: non-discrimination, the OFCCP will attempt to conciliate any potential violations at the conclusion of the desk audit review and such conciliation will cover all of the contractors facilities (or a negotiated subset which is agreed upon between the contractor and the agency). Where the two processes differ is that in the case of an ERCA for material violations related to discrimination, all of the facilities that the contractor agrees to review are: 1) subject to relief for identified violations; 2) required to submit to semi-annual progress reporting for a five-year period; and 3) are exempt from further compliance reviews for the five-year period covered by the ERCA. As with the material non-discrimination issues, this exposes the bulk, if not the contractor’s entire workforce, to audit and review and results in a wealth of critical data being submitted to the OFCCP.
Directive 2019-03: Opinion Letters and Help Desk
This directive continues the OFCCP’s recent efforts to “ensure contractors have sufficient, practical, and timely compliance assistance resources to understand and fully meet equal employment opportunity obligations.” As part of these efforts, the OFCCP operates a Help Desk which allows employers and their employees to seek technical assistance by phone which may then be converted into Frequently Asked Questions (“FAQs”) for broader use by the contractor community. The OFCCP also seeks to provide technical assistance by issuing fact-specific Opinion Letters which are in response to a particular situation, but may also provide broader guidance around generally applicable topics such as OFCCP jurisdiction and exemptions.
In order to enhance its abilities in these areas, the directive calls upon OFCCP staff to develop a ”searchable publicly available source of Help Desk questions and answers” and create a process for “issuing Opinion Letters that provide guidance on the application of OFCCP regulations to fact-specific situations that follow the criteria in this directive.” The increased focus on these two forms of guidance is another example of the agency’s efforts to become more transparent and to empower the contractor community to take a more pro-active and cooperative approach to compliance. The directive also notes that compliance evaluation determinations will take into account whether contractors have “acted consistently and in good faith with an Opinion Letter, Directive, FAQ, Help Desk answer, or other OFCCP guidance.”
What Does This Mean for Contractors?
On their face, these directives continue to signal that OFCCP is serious about forging a more transparent and cooperative relationship with the contractor community. As with previous directives, the agency is touting its desire to shorten the length of compliance reviews and directives 2019-01 and 2019-02 will both give the agency greater flexibility to try and achieve that goal. Under DIR 2019-01, the OFCCP will no longer be beholden to the mandatory onsite review prescribed by the ACE. Additionally, OFCCP compliance officers may now be more willing to close audits after contractors respond to initial inquiries rather than dragging out the process. Similarly, DIR 2019-02 gives compliance officers a pathway for addressing potential violations before proceeding to an onsite review which may save contractors from both the cost and business disruption of defending onsite reviews. The expanded exemption available under DIR 2019-02 allows contractors whose systems are out of compliance additional time to correct the deficiencies before receiving another audit. Finally, the Opinion Letters and Help Desk responses can be helpful resources for contractors to better understand the often murky waters of OFCCP compliance. It is worth noting that while EEOC Guidance is subject to the Notice and Comment Rulemaking process, the DIR 2019-03 does not appear to contemplate a similar publication requirement for OFCCP Opinion Letters. Such a requirement may ultimately end up as part of the process that the agency creates for issuing Opinion Letters, however, if not, the OFCCP could use Opinion Letters to establish broad reaching policy without any input from the contractor community.
[1] Please note that while the directive only exempts from further review those establishments which have undergone a compliance review during the last 24 months, the OFCCP’s “Methodology for Developing the Scheduling List Supply & Service Contractors FY 2018, Release - 1 ” stated that those establishment which had completed a review within the last five years were removed from the pool of establishments available for scheduling. It is unclear at this point which of these policies is controlling as DIR 2019-01 only rescinds DIR 2011-01 and does not state that it supersedes any other previously issued guidance.