Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
On March 31, 2022, the Office of Federal Contract Compliance Programs (OFCCP) issued a new Directive 2022-02. Its stated purpose is to provide “transparency on OFCCP’s compliance evaluation policies and expectations for contractors”—but upon review, it appears to be a retreat from the standards of transparency, certainty, and efficiency that guided OFCCP from 2017 through 2020. The new directive radically alters OFCCP’s approach toward compliance reviews and removes guardrails that had been put in place to ensure that the agency’s actions would be consistent with the law and due process.1
Beyond their immediate impact on employers, these changes have important public policy implications. They will increase the cost of doing business with the federal government, which will, in turn, impact the ability of the government to acquire goods and services and increase the cost to the government of those services. At the same time, by permitting compliance officers to ignore the clearly established standards of proof that apply to discrimination claims, OFCCP is opening the door to longer and less-focused compliance reviews which, in the end, will be less likely to result in findings that could be upheld by a court. By disclaiming its obligations to be disciplined in conducting audits and careful in accusing contractors of discrimination, OFCCP may be undercutting its ability to be effective in protecting employees.
This Insight describes the changes resulting from this new directive and their immediate practical significance for federal contractors.
The directive states that OFCCP is enhancing its neutral scheduling procedures for selecting federal contractors for compliance evaluations “to reach a broader universe of contractors and subcontractors and to identify those with greater risk factors for noncompliance with nondiscrimination and affirmative action requirements.” As OFCCP’s current scheduling methodology has tended to result in a relatively small group of contractors being burdened by almost constant auditing, some contractors will welcome this change if it is successfully implemented; others, who may not have faced auditing in the past, may be less enthused to find themselves on the receiving end of an OFCCP investigation. At this juncture, OFCCP has offered no details as to how it will accomplish this enhancement, but the directive does commit OFCCP to continuing to provide information about its scheduling methodology.
Reducing the Time Contractors Have to Respond to an Audit
Directive 2022-02 rescinds Directive 2018-08, Transparency in OFCCP Compliance Activities, which OFCCP faults for containing several policies that the agency now describes as having “caused misunderstanding and delay.”
One “delay” the agency is doing away with involves the Corporate Scheduling Announcement List (CSAL). The OFCCP is discontinuing the practice of waiting at least 45 days before beginning to schedule compliance reviews after the issuance of a new list.
The other “delay” that Directive 2022-02 explicitly criticizes is the policy of “dividing the AAP into a data portion and a non-data portion for desk audit submission and authorizing an automatic 30-day extension for submitting key compensation, employment activity, and other support data.” Moving forward, these extensions will not be available unless there are “Extraordinary Circumstances.” Pursuant to Directive 2022-2:
[u]pon receipt of a Supply and Service Scheduling Letter and Itemized Listing or a Construction Scheduling Letter and Itemized Listing, a covered contractor that is scheduled on or after the effective date of this directive is required to submit all AAPs and itemized listing data, including support data, within 30 calendar days.
OFCCP states that it is “modifying these policies because they run counter to OFCCP’s goal of conducting comprehensive compliance evaluations that foster consistent accountability and timely submission of required information.” In simpler terms, OFCCP appears to take the position that contractors should always have on hand all of the information required by the agency’s scheduling letter and, therefore, should be able to provide a satisfactory response immediately to surprise demands for information.
While one could make an argument in support of this approach regarding a written affirmative action plan, it is much harder to justify with respect to the support data that is requested by OFCCP’s scheduling letter. The directive does not acknowledge that OFCCP’s rules do not require contractors to maintain records in the form in which they are requested by a scheduling letter such that a contractor’s need for additional time in which to pull together this additional data is not at all an indication of non-compliance.2
It is unclear why OFCCP is focused on the delays purportedly caused by waiting 45 days before beginning to schedule based on the CSAL, or providing an extra 30 days in which to provide support data, when it regularly takes OFCCP years to complete a compliance review and it is very common for five or six months to go by in an audit without any activity at all by OFCCP. While there is no doubt that contractors are sometimes responsible for delaying the progress of an audit, it is much more common for OFCCP to be responsible for delay.
Under the circumstances, the decision to rescind Directive 2018-08 seems to be driven by a fundamental distrust of employers rather than any legitimate need or failure in existing processes and procedures.
Coordinating Compliance Reviews Across Establishments
Historically, OFCCP has conducted compliance reviews entirely by establishment. If a contractor happened to have multiple compliance reviews in progress at the same time, each review would proceed separately and much more often than not the OFCCP office and staff handling each review would be different. Directive 2022-02 announces implementation of a new coordinated, cross-regional approach to conducting multi-establishment compliance reviews. According to the directive, “[w]here an employer has multiple establishments scheduled for review pursuant to OFCCP’s neutral scheduling methodology, OFCCP will coordinate evaluations of common policies and patterns across establishments.” It remains to be seen what form this coordination will take, or whether it will improve efficiency and consistency in multiple-establishment audits.
Requests for Supplemental Information and Data Created After the Date of the Scheduling Letter
Among other things, OFCCP states that it may also request to examine records, including employment activity data such as hiring and compensation data, created after the date of the Scheduling Letter. It has long been an open question as to whether OFCCP has a right to demand post-Scheduling Letter information. The issue was previously litigated, but that litigation did not establish a precedent binding on the agency or contractors. Without having engaged in rulemaking on this issue, OFCCP is likely to see objections from contractors to any such requests for data relating to periods after the date of the scheduling letter.
Access to Employees, Applicants and Other Witnesses
The directive appears to imply that requests for contractors to provide the agency with unredacted contact information such as telephone numbers, mailing addresses, email addresses, and social security numbers, which have generally been infrequent in the past, will become more common. As many employees object to having their personal data produced to the government, and as many employers have experienced instances in which OFCCP mishandled confidential and sensitive information, this is likely to be another area which generates disputes and controversy.
In short, while it purports to cure certain perceived deficiencies in the OFCCP audit process, the directive in many instances appears to be a solution in search of a problem. It is not yet clear whether these changes will in fact improve efficiency or consistency in audits, and in the determination of whether unlawful discrimination has occurred, or simply result in OFCCP taking a more aggressive posture against employers in these investigations. Littler will continue to keep readers apprised of relevant developments.
1 Between 2017 and 2020, the OFCCP under Director Craig Leen made progress in reducing a longstanding backlog of pending audits, took steps to improve contractor compliance, recovered record amounts in relief for applicants and employees alleged to have been impacted by discrimination, and recovered some of the agency’s lost prestige. This progress was noted by the Government Accountability Office, which had issued a Report to Congressional Requesters in September 2016, that was highly critical of OFCCP. The full report, Equal Employment Opportunity: Strengthening Oversight Could Improve Federal Contractor Nondiscrimination Compliance, is available at https://www.gao.gov/assets/gao-16-750.pdf. For GAO’s assessment of the sufficiency of the agency’s responses to the report during Director Leen’s tenure, see https://www.gao.gov/products/gao-16-750.
2 The supply and service scheduling letter requires contractors to produce “[d]ata on your employment activity (applicants, hires, promotions, and terminations) for the immediately preceding AAP year and, if you are six months or more into your current AAP year when you receive this listing” and “compensation data for all employees as of the date of the organizational display or workforce analysis.” OFCCP’s rules do not require contractors to maintain data in this way in the ordinary course of business. 41 CFR §60-1.12 requires contractors to retain records but does not mandate how the records are to be maintained. 41 CFR §§60-2.17(b) and (d)(1) require contractors to “evaluate” and “monitor” personnel activity and compensation, but do not specify how this should be done. A contractor can be in full compliance with all of its obligations under OFCCP’s rules but still require more than 30 days to put together some of the materials requested at the commencement of an audit.
The construction scheduling letter requires contractors to produce data for a period determined by the date on which the letter is received, making it even more apparent that a contractor will not have the responsive data just sitting on the shelf ready to be produced.