The U.S. Department of Labor’s Office of Federal Contractor Compliance Programs (OFCCP) issued final regulations on August 4, 2023, that essentially gut the 2020 rule on Predetermination Notices (PDN).  Essentially, the new rule takes out all transparency of the conciliation process. 

Although OFCCP has stated that these regulations will strengthen OFCCP's ability to enforce the nondiscrimination requirement and "gives the agency more flexibility in its pre-enforcement and conciliation procedures, promotes efficiency in resolving cases, and promotes greater consistency with Title VII of the Civil Rights Act of 1964," it will likely accomplish the opposite.

Federal Contractors have found since the old rule was promulgated in 2020, the PDN has facilitated communication between the agency and the contractors, especially when OFCCP identified violations of Executive Order 11246 and implemented regulations, leading to a better understanding of the issues and the possibility of settlements.   Now, under this new rule, communication is strictly one-sided, opaque, and illogical to assist with any conciliation between the agency and the contractor.

The 2020 rule established the process that before any enforcement action could be initiated, a predetermination notice and then notice of violation would have to be issued first.  Both would be reviewed by the National Office before being issued.  Contractors would be given thirty (30) days to respond. The process still wasn’t perfect by any means.  Although more transparency was provided as to findings by the agencies, contractors often would get frustrated when their response was seemingly ignored by the agency, and the PDN would continue as originally written. 

With respect to evidentiary findings, under the old rule the agency was required to disclose both the “qualitative” (i.e., testimony and documents) and “quantitative” (i.e., data analysis) evidentiary support for its preliminary findings.  Quantitative evidence had to demonstrate that any disparity is “practically significant.”

The current OFCCP administration disliked the 2020 rule as it felt that it locked the agency into a process that was inflexible with stricter evidentiary requirements than Title VII.  Therefore, the new regulations were promulgated and eliminated many positive features of the old rule:

• Evidentiary requirements for the issuance of pre-determination notices (“PDNs”) and notices of violation (“NOVs”) are eliminated;

• PDNs do not have to be approved by the OFCCP Director before issuance;

• OFCCP is allowed to issue Notice of Violations (NOVs) for violations not included in PDNs; and

• Contractors’ time for responding to PDNs is now 15 days as opposed to 30 days under the old rule.

In effect, the agency is reverting to a time when contractors failed to settle and is taking multiple steps backwards.  Under the Obama administration settlements were down, and under the Trump administration settlements reached all-time highs.  Transparency was a cornerstone of the Trump OFCCP.

In essence, OFCCP has no restrictions on whatever they want to do in a given review.  "A lot of it is in the hands of OFCCP.  They could choose to apply the new rule in a cooperative way, or they could apply the new rule in a rather aggressive way," said Husch Blackwell LLP partner Michael Schrier, who frequently represents contractors on labor and employment issues.

Further, by limiting time for response, it pushed the agency to force settlements when contractors don’t understand what the violations are.  “It puts us at a disadvantage, because we can't really respond to that," Andrew Turnbull, a Morrison & Foerster LLP partner said. "I think that's the fear from a lot of contractors, that we're going to be back to that [situation of], 'We have no details; you're asking us to settle a case where we don't even know what you're asking.'"

Source: Proskauer 8/4/23, Law360 8/4/23