For a long time, many contractors have criticized the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) as lacking sufficient transparency, clarity, certainty, and timeliness in its dealings with contractors, and have brought cases without an adequate evidentiary foundation. In response, after issuing preliminary regulations in December 2019 and reviewing comments, the OFCCP promulgated final regulations last week that it believes follows its four central principles: certainty, efficiency, recognition, and transparency. The final rules identify a number of actions that OFCCP must take before issuing a Predetermination Notice (PDN) or Notice of Violations (NOV).
A PDN identifies the discrimination alleged. The NOV lists the corrective actions that are required to resolve those violations and invites a conciliation meeting.
First, the final rule clarifies that the evidentiary standards OFCCP must meet in order to issue a PDN in a discrimination case must also be met before issuing NOVs. Second, OFCCP changed the terms that the final rule defines from “statistical evidence” and “nonstatistical evidence” to “quantitative evidence” and “qualitative evidence,” to provide greater clarity as to the types of evidence that OFCCP collects and how it uses the different types of evidence to support the issuance of pre-enforcement notices. Third, the final rule differentiates the procedures followed for disparate treatment and disparate impact theories of discrimination, which have separate, although similar, elements, and provides clarity on the evidentiary standards OFCCP will have to meet to issue pre-enforcement notices under each legal theory.
Next, it requires OFCCP to provide qualitative evidence supporting a finding of discriminatory intent for all cases proceeding under a disparate treatment theory, subject to certain enumerated exceptions. Fifth, in order to issue a PDN or NOV in cases involving a disparate impact theory of discrimination, the final rule requires OFCCP to identify the policy or practice of the contractor causing the adverse impact with factual support demonstrating why such policy or practice has a discriminatory effect.
Further, it requires that OFCCP must explain in detail the basis for its findings in pre-enforcement notices, obtain approval from the OFCCP director or acting agency head, and, upon the contractor’s request, provide the model and variables used in the agency’s statistical analysis and an explanation for any variable that was excluded from the statistical analysis. This situation especially irked federal contractors, who tried to replicate OFCCP’s analyses and could not, and OFCCP was not forthcoming how it came to its conclusions, and then were issued a PDN with no opportunity to dispute the findings.
Finally, in the final rule OFCCP extends the amount of time contractors have to respond to a PDN to 30 days with the possibility of extension, as opposed to the 15 days proposed in the NPRM, in response to comments requesting more time to respond.
OFCCP recognizes the issues it had in cases in which the discriminatory actions alleged were merely subjective. However, in OFCCP v. Analogic Corp., 2017-OFC-00001, at 41 n.60 (Rec. Dec. & Order Mar. 22, 2019) , the Administrative Law Judge (ALJ) ruled that “the fact that hiring criteria or practices are subjective, and are thus susceptible to discriminatory application, is only marginally relevant to the question of discriminatory intent in the absence of proof that the criteria were, in fact, applied in a discriminatory manner.” Therefore, OFCCP needs to be specific as to what in the practices are causing discrimination.
For example, OFCCP states that a witness’s statement merely conveying his or her subjective belief that the contractor discriminated would not be sufficient. However, a witness’s statement that a particular manager discriminated against him or her that was backed by specific examples of problematic or unequal treatment would be evidence of discriminatory intent. At the same time, OFCCP describes what contractors should provide when an issue of discrimination arises. A contractor’s mere compliance with basic legal obligations will not be considered by the agency as dispositive evidence weighing against a finding of discrimination. But OFCCP may consider testimony and other documentation that includes for example, that a contractor has made good faith efforts to comply with its equal employment opportunity obligations or made corrections to salaries during its own self-audit.
Further, in a win for contractors, OFCCP will be following case law as to statistical significance. Although OFCCP’s regression analyses may assume that a two or higher standard deviation shows that that the contractor’s employment decisions are likely discriminatory, it will not assume that factor alone means there is discrimination. In the past it did. The agency still has to prove what is causing the discrimination.
Practical significance is a factor OFCCP uses for bringing discrimination claims, but OFCCP never really disclosed what they use as a scale. Although OFCCP declined to provide a definition to practical significance as requested by contractors, it did provide guidance as to how it views it. For employment activity cases (hiring, promotions, terminations), OFCCP utilizes a sliding scale to assess whether the impact ratio in a particular matter indicates that a disparity is practically significant. The scale for adverse impact and the likelihood of practical significance is:
> 0.9 Very Unlikely
0.8 - 0.9 Unlikely
0.7 - 0.8 Likely
< 0.7 Very Likely
The baseline for adverse impact is the 4/5ths rule or 80%. For small sample sizes analyses, OFCCP identifies practical significance when the ratio is .03 or less. For compensation analysis, OFCCP reviews disparities between salaries. The scale is:
< 1% Very Unlikely
1 - 2% Unlikely
2 - 5% Likely
> 5% Very Likely
Although statistically speaking the analysis may show discriminatory indicators, it will not be the sole basis for a claim of discrimination. OFCCP generally uses pattern and practice disparate treatment cases when bringing discrimination cases, and OFCCP will still have to show qualitative evidence.
In addition, the regulations are codifying the PDN and NOV process. PDNs are issued by OFCCP only after considering statistical evidence, practical significance, and nonstatistical evidence. In a disparate impact claim, they must also specify what employment practice is causing this discrimination. Both PDNs and NOVs must follow these regulations in terms of evidentiary findings. However, OFCCP can issue a PDN if the following are found without providing any further evidence:
a. When the qualitative evidence by itself is sufficient to support a preliminary finding of disparate treatment, regardless of quantitative evidence;
b. Where the numerical disparities are so overwhelming that, in OFCCP’s judgment, additional evidence of discriminatory intent is unnecessary to support a preliminary finding; and
c. If the contractor has prevented OFCCP from compiling qualitative evidence.
Therefore, the PDNs must clearly explain why they are being issued by OFCCP. OFCCP will issue a PDN or NOV only if there is quantitative (i.e., statistical or other numerical) evidence, practical significance, and qualitative evidence.
Finally, the rule codifies the early resolution process (ERP). Federal contractors have the option to bypass the PDN and NOV procedures to enter directly into a conciliation agreement when there are preliminary findings of material violations, regardless of whether those violations involve discrimination. This option for conciliation may suit contractors who wish to expedite the resolution of discrimination or other material violations.
These regulations are good for the federal contractor community and will be an excellent legacy for the current director, Craig Leen. He has done much in his time as OFCCP Director. Under his leadership, OFCCP has had over $117 million in settlements, more than the previous administration over an eight-year period. Director Leen has brought greater professionalism and transparency to an agency not known for either. Finally, he has established a dialogue between the contractor community and OFCCP that has provided clear guidance for compliance objectives.
Additional ASE Resources
HR Comply - HR Comply, a 2-day virtual conference, will feature a plenary session, OFCCP 2020 in Review, on day 2 presented by Tina Williams, Director of Policy and Program Development, U.S. Department of Labor ‐ Office of Federal Contract Compliance Programs (OFCCP). View the full conference agenda and register here.
