How OFCCP’s Jurisdiction Has Been Circumscribed Over the Past Four Years - American Society of Employers - Anthony Kaylin

How OFCCP’s Jurisdiction Has Been Circumscribed Over the Past Four Years

ofccp logoExecutive Order 11246 covers federal contractors and subcontractors if they hold $50,000 or more in federal contracts or subcontracts.  The Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) is the agency tasked to audit them.  However, over the past four years, the agency moved away from the past method for identifying contractors for audit, and it greatly diminished the universe of auditees.  Only direct contractors have been audited.

The development of the audit list has gone through a variety of iterations, but essential to the core was that the list was derived from the EEO-1 report filings based on Question 3, which asks:

Does the company or any of its establishments (a) have 50 or more employees AND (b) is not exempt as provided by 41 CFR 60-1.5, AND either (1) is a prime government contractor or first-tier subcontractor, and has a contract, subcontract, or purchase order amounting to $50,000 or more, or (2) serves as a depository of Government funds In any amount or Is a financial Institution which is an Issuing and paying agent for U.S. Savings Bonds and Savings Notes?

By answering this question yes, it would automatically place the employer in a federal contractor database from which to draw a list of contractors and subcontractors which could be audited.  The EEO-1 report generally is completed by employers with 100 or more employees.  However, a contractor or subcontractor that has 50-99 employees would be required to file an EEO-1 report.

This approach has inherent problems.  It is not perfect.  First, federal contractors who failed to answer yes would unlikely be on the audit list.  This problem was attacked by the Bush administration by matching the EEO-1 list to the federal contractor procurement data system known as the SAM database.  Any contractor in SAM that did not identify themselves as a yes in the EEO-1 report would automatically be scheduled for an OFCCP audit.  But the Obama administration appeared to drop this approach.

The second issue dealt with federal subcontractors.  The easiest subcontractors for identification were likely those, for example, who worked directly on defense contracts or healthcare contracts with the VA or Health and Human Services.  However, many times subcontractors would be supplying to federal contractors but did not know if their product was being used in a federal contract.  For example, in Detroit there are many tier one suppliers who provide similar products to the OEMs and have no clue whether their product is being used for the production of a vehicle being sold to the federal government.  Therefore, they would not know if their contracts, which are over $50,000, would subject them to Executive Order 11246.  OFCCP had previously taken the assumption that it would unless proven otherwise. 

And then there are subcontractors that could only be tangentially attached to any contract.  For example, cleaning crews in buildings or temporary agencies or other manufacturing suppliers for commercial side products are subcontractors to a federal contractor but not involved in any federal contract per se.   In the field vetting subcontractors became very onerous, burdensome and time-consuming. 

Thus, there was a new approach by the Trump administration which greatly limited the universe of potentials for audits.  Although the OFCCP had settled a number of cases and had the highest total settlements in any four-year period, no subcontractors were audited in the past four years.  In effect, it appeared that OFCCP was diminishing the scope of their jurisdiction quietly on the grounds of administrative convenience.  OFCCP did try when renewing the regular scheduling letter to add a question about the top three by value subcontractors as a requirement for reporting in an audit, but the comments came fast and furious against and the requirement was dropped in the final letter. 

There may be an approach that would be appropriate in adding the subcontractors back to the audit lists.  First, the agency should return to a contract first approach mapping SAM with the EEO-1 question 3 and confirming federal contractor status.  Next, as for any other employer inputting yes and not identified in SAM, have them placed on a separate scheduling list.  From that list, a couple hundred can be randomly selected per each scheduling time.  Vetting should not be such a burden to the field offices.

In today’s world, this approach could be the hammer to keep subcontractors honest and ensure compliance with EO 11246, even if the odds of being audited are low.  This approach is also more preferable than the previous administration’s approach of the Fair Pay and Safe Workplaces Executive Order 13673 that laid the burden on contractors to ensure their subcontractors were in compliance or be barred from federal contracts – not just on Executive Order 11246, but with Wage and Hour, OSHA, and other laws.

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