It’s Not Easy Being a Federal Contractor These Days…
Is your company a federal contractor or subcontractor? Have you been audited recently by the Office of Federal Contractor Compliance Programs ("OFCCP")? If it’s been a while since your last OFCCP audit, you may not realize how much more aggressive the OFCCP has become in the last few years. To make sure that you are ready the next time the OFCCP selects your company for an audit, here are some things that you should know:
- The OFCCP is now conducting an "on-site" investigation as part of every 25th audit. The OFCCP begins most audits with a "desk audit" that simply involves a review of documentation relating to the contractor’s affirmative action programs and its workforce. Historically, the OFCCP would escalate the investigation and conduct an on-site audit only if it found indicators of discrimination at the desk audit stage. However, in December 2010, the OFCCP issued a directive stating that every 25th audit must consist of a "full compliance audit," including an on-site investigation. We have found that some regional OFCCP offices perform on-site investigations even more frequently than this. You need to know that if your company is audited by the OFCCP, there is a good chance that the audit will involve on-site interviews by the investigator – not just a review of your affirmative action documentation and statistics.
- The OFCCP continues to focus a great deal of time, attention and money on pursuing claims of systemic discrimination. In 2012, the OFCCP secured several large settlements of systemic claims of discrimination in hiring. One particularly notable settlement involved FedEx, which paid $3 million in back wages and interest to 21,635 applicants who were rejected for entry-level positions and required FedEx to extend job offers to 1,703 affected workers as they become available. In light of the OFCCP’s increased focus on systemic hiring issues, contractors should review their hiring procedures, pre-employment tests and background check requirements to ensure that they do not have a disparate impact on minorities or women and that they are job-related and consistent with business necessity. Contractors should also ensure that they are accurately tracking the disposition of all applicants for employment using specific disposition codes.
- Compensation discrimination is also a continued focus of the OFCCP. On February 26, 2013, the OFCCP rescinded prior guidance and release new guidance expanding the opportunities for the OFCCP to investigate pay discrimination claims. In a statement released by OFCCP Director Patricia A. Shiu, she said “today, we are lifting arbitrary barriers that have prevented our investigators from finding and combating illegal pay discrimination.” The OFCCP reports that in the past couple years it has identified more violations and secured more settlements for compensation discrimination than for any other type of discrimination. Clearly, this new guidance suggests that the OFCCP will continue its efforts, but now on an even broader scale. Contractors who have not conducted a comprehensive compensation review in several years may want to do so now, so that they can address any problems before the OFCCP requests all of their compensation data as part of an audit.
- One of the biggest changes in the OFCCP’s audit practices is their increased focus on contractors’ affirmative action plans for disabled employees and veterans. In the past, an OFCCP audit would focus almost exclusively
on the affirmative action plan for minorities and women, with its statistics, goals, and action areas. Now, however, the OFCCP is scrutinizing the contractor’s practices required by the Rehabilitation Act and the Vietnam
Era Veterans Readjustment Rights Act ("VEVRRA") much more closely. In fact, OFCCP Director Patricia Shiu reported last year that 16% of the reviews the OFCCP conducted that year found that the contractor had failed to
comply with obligations concerning individuals with disabilities – up from 4-9% in previous years. Among other things, the OFCCP is now asking contractors to produce the following during an audit:
- Documentation proving that the contractor posted all non-management jobs with the state unemployment office.
- Evidence that the contractor filed a VETS 100 or VETS 100A form as required.
- Information about the specific, good-faith efforts the contractor took to recruit individuals with disabilities and veterans.
- Documentation of any reasonable accommodations that the contractor made for disabled individuals.
- New regulations governing the employment of disabled individuals and veterans are coming soon! In 2011, the OFCCP issued new proposed regulations under both the Rehabilitation Act and VEVRRA. The proposed regulations would impose significant new burdens on contractors with respect to their employment of individuals with disabilities and veterans, including formal accommodation processes with required deadlines and documentation and concrete "utilization goals" for the number of disabled individuals the contractor employs. If these regulations are issued in final form similar to what has been proposed, contractors will have to develop a number of wholly new processes and may even need to hire additional personnel to manage all the new obligations imposed by the regulations. The OFCCP has indicated that it expects to issue the final regulations in April 2013.
With all the OFCCP’s increased activity, scrutiny and rulemaking, it’s not an easy time to be a federal contractor. However, if you know what to expect from the OFCCP, you can prepare your company for any audits.
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