Federal Contractors Take Notice: OFCCP Developments
Federal government contractors are well aware of the importance of the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) and its Affirmative Action Program obligations. The OFCCP’s audit and enforcement activities – and the consequences of a contractor’s failure to comply with regulatory requirements – are of critical importance to the contractor community. Holland & Knight advises contractors about developments (or the lack of developments) to keep contractors current on OFCCP policy changes and trends.
Over the past several months, there have been three developments that suggest that increased audit and enforcement activities are a focus of the OFCCP’s attention. The effects on contractors, however, are not yet clear.
First, the OFCCP has not finalized its standards concerning compensation discrimination. The proposed standards purported to resolve a long-standing dispute between the OFCCP and the contractor community concerning acceptable methodologies for measuring alleged compensation discrimination. Additionally, the proposed standards appeared to offer a “safe harbor” for contractors who conduct self-audits of their compensation practices. The final standards were expected at the beginning of the year, but an unexpected volume of responses by the contractor community may be responsible for the delay.
Second, the OFCCP has set forth new criteria to determine whether its initial review of a contractor’s compensation information warrants a request for more detailed compensation data and further examination of the contractor’s compensation practices. The letter – which is typically sent to the contractor after the desk audit stage – states that the OFCCP is continuing to analyze possible compensation discrimination based on differences between the average compensation levels of certain employees (e.g., males and females, minorities and non-minorities) in particular categories (e.g., pay grades, salary bands). It is less than clear what other criteria the OFCCP will apply to determine whether more complete compensation data will be sought. It is not clear whether there is any connection between the new criteria and the OFCCP’s proposed standards concerning compensation discrimination.
Third, OFCCP officials have announced a new system for selecting contractors for compliance reviews. Although the details of the selection criteria were not disclosed, the OFCCP has adopted a practice of providing advance notice to contractors that they are on a list of contractors to be audited in the near future. (The OFCCP sent a recent round of scheduling letters in May 2005, and the OFCCP expects to send another round of letters in August 2005.) The new selection system is purportedly a component of an increased enforcement effort.
In sum, be alert for the adoption of the new compensation guidelines; scrutinize carefully the new scheduling letters and be certain you understand your obligations; and be prepared for enhanced enforcement by the OFCCP.