August 30, 2021

OFCCP and New Affirmative Action Developments for Federal Contractors

Holland & Knight Government Contracts Blog
Kara M. Ariail | David J. Santeusanio
Government Contracts Blog

During the first seven months of the Biden Administration, there have been several developments in the area of federal contractor affirmative action. As most contractors know, three federal contractor affirmative action obligations arise under Executive Order 11246 – Equal Employment Opportunity (affirmative action for females and minorities), the Rehabilitation Act (affirmative action for the disabled) and the Vietnam Era Veterans' Readjustment Assistance Act (affirmative action for veterans). The U.S Department of Labor's (DOL) Office of Federal Contract Compliance Programs (OFCCP) is the federal agency that enforces these affirmative action requirements. This post summarizes the new developments at OFCCP and how these changes affect federal contractors.

New Leadership

OFCCP's recent leadership changes signal that OFCCP is focused on more vigorous enforcement of employee rights. On Jan. 20, 2021, OFCCP named Jenny Yang as director. During the Obama Administration, Yang held leadership roles with the U.S. Equal Employment Opportunity Commission (EEOC). Before joining EEOC, Yang was in private practice representing employees in employment discrimination and wage and hour cases. On July 19, 2021, OFFCP named Maya Raghu as deputy director. Raghu previously served as the director of workplace equality and senior counsel at the National Women's Law Center.

OFCCP Priorities and Staffing

Historically, under Republican administrations, OFCCP has focused on ensuring contractor compliance and under Democrat administrations has focused on enforcement against non-compliant contractors. This pattern is expected to continue under the Biden Administration. Yang has stated that OFCCP's new priorities include increased enforcement efforts with a continuing focus on pay equity and compensation discrimination, including an increased focus on equity and discrimination issues relating to employee fringe benefits (including leave). Yang has also stated that OFCCP will focus on systemic/institutional bias in hiring and compound intersectional discrimination (discrimination based on, and exacerbated by, multiple protected characteristics and identities).

Consistent with Yang's intent to expand OFCCP's enforcement capabilities, OFCCP has increased its staffing as it seeks to hire more than 180 full-time agency employees.

Pay Discrimination Cases After OFCCP v. Oracle

In the case of OFCCP v. Oracle America, Inc., OFCCP sued Oracle in January 2017, alleging that Oracle engaged in a pattern and practice of pay discrimination on the basis of gender and race. OFCCP claimed damages in excess of $400 million. On Sept. 22, 2020, a DOL administrative law judge concluded that OFCCP failed to prove a pattern of practice of discrimination based, in part, on OFCCP's inability to make comparisons between relevant groups of employees. OFCCP did not appeal the decision.

OFCCP has not explained how it may change its approach to pay discrimination cases in the future in light of its loss in the Oracle case. However, it is expected that OFCCP investigations of pay discrimination cases will likely be more stringent, with an increased focus on wage and hour data gathering and analysis. As a reminder, even when not investigating a pay discrimination complaint, OFCCP routinely asks for a contractor's compensation data as part of its compliance audit process (item 19 in the OFCCP's scheduling letter), including corresponding information about employee gender, race/ethnicity information, hire date, EEO-1 category and job group.

Corporate Scheduling Announcement List

OFCCP will continue its use of a Corporate Scheduling Announcement List (CSAL), which is a courtesy notification to federal contractors to provide advance notice of audit. On July 1, 2021, the OFCCP issued its CSAL, which listed 750 compliance reviews.

Educational Institutions and OFCCP Audits

As evidenced by the recent CSAL, OFCCP continues to audit colleges and universities. The unique aspects of affirmative action programs for colleges and universities are addressed in the OFCCP's comprehensive Education Institutions Technical Assistance Guide, published in October 2019.

Affirmative Action Verification Initiative

The Affirmative Action Verification Initiative (AAVI) remains a work in progress. AAVI is a proposed program that would require federal contractors to verify to the government that they do, in fact, have written affirmative action programs. Contractors that fail to prepare a plan but verify their compliance will be making a material representation to the government. Failing to complete the verification at all will likely increase a contractor's risk of audit. For these reasons, OFCCP believes that a verification obligation will increase the likelihood that federal contractors develop and maintain written affirmative action plans as required by law.

AAVI would also allow for the transfer of affirmative action program data between federal contractors and OFCCP. While OFCCP already has a webpage dedicated to an "Affirmative Action Plan Verification Interface," it provides only a brief description of the program and notes that it is "coming soon."

Challenging Legal Issues Persist

In the midst of these changes, several key legal issues remain constant for federal contractor and subcontractors, including:

  • whether a federal contract triggers affirmative action obligations
  • whether and to what extent a federal contractor has flow down obligations to subcontractors through federal contractor affirmative action regulations or Federal Acquisition Regulations (FAR)
  • whether a subcontract is "necessary to the performance" of a federal contract, such that the subcontract triggers federal contractor affirmative action obligations
  • whether a company with a federal contract is considered a so-called "single employer" with its parents, subsidiaries or affiliates so that the affirmative action obligations flow to all companies in the corporate family

These legal issues are often critical for a federal contractor to understand and evaluate in developing compliant affirmative action programs. Contractors should continue to consult with legal counsel as these issues arise.

Recommendations for Contractors

In light of these new developments at OFCCP, there are several steps contractors can take to ensure legal compliance and to manage issues that may arise in connection with an OFCCP audit or investigation.

  • Consider an attorney-client privileged compensation audit to identify and proactively address any pay equity issues and to ensure that supporting data is documented and available for production as needed.
  • Ensure that pay decisions are based on legitimate, non-discriminatory business factors and that the reasons for pay decisions can be clearly explained.
  • Determine whether any establishments are included on the 2021 CSAL (and any future CSAL), and take steps now to prepare for the upcoming OFCCP audit.
  • Evaluate applicable affirmation action plan requirements to ensure compliance, work with legal counsel and other outside resources to ensure your affirmative action program is up to date, and identify and address any potential liabilities and problem areas.

Webinar and Next Steps

Kara Arial, David Santeusanio and Christian Nagle presented a Holland & Knight webinar, "Affirmative Action: Overview and Key Updates," on July 29, 2021. The webinar recording (use password #HK_GovCon_0729) and presentation materials can be viewed on Holland & Knight's website.

If you have questions about the recent developments at OFCCP or about your organization's affirmative action obligations, please contact Kara Ariail or David Santeusanio.

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