The refocused and recharged lean and mean OFCCP: what it means for contractors in practical terms.


You have heard the old adages, “Put your money where your mouth is” and “Walk the talk.” With the release of its 2011 Budget, OFCCP is poised and ready to do both. The evidence shows that the agency intends to keep its promise of moving from a compliance-based agency to one focused primarily on enforcement of the laws and regulations that mandate Affirmative Action.

To highlight this fact, the Obama Administration has been aggressively expanding federal contractors’ affirmative action obligations, including:
• Signing into law the American Recovery and Reinvestment Act of 2009, which had the effect of greatly increasing the number of federal contractors, rendering many unsuspecting companies subject to affirmative action requirements.
• Issuing two Executive Orders imposing additional burdens on federal contractors, including the requirement that covered contractors post the “anti-Beck” notice advising employees of their rights under federal labor laws.
• Publishing interim regulations that require covered federal contractors and first-tier subcontractors to publish information about their executives’ compensation.
• Announcing its intention to rescind its guidelines to contractors on analyzing compensation and issuing a new directive on the way that it will conduct compliance reviews.
• Issuing a directive outlining its new expanded approach toward jurisdiction over health care providers.
• OFCCP seeks to further strengthen federal contractor’s affirmative action obligations towards Veterans by proposing to amend its regulations regarding a contractor’s and subcontractor’s affirmative action and nondiscrimination obligations towards protected veterans.
• Finally, OFCCP recently published a notice of its intent to change its Scheduling Letter, used in connection with its compliance evaluations. With these changes, OFCCP intends to broaden the type and nature of data it seeks in an evaluation, imposing significant new burdens on the contractor community.

When thinking about what this means for the federal contractor and subcontractors, another adage comes to mind: “Rise to the challenge.” Simply put, contractors need to understand that a shift in the meaning of the phrase “being in compliance” has occurred.

Maintaining and continuing to develop annual AAPs will remain an important first step. But, in and of itself, the AAP will not go the distance in this enforcement environment. OFCCP is looking at all the systems, policies and procedures that support equal employment opportunity, and they are looking for proof that contractors are “walking the talk” and “talking the walk.”

For example, most AAPs indicate various levels of support for the AAP within the contractor’s workplace, including ongoing communication. When on site, OFCCP will interview stakeholders to gauge what they think the firm’s true level of commitment to EEO/Affirmative Action policies and procedures is. Stakeholders will include supervisors, employees, and even applicants who were not selected for hire (if the data streams warrant it) as well as recently terminated employees.

In essence, federal contractors and subcontractors will need to commit themselves to a long-term compliance strategy, one that focuses on true implementation and communication strategies, not just AA plan development.

The rather obvious question then, is what contractors can do now to ready themselves for the implementation of these changes. In general, it starts with the content of the Affirmative Action Plan and the employer’s accountability under those requirements.
• It’s time to review for accountability, many construction contractors and health care providers were quite surprised to find they were now contractors, know for sure if you are.
• Review AAP in detail, become familiar with problem areas and strengths and be prepared to address decisions both narratively and quantitatively.
• Look very closely at all admissions of problems, especially those involving adverse impact; not only should you be able to address, but you must be able to demonstrate your effort to resolve issues systematically.
• If affirmative action efforts were not successful, be prepared to explain before asked.

To be prepared, proactive is best. What this means is that contractors should take this opportunity to review their policies, as well as their affirmative action plans and procedures, to ensure they comply with legal requirements. What we do know is that OFCCP is going to be seeking information that codifies corporate practice in a more substantial way. So, it is also going to be important to evaluate employment practices against affirmative action plan data and actions at least once partway through the plan year, so that any deficiencies can be identified and corrected at the earliest possible opportunity.

From a policy perspective, it’s a good idea to review the content of each policy, the procedures established for administering the policy as well as how it is communicated. This is very important since OFCCP will also be requiring the entire handbook as part of their data requests moving forward. OFCCP believes that by reviewing this information will allow them to better enforce the prohibitions on sex and religious discrimination (and, presumably, the requirement to accommodate disabilities). So check now to ensure consistency between what you say, what you actually do and what is communicated across the organization.

It’s also important that a diligent effort be made to capture and manage employment data during the full life-cycle of employment in a systematic manner. The content of the proposed scheduling letter is a good place to start when deciding what to capture and manage.

We do know that how an organization comes about making employment and pay decisions are going to be vital to your success in an audit. All contractors would be required to submit data by employee level compensation for all employees (including but not limited to full-time, part-time, contract, per diem or day labor, temporary) as of the most recent February 1st date. This one requirement changes the typical snapshot we normally use for AAP compilation and requires that we have a system in place that can accurately collect and analyze that data in a more consistent and thorough process.

In the proposed scheduling letter, contractors are going to be required to provide more demographic information for applicants, hires, promotions and terminations. Specifically, OFCCP wants data for the entire pool of candidates by certain sub-minority groups, by job group as well as job title.

OFCCP believes this change will provide more accurate data to allow it to identify discrimination indicators. This highlights the need to ensure that ALL employee decisions are well documented in a concise and objective manner. So a review of data collection practices as well as the documentation regarding decisions affecting employment actions is necessary to ensure information is collected in a clear and concise manner that supports decisions in a quantifiable manner.

Therefore, we must codify all compensation information including base salary, wage rate and hours worked. Other compensation or adjustments to salaries such as bonuses, incentives, commissions, merit increases, locality pay or overtime should also be identified separately for each employee.
It is also important to be prepared to do the following at the investigator’s request:
• Describe application process, not just in detail, but quantitatively.
• Describe your application recordkeeping system.
• Describe retrieval system for applicants to be reconsidered if no job can be offered at the time of application.
• Provide copies of written job descriptions for all positions.
• Discuss and provide evidence of job description review system.
• Describe the selection process, including the identification of all recruiting sources.
• Identify methods used for external job recruitment and describe how they are evaluated.
• Provide explanation for failure to attract representative numbers of applicants, if applicable. Be sure you are able to quantify your assumptions at the very least.
• Confirm listing with applicable state agency or agencies.

All applicants should be reviewed according to Affirmative Action guidelines. Information that needs to be included for applicants are: Number of persons applied; how many of those met the minimum qualifications? What is the breakdown by race and gender who met the minimum qualifications? Who are the top three candidates by name, education or employment, gender and race?

According to the agency, “perhaps the most significant substantive changes in the proposed veteran rules address the scope of the contractor’s recruitment efforts and the dissemination of its affirmative action policies.”

For example, the current Veterans proposal would require a contractor to engage in a minimum number of outreach and recruitment efforts, and quantify the success of such outreach efforts. As a part of this effort at quantifying good faith efforts, the contractor would be required to enter into linkage agreements and establish ongoing relationships with the Local Veterans’ Employment Representative in the local employment service office nearest the contractor’s establishment and at least one of several other listed organizations and agencies for purposes of recruitment and developing training opportunities.

In addition, the contractor would be required to consult the Employer Resources section of the National Resource Directory, an online database. The proposed rule would require the contractor, on an annual basis, to review the outreach and recruitment efforts it has undertaken over the previous twelve months and evaluate their effectiveness in identifying and recruiting qualified protected veterans, and document its review.

Something quite simple to review would be the EEO content used in job postings. You want to be sure it includes an enhanced EEO statement such as “We are an equal opportunity/affirmative action employer. Applications from women, minority persons, handicapped persons and special disabled or Vietnam era veterans are especially welcome.”

Review the avenues employees have for lodging a concern or complain. Any employee, who believes that he or she has been the victim of discrimination, should have the ability to report this problem to management within 24 hours of the alleged event.

Did you know that to not do an effective and efficient investigation is a violation of OSHA. So make sure that there is a verifiable mechanism in place to investigate all complaints in a timely and confidential manner. When the investigation discloses a violation of this policy, you also need to be able to verify and validate that appropriate disciplinary action was taken.

Of utmost importance would be to ensure that supervisors are properly informed about key employment-related laws, how they apply to the workplace, and their specific responsibilities for communicating and implementing the associated workplace practices. It is advisable that a comprehensive “how to” manual be developed that is coordinated with the organization’s employee handbook.

Another key area of consideration for review is the documentation habits employed by your managers and supervisors. OFCCP is also seeking to review documentation and policies related to compensation practices of the contractor particularly those that explain the factors and reasoning used to determine compensation. This means that pay decisions based on performance and merit reviews will play a key part in how OFCCP determines a potential for discriminatory activity. So make sure your process for performance and merit reviews are sound and that the justification for the decisions is written in an objective manner.

But don’t just stop at what one manager says or does. You will want to review current performance management practices and ensure that all information and other employment activities are thoroughly documented in an objective manner so that resulting decisions can be easily validated as consistent across the entire organization.

This will require that managers and supervisors be fully trained on how to do an effective performance appraisal using a rating scale that makes sense so that such determinations can be quantified. Begin by questioning when and how often do you review the content of those decisions and how often you compare that data across the organization for consistency.

While much discussed results from proposed regulations at this point, the changes do represent the focus of enforcement vs. compliance and federal contractors should be familiar with their requirements. Even if the proposed regulations are modified in the future, they demonstrate the OFCCP’s efforts to address both working conditions and unemployment rates in a more meaningful way than the current regulations provide. One thing is for sure, we will likely see many of the proposed concepts implemented during the audit process, even before the OFCCP issues final regulations.

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