By: Quentin Dorsey
Navigating a compliance review (“audit”) with the Office of Federal Contract Compliance Programs (OFCCP) can be a complex and nerve-wracking experience for federal contractors. The process is often extensive, and the results can have a significant impact on an organization's reputation and bottom line. Understanding the possible outcomes is critical for preparedness and peace of mind. Below, we break down the possible results of an OFCCP audit and what it could mean for your business.
Notices of Compliance (NOC)
Ideally at the conclusion of an audit, a contractor receives a Notice of Compliance (NOC). A NOC indicates that no violations of OFCCP regulations were found during the audit. In some audits, OFCCP may issue a NOC that documents minor technical violations identified during the audit but were corrected prior to or during the audit. This would still be considered a successful NOC and should not be confused with a Non-Financial Conciliation Agreement (CA), which involves similar allegations but requires additional remedial action after the audit's closure.
Pre-Conciliation: Notice of Violation (NOV) or Predetermination Notice (PDN)
If OFCCP believes a contractor is in violation of any of the laws it enforces, a Notice of Violation (NOV) and/or a Predetermination Notice (PDN) will be issued. The NOV outlines the specific violations and proposes corrective actions. A PDN, on the other hand, indicates that OFCCP believes a violation has occurred but is giving the contractor an opportunity to provide additional information before finalizing the findings and issuing an NOV. A PDN will only be issued if OFCCP believes there are nondiscrimination findings that will need to be included in a financial conciliation agreement.
Conciliation Agreements (CA)
If a contractor is unable to address the issues outlined in the NOV or PDN, OFCCP will issue a Conciliation Agreement (CA). This is a negotiated settlement between the contractor and OFCCP to resolve the violations without resorting to litigation. There are two main types of conciliation agreements:
- Non-Financial CA: These agreements address technical violations within areas such as recordkeeping, outreach, and recruitment processes. The majority of OFCCP agreements are non-financial, focusing on remedial actions rather than financial penalties.
- Financial CA: In cases where OFCCP believes discrimination may have occurred, OFCCP will pursue financial remedies. This can include back pay for affected employees and applicants or other monetary settlements. These agreements are less common but carry more significant implications for the contractor.
Consent Decrees
In the rare cases where a contractor refuses to enter into a CA as issued, OFCCP may pursue legal action. If the courts rule in favor of OFCCP, the outcome is a Consent Decree—a court-ordered agreement that typically includes the same type of financial and non-financial remedies as a CA but with the added weight of judicial enforcement. The process leading up to a consent decree can be long and costly.
Regardless of the outcome, once the review has ended OFCCP practice is to provide a two-year exemption period for the establishment or FAAP from being scheduled for a new audit. This period begins once the NOC is received or at the end of the progress reporting period required by a conciliation agreement or consent decree.
Key Audit Points to Remember
- Preparation is crucial: Contractors should ensure they are fully prepared for an OFCCP audit by maintaining accurate records and proactively addressing potential compliance issues.
- Financial penalties are rare: Less than 5% of audits result in financial settlements, highlighting the importance of addressing any identified nondiscrimination issues promptly.
- Technical violations are more common: On average, 15% of audits result in a non-financial CA, which focus on technical violations that can be resolved through non-financial corrective actions.
- By understanding the potential outcomes of an OFCCP audit, contractors can better prepare for compliance evaluations and mitigate the risk of violations. For assistance with audit preparation or compliance issues, contact DCI Consulting today!
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