by Art Gutman Ph.D., Professor, Florida Institute of Technology

BoA Suffers a Loss that Likely Benefits All Federal Contractors in the Future

BoA issued a 4th Amendment challenge to an OFCCP request for information for an on-site review under the threat of debarment. The case was heard by US Magistrate Judge Deborah A. Robinson of the District Court of the District of Columbia on 12/13/11. A link to the 37-page ruling follows:

We have reported on BoA’s struggles with the OFCCP in the past (see Alerts posted on 2/16/10 & 2/22/10). The current ruling by Judge Robinson relates to a collateral attempt to avoid providing data to the OFCCP. BoA lost this battle, but federal contracts may have won a lot more because of BoA’s efforts.

As a starting point, OFCCP regulations define a “compliance review” as follows:

A “compliance review” is “[a] comprehensive analysis and evaluation of the hiring and employment practices of the contractor, the written affirmative action program, and the results of the affirmative action efforts undertaken by the contractor.” 41 C.F.R. § 60-1.20(a)(1). A compliance review may proceed in three stages: a desk audit; an on-site review; and, “where necessary,” an off-site analysis. 41 C.F.R. § 60-1.20(a)(1)(i)-(iii).

In the desk audit, the OFCCP will, under DOL regulations, review a company’s affirmative action plan (AAP) and supporting documents to determine whether the AAP meets OFCCP standards of “reasonableness, and whether the [AAP] and supporting documentation satisfy agency standards of acceptability.” If the OFCCP is not satisfied, it can then proceed with the on-site review, which is often far more ominous because the agency can interview employees at all levels of the company and copy/inspect documents related to actual employment selection decisions. Critically, the OFCCP claims it maintains a random computer-generated list of contractors in a specific geographic area, and selects contractors in strict sequential order for its compliance reviews. According to BoA, this is not exactly what happened.

The record shows that the OFCCP notified BoA in 2004 by that a branch in Charlotte, North Carolina was selected for a compliance review, and that documents were needed for the desk audit. BoA agreed to cooperate, but wanted to know how it was selected for the desk audit. The OFCCP responded that it used its internal selection procedures (i.e., neutral, random, top-down selection) and BoA complied. The OFCCP then requested an on-site review based on the documents submitted, at which point, BoA refused to cooperate further without definitive information on how the initial selection for the desk audit was made. Instead of getting an explanation, the OFCCP filed an enforcement action with the DOL to gain access to BoA’s facility under the threat of sanctions.

What happened next is scary. BoA learned that the OFCCP did not use its internal selection procedures for the desk audit. Indeed, there were 20 other contractors that were higher on the OFCCP’s selection list than BoA, and the OFCCP did not select any of them for a review. Therefore, BoA argued that OFCCP’s explanation for how the agency originally selected BOA for the desk audit was misinformation. Therefore, its original agreement to provide information for the desk audit was not “voluntary”, and the OFCCP was in violation of the 4th Amendment, which protects individuals from “unreasonable searches and seizures” (meaning there must be “probable cause.”).

For its part, the OFCCP argued that the 4th Amendment is inapplicable to desk audits, while agreeing that it does apply to on-site reviews, but that there was no violation because the desk audit yielded information supporting “probable cause.” As critical, the OFCCP argued that even if the 4th Amendment applies to desk audits, BoA waived it rights by voluntarily producing the documents for the audit.

Next, an Administrative Review Board sided with the OFCCP, upheld the enforcement actions, and notified BoA that it must comply with the OFCCP order or face termination or suspension of its contracts. Rather than complying, BoA filed the current action in the DC District Court seeking relief via the Administrative Procedure Act.

Judge Robinson ruled that the 4th Amendment can be satisfied if: (1) it there is "specific evidence of an existing violation" or (2) the search is pursuant to "an administrative plan containing specific neutral criteria." She ruled the OFCCP failed to satisfy the first condition, but nevertheless, gave the OFCCP the benefit of the doubt on grounds that BoA “voluntarily” consented by producing the documents requested for the desk audit. Judge Robinson rejected BoA’s argument that it was “coerced” into producing the initial documents under the threat of sanctions. She also rejected the argument that it only produced those documents because the OFCCP misled BoA to begin with in its response to the query on why it was selected for the desk audit. The real stinger, however, was Judge Robinson’s ruling that BoA is a “sophisticated” company, that it knew what its rights were under DOL regulations, and that it should have exerted more effort to protect those rights prior to producing the documents for the desk audit.

A sour loss for BoA? Maybe. Seems to me there are grounds for appeal to the DC Circuit. Regardless, think of the bright side. While playing the role of “sacrificial lamb”, BoA elicited from a federal court a clear statement that what the OFCCP did, and was perhaps habitually doing, was illegal, that contractors can and should stand up and seriously question why a desk audit is being conducted.

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