How to Avoid the Pitfall of Worker Misclassification
David Fortney, Jill Smith, Naomi Hackenberg from Fortney Scott and Workplace HR
Representatives of Fortney Scott and Workplace HR presented on issues that may occur in an organization related to mis-classifying employees as “consultant,” “independent contractor,” or “temp” in the workforce. The Fortney Scott/Workplace HR team indicated that the Supreme Court ruled that employee status is based on the “totality of the circumstances” and engaged audience members with a workshop designed to address specific tests that can be used to determine employment status.
Some factors that can be used in assessing whether an individual is an “employee” or “independent contractor” include factors used in the Department of Labor’s “economic realities” test such as the extent services rendered are an integral part of business, permanency of employment relationship, degree of control, facilities and equipment used, and degree of independence in operation. There are many penalties associated with misclassification, including back wages, damages, and injunctive relief.
The Fortney Scott/Workplace HR team also highlighted the Memorandum of Understanding (MOU) signed September 19, 2011 between the Department of Labor (DOL) and the Internal Revenue Service (IRS) for information-sharing. With this MOU, both the DOL and IRS can now refer instances of worker misclassification or referrals of possible misclassification issues. The MOU is timely in relation to the proposed changes to the OFCCP scheduling letter, which defines “employee” as including full-time, part-time, contract, per diem or day labor, and temporary employees.
Policy Division Update
Debra Carr, Director of OFCCP’s Policy, Planning and Program Management Division, provided session attendees with an update via live interactive broadcast. The following bullets highlight some of the more important updates:
- Completion of the revision of OFCCP’s Federal Contract Compliance Manual (FCCM) is expected later this year; it will be a “ clearly and plainly written” manual reflecting the “current state of the law”
- The Planning and Program Development Branch is currently overseeing a new Limited English Proficiency (LEP) plan which will assist in providing information to workers, groups who represent workers, and the public; the LEP will cover 15 total languages and also includes a procurement plan to make interpreters and translators available as necessary
- Multiple fact sheets are currently being developed to provide the public with information on Section 503, 4212, sex and pregnancy discrimination, and other equal employment opportunity (EEO) matters
- As one of three pilot agencies within the Department of Labor tasked with searching for methods designed to improve customer service and interaction with the public, the Division has conducted one listening session with three more expected over the next 9-12 months; particularly, the Division is looking for feedback from contractors/subcontractors related to (1) outreach in terms of increasing OFCCP’s profile, (2) quality and challenges of providing technical assistance, (3) communicating enforcement priorities, and (4) a “directives modernization project” to continuously review the agency’s directives
- The OFCCP Complaint Form is being updated in order to revise, streamline, and make the form more useful, to allow investigations become more timely
- Revision and re-authorization of the scheduling letter is in process, following public comments from last year
- The Division is working on responding to public comments regarding OFCCP’s Functional Affirmative Action program (FAAP), as it relates to the information collection request (ICR) under the standard procedures for contractors seeking approval to develop affirmative action programs based on functional or business units
- Consistent with the ‘customer service’ theme present throughout the session, Ms. Carr also mentioned that her Division is working on developing a customer service feedback card, and “looking for better ways to serve all stakeholders”
Carr did discuss the agenda in terms of rule-making, and mentioned that the Division is still working to finalize many of the rules proposed under this administration, including updates to Section 503, 4212, construction regulations, and approvals for ICRs. When asked about compensation data and a February 1 snapshot date as it relates to the revised scheduling letter, Carr did not say much except that there was no consensus about a single snapshot date that worked best. Responding to an audience member’s question about current staffing levels in the Division, Carr stated that the number of employees in her Division is in the mid-twenties. Perhaps this number is not sufficient enough for a regulatory agenda as ambitious as the one current facing her team.
Contemporary Systemic Discrimination Settlements: A View from 2011 Settlement Data
David Cohen from the Center for Corporate Equality (CCE)
The Senior Vice President of the Center for Corporate Equality (CCE) and President of DCI Consulting Group, David Cohen, presented on trends in systemic discrimination settlements based on CCE research of 2011 OFCCP settlement data. Cohen began by contrasting major initiatives of the current and previous OFCCP administrations. He noted that under the prior administration, four major initiatives were implemented, including: the Internet Applicant regulations, compensation standards and guidelines, Active Case Management directive, and the FAAP directive. So far, two initiatives have been implemented by the current administration, including: the Active Case Enforcement directive, and a new FAAP directive. Other initiatives such as a revised Federal Contract Compliance Manual, new compensation standards, compensation data collection tool, new scheduling letter, and revisions to Section 503, construction, sex discrimination, and 4212 regulations have been proposed, but have not yet been finalized.
Cohen stated that under the Obama administration, there has been a major emphasis on compensation and increased focus on affirmative action issues, as well as a continued focus on systemic discrimination, particularly in areas in which there are large applicant pools, and unstructured selection processes. Reliance on statistical significance testing focusing on comparing a ‘highest selected’ referent group to focal subgroups seems to be a common OFCCP approach. However, Cohen cautioned the audience on relying on statistical significance testing alone when evaluating impact.
Interestingly, Cohen mentioned that there is not much difference between the Bush and Obama administrations, in terms of actual financial remedies collected; however, the frequency of conciliation agreements has substantially increased. Cohen reiterated that this administration is very interested in compensation, citing the 27 findings of compensation discrimination cases in 2011 and 15 in 2010, which is approximately 30% and 20% of the total findings, respectively—up from approximately 5% in 2009 and 7% in 2008. Given the current enforcement landscape and proposed regulatory changes, Cohen predicted that the agency will continue to seek a large compensation settlement in 2012, as well as attempt to finalize the 4212 Veteran regulations in the near term.
Contemporary Pay Equity Enforcement: What You Need to Know
David Cohen and Keli Wilson from DCI Consulting Group
This NILG presentation focused on pay equity because it’s a priority enforcement initiative. The presenters provided contextual background on key initiatives related to pay equity that occurred during the Bush administration (i.e., report by CONSAD with a foreword signed by Charles E. James on January 12, 2009, and the Active Case Management directive) and the Obama administration (i.e., President Obama signing the Lilly Ledbetter Fair Pay Act in January 2009, and the White House formation of the National Equal Pay Task Force in July 2010). Also discussed during this session were a couple other initiatives that have occurred, such as increased hiring of compliance officers to support compliance efforts and the proposed rescission of the compensation standards. The presenters emphasized the following points related to the compensation standards:
- The compensation standards are based upon Title VII standards (i.e., SSEG, multiple regression analysis, and anecdotal evidence of intentional discrimination); and
- Expertise is necessary in four key areas to effectively enforce the compensation standards:
- Title VII case law;
- Compensation systems;
- HRIS data; and
- Advanced statistical modeling.
Pamela Coukos, Michele Hodge, and Melissa Speer from OFCCP with Consuela Pinto from the Solicitor’s Office
OFCCP’s New Scheduling Letter: Anticipating the New Desk Audit Submission
Joshua Roffman and David Goldstein from Littler
Richard Fischer from the OFCCPOFCCP’s Director of Testing, Richard Fischer, Ph.D., discussed best practices and potential risks in using tests, via live interactive broadcast. Dr. Fischer communicated the reality that OFCCP continues to rely on the Uniform Guidelines on Employee Selection Procedures when evaluating whether or not an employment test is discriminatory. The Uniform Guidelines state that “the use of any selection procedure which has an adverse impact on the hiring, promotion, or other employment or membership opportunities of members of any race, sex, or ethnic group will be considered to be discriminatory and inconsistent with these guidelines, unless the procedure has been validated in accordance with these guidelines…”; however, Dr. Fischer stated that smart Federal contractors should be validating their employment tests anyway regardless of any apparent impact, and that validation in accordance with the Uniform Guidelines does not require anything above and beyond what they should already be doing. Dr. Fischer concluded that if the OFCCP finds anything wrong with your tests in terms of unlawful discrimination, “it’s your fault”.
Veterans Affirmative Action Requirements: The New Rules
Mickey Silberman and Jen Seda from Jackson Lewis
Thomas Dowd and Marika Litras from the OFCCP with Jeff Lupardo and Theresa Schneider from the Solicitor’s Office, Department of LaborThomas Dowd and Marika Litras, Ph.D., from OFCCP’s Division of Operations, and Jeff Lupardo and Theresa Schneider from the Civil Rights and Labor Management Division of the Department of Labor’s Office of the Solicitor, provided updates on Operations Division initiatives as well as recent OFCCP cases. Dr. Litras gave a brief overview of the Operations Division, explaining that part of the Division’s responsibilities include ensuring audit consistency and assisting field personnel as necessary toward achieving that objective. Dr. Litras further stated that the OFCCP has staffed all regions with compensation experts and statisticians to assist with technical matters related to enforcing non-discrimination. In addition to assisting those in the field, the Division is also responsible for producing audit scheduling lists for Federal contractor establishments. Thomas Dowd discussed the courtesy notification commonly known as the Corporate Scheduling Announcement Letter (CSAL) which is typically sent to corporate locations and lists all establishments for potential audit during a particular cycle. Perhaps the most notable piece of information during this session was the announcement that although the agency will continue providing this courtesy notification, instead of sending CSALs directly to contractors, it will instead provide a list of all establishments to be audited on the OFCCP’s website beginning in 2013. When asked by a member of the audience, Dowd did not definitively answer whether the same process would be used for scheduling Functional Affirmative Action Program (FAAP) audit, but suggested that the Division would take that idea into consideration.Jeff Lupardo and Theresa Schneider of the Solicitor’s Office reviewed recent denial-of-access cases, including: OFCCP V. United Space Alliance LLC, DOL, OALJ, No. 2011-OFC 00002, 2/28/11, in which the Disctrict Court ruled in favor of OFCCP concluding that the agency has broad investigative authority over Federal contractors that are audited, and Frito-Lay Inc. v. Solis, N.D. Tex., No. 12-01747 in which Frito-Lay seeks to overturn an Administrative Review Board (ARB) ruling to supply additional data beyond the timeframe requested in the scheduling letter. Bank of America v. Solis No. 09-2009 (D.D.C. Dec. 13, 2011) in which the bank issued a 4th Amendment challenge to an OFCCP request for information for a non-site review under the threat of debarment and the DC District Court subsequently ruling that the 4th Amendment can be satisfied if there is “specific evidence of a violation” or the search is pursuant to “an administrative plan containing specific neutral criteria”, was discussed, along with OFCCP v. Florida Hosp. of Orlando [ALJ Case No. 2009-OFC-00002, October 18, 2010, in which Florida Hospital was deemed a covered subcontractor based on its contract with another hospital until the National Defense Authorization Act was signed into law, requiring a rescission of OFCCP Directive 293 in which the OFCCP used a case-by-case approach in making coverage determinations because of the wide-array of relationships health care providers and insurers may have with the Federal government.
Applicant Tracking Trends & Compliance
Valerie Hoffman and Christine Hendrickson from Seyfarth Shaw LLP
This NILG presentation covered new methods for identifying and attracting top candidates and implementing best practices for applicant tracking. The presenters highlighted the importance of getting compliance professionals involved in an applicant tracking implementation team, and focused on applicant tracking issues to be aware of that could impact compliance efforts (i.e., missing applicants, too many applicants, useless disposition codes, etc). A few take-away recommendations mentioned by the presenters were:
- Streamlining candidates to apply through the company website;
- Differentiating basic and preferred qualifications in job advertisements;
- Periodically closing perpetually open requisitions; and
- Having recruiters enter the data management technique (DMT) applied at the time of consideration, in a notes section within the applicant tracking system.
by David Morgan, Joanna Colosimo & Keli Wilson, DCI Consulting Group