by Brendan Cassidy, Contributing Writer
On May 8, 2012, the Department of Labor’s Administrative Review Board (ARB) held that the Office of Federal Contract Compliance Programs (OFCCP) has the authority to request Affirmative Action Plan (AAP) data for activity occurring after an initial Scheduling Letter. The ARB reversed a 2010 Administrative Law Judge (ALJ) ruling which held that Defendant Frito Lay, Inc. (Frito-Lay) did not have to comply with the OFCCP’s request for 2008 and 2009 AAP data because it was outside of the scope of the 2007 Desk Audit. The ALJ relied on the OFCCP Federal Contract Compliance Manual (FCCM) provisions, which state that the OFCCP may only look back two years from the date of the Scheduling Letter, and held that the data the OFCCP requested for 2008 and 2009 exceeded the Desk Audit’s temporal scope.
The ARB held that the OFCCP’s request for post scheduling letter data was appropriate because, 1) the OFCCP found a significant statistical disparity, and 2) the data requested for 2008 and 2009 was narrow.
1. Statistical Disparity Makes Subsequent Two Year Data Request Appropriate. The ARB used case precedent to show that a statistically significant discrepancy may demonstrate further discrimination, and that this occurs when a request for two subsequent years is consistent with a proper disparate impact analysis. However, OFCCP regulations do not indicate that desk audits were meant to extend past the Scheduling Letter. The ARB’s decision noted that Frito- Lay, “points to various FCCM provisions to argue that compliance reviews allow OFCCP only to look backwards two or more years from the Scheduling Letter.” [emphasis added]. (Note that under 60-1.12 OFCCP has a 2 year record keeping requirement) The ALJ holding stated: “Nothing in OFCCP‟s regulations, comments to its regulations, or the FCCM suggests that OFCCP intended to extend audits forward past the date that the contractor received the initial desk audit Scheduling Letter. Indeed, everything in the regulations and interpretive guidance on the regulations suggests that compliance reviews look backwards from the date the review was initiated.”
The ARB also placed a significant deal of weight on the perceived statistical disparity in this matter. In an amicus curiae brief supporting the ALJ’s decision, the Equal Employment Advisory Council stated that, “the OFCCP’s initial showing of statistically significant selection disparities adverse to women is hardly a ’strong basis in evidence‘ for concluding that unlawful discrimination existed during the 2005-2007 time period. It is entirely possible that OFCCP’s initial statistical showing relied upon incomplete or inaccurate data; used an analytical model that did not reflect the selection process used; failed to consider legitimate, nondiscriminatory reasons for the selections that were made; or was inappropriate for other reasons.”
2. Data Requested was Narrow. The ARB held that the OFCCP’s request was appropriate because the, “OFCCP’s request for 2008 and 2009 AAP data was narrow… and focused only on AAP plans and data for two years.” The ARB did not, however, elaborate on why it considered this request to be “narrow.” DCI Consulting Group, Inc.’s President, David Cohen, feels that with the ARB’s ruling we are entering dangerous territory for contractors and the OFCCP. “How could expanding the temporal scope of the audit beyond the desk audit be narrow” Cohen expressed that the two year time frame is not narrow. “What is a narrow period of time? Two years? Three? Ten? The only reason they consider this narrow is because they think they found something.”
The ARB rejected Frito-Lay’s arguments that the OFCCP’s request was inappropriate because, 1) the FCCM only provides internal guidance for the OFCCP, 2) the regulations were amended to remove the 60 day limitation on Desk Audits, 3) the OFCCP does not need to issue a final order within one year of an ALJ’s decision, 4) and a 2009 audit would have allowed the OFCCP to request the disputed data.
1. FCCM is Internal Guidance to the OFCCP. The ARB disagreed with Frito-Lay’s assertion that the FCCM provisions only allow the OFCCP to look backwards two or more years from the date of the Scheduling Letter when they find a potential discrepancy. The ARB stated, “[W]e view the FCCM as an internal manual that courts generally consider “non-binding statements of general policy” that do not provide due process rights in the public, except in unusual circumstances.” The refusal to make the FCCM binding removes restrictions on how the OFCCP ensures contractor compliance. Cohen asks: “Why does the OFCCP have a 2 year guidepost? There has to be parameters in terms of scope of the audit. If not, what is the definition of an indicator; it is just a sniff test.” Moreover, federal contractors are going to be lost as to what rules apply. Cohen also asks whether this will backfire against the OFCCP, and whether contractors can use this to their advantage. “Since the ruling says the OFCCP does not have to play by the rules, can a contractor do the same thing and say this is not binding, it is a regulation document.”
2. Removal of the 60 Day Desk Audit Limitation. The ARB interprets the elimination of the 60 day limitation on desk audits as evidence that audits might last longer. The ARB’s holding took the removal of the two month limitation, and extended the length of audits at least two years. Moreover, as Cohen points out, “the ARB incorrectly interpreted the removal of the 60 day limitation. It was extended to give the OFCCP more time, not to allow them to collect more data.” Furthermore, as the Equal Employment Advisory Council stated in their amicus curiae brief, “Prior to 1997, 41 C.F.R. § 60-60.7 provided that compliance reviews should be completed within 60 days. When that provision was deleted in 1997 along with the remainder of the Part 60-60 regulations, contractors were assured by OFCCP in the preamble commentary that they need not be concerned about the 60-day time frame for completion of compliance evaluation.” The Equal Employment Advisory Council cited this portion of the preamble, “ Contractors should not be concerned that the elimination of the regulatory provision in § 60–60.7 will mean an end to established schedules for completing evaluations of contractor compliance. OFCCP’s subregulatory guidance will continue to reference the 60-day time frames even after the final rule is effective.”
3. No Consequence for Failure to comply with One-Year Ruling Time Period. 41 C.F.R. states that, “Administrative enforcement proceedings shall be conducted…[p]rovided, [t]hat a Final Administrative Order shall be issued within one year from the date of the issuance of the recommended findings, conclusions and decision of the Administrative Law Judge, or the submission of any exceptions and responses to exceptions to such decision (if any), whichever is later.” Since the last filing was on October 1, 2010, Frito-Lay argued that the ARB no longer had the authority to render a decision because over a year had passed. The ARB rejected this argument stating, “The regulation at 41 C.F.R. § 60-1.26(b)(2) does not specify a consequence for failure to comply with the one-year time period and thus, such period is directory not jurisdictional.” Since the regulations are not binding on the OFCCP if there is no consequence for failing to comply with a deadline, Cohen asks whether contractors can do the same. “Regulations state that within 120 days of commencement of federal contract, you have to implement an AAP. It does not say what happens if you don’t. Does this really mean 120 days? Seems like a contractor can apply the same logic and do the AAP in 180 days and that is ok. It does not say contracts will be pulled or debarred. It does not say what happens if you don’t comply.”
4. OFCCP Could Have Performed a Desk Audit in 2009. The ARB points to Frito-Lay’s concession that a new desk audit could have been performed in 2009, “which would have involved production of the exact same data being withheld in this case.” Cohen does not feel this argument makes sense. “The ARB says, what is the big deal? Another audit could have been performed in 2009. But, the OFCCP has no discretion on whom, and when they audit a company. Audits through the federal contractor electoral system have to be administered under a administratively neutral system under the Fourth Amendment, and the OFCCP cannot audit you within 2 years of the closing of the audit. So to say they could have arbitrarily audited and then got the data, that is untrue. They got that that wrong.”
The ARB’s decision could have serious consequences for federal contractors. Contractors can no longer rely on the FCCM. Guidance in the FCCM that were once considered binding on how the OFCCP handled audits are now discretionary. Contractors should be especially wary of any regulation that does not have a consequence for the OFCCP’s failure to comply. According to the ARB, there is no consequence if a regulation does not state one.
Contractors should also exercise caution, avoiding anything that might be interpreted as a disparity. Based upon the ARB ruling, if the OFCCP finds potential evidence of a statistical discrepancy it can request AAP data for at least two years after the scheduling letter. Contractors would then have to spend more time and money to comply with the extended desk audit that has no set end date.
Cohen points out that this ruling could backfire on the OFCCP. “If the OFCCP asks for three years of data and they see discrimination for one of those years, the contractor can say, what about the other two years?”
Cohen says that he used to tell clients that if they had not heard anything about their audit status for a few years, to not start asking questions. “I used to tell contractors to let sleeping dogs lie. If an audit goes dark don’t wake up the sleeping dog.” However, Cohen does not feel this is good advice anymore. “If an audit goes dark, maybe because a compliance officer quit, and two years later a new compliance officer shows up, the new compliance officer can tell the contractor the data they have is old and to send them new data. My advice is to stay on top of audits, and get them closed as quickly as possible.” Cohen warns that the ARB’s decision could be problematic for contractors. “If the OFCCP looks at the data and finds a statistical discrepancy, they may say settle with us now or we will drag our feet and keep asking you for data over and over again. Look at the Bank of America case. That lasted 10 years.”
1. the OFCCP’s FCCM and public commentary accompanying implementation of the current regulations, “constitute binding norms from which OFCCP is not free to deviate under the Administrative Procedure Act (APA) or the Due Process Clause of the Fifth Amendment;
2. the OFCCP violated the Fourth Amendment when they requested additional AAP data when there was no rule or regulation allowing them to request the data, and there was no evidence of a violation;
3. the ARB violated the APA by refusing to apply the plain language of 41 C.F.R. § 60-1.26(b)(2), and close the case when the ARB failed to issue an order within the regulation’s time restraints;
4. the OFCCP’s three year delay between issuing the Scheduling Letter and filing a complaint was unreasonable and violated 5 U.S.C. § 555 (b); and
5. any potential discrimination claims are time barred under Title VII, the APA, or 41 C.F.R. § 60-1.21.
* This article is not legal advice and should not be considered as such. The author is a student at the George Mason University School of Law, not an attorney.