FRITO-LAY DEFEATS THE OFCCP

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

On July 23, 2010, Administrative Law Judge Larry W. Price supported Frito-Lay on an issue that is critical to all DCI clients. The facts in this case are as follows. The OFCCP selected the Frito Lay Dallas Baked Snack facility for a compliance review and sent the standard scheduling letter. Item 10 of the scheduling letter specifically asks for information pertaining to applicants and hiring. More specifically, Item 10 requests:

Data on your employment activity (applicants, hires, promotions and terminations) for the preceding AAP year and, if you are six months or more into your current AAP year when you receive this listing, for the current AAP year.

Because Frito Lay was six months or more into its plan year, it sent the required 12 months (June of 2006 through May of 2007) of applicant flow data for the annual plan and the required six months of update data (June of 2007 through December of 2007). OFCCP conducted a desk audit review and identified “adverse impact” in the supplied applicant flow data. As a result, on November 10, 2009, OFCCP requested that Frito Lay supply more recent applicant and hire data from January 1, 2008 through October 31, 2009. Frito-Lay refused and the OFCCP filed an administrative complaint.

As stated in the ALJ Price’s ruling:

The issue before the Court is whether the temporal scope of the desk audit phase of a compliance review can be extended beyond the date that the contractor received its Scheduling Letter

Short and Sweet --- the answer is NO!!!. In the words of ALJ Price:

In summary, I find that the EO, regulations, case law and the FCCM contemplate that the temporal scope of the desk audit phase of a compliance review cannot be extended beyond the date that the contractor received its Scheduling Letter. Accordingly, Frito-Lay‟s Motion for Summary Decision should be granted.

Here’s wondering if they can re-open the Bank of America case.

Some potential implications of this significant ruling include the following:

1. This ruling makes it clear that OFCCP can go back two years from the receipt of the scheduling letter. However, OFCCP cannot ask for additional data going forward once the scheduling letter has been received. This is a significant ruling for federal contractors as requests for additional data going forward have been a common practice for OFCCP in recent compliance evaluations.

2. The decision reduces potential back pay exposures in pending audits to the two year period preceding the audit notice.

3. Frito Lay cited language from OFCCP’s Federal Contract Compliance Manual (FCCM) as its justification for NOT submitting the additional data going forward. The OFCCP basically said that the FCCM is “old and outdated” and did not have to abide it. The judge thought otherwise and stuck to guidance in the FCCM. Note that OFCCP is currently reviewing and revising the FCCM, so it will be interesting to see what changes are made to relevant data-related sections.

4. It is important to note that OFCCP could open a new audit for the “post-audit” period, but that location would have to be selected again from the ‘neutral’ FCCS system