Federal contractors doing business with the federal government must comply with the regulations enforced by OFCCP and during a compliance evaluation, they must submit all items on the scheduling letter. However, some of the proactive analyses that are conducted that are outside of the requirements of the regulations are done under the attorney-client work privilege and/or attorney-client work product. As a result, it is important that federal contractors know their rights with regard to the attorney-client privilege. More information and the origin of these two doctrines can be found at the Federal Rules of Evidence.
This concept is outlined in the ABA Model Rule 1.6 under Comment (2): “A fundamental principle in the client-lawyer relationship is that, in the absence of the client's informed consent, the lawyer must not reveal information relating to the representation.” This establishes the basis of trust under the attorney-client relationship and a violation of the ethics rule may lead to disciplinary sanctions. Furthermore, Comment (3) explicitly states: “The attorney-client privilege and work product doctrine apply in judicial and other proceedings in which a lawyer may be called as a witness or otherwise required to produce evidence concerning a client.”
The regulations implementing EO 11246, found in section 41 CFR 60-2.17 (b) (3), require Federal contractors to “evaluate… compensation system(s) to determine whether there are gender, race, or ethnicity-based disparities.” Unlike other requirements of the affirmative action plan, it is important to note that the regulations do not require that the contractor conduct an “analysis” nor do the regulations prescribe what is an acceptable “evaluation of systems.”
What does all this mean? It is clear that compensation is OFCCP’s number one priority for enforcement and that the OFCCP will conduct an analysis of your compensation systems. With that in mind, it is now even more critical to conduct these under attorney-client privilege. Conducting a proactive compensation analysis is the right thing to do, and supposedly the agency would prefer that contractors proactively analyze, identify, and correct their own compensation issues. However, if that analysis is not done under privilege, the contractor is open to unnecessary liability in that the analysis would need to be handed over if requested, for example, by OFCCP in an audit situation.
But that’s not all! DCI is seeing a trend, particularly in the pacific region, where the agency is asking for proof and confirmation that the contractor is in compliance with regulations at 41 CFR 60-2.17 (b) (3). Many contractors have responded to this request by confirming that they are in compliance but all “analyses” have been conducted under privilege. Where previously OFCCP would accept that answer, the agency is now sometimes asking contractors for “proof” that compensation analyses are done under attorney-client privilege/work product by providing a “privilege log”. This is a fairly new request, and contractors are not required to submit “privilege logs” as they are not maintained in the regular course of business nor are they a required component of the itemized listing. The only instance where these are relevant is in the process of responding to discovery requests under litigation. This requirement to provide information related to privileged documents is found in the Federal Rules of Civil Procedure (FRCP” or “Rules”) which are rules that “govern the procedure in all civil actions and proceedings in the United States district courts.”
From their perspective, the agency feels that because it’s a regulatory requirement, you have to turn over these analyses in the course of the audit. However, other legal experts contend there is no need to submit “analyses” because the regulations don’t specifically require it (see quoted requirement above). What is the incentive or motivation to proactively analyze one’s compensation systems if you’ll be asked to hand over the analytics? Instead of encouraging contractors to do what’s right, the agency is doing the opposite.
So what’s the takeaway message? Make sure you are doing your proactive in-depth evaluation of your compensation systems and if conducting an actual analysis, conduct them under privilege.
By Yesenia Avila, Associate Consultant, DCI Consulting Group