OFCCP Announces Notice of Proposed Rulemaking Standardizing Procedures for Evaluating Employment Discrimination Claims

OFCCP ended 2019 by releasing a notice of proposed rulemaking (NPRM) attempting to codify procedures the agency uses to resolve alleged violations of affirmative action laws under the agency’s jurisdiction. The regulation would establish differing standards for anecdotal evidence based on strength of presented statistical evidence, solidify the importance of practical significance, and clarify the procedures surrounding two formal notices, the Predetermination Notice (PDN) and Notice of Violation (NOV).  Finally, the proposed regulation updates the citations for the term “Deputy Assistant Secretary” to “Director” to reflect the current title of the head of OFCCP.

Changes in Evaluation Procedures and Standards

Most notably, the proposed rule advances the following changes to evaluation procedures.

1. OFCCP has outlined that in the presence of a 2 or more standard deviation statistical finding and “nonstatistical” evidence, the agency would move forward with formal charges towards the contractor. In the absence of “nonstatistical” evidence, a statistical finding of 3 or more standard deviations would need to be found to move forward with further action. The rule makes an exception for employers with “similar patterns of disparity in multiple years or at multiple establishments of a federal contractor.” Footnote 11 expands,

“that for multiple findings of discrimination without nonstatistical evidence present at a given contractor establishment, or at multiple facilities of the same contractor, OFCCP may issue a PDN where at least one finding is supported by statistically significant evidence at the 99 percent confidence level and may include additional findings that are supported by statistically significant evidence at the 95  percent confidence level (i.e., two standard deviations, or a p value of 0.05 or less) or above.”

The proposed rule does not offer guidance for how to combine years of data or sites in statistical analyses.

  2. OFCCP will conduct regression analyses in the course of investigations.

“OFCCP conducts regression analyses of hiring and compensation outcomes which control for major, measurable variables, to determine the probability of hiring and compensation outcomes occurring by chance.”

This marks a departure from past precedence where OFCCP formerly included regression within the toolkit of statistical tests available to its statisticians to evaluate claims of discrimination, but did not require regression analyses to prove a claim.  It is not uncommon for OFCCP or contractors to utilize regression analyses in compensation, but it is not as common to utilize logistic regression for hiring related claims in current compliance practice.

3. OFCCP formally stated commitment to practical significance, or the concept that claims of discrimination must both be statistically significant and reflect meaningful harm. They note:

“To determine whether the evidence of discrimination is sufficient to warrant a PDN, OFCCP considers whether an employment or compensation disparity identified during the compliance evaluation is both practically and statistically significant.”

Footnote 6 goes on to refer to the recent FAQ on practical significance.  This inclusion is notable and speaks to Director Leen’s public commitment to focus agency efforts on the worst offenders.

While the FAQ is mentioned, practical significance is not directly defined in the proposed regulation. The authors note that an FAQ is considered sub-regulatory in nature.

Clarifying Processes for PDNs, NOVs and Conciliation Agreements

The proposed rule also clarifies practices surrounding PDNs, NOVs, and, to a lesser extent, conciliation agreements.

Under the proposed regulation, OFCCP cannot issue an NOV for alleged discrimination unless it first issues a PDN; however, it can forgo a PDN and only issue a NOV for material violations which do not include allegations of discrimination.

When determining whether to issue a PDN, the OFCCP must consider whether they have found:

  1. A statistical disparity is “both practically and statistically significant”;
  2. Whether, when required, corroborating non-statistical evidence “demonstrates an intent to discriminate”; and,
  3. Whether the statistical indicator is at or above 3 standard deviations (p value less than .01).

The proposed rule highlights that contractors may enter directly into a conciliation agreement with the OFCCP, however does not identify incentives to do so outside of expedited conclusion to compliance evaluations.

Implications for Contractors

OFCCP Director Craig Leen commends the proposed regulation as providing greater transparency for federal contractors and offering “greater certainty” about what to expect during compliance evaluations. Significantly, unlike FAQs or Technical Assistance Guides, such as those released by the agency on higher education or practical significance earlier this year, a NPRM, if approved, is more durable in nature, and would require formal regulation to be removed by subsequent administrations.

OFCCP is currently soliciting comments about the proposed rule. Comments can be submitted online or by mail for consideration by January 29, 2020.

By Susanna Vogel, Associate Consultant, and Tyler Wurtz, HR Analyst at DCI Consulting Group

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