OFCCP Audit Case Administrative Law Judge Rules on Key EO 11246 Issues

Administrative Law Judge (ALJ) Larry Merck issued an order in May 2020 ruling against WMS Solutions, LLC (WMS) on a majority of violations filed by the Office of Federal Contract Compliance Programs (OFCCP) in June 2015. WMS, based out of Baltimore, Maryland, operates as a staffing agency primarily for construction contractors for services related to demolition work as well as asbestos and lead removal.

The OFCCP alleged WMS violated EO 11246 by:

  1. Discriminating against White, Black, Asian, and American Indian/Alaskan Native laborers in favor of hiring Hispanic laborers,
  2. Discriminating against female laborers based on their sex and male laborers based on their race or ethnicity concerning compensation,
  3. Failing to ensure and maintain a working environment free of harassment, intimidation, and coercion at construction sites where WMS’s laborers worked, and
  4. Failing to preserve and maintain all personnel and employment records for a period of two years from the date of creating the record or the relevant personnel action.

The ALJ issued a recommended order that concluded  WMS was in violation on the first three counts listed above and accordingly ordered WMS to pay damages totaling $960,905. WMS was not found in violation of the fourth count. (Note: This is just an ALJ decision and WMS could appeal this ruling to the Administrative Review Board). The decision criteria implemented by the ALJ present a few key insights into the way in which these matters were addressed which we present below.

In his order, the ALJ notes that the legal standards developed under Title VII of the Civil Rights Act apply to cases brought under EO 11246. Because the OFCCP claims WMS intentionally discriminated against employees on the basis of sex or race, the applicable standard is one of disparate treatment, not disparate impact. What is interesting is how the ALJ frames the level of proof required to show discriminatory intent, stating that “a disparate treatment case may be proven with circumstantial evidence and need not be proved by direct evidence.”[1] Such a statement suggests that statistical evidence in the absence of anecdotal evidence may suffice to prove a disparate treatment claim. The ALJ alludes to this requirement earlier in his opinion, but asserts that simply ruling out chance as the cause of a disparity is not sufficient for statistical evidence to stand on its own. Instead, “[e]xtreme cases of statistical disparity may allow a trier of fact to find that intentional discrimination occurred without the need for additional evidence.”[2]

Rather than articulate a specific statistical threshold to define “extreme,” the ALJ suggests a sliding scale: “The more significant the statistical disparity, the less additional evidence that is needed to establish that the reason was racial, ethnic, or gender discrimination.”[3] Such a sliding scale stands in contrast to the bright line stated by the OFCCP in a Notice of Proposed Rulemaking released at the end of 2019.[4] In the Notice, the agency proposes that a statistical disparity greater than two standard deviations but less than three would require additional non-statistical evidence to issue a Pre-Determination Notice (PDN). However, a statistical disparity greater than three standard deviations requires no non-statistical evidence for a PDN to be issued.

Within this legal framework, the ALJ considers the statistical and testimonial evidence put forth by the OFCCP and concludes that the agency has made a prima facie case of intentional discrimination by WMS. Turning attention to WMS’s rebuttal of the OFCCP’s statistical evidence, the ALJ first summarily dismisses the argument that the OFCCP’s statistical analysis of WMS’s compensation practices is flawed as a result of not attributing the disparities in work hours or wage rates to a specific employment practice. Identifying such a practice is required under the disparate impact standard; however, under the applicable disparate treatment standard, the OFCCP instead must prove discriminatory intent.

Secondly, the ALJ rejects WMS’s attempt to attack the OFCCP’s regression analysis by solely identifying factors omitted from the analysis that WMS asserts could explain the sex or race disparities. The ALJ declares that WMS must move beyond “mere conjecture or assertions” and instead “produce credible evidence that curing the alleged flaws would also cure the statistical disparity.”[5] In other words, to successfully rebut the OFCCP’s prima facie case, WMS must proffer its own statistical analysis showing how the inclusion of the identified factors eliminates the statistical disparity. With no such rebuttal analysis to consider, the ALJ finds in favor of the OFCCP on the discrimination claims.

With regard to the record-retention issue, the ALJ notes that EO 11246 requires federal contractors to preserve and maintain personnel and employment records for a minimum of two years from the date the record or personnel action was created (41 C.F.R. § 60-1.12(a)).

                “. . Such records include . . . records pertaining to hiring, assignment, promotion, demotion, transfer, lay off or termination, rates of pay or other terms of compensation, and selection for training or apprenticeship…”

The OFCCP argued WMS failed to maintain applications for a majority of its applicants; did not keep applicant flow data or records related to employee experience, promotions, or demotions; and failed to have any written policies regarding compensation. WMS countered that it provided all available records to the OFCCP and argued that regulation 41 C.F.R. § 60-1.12(a) requires only record preservation, not record creation. In referencing the regulation’s specific language, the ALJ notes the covered contractor’s obligation is to preserve any records that are “made” or “kept’, but the regulation does not “impose an affirmative obligation on covered contractors to ‘create’ personnel and employment records.”[6] Thus, WMS was not found in violation of the record-retention requirement.

In sum, the ALJ’s order in OFCCP v. WMS Solutions sheds light on how such judges weigh statistical and anecdotal evidence when considering disparate treatment claims, how they may reject rebuttal arguments based on mere assertions as having little probative value, and how they consider specific language in affirmative action regulations to be critical.

By Melissa Haudek, Senior Consultant, and Murray Simpson, Principal Consultant at DCI Consulting Group

[1] OFCCP v. WMS Solutions, OALJ Case No. 2015-OFC-00009 (Recommended Decision and Order), Footnote 131 at 70.

[2] OFCCP v. WMS Solutions, supra, at 59.

[3] OFCCP v. WMS Solutions, supra.

[4] https://www.federalregister.gov/documents/2019/12/30/2019-27258/nondiscrimination-obligations-of-federal-contractors-and-subcontractors-procedures-to-resolve

[5] OFCCP v. WMS Solutions, supra, at 71.

[6] OFCCP v. WMS Solutions, supra, at 83.

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