By: Cassie Alfheim
We conclude our blog series regarding the Office of Federal Contract Compliance Program’s (OFCCP) Technical Assistance Guide (TAG) for supply and service contractors and subcontractors by diving into OFCCP’s compliance review process and types of audits. We will finish this series by describing the final sections of the TAG: Complaint Investigations, Confidentiality of Records, and Compliance Assistance.
This is the final of DCI’s 14-part OFCCP supply and service TAG series; you can find each of these posts on our blog here.
Compliance Reviews
Desk Audit
All OFCCP compliance reviews begin with a desk audit, where OFCCP personnel review the documentation, reports, and data a contractor submitted in response to the scheduling letter. During this phase of the audit, the OFCCP Investigator (formerly referred to as a Compliance Officer) does a broad, initial review of:
- Organizational structure,
- Completeness of the submitted affirmative action programs (AAPs) and supporting documentation,
- Personnel processes and procedures described,
- AAP goals and actions taken to meet them, and
- Areas of potential discrimination requiring more in-depth investigation.
At any point during the desk audit process, OFCCP may circle back to the contractor requesting additional information, data, or clarification. These requests are commonly referred to as “Requests for Information” (RFI). The TAG describes the areas OFCCP will analyze as it continues its desk audit.
Personnel Activity Analysis
Using the reports provided in response to the scheduling letter, OFCCP performs preliminary statistical analyses on personnel activity from the reporting period (i.e., applicants, hiring, promotions, terminations, etc.). The TAG indicates that OFCCP utilizes impact ratio analyses and standard deviation analyses to evaluate whether there might be adverse impact in selection rates between males versus females, minorities versus non-minorities, and specific races/ethnicities compared to other races/ethnicities.
Per the TAG, “Adverse impact is defined as ‘a substantially different rate of selection in hiring, promotion, transfer, training, or other employment related decisions for any race, sex, or ethnic group.” The TAG indicates that when OFCCP’s initial analyses result in statistically significant adverse impact, the agency will usually follow-up with RFIs for underlying data, policies or procedures, and/or requests for interviews with contractor representatives such as hiring managers or recruiters involved in the personnel activity at issue.
Hiring
When adverse impact is identified in OFCCP’s preliminary analyses of hiring, the agency will seek additional information, documentation, and underlying data to justify selection decisions made by the employer. The TAG reminds contractors and subcontractors to ensure all selection policies and procedures are clear, well-documented, non-discriminatory, and consistently applied. Clarity and consistency are integral to a contractor’s ability to defend itself if OFCCP’s findings are erroneous.
Promotions
OFCCP evaluates promotion selection rates by dividing the number of individuals who were promoted by the number of eligible individuals in the promotion pool. If those rates indicate adverse impact, the agency will request additional information and documentation, and/or request interviews with hiring managers and/or human resources personnel. The TAG provides four best practices for providing equal opportunities through promotions. These are as follows:
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- Post promotional opportunities;
- Offer counseling to assist employees in identifying promotional opportunities,
- Offer training and educational programs to enhance promotional opportunities and opportunities for job rotation or transfer; and
- Periodically evaluate job requirements for promotion.
Since the TAG was published, OFCCP has begun requesting competitive versus non-competitive data for promotions in some audits. A competitive promotion would typically be a situation where more than one candidate is considered for one opening and the most qualified candidate is selected for promotion. A non-competitive promotion would be an in-line progression step or similar non-comparative developmental movement.
Terminations
OFCCP will analyze all terminations (both voluntary and involuntary) for any adverse impact and, just as above, request follow-up documentation, data, and/or request interviews.
Compensation Analysis
The concepts involved in this section of the TAG are still relevant today, despite OFCCP’s various changes to the scheduling letter’s compensation data request, how the agency analyzes that data, and how the agency reviews contractors’ compliance with the requirement to evaluate their compensation systems.
The TAG describes how OFCCP should approach reviewing and analyzing the compensation data provided in the desk audit submission, including a reference to Directive 2018-05 which remains in effect as of this post.
The TAG also provides three key questions OFCCP is trying to answer when investigating compensation disparities:
- Is there a measurable difference in compensation on the basis of a protected class?
- Are the differently compensated groups of employees comparable under the contractor’s wage or salary system?
- Is there a legitimate, nondiscriminatory explanation for the difference?
When OFCCP is unable to answer the above questions, RFIs and requests for interviews are likely. Compensation interviews typically involve HR personnel who set compensation rates and manage compensation structures and policies within the establishment/functional unit undergoing audit.
Conclusion of Desk Audit
When OFCCP’s preliminary analyses result in statistically significant disparities, the compliance officer will request further information, interviews, and/or proceed to the on-site investigation stage of the audit.
On-Site Investigation
An on-site investigation is only conducted during audits wherein the desk audit reveals potential violations needing further investigation. As described later in this post, however, there are certain types of reviews that typically require an on-site investigation, such as Corporate Management Compliance Evaluations (CMCE), Focused Reviews, or other full reviews.
OFCCP does not do surprise visits; the on-site will be coordinated ahead of time with the contractor and a formal letter confirming the on-site will be issued beforehand. On-sites typically consist of the following: entrance conference, facility tour, required poster checks, interviews, records review, and exit conference.
During the exit conference, contractors should not expect a final outcome of the audit. The exit conference typically summarizes what happened during the on-site, any commitments made by either party, and additional requests.
Off-Site Analysis
If OFCCP receives additional information and/or data throughout the course of the desk audit and on-site stages of the compliance evaluation, the compliance officer/investigator will conduct an off-site analysis phase to reassess all data, information, interview notes, and documentation before ultimately notifying the contractor of the agency’s findings. OFCCP may send more RFIs during this stage if necessary.
Notice of Findings
If OFCCP’s areas of concern have been resolved, the contractor receives a Notice of Closing (NOC, sometimes also referred to as a Notice of Closure or Notice of Compliance) and the compliance review ends. OFCCP sometimes issues NOCs with technical violations; in this case, the violations have typically been addressed and resolved throughout the course of the compliance review.
If, after the on-site and/or off-site, OFCCP continues to have concerns that are technical in nature only, OFCCP will issue a Notice of Violation (NOV). An NOV describes OFCCP’s preliminary findings and proposed violations, corrective actions, and remedies.
If OFCCP believes it has found discrimination, the agency will first issue a Pre-Determination Notice (PDN) before issuing an NOV. The PDN provides the contractor with a final opportunity to provide additional information or otherwise explain OFCCP’s findings before engaging in the enforcement process. If OFCCP’s findings remain unchanged after reviewing the contractor’s response to the PDN, OFCCP will issue the NOV, and formally begin the enforcement process.
This section of the TAG concludes with four broad recommendations for how to prepare for compliance evaluations. OFCCP recommends contractors:
- Learn OFCCP’s regulations,
- Update AAPs annually,
- Ensure leaders within an organization are aware of OFCCP, and
- Self-assess compliance with regulatory obligations.
For more information about OFCCP’s enforcement process and usage of the PDN since the agency’s publishing of this TAG, readers are encouraged to read “Everything You Want to Know About the Revised PDN Final Rule” by DCI consultants Cassie Alfheim, Amanda Bowman, and Evan Szarenski. This resource is available to the public through SHRM and JD Supra and to DCI clients through our Client Resource Portal.
Alternate Compliance Evaluation Options
The TAG discusses the fact that OFCCP also utilizes Focused Reviews and Compliance Checks when evaluating contractors’ compliance with the agency’s regulations. Focused Reviews are focused on a specific type of employment actions (e.g., accommodations or promotions) or compliance obligations (e.g., evaluating compliance obligations regarding individuals with disabilities). Compliance Checks are recordkeeping-focused and are typically the most efficient compliance evaluations the agency conducts.
Corporate Management Compliance Evaluations
Corporate Management Compliance Evaluations (CMCE) can be some of the most involved compliance evaluations OFCCP conducts. These audits begin with corporate headquarters establishments and may continue through additional establishments or functional units as OFCCP deems necessary based on its findings. CMCEs, sometimes referred to as “Glass Ceiling Reviews,” target artificial barriers to advancement into management and leadership that qualified minorities, women, individuals with disabilities, and protected veterans might face.
Complaint Investigations
While the vast majority of OFCCP’s caseload is comprised of compliance evaluations, the agency also investigates applicants’ and employees’ complaints of discrimination against federal contractors. The TAG notes that OFCCP works in partnership with the Equal Employment Opportunity Commission (EEOC) when complainants allege Title VII based discrimination (race, color, religion, sex, national origin, or retaliation). OFCCP typically handles complaints based on veteran status or disability by itself. Complaint investigations often depend on a number of factors described in the TAG, but typically reflect much of the off-site and on-site phases of the compliance review process outlined above.
Confidentiality of Records
The TAG states that OFCCP is required to comply with strict confidentiality and security protocols when handling contractor information, including personally identifiable information. OFCCP is also bound by several laws and regulations to comply with the Freedom of Information Act (FOIA). These obligations require OFCCP to refer requests for information received from contractors to designated FOIA personnel. These FOIA personnel evaluate the request for possible exemptions, notify contractors of the request, provide contractors with the opportunity to object, and evaluate any objections before any public disclosures are issued.
Compliance Assistance
The supply and service TAG concludes with directing federal contractors and subcontractors to the many resources located on OFCCP’s website. There are regulatory documents, recorded trainings, detailed guides, frequently asked questions, and more aimed at helping contractors understand and achieve their compliance obligations.
In Conclusion
DCI is pleased to have brought the federal contracting community this series digesting OFCCP’s Supply and Service Technical Assistance Guide. If you have any questions about this series, your own organization’s compliance with OFCCP’s regulations, or find yourself in a compliance evaluation, please reach out to us – we’re here to help!
