For several years now, I have been conducting an ongoing study of OFCCP statistics and the impact on the contractor community. The most recent results are based upon the review and analyses of OFCCP closed compliance activity between FY 2014 through FY 2018 (as reported as of 7/21/2018) and do not address the compliance readiness of the entire federal contractor community who may have an open OFCCP compliance activity (evaluation or complaint investigation) or are not under review by the OFCCP. The source of data relied upon for the study include the raw data from the DOL Enforcement Database and OFCCP by the Numbers.
In 2010, the U.S. Department of Labor released the DOL Enforcement Database and subsequent has released a number of areas to the public that in the past, the only way such information was available was for such parties to submit a written request through the Freedom of Information Act (FOIA). Today, much of this information is available online to the public. Most recently OFCCP released the Corporate Scheduling Announcement Letter (CSAL) Lists and Scheduling List available on OFCCP’s website unless such information falls within one of the nine exemptions and three exclusions contained in the statute.
OFCCP statistics tell us contractors are not prepared and in fact there is an increase in the percentage of contractors being found in non-compliance. What we found is that in approximately 17.3% of all closed compliance activities (compliance evaluations and complaint investigations), contractors are found in non-compliance with one or more obligations. The percentage of Supply and Service contractors being found in non-compliance is at an all-time high based on statistics through the FY 3rd quarter at 30% as compared to 11.4% being found in non-compliance in FY 2014. The construction industry by far has the highest rate of overall non-compliance ranging from 51.9% in FY 2018 (as reported as of 7/21/2018) to 76.4% in FY 2014.
Discrimination findings are found in less than 3% of all closed compliance evaluations and complaint investigations. We noted that discrimination findings are on the rise since FY 2015, with pay discrimination being found in 21.7% (FY 2015) – 40.4% (FY 2017) of all discrimination findings. Other forms of discrimination including hiring, promotion, termination, accommodation and harassment were found in 59.6% (FY 2017) – 78.2% (FY 2015) of all discrimination findings.
Monetary settlements were at the highest in FY 2017 at $23,910,884, with the lowest number of class members at 11,653. As part of our study, we have reached out to OFCCP for an explanation on how the monetary settlement in FY 2017, were calculated. Over the years, OFCCP has periodically included annualized salary for not only alleged victims of discrimination but also have included annualized salary in situations where the contractor was cited with a lack of good faith effort or where there were placements where the contractor was previously found to have inadequate Action Oriented Programs to recruit in areas where there was an obligation to do so. We continue to wait for a response from the OFCCP.
The highest percentage of groups affected by OFCCP’s alleged findings of discrimination include, in the following order: Blacks – 27.9% (FY 2017) and 63.6% (FY 2015); Females – 17.7% (FY 2016) and 33.4% (FY 2018); Other (Males and/or Whites) – 4.2% (FY 2015) and 30.7% (FY 2016); Asians – 0.8% (FY 2016) and 22.9% (FY 2017); Hispanics less than 1% (FY 2015) and 6.0% (FY 2014); Native American Indians, Protected Veterans and Individuals with Disabilities less than 1% in any given fiscal year. For full details see Figure 8.
The period of this review shows OFCCP concluded 9,872 compliance evaluations and 598 complaint investigations. A more detailed analysis of this FY 2014 through FY 2018 (as reported as of July 21, 2018), Long-Term Trends (FY 2018 as compared to FY 2014), and Short-Term Trends (FY 2018 as compared to FY 2017) show the percentage of Conciliation Agreements and Financial Agreements are on the rise.
A review of the case closures during the period of this study shows the SWARM Region had the highest percentage of Notice of Compliance (88%); the Mid-Atlantic Region had the highest percentage of Conciliation Agreements (20%); and the SWARM Region had the highest percentage of Financial Agreements (3%). All regions had Consent Decrees except the Mid-Atlantic Region. Consent Decrees were less than one percent in any one region.
Do all industries face the same challenges? Absolutely not! As we take a deeper dive by industry, we must recognize that the construction industry is by far the industry most challenged by OFCCP requirements, due in part because of the requirements and persons usually responsible for the affirmative action steps of that industry are typically outside of HR. The study shows the NAICS1 Industry Codes affected in Figure 3. Of the 9,872 closed compliance evaluations, there were 139 or 1.4% that either had no industry classification or an invalid NAICS code assigned that are not included in Figure 4.
The study shows Federal contractors and subcontractors continue to have some of the same technical challenges as found in earlier years: Recordkeeping, Recruitment, Written AAP, Past Performance, Compliance Other (formerly known as Denial of Access, changed in 2013), as well as allegations of discrimination in compensation (pay), hiring, placement, promotion, termination, and harassment.
Not all industries are found to have the same level of challenges. The number 1 violation seen for most industries is Recordkeeping, except for the Construction, Real Estate and Rental and Leasing, and Educational Services – Other Technical & Trade Schools, where Recruitment is the number 1 violation.
Every industry listed in Figure 7, has been cited with one or more forms of discrimination, except the following industries who have had no findings of discrimination: 1) Mining, Quarrying, Oil, and Gas Extraction; 2) Educational Services – Other Technical & Trade Schools; and 3) Arts, Entertainment and Recreation.
OFCCP statistics tell us contractors are not prepared and in fact there is an increase in the percentage of contractors being found in non-compliance in technical violations and in discrimination findings. Based upon a review of OFCCP Statistics between FY 2014 and FY 2018 (as reported as of 7/21/2018), the data tells us that in approximately 18.1% of the closed compliance evaluations, organizations were not prepared. Recordkeeping and Recruitment continue to be among the top two violations most cited.
OFCCP has defined non-compliance as a contractor’s failure to adhere to the conditions set out in the contract’s equal opportunity clauses and/or the regulations implementing those clauses (41 CFR Chapter 60) and/or failure to correct violations. When a contractor is found in violation of one or more of OFCCP regulations, the contractor must enter into a Conciliation Agreement to resolve technical violations and where discrimination is alleged, in instances where the contractor is unable to refute OFCCP’s findings, the organization will be required to enter into a Conciliation Agreement with a financial component, otherwise known as a Financial Agreement, to resolve the violations. In cases where the OFCCP and the contractor are unable to resolve the violations (technical and/or discrimination) OFCCP will seek enforcement that may result in a Consent Decree. The ultimate sanction that can be imposed is debarment. When an organization is debarred, the organization is prohibited from doing business with anyone who has a Federal contract or subcontract.
The Government Accounting Office (GAO) Report of September 2016, states that in 2015 almost 85% of the federal contractors selected for a Supply and Service Compliance Evaluation were not prepared and failed to submit their affirmative action programs within the 30 days required by the regulations. Since January 2018, OFCCP has issued a number of Directives in response to the recommendations made in the GAO report with more guidance forthcoming from the OFCCP in the areas of: Focused Reviews, Contractor Recognition Program, Affirmative Action Program Verification Initiative, etc. This is a reminder that OFCCP regulations call for contractors to submit a Program Summary (41 CFR §60-2.31), that has never been implemented.
When entering into a Federal contract or subcontract, such contractors agree to:
Further, the Company agreed to the EEO Clause in Government Contracts:
Since Recordkeeping and Outreach/Recruitment continue to be among the top two violations, following are things that could trigger such violations.
Where adequate records are not maintained, enforcement agencies such as OFCCP can infer wrongdoing, which can include allegations of discrimination.
Affirmative action programs (AAPs) are more than a paperwork exercise! Organizations should not wait until they receive a CSAL or scheduling letter from the OFCCP to review and implement their AAPs. The AAP and associated statistical analysis tell a lot about an organization e.g., demographics of the workforce, where demographic groups are and where they are not, the demographics of the organization’s historical employment decisions to include recruiting efforts, who is hired and not hired, promotions, terminations, compensation practices, etc. The purpose for doing the AAPs is not just for OFCCP, but to provide the organization an opportunity to effectively manage their EEO and affirmative action obligations and take steps to correct areas of concern, e.g., underutilization, compensation disparities, selection decision disparities. Having a disparity of any type does not automatically mean discrimination has occurred but warrants further investigation to determine the cause and the effect.
As the saying goes, what is not measured, cannot be managed!
1. The North American Industry Classification System or NAICS is used by business and government to classify business to classify business establishments according to type of economic activity (process of production) in Canada, Mexico, and the United States of America.
2. Executive Order 11246, as amended and Section 503 of the Rehabilitation Act of 1973, as amended – $50,000 contract and 50 or more employees; Vietnam Era Veterans Readjustment Assistance Act of 1974, as amended (VEVRAA) – $150,000 contract and 50 employees.