As President Obama’s time in office comes to an end, it is becoming clear that a lasting piece of his legacy will be the blending of technology and government. Starting with his 2008 presidential campaign, which embraced digital tools such as Facebook, text messages, podcasts, and “big data” analytics like no candidate had done in the past, it became clear that President Obama would bring to the table a strategic focus on data and technology.
That view has permeated his presidency – nowhere more so apparent than in increasingly data-based initiatives of the federal enforcement agencies. The Equal Employment Opportunity Commission’s (EEOC) top priority is investigating and eradicating systemic discrimination. How is it doing so? By focusing on employer data and data systems to build large classes out of individual claims of discrimination. Indeed, EEOC’s position rests on the premise that “for every person who files a claim of discrimination, there are dozens or even hundreds more who are afraid to come forward, but who can be identified and remedied through analysis of the employer’s data.”
OFCCP seems to have also adopted this philosophy, as the Agency is becoming adept at leveraging big data and technology to better find and eradicate group-based discrimination. OFCCP’s motivation for doing so may be based purely in altruism, but there is evidence that budgetary reasons are also driving the data-based initiative. For its 2016 fiscal year, OFCCP asked Congress for a budget increase of $7.2 million to expand and increase specialization in its investigative capacity. Congress not only rejected OFCCP’s requested increase, but also cut Agency funding by $1 million. That $8.2 million swing represents more than 7.5% of OFCCP’s total 2016 budget.
When private sector companies face budget crunches, they seek to leverage efficiencies to “do more with less.” OFCCP seems to be attempting the same, and it is doing so by focusing on using big data and technology to get smarter and more wide-reaching in its investigatory efforts.
In view of the Agency’s increased focus on data, there are two things every federal contractor needs to know to properly and proactively prepare for OFCCP audits:
1. OFCCP is Using its Cloud-Based System to Look Beyond a Single “Establishment”
Several years ago, OFCCP invested in developing an internal cloud-based data system for recording and tracking compliance reviews. The goal was that, upon being assigned to an audit, Compliance Officers could research prior or ongoing audits of the employer’s other locations to identify any systemic compliance issues.
Federal regulations only permit OFCCP to conduct compliance reviews by “establishment” (think physical street address). They do not permit audit of company-wide practices across establishments. Be that as it may, we have seen OFCCP combine findings of hiring discrimination from multiple establishment-specific audits and demanding a “global” settlement. This is significant for two reasons. First, as new audits are initiated, Compliance Officers are being “tipped off” about issues that were discovered in other audits that may be company-wide – making it far easier for the Compliance Officer to find the issue and far harder for the employer to defend the incident as being isolated to a “one off” situation. Second, OFCCP is showing that it can (and will) coordinate on a national level to take potentially isolated findings and grow them into national, multi-establishment issues, leading to bigger settlements and more eye-catching headlines.
The Agency is coordinating the investigation of compliance reviews of multiple establishments of the same contractor. This is true wherever the reviews are being conducted. In fact, OFCCP is holding meetings of nationwide staff who are working on multiple compliance reviews for the same contractor across Districts and Regions – and they’re comparing notes. We’ve even received requests early in audits that use client jargon from internal policies and compensation related data, which the Compliance Officer could not otherwise know at an audit’s onset.
What should employers do to prepare? Employers must realize if OFCCP finds an issue in an audit of one location, the Agency will likely assume that same issue exists in every other location. Even if the original audit has closed, employers must assume in subsequent audits that Compliance Officers are pre-dispositioned to believe the same issue exists in every other location because they are reading about it on the cloud-based system. For instance, if OFCCP issued a technical violation for inadequate outreach for individuals with disabilities after an audit of your California location, and OFCCP is now auditing your New York and Michigan offices, you should assume those audits will include a deep dive into your disability outreach for open positions in those locations.
In short, in this age of cloud-based information sharing, employers must make sure they are taking post-audit steps to address on a company-wide scale any issues/violations found by OFCCP in their single establishment audits.
2. OFCCP is Diving Deeper
Every year, OFCCP is required to submit a request for budget to Congress along with a report justifying its request. In the past, OFCCP has touted the number of audits commenced and closed as evidence of the great work it was doing to investigate and eradicate discrimination. In 2015, however, OFCCP was neck-deep in a number of lofty initiatives, including training Compliance Officers on a new scheduling letter and implementing new rules for protected veterans and individuals with disabilities. As a result, the number of audits opened and closed in 2015 dropped significantly.
OFCCP is therefore taking a different approach in its latest message to Congress. In its 2017 budget justification (submitted in 2016), OFCCP attempts to excuse its lack of measurable results in 2015 by claiming the Agency has adopted “intentionally relaxed case closure production targets to focus efforts on its robust open inventory of systemic discrimination cases.” Instead of counting closed audits, OFCCP shifted the focus to the quality of each audit – to ensure discrimination is not skirting its Compliance Officers’ hasty investigations.
Moreover, OFCCP has “entirely eliminat[ed] case closure targets” in favor of its “enforcement priorities,” including complex systemic compensation cases. According to OFCCP, this new approach resulted in “record highs in the percent of cases without major deficiencies” and in the percent of cases without Agency errors in 2015. And, going forward, OFCCP reported that it intends to “continue this new strategy in order to maximize case quality and prioritize larger systemic discrimination cases with the potential for helping more workers and thereby realizing even larger total back pay recovery amounts.”
In other words, rather than conducting as many audits as possible, OFCCP is going to focus its resources on taking deeper dives in less audits. It has even set a goal that 30% of its discrimination findings be compensation related. This is not good for employers (unless of course, it allows them to avoid audits entirely). In the past, OFCCP used to pressure Compliance Officers to process audits quickly – which led to many Compliance Officers rushing mere surface reviews of AAPs to simply “check the box” on several areas of compliance. Now, according to the 2017 budget justification, Compliance Officers are being instructed to slow down and carefully review what lies beneath the surface of the AAP reports. In audits, this has already led to an increased number of requests for information, and requests for follow-up information based on responses, and requests for follow-up information based on those responses, and so on and so forth.
What can employers do to prepare? When preparing for audits, employers can no longer afford to leave any stone unturned. It is now more important than ever that employers carefully review all aspects of compliance, including taking their own proactive, deep dive data analyses before submitting anything to OFCCP.
In sum, employers with multiple compliance reviews should not assume its audits are being conducted independently or in isolation. They are being handled in tandem; each one informs the others. Moreover, employers can no longer assume OFCCP will not take the time to turn over every stone in search of potential issues in audits.
With the backdrop of OFCCP’s recent bad press and Congressional heat for failing to produce results, employers are wise to be on alert as the President’s final term draws to a close. OFCCP may push for more violations (and ultimately settlements) to justify its course, validate its priorities, and present new opportunities to highlight that it is winning “the good fight.” These violations may take the form of hiring discrimination or compensation administration – data-driven priorities for both the Agency and Administration.
So, be prepared. Taking the President’s lead, OFCCP has become a far more strategic enforcement agency. Our approaches to audit defense should recognize this trend and follow suit.
To learn more about OFCCP compliance and strategic audit defense, best practices in equal employment opportunity, and EEO pay analyses, contact Scott Pechaitis at 303 876 2201 or firstname.lastname@example.org or Chris Patrick at 303 876 2202 or email@example.com.
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Copyright © 2016 Jackson Lewis P.C.