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July 2013

The Myth of OFCCP’s Debarment Authority:
Another Great Urban Legend Skewered

OFCCP Director Pat Shiu has garnered some flattering and critical (both) press coverage for her recent speech to the annual meeting of The National Employment Lawyer’s Association (NELA), one of the country’s leading trade associations for Plaintiff Employment Lawyers. (Note: NELA is not to be confused with NELI – the National Employment Law Institute, which many believe, is the country’s leading non-profit employment law training institute. Ethics Alert: I sit on the Board of Directors of NELI.)

Director Shiu’s speech is on OFCCP’s website at this link:

While many things caught my eye in this major speech, the statements that leaped off the page at me were these two as Director Shiu, an accomplished civil rights litigator, was describing to the NELA membership OFCCP’s conciliation mission and its litigation “sanctions”:

  • “Voluntary compliance is always our goal.

    But in those cases where we find egregious violations of the law and cannot come to a mutually agreeable resolution, we go to court. And we almost always win.

    In the courtroom, we not only seek out remedies, but we also ask to debar bad actors from being federal contractors any further. This is a step we rarely take, but it is important to note that debarment is a powerful tool that OFCCP can wield to ensure employers comply with the law.”

NOTE: “Sanctions” are different from “remedies” and are available to OFCCP only because it is a federal contracting agency. (OFCCP is not truly a civil rights agency: it carries out its federal contracting mission to help the federal government procure the goods and services it needs by breaking down barriers to employment so as to increase available labor and drive wages down, as a result, making goods and services cheaper to the federal government. The EEOC and state human rights agencies, for example, do not enjoy “sanctions” authority…just remedial authority.)

“Sanctions”, in government contract law, means “debarment”. Debarment may take several forms: cancellation of existing contracts, cancellation of future contracts or cancellation of progress payments under an existing contract. Sanctions are different from financial “remedies” which are available to recompense Title VII violations (including back pay, interest, front pay, etc.).

Here is OFCCP’s debarment authority as taken from Executive Order 11246:

Subpart D–Sanctions and Penalties

Sec. 209. (a) In accordance with such rules, regulations, or orders as the Secretary of Labor may issue or adopt, the Secretary may:

* * * *

(6) Provide that any contracting agency shall refrain from entering into further contracts, or extensions or other modifications of existing contracts, with any noncomplying contractor, until such contractor has satisfied the Secretary of Labor that such contractor has established and will carry out personnel and employment policies in compliance with the provisions of this Order. (Emphases added). See Subpart D–Sanctions and Penalties at Sec. 209 (a) (6) of Executive Order 11246.

While Director Shiu is correct about OFCCP’s litigation record, in general, almost all of OFCCP’s court cases, however, involve only access to data issues, and not unlawful discrimination. In fact, I can’t recall a discrimination case OFCCP has tried to judgment in over 20 years, although it has filed a small handful of cases raising substantial discrimination law claims which the parties settled before trial.

The larger issue of interest is Director Shiu’s statement that “…debarment is a powerful tool that OFCCP can wield to ensure employers comply with the law.” Sadly for OFCCP, debarment is a toothless tiger, and always has been. Were I still working at OFCCP, I might have stood before NELA and asked for its support to both obtain more budget to upgrade OFCCP enforcement processes and personnel and to thereafter amend the Executive Order to provide meaningful sanction authority for OFCCP.

Consider these three observations:

  • In almost 50 years, and after hundreds of thousands of audits, OFCCP has presided over the debarment of only approximately 65 contractor debarments since 1965.
  • All approximately 65 debarments were ones the contractors sought. All OFCCP debarments are voluntary, NOT punishments for failed contractor compliance. Only contractors may debar themselves; not OFCCP.
  • As noted discrimination law expert David Copus first explained it to me over 30 years ago:
    • “OFCCP debarment is the administrative equivalent of judicial civil contempt.”

What a remarkably elegant and perfect description of debarment, OFCCP-style…at least so long as one understands what judicial civil contempt is and how it is different from judicial criminal contempt.

Civil contempt: We are taught in law school that when a Judge holds someone in “civil contempt” by placing him/her in jail, the violator “has the keys to the court house door”. That is, the violator only has to comply to “purge the contempt” – to end the punishment and get out of jail. Civil contempt only creates an incentive for the violator to change habit and comply. The intent is NOT to punish, but to incent future voluntary compliance with the law.

Here is what a few OFCCP case decisions have said about debarment OFCCP-style and which David Copus has recently collected in preparation for this October’s NELI Affirmative Action Briefings around the country. These case decisions are not aberrational. There are more OFCCP cases which so hold, and no cases to the contrary:

  • Uniroyal, Inc. v. Marshall, 482 F. Supp. 364, 375-76, (D.D.C. 1979): Prohibiting debarment as punishment if contractor complies with final order.
  • First Alabama Bank, N.A. v. Donovan, 692 F.2d 714, 722 (11th Cir. 1982): Prohibiting debarment if contractor complies with final order. “Clearly, the purpose of debarment is limited to encouraging compliance and is not intended for use as punishment for non-compliance.”
  • Beverly Enterprises, Inc. v. Herman, 130 F. Supp.2d 1 (D. D.C. 2000): The “purpose of sanctions under E.O. 11,246 is to encourage compliance, not to punish. Therefore, the court holds that the defendants may not debar the plaintiff unless the plaintiff fails to comply with the Board’s final order within 30 days from the date that the Board issues its final judgment.”
    • – Ethics Alert: I represented Beverly Enterprises. (OFCCP lost the case in federal District Court, by the way, when the Chief Judge of the federal District Court for the District of Columbia found that OFCCP had failed to prove that Beverly Enterprises (the country’s then largest nursing home company comprised of 676 nursing home companies) was a “single entity”. Thus, the non-federally involved Beverly nursing home which OFCCP wished to audit was not found to be a single-entity with another Beverly Enterprises nursing home which had signed a federal contract to provide nursing home services to the Veterans Administration.)

Criminal contempt: Most federal contracting sanctions outside of OFCCP are punitive in nature. That is, those sanctions are punishments (usually in the way of financial fines or penalties) for violations of federal contracting rules. These are meaningful sanctions for past misconduct, but the Congress only accords such important punishment authority to highly trained federal contracting agencies. Absent substantial training and upgrading of OFCCP enforcement procedures, it is unthinkable that the Congress would authorize OFCCP to exact punitive sanctions from federal contractors for affirmative action violations.

OFCCP recently learned, again, the limits of its debarment authority in the cases of OFCCP v. USSA (Portage, Indiana and Milwaukee). USSA is a security guard company which had a single federal contract for only $150,000 but suffered notice of 41 OFCCP audits. In these companion cases, filed together before a U.S. Department of Labor Administrative Law Judge and decided together, OFCCP sued USSA to compel access to conduct the audits when USSA refused to allow OFCCP to audit the last 19 establishments OFCCP had scheduled for audit. (Note: OFCCP only sued as to two of the 19 establishments.) After almost two years of failed conciliation efforts and discussions about staggering the audits in a way satisfactory to USSA, and the ensuing litigation, USSA agreed to comply, a week before trial, and tendered AAPs and other documents in response to OFCCP’s audit Scheduling Letters for Portage and Milwaukee. While OFCCP wanted to debar USSA, it found it could not do so since USSA had complied with OFCCP’s regulatory authority. So, USSA immediately thereafter moved the court to dismiss OFCCP’s complaint, which the Court did. The case was ended without economic fines or punishment and USSA proceeded to audit, as OFCCP had hoped two years before when it issued the at-issue audit Scheduling Letters. (Ethics Alert: I represented USSA.)

Said another way, the only way OFCCP can cause debarment to occur is if the contractor refuses to comply or wants to be debarred.

To give meaning to Director Shiu’s statement that “…debarment is a powerful tool that OFCCP can wield to ensure employers comply with the law”, I have noticed often through the decades that many federal contractors do not understand that debarment is not punitive and fear that if they resist OFCCP that the company will be debarred. [Indeed, I defended PeopleSoft Corporation in 2000 in a five month state court wrongful termination/whistle blower jury trial in Oakland, California based on this very theory. The Plaintiff employee’s argument in that case was that PeopleSoft fired her because PeopleSoft management feared she would “blow the whistle” about alleged employment discrimination during an in-progress OFCCP audit and cause the company to be debarred from federal contracting. Note: The jury found PeopleSoft had not engaged in unlawful employment discrimination.] Resistance to OFCCP has never caused a federal contractor to be debarred in OFCCP’s almost 50 year history so long as the contractor complies after any loss: i.e. deliver the AAP to OFCCP (if it is decided that the contractor must indeed deliver AAPs to OFCCP), allow OFCCP onsite (if it is indeed decided in the litigation that OFCCP is so entitled to come onsite) or pay the back pay (if the Court indeed finds that the contractor engaged in unlawful employment discrimination). Punitive debarment will not happen/cannot happen absent change to OFCCP’s basic sanction authority.

There is much much more to a full understanding of OFCCP’s web of regulatory authority, or lack thereof, beyond just the debarment story. Without letting too much out of the bag, David Copus assures me he is going to reveal at the NELI Affirmative Action Briefing this October some fundamental and counter-intuitive limits on OFCCP’s audit and regulatory authority most OFCCP practitioners (and OFCCP) have long forgotten since the days of OFCCP v. The Harris Bank (1981). The name of that story will be: Back To The Future: The Frito-Lay Litigation Threat To OFCCP’s Audit And Enforcement Authority.




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