New OFCCP Federal Contract Compliance Manual Has Many Provocative Surprises:
Because OFCCP has not yet released the new “Federal Contract Compliance Manual” (“FCCM”) to the public even while the agency uses it to train its Compliance Officers, I thought I would devote this column to the new FCCM and report (“verbatim”) some of its more provocative content. Because you do not have copies of it, I did not want to summarize it. Rather, I wanted you to see for yourself whether I had faithfully characterized what I am reading. The new FCCM is dated July 2013 and is a streamlined and svelte 486 pages long. The new 2013 FCCM replaces the 730 page 1998 OFCCP FCCM, effective already.
SUMMARY: While the new FCCM is very well written, and understandable, there are many highly provocative policy changes which affect audits in an immediate and dramatic fashion. I have tried to give you a smattering, below, of some of the most important policy and practice shifts. However, my organization of the material, below, does not proceed from most important to least important, but rather follows OFCCP’s layout and organization of its new FCCM. My commentary is in black “ink” and usually precedes the FCCM passage of interest. You will find the new FCCM language of interest in
With that said, the three biggest shifts in policy I discuss and urge you to look for, below, appear to me to be OFCCP’s new-found assumption that it now has legal authority to conduct “Offsite Reviews of Records” (even absent OMB approval), that the agency assumes it has (unstated) carte blanche protections from the limits of the 4th Amendment when conducting onsite audits, and that there is now no longer any statute of limitations, in effect, applicable to Executive Order 11246: contractors can be liable for unlawful actions back to 1965.
Thus, OFCCP believes it may sit at Desk Audit and may now fire off request after request after request of “Supplemental Data Requests” and may further just roam about a contractor’s premises at-will when it chooses to come onsite and may look under every nook and cranny should it choose to do so upon mere whim, despite the utility or cost of such conduct and in the absence of any “probable cause” leading it to believe a violation of law exists as to the issues OFCCP chooses to investigate while onsite. Defense lawyers and those caught up in long-runway compensation cases will be very agitated to also learn that OFCCP has both changed the so-called “2-year liability” rule I created and laid down as written OFCCP policy in March of 1983 and has, as a practical matter, eliminated any statute of limitations under Executive Order 11246.
A major issue thus arises in this OFCCP Administration as to its dedication to adhere to the Rule of Law, as opposed to simply making up policy as it goes along because it either is in fact a good idea, or seems to OFCCP to be so. Good ideas are a great place to start (not end), but after following the defined rules of engagement the Administrative Procedure Act lays out as the fair and appropriate way to lay down a good idea, particularly when changing a prior good idea.
The new FCCM has a short INTRODUCTION and 8 formal chapters, as follows:
The new FCCM bolsters these 8 chapters with separate sections at the end of the Manual containing:
As any writer knows, The Introduction to a writing is important to capture the reader’s interest and frame the coming discussion. It is interesting the new 2013 FCCM advises OFCCP Compliance Officers (COs) what to do, but not why they do what they do day-in and day-out. (And, I find few currently at OFCCP who remember the agency’s true mission.) OFCCP traces its legal authority to act to the Federal Procurement Act (FPA). The FPA is the backbone federal contracting statute which sets out the right of the federal government to buy services and supplies in the marketplace. Title VII of the 1964 Civil Rights Act is not the governing source of OFCCP’s mission. Rather, OFCCP’s mission, in subservience to the FPA, is to cause covered federal contractors and subcontractors to engage in “affirmative action” to increase the supply of labor (by causing excluded work populations (like women and minorities) to integrate the workforce and thereby expand the labor pool (by bringing all those otherwise excluded women and minorities into the workforce)) and drive prices down for the federal government when it buys needed goods or services. (The unions should absolutely hate OFCCP if the agency is doing its job.) Enforcement of non-discrimination is OFCCP’s tool, not its mission.
The new OFCCP FCCM begins by describing OFCCP’s tools, but not its mission, and thus confuses its mission as that of a civil rights agency and not as a federal contracting agency:
(See p. 1)
The OFCCP also expresses its hope the FCCM will standardize OFCCP investigative practices…a hope the federal contractor community shares despite Emerson’s warning that “Foolish consistency is the hobgoblin of small minds”. See Emerson’s essay on Self-Reliance. A hobgoblin, by the way, is a folk tale invention: usually thought of as a friendly but meddlesome creature of the Seelie Court (i.e. a “good fairy” from the Lowlands of Scotland). (In defense of the contractor community and OFCCP management, please specially note the word “foolish” in Emerson’s formulation of the admonition.)
(See p. 1)
It is important to remember, too, that the FCCM does not have the binding force and effect of law, as the FCCM clearly announces. The FCCM, rather, is the OFCCP Director’s instructions, in general, to her Compliance Officers:
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(See p. 1)
Contractors will want to copy now the prior paragraph and feed it back to OFCCP COs in audits when they find the Manual (which professes it sets no “policy”) conflicts with substantive Title VII law and applicable procedure and Administrative Law (as it does, as you will see).
OFCCP’s architecture, going forward, will be to continue the use of Directives to communicate substantive policy (but not to supplement the FCCM):
(See p. 1)
The problem with the above statement, however, is both (a) that the progression of OFCCP investigative procedures and “policy” is often seamless, and (b) the new FCCM is not only filled with “policy” pronouncements, it contains several highly provocative changes to both longstanding OFCCP written policies and practices.
Chapter 1 starts the substantive instruction to the COs in the field and begins by very helpfully cataloguing the types of “Compliance Evaluations” at OFCCP’s disposal. But, this catalogue augurs immediate intrigue because it is both overly-inclusive and underly-inclusive, as we shall see:
This catalogue is twice overly-inclusive, though, since OFCCP has never sought, and the Office of Management and Budget (“OMB”) has never authorized OFCCP, to undertake the “offsite review of records” which OFCCP’s regulations have authorized since 2000. Moreover, the Bush Administration quit undertaking “Compliance Checks” and OMB’s authorization allowing OFCCP to undertake Compliance Checks has now lapsed. Accordingly, OFCCP is not currently authorized to undertake either an Offsite Review of Records or Compliance Checks.
The catalogue is underly-inclusive because it does not list Complaint investigations as a form of “Compliance Evaluation”, although this activity has shrunk to usually fewer than 300 Complaint filings/investigations per OFCCP Fiscal Year. OFCCP also devotes an entire (and lengthy) new FCCM Chapter to Complaints and their investigation, so OFCCP certainly did not forget them. Rather, OFCCP merely neglected to list Complaints as one of its several “Compliance Evaluation” tools. (Note: The Clinton Administration created the phrase “Compliance Evaluation” in 2000 and defined it to be the generic reference to one or more of OFCCP’s several investigative tools.)
Here’s how the new FCCM describes the Offsite Review of Records investigative tool, by the way:
(See p. 4)
And let me cull out and recite the new FCCM’s description of a “Focused Review” (also new with the Clinton Administration in 2000) which OFCCP uses as a form of onsite review. However, because OFCCP does not label its onsite review as a “Focused Review”, I find few contractors are familiar with this OFCCP investigative tool even though they suffer it routinely:
(See p. 4)
The new FCCM reports that the OFCCP document OFCCP has used for decades as its internal recordkeeping log to record all actions, correspondence and conclusions and to create a timeline for the audit (known historically as the Standard Compliance Review Report=”SCRR”) is now renamed to “SCER”=”Standard Compliance Evaluation Report”.
(See p. 5)
Contractors ask speakers at every Affirmative Action conference what COs want to see by way of “good faith efforts”. Here is what “the Book” says:
And, contractors have heard for years about so-called “indicators” of potential discrimination. Here is what COs are now told they are:
Happily for contractors, OFCCP has continued the so-called “2-year (“cooling off”) period” my former boss OFCCP Director Ellen Shong Bergman and I created in 1982 prohibiting OFCCP from auditing a contractor establishment within 24 months of the closure of its last audit at that establishment. The FCCM now further codifies another part of that practice (see footnote 9 of page 10 of the new FCCM) that the prior audit does not “close” until OFCCP monitoring of the Progress Reports the prior Conciliation Agreement may require has ended:
Footnote 9 reads, in relevant part:
Many contractors ask me what other federal agencies OFCCP contacts during a Compliance Review, if any. The new FCCM catalogues the list of agencies OFCCP COs must contact. These include:
The new FCCM continues OFCCP’s historic audit tradition of looking at the employment “transactional analyses” (i.e. the hiring/promotion/involuntary terminations “disparity analyses” – not “adverse impact analyses”) in the year prior to the date on the face of the contractor’s at-issue AAP and also separately requiring the contractor to bring its “transactional analyses” up to date if the date on OFCCP’s audit Scheduling Letter is 6 months or more AFTER the date on the contractor’s at-issue AAP. So, for example, if the OFCCP audit Scheduling Letter is dated August 1, 2013 and the contractor’s responsive AAP is dated January 1, 2013, OFCCP will look at the contractor’s transactional data for calendar 2012 (the year before the date on the contractor’s AAP) and will further cause the contractor to update those transactional data from January 1, 2013 to August 2013 (since those transactional data are now more than 6 months out of date). OFCCP further reserves the right, per the usual, to look back to a second year before the date on the at-issue AAP IF “special circumstances” exist (meaning “potential discrimination”):
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The new FCCM resurrects the ugly word “underutilization” despite the Clinton Administration’s burial of that term (no longer found – since 2000 – in OFCCP’s regulations describing goal setting requirements):
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Contractors will continue to resist using the term “underutilization” because of its lack of regulatory definition and pejorative connotation which most individuals not schooled in technical OFCCP lore believe is “code” for having engaged in “unlawful discrimination”. Remember, too, even apart from the Administrative Procedure Act’s requirements requiring notice to the public and comment before an agency may willy-nilly change long standing policies or practices, and the Due Process Clause’s requirement that federal agencies give fair warning of proposed change, the new FCCM is not binding on federal contractors. Rather, the FCCM, again, is not the “law”…it is just the Director’s instructions to her troops in the field. So, the battle lines are forming as inappropriate change begins to waft across the no-man’s land separating the contractor’s trenches from the OFCCP’s trenches on the audit battlefield.
There is little remarkable in the new FCCM as to compensation (most of what “counts” as to OFCCP’s analyses of compensation is in the training manuals OFCCP is using to train COs). The new FCCM does, however, instruct COs when to request additional compensation data. Those instructions mirror requests contractors have observed OFCCP making for more than a year now. Significantly, the new FCCM instructs COs to demand access to employee-level data and to thus (unwittingly) violate the Paperwork Reduction Act’s prohibition on federal agency requests of “more than 9” identical information requests without OMB’s specific approval:
Despite a promising Headline, the new FCCM does not provide any legal standard to the CO as to when to go onsite, but does assume that both Offsite Reviews of Records and Compliance Checks are investigative tools immediately available to the CO:
While not a concern in and of itself, the new FCCM encourages CO mis-thinking about what s/he may inspect once onsite by instructing the COs to inspect onsite (100 times out of 100) the contractor’s EEO posters and notices of accessibility of AAPs for the Disabled and Protected Veterans EVEN THOUGH the CO’s Desk Audit investigation revealed no probable cause to believe a violation of these requirements existed. The concern here is that the FCCM does not advise the CO of any limits to his/her onsite investigation (such as the need for “probable cause” to believe a violation of law has occurred) and rather assumes that the CO is at liberty to pursue onsite any question or document of interest to OFCCP:
The new FCCM again repeats this “invitation to romp” as to several other kinds of investigations the FCCM now directs COs to undertake as routine “checklist items” upon each and every onsite review, regardless of what precisely precipitated OFCCP’s “probable cause” conclusion providing it the legal authority to come onsite. For example on p. 78:
Despite all the hullabaloo and undesirable excitement OFCCP’s Pam Coukos (a known data “aggregator”) stimulates among federal contractors whenever she speaks or writes about compensation issues, Pam has allowed the new FCCM to fairly treat, I believe, the subject of “similarly situated” employees:
The new FCCM confirms that “CMCEs”, technically known as Corporate Management Compliance Evaluations (i.e. “so-called “Glass-Ceiling” audits of corporate HQ offices), take on the same OFCCP treatment during audits as “regular” 3-part (Desk Audit/Onsite Audit/Offsite Audit) Compliance Reviews:
CMCEs raise profound 4th Amendment selection for audit issues because OFCCP (unlike as to several of its other Compliance Evaluation tools) insists on an onsite audit (100 times out of 100):
The phrase “full review” is OFCCP-speak for all three parts of a Compliance Review. CMCEs just suddenly became controversial (after years of being boring), too, since OFCCP took the occasion of the new FCCM to announce its “broadening rules” allowing COs to expand the scope of audits beyond the establishment selected for audit to other locations where the CO “becomes aware that problems exist” (NOTE: the new FCCM does not say: “may exist”):
Like CMCE audits, OFCCP audits of Functional Affirmative Action Programs (“FAAPs”) also raise profound 4th Amendment selection for audit questions because the new FCCM continues OFCCP’s tradition of insisting upon onsite inspections (i.e. “full compliance reviews”) for FAAPs under audit:
The new FCCM purports to maintain the so-called “two year rule” as to audit liability (i.e. OFCCP may hold a contractor liable during the two years immediately prior to the date on OFCCP’s audit Scheduling Letter for any unlawful acts which occurred in that two-year window). However, the new FCCM alters the old OFCCP practice substantially by expanding the liability period indefinitely via a change to incorporate and embroider onto the 2-year rule, just willy-nilly and without proper notice and Rule-making, the “continuing violation” doctrine. What this addition of the “continuing violation” doctrine ignores entirely is that when I created the “2-year rule” in March of 1983, I specifically incorporated the continuing violation concept into the 2-year rule: that is precisely how Director Shong and I justified (to the great delight of the Plaintiff’s Bar, I might add) expansion of the liability period for Executive Order 11246 audits back to Title VII’s full 2 year limit on back pay. In other words, in setting the 2-year liability period under the Executive Order, we assumed and codified that every violation found was, or could be, a continuing violation allowing liability to go a full two years back from the alleged Charge. (And then, in another “gimmie” for employees and the Plaintiff’s Bar, OFCCP did not measure the 2-years back from the date OFCCP first put the contractor on notice of a violation, but rather OFCCP counts from the earlier date on which OFCCP commenced its (then) “routine, random” audits of the contractor’s establishment. Here is the new FCCM’s bastardized construction of my now longstanding “2-year rule”:
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The above change to the 2-year rule will undoubtedly foment much litigation with OFCCP and is obviously designed to attempt to crowbar the Lilly Ledbetter Act into the Executive Order so as to apply the so-called “paycheck rule” to modern compensation systems and allow OFCCP to challenge untimely compensation acts. This is a bold act of defiance of Title VII case law, the Administrative Procedure Act, the Due Process Clause, and OFCCP’s longstanding policy and practice in audits and prosecutions in the courts of alleged violations. It is very disturbing, too, that OFCCP attempts this major change of policy without rulemaking, even if it thought it could make such a change as a matter of law.
The new FCCM also ignores the unanimous holding of the United States Supreme Court in Wal-Mart v. Dukes striking down “pro rata” (or what many call “formula relief”) when there is a finding of unlawful discrimination.
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Conclusion: I will write more in future months and will have much more to say at the annual Affirmative Action Briefings the National Employment Law Institute holds around the country in October about the many surprising, and sometimes mundane, contents of the new FCCM. Sometimes it is useful and reassuring to know that OFCCP has not sought to change a major point of law, a common form, or a routine audit procedure or compliance action. But, given the many changes to coming OFCCP audits the new OFCCP FCCM portends, please consider this discussion to be the first of a continuing conversation given the FCCM’s size, breadth and sometimes fundamental and highly controversial new directions and instructions.
|THIS COLUMN IS MEANT TO ASSIST IN A GENERAL UNDERSTANDING OF THE CURRENT LAW AND PRACTICE RELATING TO OFCCP. IT IS NOT TO BE REGARDED AS LEGAL ADVICE. COMPANIES OR INDIVIDUALS WITH PARTICULAR QUESTIONS SHOULD SEEK ADVICE OF COUNSEL.