Business demands predictability and abhors uncertainty. General Counsels want to know “likely outcomes” and timetables. Vice Presidents of Human Resources want to know what to do to comply and what not to do to unnecessarily increase the Company’s legal risk.

I was just about to decide on this theme of regulatory agency predictability and reliability for this month’s column when I saw a Blog entry from Chris Lindholm (with Outsolve in its offices outside New Orleans) festering about the lack of predictability issue now emerging with OFCCP. Chris has his finger on the pulse of federal contractors, so that cinched it for me: I had to write about the problems that regulatory and investigatory change bring to regulatory compliance programs, especially when combined with a lack of contemporaneous transparency. But, I also want to write about possible solutions, and to not just decry the situation. Whining is very therapeutic, but it does not solve the challenge at the end of the day.

The problem of predictability raises its ugly head, of course, because federal agency managers want to do whatever they want to do, whenever they feel like doing it…just like managers in the private sector. The problem magnifies itself in size and importance, though, as to federal agency managers changing regulatory practices and policies because they have to drag the other couple of hundred thousand of us federal contract compliance practitioners along with them down the road of change. And, of course, we contractors and contractor representatives are quite heavy baggage for agency managers to carry through hairpin turns, let alone 180 degree full about-turns. And then there is all that law…like Stop Signs on a freeway screwing up an otherwise perfectly good and unimpeded raceway: the Administrative Procedures Act; the Paperwork Reduction Act; the Due Process clause; the Equal Protection Clause; the Fourth Amendment and regulatory “flexibility act” on top of regulatory “flexibility act” all operating to require change to be public, participatory and thus MUCH more slowly and carefully implemented than any manager would ever like.

And every OFCCP Director eagerly jumps into the driver’s seat of the racecar the Secretary of Labor has newly configured for him or her. But, every Director then quickly wonders in amazement as to what happened to the high-speed lean and mean Porsche the Secretary had promised and why in the world the Secretary had issued her an under-powered putt-putt car left-over from Disneyland’s Tomorrowland Autopia Speedway? And just like at Disneyland, the Director’s instinct is always the same: put the pedal to the metal, blow through the stop signs (which are whizzing by only at glacier speed at any rate) and thrash about and bump into the side rails and stalled cars ahead of you: what can it hurt anyway at that speed of travel OFCCP Directors always wonder?

So, how does the OFCCP practitioner satisfy his/her client’s need for predictability and reliability as OFCCP becomes increasingly less transparent and all-the-while unleashing both subtle, as well as dramatic, unannounced changes to its enforcement of regulatory compliance obligations as it trundles down new roads not previously traveled? And, what does the conscientious OFCCP practitioner do as s/he confronts new and different “local OFCCP practices” often unique unto each Region, and sometimes different even unto each District Office within an OFCCP Region?

WITNESS:

1. OFCCP’s rejection (during the past two years-without regulation or written notice) that outreach efforts to referral sources for the disabled and to Protected Veterans (which were satisfactory to both the Bush and Clinton Administrations) are suddenly no longer acceptable to this Administration (and what will now fly depends on which OFCCP Compliance Officer now stands in front of you);
2. OFCCP’s deployment of any number of different and evolving “Supplemental Data Demands” (by whatever local name), some via informal e-mail and some via formal letter sent (typically) via e-mail, and none bearing an Office of Management and Budget (OMB) approval number, but all demanding various and sundry additional documents and information during the Desk Audit;
   1. And then there is the subset of that experience in which some particularly a-go-go OFCCP District Offices now send out their Supplemental Data Demand BEFORE the District Office even receives the contractor’s response to OFCCP’s audit Scheduling Letter and attached Itemized Listing.
      • The OFCCP District Offices in OFCCP’s Pacific Region (San Francisco) particularly enjoy this “quick draw” action. Welcome to the Wild West, Baby! “We don’t care what you’re doing: Get your hands up above your head!”

3. OFCCP’s sudden and unannounced change in Fiscal Year (FY) 2012 to deploy a new auditing selection methodology which is badly flawed and wreaking havoc nationwide with many, many contractors;
4. OFCCP’s unannounced decision to suddenly seek to audit in FY 2012 those contractor establishments with fewer than 50 employees, although adding to the excitement of that guessing game challenge, some OFCCP District Offices:
   1. Administratively close the audit upon contractor challenge; or
   2. Bully their way through and insist to impasse OFCCP may audit whoever it darn well pleases wherever it darn well pleases; or
   3. Bully their way through and insist on auditing the contractor’s establishment into which the contractor has aggregated (if it has) the establishment employing 49 or fewer employees.

   NOTE: OFCCP is not at liberty, in my judgment, to audit below the 50 employee threshold without at least a formal prospective Notice in the Federal Register, if not through formal Rulemaking…but these are waste of time audits, at any rate…which is why OFCCP has exercised its discretion for the past 30 years not to audit below the 50 employee in-the-establishment level.

5. OFCCP’s unpublicized decision over the last 3 years to dramatically increase the number of audits closed with minor paperwork violations (400% increase between FY 2008 and FY 2011—from about 5% to over 20%, and steadily growing each year);
6. OFCCP’s sudden and unannounced decision to start citing contractors for recruitment violations and denials of access to records (see reasons why, below);
7. OFCCP’s June 6, 2010 secret Directive (#289) to OFCCP field office personnel radically changing the way OFCCP undertakes Desk Audits (to return to so-called “full” Desk Audits) during which OFCCP reviews more than just “indicators” of unlawful discrimination (in hires, promotions, and involuntary terminations) pursuant to E.O. 11246, and so as to allow OFCCP to also review many other contractor actions which OFCCP has historically left to consider later, if at all, during any ensuing On-Site audit;

So here are Six Rules to live by in this era of continuing transition at OFCCP:

RULE 1: Keep your ear to the ground. Strategically attend those seminars/webinars/ on OFCCP where speakers tend to share a lot of the on-the-ground experience and candid advice. But, be picky. There is much misinformation in the marketplace and much drivel. (The National ILG Meeting in Hawaii ought to be a good venue next month in Kona. Good speakers; great topics and OFCCP will not be there so speakers will be more candid (optics do not look good for OFCCP to be on the beach in an election year – the President is the only federal government official who can pull off a trip to Hawaii without getting burned by public opinion). NOTE: The National ILG has an astoundingly good nightly rate at The Hilton Kona Waikaloa Village Resort, and airfare non-stop San Jose to Kona is cheaper than flying halfway across the country. I was delightfully surprised (if not amazed) when I booked my flights and hotel. I hope to see you there! Here is the link to the National ILG meeting website: http://pacilg.org/?page_id=86 )

RULE 2: Regardless whether you are in-house or an outside consultant, set your Client’s expectations. And do it early in the engagement. First discussion. Warn your client that the only thing consistent about OFCCP is change. And warn your client too that the experience with OFCCP right now is like riding a roller-coaster backwards: you have no idea where you are going, but you know you are getting there fast!

RULE 3: Politely, but firmly, ask OFCCP where in the regulations, exactly, there is legal authority for OFCCP to do what it is requesting the contractor to do.

RULE 4: Politely, but firmly, ask OFCCP where, exactly, in OFCCP’s Compliance Manual there is an instruction for OFCCP to do what it is requesting to do.

NOTE: You may get lucky and get a copy of some part of OFCCP’s new Compliance Manual which it has finished writing, is using, but has not distributed to the public.

RULE 5: Politely, but firmly, ask OFCCP where OMB’s approval number is located on any standardized data requests (whether OFCCP put the data requests forward via informal e-mail, formal letter, on the back of a napkin at lunch, or on the backside of the last known original signed copy of the Declaration of Independence); and

RULE 6: Make a decision whether to “draw a line in the sand” and resist OFCCP’s demand, or to bow, kneel and accede to any of OFCCP’s “out-of-bounds” demands.

NOTE: OFCCP is typically a very practical agency and does not like to fight for the sake of being fractious or to just get its way. However, it typically chooses to push hard, or “bully” contractors when:

• it senses the contractor is not technically proficient (is just giving “lip service” to its OFCCP compliance obligations)…so think hard about who you have front the audit with OFCCP, or
• the contractor is uncertain, halting and exhibits a “self-esteem problem” (hyenas always attack first the weakest looking Water Buffalo in the herd); or
• OFCCP believes (rightly or wrongly) that something important is at stake to its analyses. This is where a little contractor education of the OFCCP Compliance Officer (CO) can often go a long way to relieving the CO’s misplaced sense of concern. But address any OFCCP misapprehensions immediately, as soon as they arise. Don’t let these perceived problems linger and fester. It is MUCH harder to right the locomotive once it has driven off the tracks.
• OFCCP knows that it is operating beyond its appropriate limits, but believes the contractor will nonetheless cooperate to avoid a more involved engagement with OFCCP and will “give in” just to get the audit done. Contractors need to make it clear that they adhere to the Rule of Law and expect OFCCP to do so, too. Moreover, OFCCP often does not realize that what seems like an administrative trifle to OFCCP COs represents in fact a large incursion of time, cost and frustration to the contractor. Don’t hide that concern and frustration from OFCCP. This is where the contractor should explain to the CO that the Rule of Law was intended, among other things, to protect against excessive costs and diversion of business focus, and also to protect against OFCCP treating the contractor differently from its competitors and other federal contractors.

At the end of the day, OFCCP has to decide if there is a violation of its regulatory compliance obligations and whether it can find a Solicitor who thinks it is a worthwhile case to pursue. The Solicitors relish jurisdictional fights since these are usually very “cut and dried” issues of fact, can be tried quickly and easily, they usually win and the results of not prosecuting jurisdiction cases is disastrous to OFCCP: “the fish is then out of the net”. But, how often do you see OFCCP litigate “merits” of compliance duties cases: almost never. Few such cases are worth trying.

So, how can you better predict which contractor actions will comply and which won’t, and what OFCCP is likely to do in what order? Insist on adherence to formal managerial process and the Rule of Law: notice to the public, involvement by the public in the details and alternatives, and prospective publication of any new requirements affecting the regulated community. In that way, everyone on the roadway can know how to drive, how fast, where the curb boundaries are, where the Stop Signs are located and how to avoid ramming headlong into compliance problems stacked up in front of you on the freeway like cordwood. While slamming into things on Disneyland’s Autopia course is usually fun, the ride is too rough and rocky when banging things up on regulatory compliance road ways where it is better to have rules of the road, and for everybody to live by them.

Thanks….John

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