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As someone who has followed the field closely, I am not aware that DOL has recently provided additional guidance in this regard. If your ATS vendor is making this claim, you might want to ask about the specific OFCCP regulation, directive, FAQ, or other published item that shows this is the situation. In the meantime, from what I know, you are allowed to use an "I prefer not to..." option rather than allowing candidates to bypass the form. In fact, I would suggest this is a far better way to deal with candidates, since we want to candidates to make a declaration (even it is "I prefer not to self-identify") rather than skipping survey forms. A quick note on ATS vendors: we have seen multiple examples over the years of ATS improperly interpreting federal regulations, and multiple examples of ATS vendors providing improper advice on federal regulatory issues. I'm sure ATS vendors are doing their best to provide accurate information, but ATS vendors do not spend the bulk of their time dealing with the increasing complexities in the EEO/AA world.
You can use this OFCCP audit checklist to ensure you're doing what is required to maintain OFCCP's regulations including VEVRAA, Section 503, and EO 11246. Or request a demo to streamline your compliance and recruiting efforts.