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The number of audits completed by the Office of Federal Contract Compliance Programs (OFCCP) has trended downward over the last several yearsThis decline can be attributed to several factors including the agency’s focus on large system discrimination casesHowever, the number of audits OFCCP is conducting has been increasing over the past months. 

Although OFCCP continues to check that Federal contractors’ affirmative action plans (AAPs) are completed and implemented during the course of a compliance review, the agency is shifting its focus more to discovering and rooting out systemic discriminationFederal contractors with establishments undergoing an audit should expect that much of OFCCP’s focus will be on identifying statistical evidence of discrimination and disparities in hiring and compensation. 

Additionally, OFCCP is hiring more expert individuals to help it keep up with the complex workforce in the US and new tools employers are using, such as artificial intelligence (AI), to make employment decisions. 

We sat down with David Cohen, the President and Founder of DCI Consulting,  to discuss the changes being made at OFCCP and what Federal contractors can expect from the agency moving forward. If you’re interested in a deeper dive, watch the on-demand webinar where David utilizes a data-driven approach to understanding OFCCP enforcement activity and trends, and how enforcement of affirmative action regulations may evolve as a result of the Supreme Court decision in the Harvard and University of North Carolina case.  

Below are the top OFCCP updates to be aware of.

 

1. The New Scheduling Letter

Several times per federal fiscal year, OFCCP creates and publishes a list of federal contractor establishments it intends to audit.  This list is split up amongst the various OFCCP offices throughout the US and these offices initiate reviews according to the order of the list they are assigned.  OFCCP initiates each individual review using a scheduling letterRecently, OFCCP made multiple changes to the scheduling letter, including: 

The new scheduling letter has brought about several changes:

  • OFCCP has expanded its list of items it requires Federal contractors to send in when one of its establishments are under review. 
  • Establishments that have been selected for review that are on a “campus-like setting” must submit employment data (e.g., hiring, applicant, compensation data) for all locations within the campus-like setting. 

 

2. Artificial Intelligence

Earlier this year, President Biden issued an executive order dealing with the use of AI, including its potential effects on civil rights issues and employment and selection decisions.  OFCCP has added the following requirement to its scheduling letter under Item 19: 

“Documentation of policies and practices regarding all employment recruiting, screening, and hiring mechanisms, including the use of artificial intelligence, algorithms, automated systems, or other technology-based selection procedures.” 

This requirement is written broadly and will require more clarification.  However, federal contractors that are using AI or automated employment decision tools to make employment decisions should consider conducting an internal bias audit to identify if there is any unintended impact on protected groups.  Federal contractors undergoing a compliance review that are not using AI tools in employment decisions should communicate as much with OFCCP. 

 

3. Compensation Data

OFCCP continues to focus heavily on compensation during compliance reviews.  Historically, Federal contractors undergoing a review were required to submit a single snapshot of compensation data for all employees as of their respective AAP effective date.  Now, Federal contractors must submit two compensation snapshots reflecting the current AAP effective date and the previous AAP effective date. 

 OFCCP also updated the language of the scheduling letter to require the submission of information of factors affecting pay.  The previous scheduling letter made the submission of such information optional. 

 Additionally, the new scheduling letter requires Federal contractors with one or more establishments undergoing review to prove they have done a compensation analysis.  Though the results of the compensation analysis are not required to be submitted, documentation should demonstrate the following: 

  • When the compensation analysis was completed
  • The number of employees the compensation analysis included and the number and categories of employees the analysis included
  • Which forms of compensation were analyzed and, where applicable, how the different forms of compensation were separated or combined for analysis (e.g., base pay alone, base pay combined with bonuses, etc.)
  • That compensation was analyzed by gender, race, and ethnicity
  • The method of analysis employed by the contractor (e.g., multiple regression analysis, decomposition regression analysis, meta-analytic tests of z-scores, compa-ratio regression analysis, rank-sums tests, career-stall analysis, average pay ratio, cohort analysis, etc.)

 

4. Systemic Discrimination Trends

Over the last five years, failure to hire cases have made up about 57% of all findings of discrimination.  Systemic pay discrimination made up 28%, 3.5% were a combination of both pay and hiring cases, and 11% were made up of other individual cases.  These findings include both intentional discrimination (also called disparate treatment) and unintentional discrimination (also called disparate impact). 

Of note, while cases affecting black employees and applicants made up 48% of discrimination findings and cases affecting women made up 30%, nearly 15% of cases with findings of discrimination involved male and/or white employees or applicants.  This shows that OFCCP is willing to pursue cases where male and/or white employees or applicants have low selection rates compared to other races and/or women. 

 

How to Address These Changes

While OFCCP does not have the power to fine Federal contractors, discrimination cases can result in back pay settlements and future hiring requirementsAdditionally, all findings of discrimination are published by the agency, which can result in other adverse reactions such as bad publicityTo help prevent this, Federal contractors should be proactive in identifying any possible issues before the onset of a compliance review. 

Our strategic partner, DCI Consulting, has nearly 25 years of experience in affirmative action planning and partnering with Federal contractors undergoing compliance reviews, as well as conducting pay equity analyses. Their consultants can help you stay compliant with affirmative action regulations and respond to requests from OFCCP. Reach out to DCI Consulting to learn more.

Author

Miranda Knudtson

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