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The Office of Federal Contract Compliance Programs (OFCCP) issued a notice of proposed rule change that would take a hatchet to the prior administration’s November 2020 changes to race and gender, disability, and veterans’ regulations (41 CFR § 60, 41 CFR § 60-300 and 41 CFR § 60-741).

The November 2020 changes, now at issue, were updates to OFCCP procedures for issuing “Predetermination Notices” and “Notices of Violation” (stages of the compliance audit process at which the Agency gives notice to federal contractor of possible or actual findings of non-compliance).

The stated goal of the November 2020, end-of-the-Trump-era rule changes (‘the 2020 rules’, commonly called the ‘PDN rule’) was to give contractors sufficient information about OFCCP’s thinking to make discussions of resolution possible.

What would today’s OFCCP “rescind”?

In its March 22, 2022 notice of proposed rulemaking OFCCP proposed to:

  • Remove evidentiary standards concerning “quantitative and qualitative” evidence.  Currently, the OFCCP needs both statistical (quantitative) evidence and documentary or testimonial (qualitative) evidence to keep an audit open.  Currently the OFCCP has to provide the contractor with evidence and its legal theory when bringing a Pre-Determination Notice.
  • Remove definitions of “practical significance.” Practical significance is a concept in statistical review to determine when a delta is large enough to warrant the Agency’s attention.  The 2020 PDN rule incorporated a simple ‘back of the envelope’ test.
  • Return the Predetermination Notice response period to the 15-calendar days in effect prior to the 2020 rule.

While the evidentiary and practical significance issues in the 2020 rule are very technical, they stand for a simple proposition.   The Trump-era OFCCP  stated that the 2020 rule provided “guidelines and guardrails” to make audits transparent and efficient.

The OFCCP now says that doing away with the 2020 provisions “would restore flexibility to OFCCP’s pre-enforcement notice and conciliation procedures, promote efficiency in resolving cases, strengthen enforcement, and promote alignment of the standards governing OFCCP’s procedures with Title VII.”

Quite a change!

What is motivating the 2022 changes?

The Trump-era 2020 PDN rule is currently in effect requiring the OFFCP to, among other things, share its legal theory of why a violation might exist, what evidence the Agency relies on, and what specific policy or practice OFCCP believes caused adverse impact.

The 2022 OFCCP statement supporting requested changes states that

… the 2020 rule’s inflexible evidentiary requirements mandate overly particularized and confusing evidentiary definitions that impede OFCCP’s ability to tailor the pre-enforcement process to the specific facts and circumstances of each case, delay information exchange with contractors, and create obstacles to remedying discrimination.”

OFCCP also now maintains, “The 2020 rule has also resulted in time-consuming collateral disputes over the implementation of the rule’s regulatory standards.”  (Code, it would seem, for the Agency maintaining that lawyers have or will use the rule against the Agency.)

The most important justification may be OFCCP’s current position that the 2020 PDN changes “impede effective enforcement by limiting the agency’s enforcement discretion” (emphasis added).  In effect, the OFCCP now maintains that the 2020 rule changes tie its hands.

The bigger picture

One rational for the about-face has an important back story.  It is found in the OFCCP’s discussion of rolling back changes to 41 CFR § 60-1-20(b) concerning the conciliation (early-audit settlement) process.   An effect of the 2020 rules is to require OFCCP to spell out its case in detail when bringing a PDN or entering conciliation.  The OFCCP’s 2022 supporting statement maintains that detailing its position at this stage of the proceedings is not a good idea:

…the disclosure of qualitative evidence creates a risk that an employer will uncover identities of those who experience or report discrimination at this investigatory stage of the proceeding, which may have  a chilling effect on the willingness of victims and witnesses to participate in OFCCP’s investigation and also potentially lead to retaliation against those who report discrimination.

The OFCCP’s 2022 statement specifies that this is the same argument the current administration used for overturning similar EEOC conciliation rules.  Like the 2020 affirmative action rule changes, the EEOC conciliation rules were intended to facilitate discussion and resolution.  The prior administration presumed that employers are, on the whole, honest brokers.  The current administration’s argument for both EEOC and OFCCP conciliation roll-backs seem to presume, or at the least stress, the overarching importance of safeguards against employer malfeasance.

Interestingly, OFCCP’s experience counters any presumption that the employer is necessarily noncompliant.  In FY 2021, for example, OFCCP found discrimination in only 3.5% of audits.  This argues that the vast majority of federal contractors are honest brokers.

What next?

Without the PDN rule’s “guidelines and guardrails”, what can federal contractors expect during audit?  See Circa’s blog, “OFCCP’s Proposed ‘PDN Rule’ Changes – Blog #2 – Can Silence Lead to Certainty?”

Author

Paul McGovern
Managing Partner
Praxis Compliance

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