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The OFCCP has been very busy of late.  On March 14, 2022, the Office of Federal Contract Compliance  Programs issued Directive 2022-01, introducing new requirements for federal contractors’ mandated compensation system review.  On March 21, 2022, OFCCP proposed rulemaking that would rescind the recent “PDN rule” changes that set specific standards for OFCCP to follow when auditing contractors.  On March 31, 2022, OFCCP issued Directive 2022-02, ‘Effective Compliance Evaluations and Enforcement’, rescinding and replacing Directives 2018-06, 2018-08, 2020-02 and 2021-02.

See Circa’s prior blogs on compensation requirements  and proposed rulemaking.   This blog summarizes Directive 2022-02 and puts its changes in the light of OFCCP’s other recent initiatives, particularly the proposed PDN rule changes. [1]

Directive 2022-02 continues OFCCP’s increasing tightening of requirements for federal contractors, and loosening (creating “flexible”) standards for OFCCP found in Dir. 2022-01 and proposed PDN rule changes.  Among other things, the Directive states that OFCCP:

  • Will limit extension of desk audit submission beyond 30 days to extraordinary circumstances (“death in the immediate family of key personnel”…).
  • May engage in “multiple” establishment reviews if a contractor’s simultaneously open reviews present similar issues (OFCCP’s review has commonly been limited to the specific work location identified in a Scheduling Letter).
  • May request supplemental data at the desk audit stage if “OFCCP identifies issues that warrant further analysis.” (The rescinded Directive 2018-08 limited the scope of information requests at this stage to “fulfill, and if necessary clarify, the data requests required by the Scheduling Letter and Itemized Listing.”)
  • May seek records for periods after the issuance of the Scheduling Letter (this has been a contentious issue with contractors in the past).
  • Will not share statistical data with contractors during the desk audit phase of review (many experts consider the sharing of statistical models a common and useful practice).

The Agency maintains that Directive 2022-02 is needed to rescind the prior administration’s Directives and policies that “caused misunderstanding and delay”.  This is ironic since the prior administration instituted the Directives and practices now in question in the name of “transparency” and “efficiency”.  The prior administration’s high case closure and recovery rates  argue that its program was working.

The Directive 2022-02 expansion of OFCCP’s audit authority aligns with the Agency’s stated purpose for its proposed PDN rule changes: rescind technical requirements that the prior administration maintained were “guardrails” needed to ensure consistency and effectiveness in Agency audit review.  Today’s OFCCP considers them “rigid evidentiary standards” that deny the Agency the “flexibility” needed for successful compliance enforcement.

 

Might History Repeat Itself?

The Agency states that the replaced Directives “ran counter to OFCCP’s goal of conducting “comprehensive compliance evaluations….” (emphasis added)  So, expect in-depth audits, as forecast in Circa’s blog  “The OFCCP in 2022 – What’s in Store?”.

“Flexibility” may slow the Agency down.  Expect some Compliance Officers to issue information request after information request as they test different theories in order to find something ‘wrong’ with an audit.  The last time OFCCP combined in-depth audits with flexible standards of review was during the Obama administration.  OFCCP audit work slowed to a crawl.  This could happen again.

 

A Silver Lining? 

In its request for PDN rule changes, OFCCP maintains that it remains in favor of transparency:

“OFCCP remains committed to providing contractors notice when the agency sees preliminary indicators of discrimination during a compliance evaluation, as such notice is mutually beneficial for OFCCP and the contractor under review because it provides the contractor an opportunity to respond and work to  resolve the issues.”

Directive 2022-02 also maintains that the Agency is rescinding the prior administration’s Directives because their provisions are to be found in the updated Federal Contract Compliance Manual (FCCM):

“OFCCP will also continue to engage in regular communication with contractors at each phase of a compliance evaluation…. For example, procedures such as contacting the contractor within 15 days of sending the Scheduling Letter, providing a high–level summary of any preliminary indicators of discrimination in the onsite confirmation letter, and taking a collaborative approach with contractors during the exchange of information to promote a shared understanding of the issues and to promote resolution are incorporated into the FCCM.”

Please remind OFCCP of these nuggets if the going gets rough during audit.

Finally, in justifying its proposed PDN rule changes, the Agency indicates that OFCCP  may “…issue appropriate guidance to field staff on the use of the procedures. OFCCP would continue to ensure transparency by sharing this guidance with the public.”  Guidance, properly developed, would help ensure consistent audit practice – a good thing for Agency and federal contractor alike.

Will OFCCP develop such guidance? Will it seek contractors’ input on guidance content? Time will tell.

[1] This blog follows up “Proposed ‘PDN Rule’ changes – Blog #1.”

Author

Paul McGovern
Managing Partner
Praxis Compliance

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