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January 2013



What's New at OFCCP for 2013
A Potpourri of Recent Changes to OFCCP Policies and Audit Procedures

HAPPY NEW YEAR!

This first column of the year is a blend of predictions looking forward and a potpourri of recent OFCCP developments, both small and large.
  1. The Change of Administration Changes Everything: Potentially including Both Substance and Timing

    Most two-term Presidents suffer close to 100% turnover of their senior managers at the 4 year intermission (President Clinton was an exception: 5 of his Cabinet members stayed for the full 8 year Presidency, while President Bush hit the average with 2 who stayed on). The two critical transitions affecting the backroom at OFCCP are the imminent departure of Secretary of Labor Solis and the departure (last year) of Office of Management and Budget (OMB) Director Peter Orszag (Deputy OMB Director Jeffrey Zients remains the Acting OMB Director).

    • NOTE: OFCCP Director Pat Shiu serves at the pleasure of the Secretary of Labor…NOT the President.

    • Even if Secretary Solis' replacement invites Pat Shiu to stay on as the OFCCP Director, the next question is what the new Secretary of Labor will think about OFCCP, Affirmative Action, and non-discrimination? What will his/her priorities be?

    • And, what will The White House policy be on Affirmative Action and non-discrimination in the President's second term?

      • Will The White House make OFCCP relevant in the second term by trying to again use the agency to leverage President Obama's political position with women (while the women's vote remains a key political objective for the President), or will it abandon OFCCP fearful that OFCCP's pay audits of contractors are now proving that there is no significant gender-based wage-gap in America, and undermine the President's assertions to the contrary?

      • Will The White House accede to the NAACP's new orientation to emphasize the employment and training of blacks (still experiencing 14% unemployment…almost twice the national average) and attempt to use OFCCP to attack the issue through heightened pressure on contractor background checks, education requirements, and challenges to minimum qualification requirements as the EEOC is doing to Title VII-covered employers?

        NOTE: The venerable 103 year old NAACP is now struggling to find relevance in the 21st Century when Hispanics, women, and the disabled are more frequently found to be victims of unlawful employment discrimination than blacks. Its new direction is to emphasize education and to find employment opportunities for blacks.

        NOTE: Criminal background checks and educational requirements now almost always disproportionally exclude blacks and Hispanics relative to whites and Asians. As the nation enters and intensifies its 42nd year of the "war on drugs" (Nixon: 1971) and inner city drug-related shootings and gang wars continue to devastate the black and Hispanic communities (The White House interest in gun control has everything to do with inner-city blacks and Hispanics and little to do with the occasional, seemingly periodic, horrific white "Lone Ranger" mass-shooters as in Colorado and Sandy Hook), black and Hispanic criminal convictions are skyrocketing well beyond the percentages of their representations in the general population:

        • Whites: population=66% but only 34% of jail population;
        • Blacks: population=13% but 40% of jail population;
        • Hispanics: population=15% but 20% of jail population.

        Significant increased employment of blacks (and Hispanics) in the short term thus now revolves around eliminating employer background checks, reduction of education requirements, and the easing of minimum qualification standards. These are changes to business practices not of interest to most federal contractors.

        Increased educational attainment for blacks and Hispanics is the long term solution to the still very large education gap:

        • High School graduation rates as of 2011:
          • Asians=78%; Whites=76%; Hispanics=60%; Blacks=58%.

        • College graduation rates as of 2011:
          • Asians=57%; Whites=50%; Hispanics=40%; Blacks/NAs=32%.

  2. OFCCP Proposed Regulations

    As I reported last September, OFCCP would be very quiet on the regulatory front pending the election and given The White House's reduction of interest in the OFCCP. While no one can predict with precision when, if ever, OFCCP's regulations, and which ones, will see the light of day, the reality is that OFCCP's regulatory agenda will slip back probably at least a year, and some, or most of it, may never go to final, as noted more fully below. That does not mean, however, that OFCCP will be moribund in the first half of 2013. Rather, as I reported in my November 2012 column for The OFCCP Digest, the fractured political environment in Washington D.C. and the country will not stymie OFCCP's audit initiatives, even while noticeably slowing and changing OFCCP's regulatory agenda.

    • The OFCCP's just published and most recent Unified Agenda of Federal Regulatory and Deregulatory Actions (December 21, 2012) pushed back all existing OFCCP regulatory publication dates, as noted below.

      KEY: NPRM=Notice of Proposed Rulemaking

      • •  Protected Veterans RegulationsFinal Rule04/2013
      • •  Individuals with DisabilitiesFinal Rule04/2013
      • •  Compensation Data Collection ToolNPRM06/2013
      • •  Sex Discrimination GuidelinesNPRM08/2013
      • •  Construction Contractor RegulationsNPRM10/2013

      NOTE: The Assistant Secretary for Veterans Employment and Training (VETs) has also published notice of his intention to publish an NPRM by 06/2013 to rescind 41 CFR Section 61-250 (requiring contractors to annually file a VETs-100 report if they signed a federal contract before December 1, 2003) and to amend 41 CFR Section 61-300 (requiring contractors to annually file a VETs-100 report if they have contracts still in effect and signed after December 1, 2003) to require contractors to report the number or percentages of employees and new hires who are Protected Veterans.

    • However, many different issues will slow OFCCP's issuance of both proposed and final regulations, including at least:
      • the transition of Secretary Solis;
      • the absence of a "permanent" Director of OMB;
      • an antagonistic House of Representatives;
      • an antagonistic and energized federal contractor community;
      • distraction of The White House/OMB ("bigger fish to fry"):
        • debt ceiling increase/government spending fight
        • budget battles
        • immigration reform
        • gun control
      • budget limitations and uncertainty and the haunting threat of sequestration (which the private sector should not underestimate, since it creates large work inefficiencies within the federal government and deeply dampens the morale and productivity of federal employees); and
      • the lack of sufficient OFCCP headquarter staff to process the draft regulations through government channels (the "too many airplanes trying to land on the same runway at the same time" problem).

    Another worry for OFCCP is that it may have less than two years to finish its regulatory agenda. Indeed, the traditional view in Washington is that the President has 4-5 months at the beginning of his second term to accomplish his agenda before the inevitable second term scandals emerge and distract, and the President's influence wanes as a "lame duck".

    Republicans understand, too, how difficult it is to control federal policy and spending by controlling only one House of Congress so they have now set their sights on wresting control of the Senate in the November 2014 mid-term elections, now only 18 months away. 33 Senate seats will be contested, of which Democrats currently control 20 and Republicans 13…not particularly desirable odds for the Democrats on this particular election turn, everything else being equal. (Currently, the Senate is comprised of 53 Democrats, 45 Republicans, and 2 Independents (who caucus with the Democrats). A change of only 3 or 4 Democrats in the Senate would give Republicans control and the ability to then stop all White House budget and federal public policy initiatives.

    So, OFCCP will be trying to finalize its regulatory agenda in the next 4-5 months, but certainly before the next 18-20 months. At a minimum, publication of OFCCP's proposed and final regulations will be unpredictable, frustrating, and fraught with contention. This is not going to be fun for either OFCCP or contractors. I see a difficult road ahead for all involved, and unhappiness regardless whether publication occurs or fails. There is no "win-win" here.

  3. OFCCP Regional Director Comings and Goings

    1. Pat Shiu Selected Diana Sen to be the New OFCCP Regional Director for the Northeast Region

      Ms. Sen graduated in 2000 from Emory Law School with her Juris Doctor degree and thereafter worked for Fried, Frank, Harris, Shriver & Jacobsen LLP in its Manhattan headquarters as a Litigation Associate. After Fried, Frank, Ms. Sen worked as the Associate Counsel for Latino Justice PRLDEF (formerly the Puerto Rican Legal Defense & Education Fund) in New York where she headed up its Southeastern U.S. Practice dedicated to protect the rights of Latinos in the Southeast US. Ms. Sen is currently the President-Elect of the Hispanic National Bar Association. Ms. Sen now joins five other OFCCP Regional Directors, although Bill Smitherman, the long term Pacific Region (San Francisco) RD, retired at the end of 2012.

    2. Bill Smitherman Retires as OFCCP's Pacific Region RD (Melissa Speer is Acting)

      This marks a passing both for the Pacific Region, which will now see a shake-up within the year, but also for OFCCP as a whole. At the time of his retirement, Bill was one of only two OFCCPers who had worked for the Office of Federal Contract Compliance (OFCC) before President Carter created the OFCCP on October 1, 1978. So, OFCCP has now had almost 100% turnover in the last 30 years. As she did when Sandra Zeigler retired last year from the Midwest Region RD post, OFCCP Director Pat Shiu turned to her favorite RD, Southwest and Rocky Mountain (SWARM=Dallas) RD Melissa Speer, to serve as an "Acting" RD while OFCCP undertakes a job search (which could take up to 6 more months). So, Melissa is responsible for both the Dallas and San Francisco Regions for the indefinite future. (Melissa must have great frequent flyer points by now…and she is single: what a catch!)

    3. Len Biermann Turned 80 Last Week

      The legendary founder of the OFCCP (with Bob Hobson), Dean of the Affirmative Action community for many decades, and my Co-Chair for 15 years of the National Employment Law Institute's (NELI) Fall Affirmative Action Briefing, turned 80 on Friday, January 18. Len sounds great and he and his wife Sandy are still going strong. If you want to wish Len a belated "Happy Birthday", here is his e-mail address: leonardjb@aol.com.

  4. U.S. Census Bureau Released in November 2012 the 2006-2010 American Community Survey (ACS), EEO Tabulation

    The tabulation is meant to supplant and replace more expensive demographic reports the Census Bureau has, since 1970, extracted from the Decennial Census to produce an EEO Report, by varying names over the decades. These reports provided condensed summaries of the race/sex/ethnicity of the U.S. labor force and were helpful to Affirmative Action developers to calculate the availability of minorities and women for usually between 472 and 512 job groupings the EEO Reports would usually provide.

    Historically, too, following publication of the Bureau of the Census' demographic EEO Report, OFCCP has eventually issued a Directive announcing the agency's expectation that contractors use the updated demographic data in their AAPs created after some certain date in the future which the Directive identifies. While there have always been legal questions surrounding whether OFCCP could compel contractor use of the Census Data without issuing formal regulations so requiring (ala the Vets-100 and EEO-1 Report), contractors have historically good naturedly and voluntarily agreed to cooperate without need for the formality of regulations.

    To date, OFCCP has issued no Directive or proposed regulation requiring use of the ACS demographic data, and when to do so, amid numerous reports that the data still suffers some technical access limitations and is not yet fully readable or available for AAP development purposes.

  5. OFCCP Continues To Claim It May Audit Establishments With Fewer Than 50 Employees

    "Contractor establishments selected with less than 50 employees may still be scheduled for an FCSS (Federal Contractor Selection System) compliance evaluation by OFCCP. This factor will no longer be an absolute reason to administratively close a selected candidate" (for audit). So, says a December 16, 2011 e-mail from OFCCP Division of Program Operations Director Tom Dowd to OFCCP's New York Region senior managers.

    As a result, we watched OFCCP auditors in the field in 2012 (unaware of this change of position after 30 years), "chase their tails" nationwide attempting to audit establishments of fewer than 50 employees. OFCCP did so without guidance as to when to exercise their discretion to Administratively Close such a small audit and what to do if the contractor had accreted (or "aggregated") the small establishment with one or more larger ones.

    With one exception in 2012 (now the subject of litigation: Entergy), my experience nationwide was that OFCCP closed the small audits in response to contractor objection and challenge. Apart from the poor utility in auditing such small establishments (where OFCCP will not typically find employee groupings sufficiently large to make for meaningful statistical analyses and where one questions the "bang for the buck" taxpayers get out of an audit of 23 employees), profound legal questions now arise as to whether OFCCP may just willy-nilly suddenly and without formal notice to contractors change its historic interpretation and application of its audit regulations at 41 CFR Section 60-1.20 and whether it must first seek OMB's approval pursuant to the Paperwork Reduction Act to do so.

  6. OFCCP Issues Its Latest FAAP (Functional Affirmative Action Plan) Directive

    Ho-Hum. While law firms and several HR consulting firms fired off emergency Client Alerts ("breaking news"), who cares? As OFCCP continues its ying-yang acceptance-discomfort with FAAPs, this latest Directive, while changing little, was nonetheless noteworthy for two different reasons:

    1. It was useful to get the OFCCP Director's imprimatur, yet again, that FAAPs are an acceptable AAP tool; and

    2. In a refreshing change of direction, the changes (while minor) did not impose new obligations on contractors, but rather shrank contractor reporting requirements when seeking OFCCP approval to deploy a FAAP (i.e. no longer have to turn in VETS-100/100A report with request to OFCCP for FAAP; no requirement to tender race/sex/ethnicity info for all employees in proposed FAAP; no need for sample outreach communiques to disabled/veterans; and no requirement to identify the job titles by race/sex/ethnicity for each proposed functional unit).

    What happened? Did someone at OFCCP get up on the right side of the bed one morning and decide it was "Let's be nice to Contractor Day"—a new federal holiday? Did someone scatter pixie dust over the U.S. Department of Labor building in Washington D.C. the day Tom Dowd and his team just happened to be drafting the new FAAP Directive?

    No. The Obama OFCCP remembered what the Bush OFCCP forgot when first creating the FAAP program 10 years ago: OFCCP needs to get the approval of OMB pursuant to the Paperwork Reduction Act for every data collection OFCCP makes of 10 or more members of the public…even if the public likes and wants the burden of the data collection (as FAAP contractor wantabes do) and even if it is a really good idea (like FAAPs). (I admit, I am biased, since I created/approved the first FAAP…in 1983). So, when the Obama OFCCP did its duty, as the Bush OFCCP should have done, and submitted its FAAP Directive for review, OMB got out its sheep shears and immediately did what it does: began trimming away all the excess of the Directive, leaving a smaller, thinner, more frail, and more naked looking creature in place of the original. OMB has almost never been OFCCP's friend.

Thanks…John

THIS COLUMN IS MEANT TO ASSIST IN A GENERAL UNDERSTANDING OF THE CURRENT LAW AND PRACTICE RELATING TO OFCCP. IT IS NOT TO BE REGARDED AS LEGAL ADVICE. COMPANIES OR INDIVIDUALS WITH PARTICULAR QUESTIONS SHOULD SEEK ADVICE OF COUNSEL.
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