Contracting

The regulations on federal contractors keep piling on

The Office of Federal Contractor Compliance Programs, part of the Labor Department, has gotten White House go-ahead, for what one lawyer calls, "A significant e...

Tom Temin@tteminWFED

September 13, 2023 1:00 pm

8 min read

The Office of Federal Contractor Compliance Programs, part of the Labor Department, has gotten White House go-ahead, for what one lawyer calls, “A significant expansion of data that contractors must report.” It is all in a new schedule letter and itemized listing. To unravel it all, Federal Drive with Tom Temin spoke with that attorney: Andrew Turnbull, a partner at Morrison Foerster.

Interview Transcript:

Tom Temin What is a scheduling letter and itemized listing? What are we talking about here?

Andrew Turnbull So that is the letter that OFCCP sends two federal contractors at the beginning of our OFCCP audits. So it essentially requires contractors to turn over certain items of information at the outset of an audit. And then there’s a number of other perculations within audits that OFCCP goes through.

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Eric White And what do you think they’re doing differently now? What are they trying to do that they haven’t done in prior audits?

Andrew Turnbull Yeah. So, so the new scheduling letter and there’s an itemized listing that includes a lot of information that federal contractors have to turn over to OFCCP has significantly expanded the types of information contractors have to provide to OFCCP in several notable ways. So one is compensation. So in prior years, contractors had to provide OFCCP with employee level compensation information related to their affirmative action plan that’s being reviewed. Now, OFCCP is requiring contractors to provide two years of that data. They’re also requiring contractors to provide any of the factors that are used to make compensation decisions or selections or compensation at that site, and also any of their policies related to compensation practices or procedures. And if contractors don’t have those, they have to tell OFCCP that they do not have that information. Another item related to compensation that’s new here is that contractors at the outset of an audit will have to provide OFCCP with its regulatory required compensation analysis. And that’s been an issue that OFCCP has already issued a directive on and that contractors are in the process of preparing for, but they will now have to provide that at the outset of an audit. Another new item for the scheduling letter here is that contractors will have to provide OFCCP for the first time information about their use of technology base selection procedures, including the use of A.I. Tools. Now, in recent years OFCCP and EOC have undertaken various efforts to try to regulate and investigate technology based selection tools like A.I. that contractors have used in selection decisions and in OFCCP is traditionally sought to investigate employment tests. But this will be the first time that OFCCP is officially requiring contractors to provide information at the outset of audit on that type of information. One other significant change here, and there’s a couple of other notable ones, but I’ll just mention one other one briefly; is that the itemized listing also expands the information contractors have to provide on their affirmative action plans and how those plans are implemented, including any type of information in terms of if they’ve identified areas of underrepresentation, what are they doing specifically to address those for whether that’s females, minorities, individuals with disabilities, protected veterans. So this in a nutshell, this this scheduling letter is a game changer for contractors.

Eric White And just out of curiosity, if they don’t like your affirmative action plan, can they do anything about it or they just want to know?

Andrew Turnbull Certainly they can OFCCP has regulations that require contractors to follow certain steps in order to create affirmative action plans. And there are certain requirements that contractors have to be to create these plans. Now, there’s a lot of flexibility because contractors are all different sizes and shapes. And so, you know, contractors have some flexibility in how they create these plans. But if they don’t do them in accordance with the regulations, OFCCP could certainly find a compliance violation. But but certainly the bigger ticket issue for OFCCP is looking at employment decisions like compensation, termination, hires and promotions to decide to determine if there’s any type of statistically significant impact based on race or gender. And they spend a lot of time in audits is looking at that and some of the new information that OFCCP is requesting in the scheduling letter will help OFCCP investigate those issues.

Eric White In other words, they’re looking for a way to impute motive from data outcomes?

Andrew Turnbull Correct?

Tom Temin We’re speaking with attorney Andrew Turnbull. He’s a partner at Morrison Foerster. In your opinion, just given what’s going on in the whole affirmative action question nationally and we’re seeing this in other parts of federal contracting, particularly at the SBA, which has suspended 8A program because one court ruling said that you can’t infer that a company is necessarily disadvantaged because of the race make up of the ownership. So could that spill over to here? I mean, is this supportable legally anymore, do you think?

Andrew Turnbull Certainly in the current landscape it is. You know, the Supreme Court decision that came out for Harvard and UNC related to college admissions and affirmative action in that space, and that is governed by different laws that are at play here for workplace affirmative action programs. In fact, for workplace affirmative action programs you’re not supposed to actually consider race or any other protected characteristic to make employment decisions. Affirmative action for federal contractors is more about reaching out and eliminating barriers and providing equal opportunity in employment for different various groups.

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Eric White Okay, Got it. And so then what are you advising contractors to do here? This sounds like a pretty heavy lift in terms of just information gathering and compliance activity.

Andrew Turnbull I think contractors definitely are going to have to review their audit preparation strategies and affirmative action practices to ensure that they are prepared to timely respond to these new audit requirements. One of the things that OFCCP said in this new scheduling letter is that they are not going to provide extensions to the 30 day time frame to respond to the scheduling letter unless there’s extraordinary circumstances. And when they say extraordinary circumstances, they really mean that. So contractors are going to have to show that they have some type of medical leave for a key personnel or some type of some type of emergency situation, like a fire or an earthquake or something like that to say, hey, we need more time to respond to this. So what that means for contractors, they have to really think ahead and prepare for this. And so some specific action items that I think contractors really have to consider if they’re not already doing this, they need to closely review their employment decisions and selection tools, including in any compensation, hiring, promotions or terminations. And they need to review that under the attorney client privilege well before an audit starts to see if there’s any potential issues that they need to address or rectify. Because that’s going to be very hard to do in the course of an audit. They also should take a very close look at compensation because obviously OFCCP is continuing to look at that. And contractors, in light of this new scheduling letter, need to really focus on the factors affecting compensation and determine whether those are electronically maintained. And if not, do they need to be for defense purposes? What are their compensation policies and practices? Are those documented? How would they present these to OFCCP. So all of those issues have to be thought through well in advance of an audit. Contractors will also need to think about their affirmative action plans proactively and make sure that they retool their plans in light of this new scheduling letter. And sometimes that will require meeting with their vendors and internal stakeholders to make sure that they have the right documents and policies and procedures in place. And then finally, this obviously OFCCP is an agency that likes documentation. So this is going to require contractors to document a lot of their practices to show their compliance with this. And they’re going to have to do that well ahead of time.

Eric White Did they take anything off the itemized listing?

Andrew Turnbull They did not. They only added to it.

Eric White All right. Well, that’s kind of what you hear pretty much from throughout government. And do you have any evidence that OFCCP is increasing the number of audits it’s doing?

Andrew Turnbull Yeah. So I think over the last couple of years, we’ve seen a little bit of a decline in the number of new audits that OFCCP has issued. And some of that is due to the pandemic. Some of it’s due to the change in administration. But I think that now we’re seeing more of an uptick in audits and we are seeing new audits being released and OFCCP becoming much more active in audits. So I think we’re going to see that trend continue, particularly with this new scheduling letter. I think it just gives OFCCP more tools in its arsenal.