Are you Ready for Complying with the New Nondiscrimination Obligations for Federal Contractors and Subcontractors?

What is it?

The Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) published a Proposed Rule entitled: Nondiscrimination Obligations of Federal Contractors and Subcontractors: Procedures to Resolve Potential Employment Discrimination (84 FR 71875, Pages 71875-71887, (Dec. 30, 2019)).

This proposed rule is expected to be an Executive Order (E.O.) 13771 regulatory action and is one to watch!

Why Another Nondiscrimination Regulatory Action?

The proposed rule seeks to provide a more visible and consolidated codification of the current collective laws requiring contractors[i] to take affirmative action to ensure equal employment opportunity, and not discriminate on the basis of race, color, religion, sex, sexual orientation, gender identity, national origin, disability, or status as a protected veteran.  The current legal governances, procedures and remedies are scattered and somewhat unclear.  They are located: E.O. 11246, as amended; section 503 of the Rehabilitation Act, as amended, 29 U.S.C. 793 (section 503); and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, as amended, Federal Contract Compliance Manual (FCCM); 38 U.S.C. 4212 (VEVRAA); and, their implementing regulations.

What Does the Proposed Rule Include?

The proposed rule looks to codify, the various procedures outlined in the FCCM, which establishes the procedural framework for compliance evaluations, investigations, conciliations and resolutions.  The Notice of Proposed Rulemaking (NPRM) proposes to revise 41 CFR § 60-1.33 by changing the title to “Resolution Procedures” and incorporating three new subsections: “Predetermination Notice” (PDN), “Notice of Violation” (NOV), and “Expedited Conciliation Option” (ECO).  The Resolution Procedures include discussions of “Conciliation Agreements” (CA) and “Show Cause Notices” (SCN) and will make it law that contractors have the option to expedite OFCCP’s normal resolution procedures for discrimination findings by entering directly into a CA Agreement prior to issuance of either a PDN or NOV.  Similarly, material violations that are not discriminatory in nature would eliminate the PDN, beginning with a NOV before proceeding to a CA or the SCN for all material violations.  The proposed rule, among other things, would codify contractors’ prohibition from discharging or otherwise discriminating against applicants or employees who inquire about, discuss, or disclose their compensation or that of others, subject to certain limitations.  Finally, the proposed rule would replace outdated references to the official title of OFCCP’s agency head, from “Deputy Assistant Secretary” to “Director.”

Who Will be Impacted?

The current E.O. 11246, as amended, generally applies to any business or organization that (1) holds a single Federal contract, subcontract, or federally assisted construction contract in excess of $10,000; (2) has Federal contracts or subcontracts that have a combined total in excess of $10,000 in any twelve (12) month period; (3) holds Government bills of lading; (4) serves as a depository of Federal funds; or (5) is an issuing and paying agency for U.S. savings bonds and notes in any amount.  Supply and service contractors with 50 or more employees and a single Federal contract or subcontract of $50,000 or more also must develop and maintain an affirmative action program that complies with 41 CFR § 60-2. Construction contractors have different affirmative action requirements under E.O. 11246 at 41 CFR § 60-4. The Proposed Rule seeks to add two new definitions, revise a definition in § 60-1, and update parts § 60-1, 60-300 and § 60-741, to codify established policies and procedures for resolving discrimination and other material violations.

Are the Proposed Changes Favorable?

This remains to be seen.  The NPRM stated that, “[s]tatistical evidence plays a crucial role in OFCCP’s enforcement.  The proposed rule is intended to provide clarity and transparency in OFCCP’s methods.”  It requested comments for improving certainty in setting parameters for statistical evidence, including methodologies, minimum sample sizes, data groupings, methodological limitations, and ways to improve objectivity.

Almost every commenter was unimpressed with the language of the NPRM surrounding the statistical methods.  A summary of multiple commenters’ recommendations to the OFCCP showed a majority favor the following changes prior to implementing any final rule: (1) expand upon their analysis beyond using only the decided upon statistical method; (2) use additional quantitative statistical methodologies beyond standard deviation to explain legitimate business cases for “pay variables” and other pay variations across protected classes after controlling for pay variables; (3) revamp or discard the regression analysis methods due to concerns over lack of controls; (4) consider not codifying statistical methodology as a part of the final rule at all due to its apparent conflict Title VII.

The majority of commenters praised OFCCP’s efforts to streamline procedures by eliminating the PDN with an opportunity for response by the contractor before OFCCP issues a NOV with a discrimination finding. Likewise, most also agreed with the proposed Expedited Resolution procedures.  However, even with the agreements to streamline these procedures, few commenters agreed to accept the proposed language as written.  Some of the salient issues raised included: lack of neutrality; pre-bias, potential discrimination; other-than-statistical discrimination going unexamined; no opportunity for the employer to provide a statement of explanation for apparent disparities, statistical or otherwise; inconsistent with Title VII principles; inconsistencies in compliance procedures (some contractors would receive PDNs and NOVs and other would not); may produce invalid/incomplete statistical data.

The contracting community awaits positive changes in much-needed updates to these critical regulations, policies, and procedures.  Stay tuned for further updates.

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Article by Kristie Huber, Revolutionary Solutions, LLC.

[i] Reference to Contractors throughout this article means Federal Contractors and includes subcontractors unless otherwise specified.