ofccp audits: how to master the process from beginning to...

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OFCCP Audits: How to Master the Process

From Beginning to End

Wednesday, May 7, 2014 1:30 p.m. to 3:00 p.m. Eastern

12:30 p.m. to 2:00 p.m. Central 11:30 a.m. to 1:00 p.m. Mountain 10:30 a.m. to 12:00 p.m. Pacific

Presented by:

David S. Fortney Emily L. Bristol

Fortney & Scott, LLC

This program has been approved for 1.5 credit hours toward PHR and SPHR recertification through the Human Resource Certification Institute (HRCI).The Program ID number will be emailed to the registered participant at the completion of the conference. For more information about certification or recertification, please visit the HRCI website at www.hrci.org.

OFCCP Audits: How to Master the Process From Beginning to End

Presented by:

David S. Fortney, [email protected]

Emily L. [email protected]

Fortney & Scott, LLC1750 K St., NW, Washington, DC 20006

www.fortneyscott.com Tele: 202-689-1200 / Fax: 202-689-1209

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Overview

• The OFCCP Selection and Audit Process.• Strategies for a Successful Audit.• Successfully Negotiating with the Agency. • Enforcement.

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OFCCP Selection and Audit Process

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OFCCP Selection Process

• A federal contractor or subcontractor must be selected in an administratively neutral manner.

• OFCCP utilizes the Federal Contractor Selection System (FCSS) to maintain an administratively neutral process.• There are exceptions to the administratively

neutral process.Complaints.

Pre-Award review ($10 million or more).

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OFCCP Selection Process (cont.)

• OFCCP's Corporate Scheduling Announcement Letter (CSAL).• The CSAL is a notification to an establishment that

has been selected to undergo a compliance evaluation (or “audit”) during the scheduling cycle.

• The OFCCP is not required to send CSALs it is a “heads-up courtesy” letter.

• The list is generated from the FCSS.

• This is not a Scheduling Letter, a Scheduling Letter marks the beginning of the audit.

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OFCCP Selection Process (cont.)

• January 2014:• OFCCP mailed over 2,100 CSALs to the

individual establishments of 856 separate federal contractors.

• This cycle, OFCCP will limit the number of audits of separate establishments for a single federal contractor to 35.

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OFCCP Audit Process

• An audit of an establishment begins with a Scheduling Letter.• This is always the same letter and must be

approved by the Office of Management and Budget (OMB).

• The Scheduling Letter contains requests for the contractor’s Affirmative Action Program (AAP) for the establishment and an “Itemized Listing.”

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OFCCP Audit Process (cont.)

• After the Scheduling Letter is received, contractors have 30 days to submit the material requested (“desk audit submission”).• The first submission sets the stage for further

actions by OFCCP, including requests.• Once the material is submitted and OFCCP

begins its evaluation, the investigation stage has begun.

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Following the Desk Audit Submission• Two Options:

• Close the review at the Desk Audit stage, or;• Indicators warrant a request for additional data.

Off-Site review of additional data.• OFCCP conducts analyses on the additional data

supplied in response to the supplemental requests.

On-Site Investigation.• OFCCP conducts interviews, inspects the work site,

and reviews additional records and data.

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Scheduling Letter

Desk Audit Review Investigation

A greater number of on-site investigations are expected.

Following the Desk Audit Submission (cont.)

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OFCCP Audit Investigations

• The investigation stage can turn out to be much broader than the initial data requested in the Scheduling Letter. • When can OFCCP ask for additional information?

“OFCCP may extend the temporal scope of the desk audit beyond that set forth in the scheduling letter if OFCCP deems it necessary to carry out its investigation of potential violations.”

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OFCCP Audit Investigations (cont.)• Access to Records.

• OFCCP regulations only permit the off-site removal of records on a very limited basis.

“Where necessary, the compliance officer may take information made available during the On-Site evaluation for further evaluation. An Off-Site analysis should be conducted where issues have arisen concerning deficiencies or an apparent violation which, in the judgment of the compliance officer, should be more thoroughly analyzed Off-Site before a determination of compliance is made.”

• However, refusing to release data off-site to OFCCP may lead to a denial of access claim.

Typically, denial of access claims are vigorously pursued and OFCCP usually prevails in its claims to access information and data.

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Strategies for a Successful Audit

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• Make sure field HR or appropriate personnel covering various establishments understand the importance of any CSALs received and ensure that Corporate is notified if and when any CSALs are received. • Then, keep a look out for a Scheduling Letter and

begin to conduct a self-audit of your compensation under privilege, and affirmative action programs.

Preparing for the Audit

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Preparing for the Audit (cont.)

• Have those items included in a typical desk audit submission ready.• Review them for accuracy and ensure they are complete.

• Review applicant and other relevant records to ensure records are complete and accurate.• Engage appropriate internal personnel early.

• Review AAP narratives and information to ensure it is complete and accurate.

• Work with third-party outreach vendors to ensure that outreach and good faith efforts have been documented, maintained in a clear, detailed format, and are readily retrievable if requested by the OFCCP.

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Typical Desk Audit Submission• Narratives.

• Minority and Female (EO 11246).• Disabled and Protected Veteran (Section 503 and VEVRAA).

• Overview of Itemized Listing:• 3 Years of EEO-1 Reports.• Collective Bargaining Agreement (if applicable).• Organizational Profile.• Job Group Analysis.• Availability Analysis.• Utilization Analysis.• Goals.• Goal Attainment.• Personnel Activity Data (updated data may be necessary if

the audit is initiated 6 months or more into the AAP year).• Compensation Data.

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Strategies for Success

• Describe in detail your company’s good faith efforts.• Scrutinize your data to ensure accurate submissions.• Present your personnel activity data in the best light.• Conduct adverse impact analyses on final personnel

activity submitted, including prior year activity and six months’ activity (depending on date of Scheduling Letter).

• Conduct a compensation analysis to determine potential liability.

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Good Faith Efforts

• In the desk audit submission, present all of the company’s good faith efforts, including:• Employment outreach efforts for:

Minorities and Females.

Individuals with disabilities.

Protected Veterans.

• Organization memberships, local charity involvement.

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• The OFCCP is very interested in robust documentation of good faith efforts made for employment outreach and is issuing technical violations for those who fail to provide proof of their efforts.

Good Faith Efforts (cont.)

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Scrutinize the Data• Review all of the desk audit materials with a fine-tooth

comb, and prepare accurate submissions.• You only get one chance to make a good first impression!

• Pay particular attention to the applicant flow data.• Utilize the Internet Applicant rule.

• Review areas of underutilization.• What rules are you using to determine underutilization?

• Are you using the appropriate census data (2010 data, recruitment areas, and census codes)?

• If data is problematic, consider seeking an extension or submitting data in stages.

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Present in The Best Light

• Present your data in a way that reflects how your processes work.• Applicant data.

Use the internet applicant rule.Consider selections (competed for position) to applicants. Job group versus job title.

• Terminations.• Total terminations, voluntary and involuntary.• If 6 months or more into your AAP do not combine 18

months of personnel activity data in one report.

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Statistical Indicators• Conduct statistical disparity analyses (adverse impact

analyses) on your applicant data to determine if you trigger statistically significant adverse impact.

• If so, consider:• Reviewing the applicant data to determine if the disposition

codes are correct.• Accurately presenting the data in more “similarly situated

groupings”.Union versus non-union.

• Total minority versus racial/ethnic sub-groups.

• Adverse impact in hiring activity continues to be the Agency’s “bread and butter” for enforcement. • Make sure you scrutinize this area before the OFCCP does.

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Conduct a Compensation Analysis to Determine Potential Liability• OFCCP will require that you submit compensation data

using the employee totals found in the organizational profile in the AAP.• Conduct an analysis on this data to determine areas of potential

liability.

• If areas of potential liability are identified, consider making adjustments in salaries.• Best practice: The analysis and consideration of salary

adjustments is done under attorney-client privilege.

• Submit data in a “manner most consistent with your compensation system” (i.e. by job title).

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Conducting a Compensation Analysis

• Review your compensation under OFCCP standards.• OFCCP’s Directive 307 - Effective February 28,

2013.Affects how OFCCP will conduct compensation analyses.

It is not law and carries limited legal weight.

It is not designed as guidance for contractors.

• Biggest consideration is the “Pay Analysis Groups” that will now be utilized to review compensation.

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Pay Analysis Groups

• OFCCP will group job titles into larger groups for analysis.

• Groupings will be a function of OFCCP’s judgment. It might cross grade, job group, or level.• OFCCP will try to control for differences in grade,

group, title, and level in its analyses.

• OFCCP believes that dissimilar jobs can be made “similar” by controlling for the areas of dissimilarity in the analysis rather than in the actual grouping.

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Submitting Your Desk Audit Information

• Contact the compliance officer in response to the scheduling letter received and build a rapport.

• Consider submitting in electronic format (pdf).• Be sure to receive confirmation that your desk

audit submission has been received by OFCCP.• After submission, the response time from

OFCCP could range from 1 day to 1 year or more.

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Post-Desk Audit

• OFCCP will most likely get back to you with follow up questions and requests.

• Typical post desk audit request include:• VETS-100(A) reports.• Additional evidence of good faith efforts.• Evidence of listing with the state employment

office.• Detailed compensation data.• Policies and procedures.

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Post-Desk Audit (cont.)

• If “indicators” are identified by OFCCP it is common for OFCCP to ask for records to be submitted.

• Typical record request include:• Applications and applicant logs.

• Employment files.

• Termination records.

• Contractors are not required to manually copy documents that are not stored electronically.

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• There has been a significant increase in the number of on-site investigations in 2014.

• Be sure to request the on-site letter at least two weeks prior to the agreed upon date.

• Many of the on-sites appear to be focused on compensation.• OFCCP wants to determine and develop Pay

Analysis Groupings.

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• Interview with Compensation Manager.• Contractor Rights:

Can select who they want to be on the call.Can have an attorney or others on the call (highly recommended).OFCCP will ask that the person sign a statement but signing is not mandatory.Limit providing pay schedules and market data to the period being reviewed.OFCCP has no right to see your salary equity analysis or know any of the details about the analysis.

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• Interview with Compensation Manager (cont.):• Questions will be general and directed at the

information included in your submission.• Question Types:

Your salary equity analysis.

Your compensation system in general.

Your performance appraisal system.

Factors used to determine compensation.

Promotions and transfers.


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Successfully Negotiating with the Agency

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Negotiating

• Initially negotiate with the Compliance Officer, (“CO”) and the Assistant District Director (“DD”).

• Work the chain – when to go above the CO.• Understand when it is appropriate to do so and

how to do so effectively.

• Ensure communications are clear and amicable.• Respond to common OFCCP criticisms.

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When to Work the Chain• When OFCCP:

• Breaks or ignores its own rules or protocols.• Refuses to provide an explanation for additional requests,

conducting more interviews, scheduling an onsite investigation, or changing direction.

• Establishes an unrealistic timeline or data demands.• Threatens enforcement proceedings without providing a

thorough explanation in writing.• Fails to provide you an opportunity to conciliate or fails to

negotiate in good faith.• Demands a monetary settlement without providing

explanations and details of its findings and the factual and legal basis.

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• Always work the chain from the bottom up.• Keep the lower level informed that you are moving

up the ladder.

• Most decisions are made with regional input but not necessarily from a thorough regional review.

• Start with Assistant District Directors, then go to District Directors, then to Deputy Regional Director and then Regional Director (RD).• By the time you reach the RD, they will have

already reviewed the case.

How to Work the Chain

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Communicating with OFCCP

• Ensure that communications are clear and amicable.

• Don’t start your communication in an offensive mode or get into an access fight.• Ask questions regarding procedures, steps, findings,

timelines, reasons, policies.

• Get a commitment and written confirmation from the OFCCP manager.

• Offer alternatives, or to provide partial responses in agreed-upon increments.

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Common OFCCP Criticisms

• Responding to common OFCCP Criticisms.• The data is not provided in a way they like.

Response: Always provide data to the OFCCP in the way that you keep it. Explain the mechanism and policy for keeping data in the manner provided.

• You are unable to respond within their requested deadline.

Response: Provide an alternative and explain why, based on your particular circumstances, you logically cannot provide the information in the timeframe given.

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Enforcement

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OFCCP Enforcement• Two types of potential violations:

• Technical Violation (does not result in financial resolution).

Recordkeeping.Not conducting adverse impact analysis.Not posting with the State.Incomplete affirmative action plan.Lack of good faith efforts.

• Systemic Discrimination (results in paying a class of individuals).

Failure to hire.Systemic compensation discrimination.

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• In 2013, 2% of all OFCCP audits were closed with a finding of discrimination.• Of these:

60% were failure to hire cases.

28% were compensation discrimination cases.

Just over 10% were testing, promotion, and termination cases.

• Approximately 25% of the OFCCP’s compliance evaluations closed with a conciliation agreement for technical violations (e.g., outreach and recruitment, recordkeeping, posting with the state).

OFCCP Enforcement (cont.)

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• Technical violations are the most common violations:• 2012 Conciliation Agreements and Consent Decrees.

Total 1199 out of 4007 (30%).• 705 (59%) outreach and recruitment.

• 529 (44%) recordkeeping.

• 2013 Conciliation Agreements and Consent Decrees.Total 1037 out of 4100 (25%).

• 617 (59%) outreach and recruitment.

• 468 (45%) recordkeeping.

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OFCCP Enforcement (cont.)• Predetermination Notice.

• Will describe the alleged discrimination and offer the contractor the opportunity to respond (optional, and often not issued).

• Notice of Violation.• Details the identified violation.

• Show Cause.• Contractor has 30 days to present to OFCCP why the OFCCP

should not move to enforcement.• Conciliation (voluntary) or Litigation (non-voluntary).

• In litigation OFCCP must involve the Solicitor of Labor (SOL) and recommend enforcement, and SOL has to agree to litigate.

• If OFCCP cannot secure a Conciliation Agreement, it then recommends enforcement, and requests that SOL files a judicial complaint and initiate the litigation enforcement steps.

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PDN• Predetermination Notice

• Varies by Region; not always used.

NOV• Notice of Violation

CA • Conciliation Agreement

Show Cause

• Show Cause

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ALJ• Administrative Law Judge.

• DOL Judge.

ARB• Administrative Review Board (ARB).

Federal Court

• Federal District Court.• Appeals by Federal Contractor from ARB.

Disclaimers

*This webinar is designed to provide accurate and authoritative information about the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. *This webinar provides general information only and does not constitute legal advice. No attorney-client relationship has been created. If legal advice or other expert assistance is required, the services of a competent professional should be sought. We recommend that you consult with qualified local counsel familiar with your specific situation before taking any action.

Mr. Fortney is a co-founder of Fortney & Scott, LLC, a Washington, D.C.-based law firm counseling and advising clients on the full spectrum of work-place

related matters, including employment discrimination and labor matters, compliance programs, government contracting, international dispute resolution and counseling matters, and developing strategies for avoiding or responding to workplace-related crises. Mr. Fortney is a Fellow in the College of Labor and Employment Lawyers; he co-chairs the American Bar Association’s Federal Legislative Development Committee; and, he is a frequent lecturer at professional conferences. Fortney & Scott, LLC has been recognized as a leading management employment law firm in the prestigious Best Law Firms survey for 2011-2014 by U.S. News & World Report and Best Lawyers for Washington, DC. Mr. Fortney has a broad-based practice representing and counseling employers and executives in employment and labor matters, including equal employment opportunity requirements, wage and hour matters, federal contractor's affirmative action and non-discrimination obligations, collective bargaining, workplace health and safety, and pension and welfare benefits. He brings experience from the public and private sectors in advising clients on these issues, and he frequently represents clients before the U.S. Department of Labor's agencies, the Equal Employment Opportunity Commission, and the National Labor Relations Board. Mr. Fortney's litigation experience includes obtaining defense verdicts for employers in extended jury trials, as well as designing and implementing Alternative Dispute Resolution procedures to help resolve employment claims in an efficient and fair manner. Before co-founding the firm, Mr. Fortney previously served as the chief legal officer of the U.S. Department of Labor in Washington, D.C. during the term of President George H.W. Bush. As Acting Solicitor of Labor, he was responsible for enforcing over 140 laws regulating the

David S. Fortney

nation's workplaces and managing an agency with 800 attorneys and support staff. He advised Secretaries of Labor Elizabeth Dole and Lynn Martin and the Department of Labor agencies on a broad range of legal, policy, legislative, regulatory and enforcement issues. The major Department of Labor agencies Mr. Fortney represented included the Wage and Hour Division, Office of Federal Contract Compliance Programs, Employee Benefits Security Administration, Occupational Safety and Health Administration, and Mine Safety and Health Administration. Mr. Fortney has been widely recognized for his professional accomplishments, including being named one of the leading employment lawyers in Washington, D.C. by the Chambers USA survey of America’s Leading Lawyers for Business in all years from 2005 through 2014. He was selected for inclusion in the 2009 through 2013 editions of The Best Lawyers in America, Washington D.C.’s, Washington D.C.’s Best Lawyers and Super Lawyers. Mr. Fortney was also awarded an AV rating (the highest level) by Martindale-Hubbell.

Emily L. Bristol has experience representing employers through litigation, administrative proceedings, OFCCP audit proceedings and

mediation before state and federal agencies and courts, as well as counseling and advising companies in all aspects of employment law, including federal contractor compliance. Specifically, Ms. Bristol has extensive knowledge and experience in advising employers on Title VII claims, OFCCP regulations implementing Executive Order 11246, Section 503 of the Rehabilitation Act, and the Vietnam Era Veterans’ Readjustment Assistance Act, OFCCP compensation audits, the Americans with Disabilities Act, and wage and hour disputes. Ms. Bristol also has experience training executives and HR

Emily L. Bristol

personnel on all aspects of proactive OFCCP compliance and other federal contractor obligations including prevailing wage issues. She is admitted to practice in Pennsylvania, Washington D.C. and before various federal courts. Prior to joining FortneyScott, Ms. Bristol represented and counseled employers in labor and employment law matters in Pennsylvania. She graduated from Duquesne University School of Law and is admitted to practice in Pennsylvania, Washington D.C., and before various federal courts.

ofccp audits: how to master the process from beginning to...

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