OFCCP Federal Contractor Update

As seems to be the trend over the last few years, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) releases new directives and information in waves.  Well, grab your surfboard, and let’s talk about this most recent wave.

OFCCP Revises its Directive on Compensation Analysis

On August 18, 2022, the OFCCP released an updated Directive on “Advancing Pay Equity Through Compensation Analysis.” This revised Directive clarifies OFCCP’s prior guidance on compensation, which was the subject of significant contractor scrutiny.  It explains that in order to determine that a contractor has satisfied its obligation to conduct a compensation analysis, OFCCP requires certain documentation to demonstrate compliance. 

As you may know, the OFCCP typically begins its review of a contractor’s compensation practices in the initial “desk audit” stage.  At this stage, the OFCCP will review the compensation information required in the OFCCP’s Scheduling Letter and Itemized Listing.  It then reviews this information to determine whether the contractor is meeting its affirmative action and nondiscrimination obligations. This review includes, but is not limited to, the OFCCP conducting an analysis of the contractor’s compensation practices as provided in DIR 2018-05, Analysis of Contractor Compensation Practices During a Compliance Evaluation. OFCCP will also look broadly at a contractor’s workforce (across job titles, levels, roles, positions, and functions) to identify patterns of segregation by race, ethnicity, and gender, which may result from assignment, placement, or upgrading/promotion barriers that drive pay disparities. It may also use regression or similar analyses to look for disparities in patterns of assignment or salary across similar functions or positions. Following such analyses, the OFCCP may request additional information.

Beyond a review of the contractor’s compensation practices, OFCCP will also ask contractors for the results of the contractor’s own annual compensation analysis, which is required by the regulations. If a contractor believes its full compensation analysis contains privileged attorney-client communications or attorney work product, the contractor may fulfill its regulatory obligations by making available a redacted version of its compensation analysis, provided that the non-redacted portions include the required facts described below. Alternatively, a contractor may conduct a separate analysis during the relevant AAP period that does not implicate privilege concerns and provide that analysis to OFCCP in full.  Finally, a contractor may generate a detailed affidavit that sets forth the following required facts related to the compensation analysis:

1. When the compensation analysis was completed;
2. The number of employees the compensation analysis included and the number and categories of employees the compensation analysis excluded;
3. Which forms of compensation were analyzed and, where applicable, how the different forms of compensation were separated or combined for analysis (e.g., base pay alone, base pay combined with bonuses, etc.);
4. That compensation was analyzed by gender, race, and ethnicity; and
5. The method of analysis employed by the contractor (e.g., multiple regression analysis, decomposition regression analysis, meta-analytic tests of z-scores, compa-ratio regression analysis, rank-sums tests, career-stall analysis, average pay ratio, cohort analysis, etc.).

In addition to the required information described above, the OFCCP encourages contractors to provide the following information to assist OFCCP in understanding how contractors evaluate their compensation systems in practice:

1. A list of all employee pay groupings evaluated;
2. An explanation of how and why employees were grouped for the analysis;
3. Which, if any, variables, factors, measures, or controls (e.g., tenure, education, structural groupings, performance ratings, prior experience) were considered and how they were incorporated in the analysis; and
4. The model statistics for any regressions or global analyses conducted (e.g., b-coefficients, significance tests, F-tests, etc.) for race, ethnicity, and gender-based variables.

The OFCCP acknowledges that this information may be privileged, but encourages contractors to maintain the information in non-privileged form to “assist OFCCP in conducting a more efficient compliance evaluation.”  The Directive makes clear that it does not require the production of attorney-client privileged communications or attorney work product, but contractors will not be found in compliance with their compensation analysis obligations if they simply invoke privilege and provide OFCCP with no or insufficient documentation of compliance.

If the contractor’s compensation analysis reveals problem areas, the contractor must demonstrate that it developed and executed action-oriented programs to address the issues.  These efforts need to be something beyond the contractor’s regular procedures.  The OFCCP will require documentation that demonstrates, at a minimum:

1. The nature and extent of any pay disparities found, including the categories of jobs for which disparities were found, the degree of the disparities, and the groups adversely affected;
2. Whether the contractor investigated the reasons for any pay disparities found;
3. That the contractor has instituted action-oriented programs designed to correct any problem areas identified;
4. The nature and scope of these programs, including the job(s) for which the programs apply and any changes (e.g., pay increases, amendments to compensation policies and procedures) the contractor made to the compensation system; and
5. How the contractor intends to measure the impact of these programs on employment opportunities and identified barriers.

Ultimately, the Directive does not create any new legal rights or requirements for federal contractors, but merely provides insight into the OFCCP’s compensation review as part of the audit process.  In any case, contractors should take their compensation obligations seriously.

OFCCP to Release EEO-1 Data in FOIA Request—Unless You Object!

On August 18, 2022, the OFCCP provided notice to contractors that a Freedom of Information Act (“FOIA”) request will require it to disclose federal contractor’s Type 2 Consolidated EEO-1 Reports from 2016-2020.   The FOIA provides any person the right to request access to federal agency records or information. Like other federal agencies, the Department of Labor is required to disclose records requested in writing by any person. However, agencies may withhold information pursuant to certain exemptions and exclusions contained in the statute.

This particular FOIA request seeks all Type 2 Consolidated EEO-1 Report demographic data (i.e., “Component 1” EEO-1 Reports) submitted by federal contractors and first-tier subcontractors from 2016-2020. The Type 2 Consolidated EEO-1 Report is one of several different types of reports that are filed by entities with multiple establishments. EEO-1 reports filed by single-establishment contractors (Type 1) and other EEO-1 reports filed by multi-establishment contractors (Types 3, 4, 6, and 8) are not covered by the request. EEO-1 reports containing compensation information (i.e., “Component 2” EEO-1 reports), which were collected by the EEOC, are also not covered by the request.

Contractors who wish to object to the disclosure of their reports should do so on the OFCCP’s new Submitter Notice Response Portal.  The responses collected on the Portal will be evaluated to determine whether the requested information includes confidential trade secret, commercial, or financial information that should be withheld pursuant to one of the FOIA exemptions, in this case FOIA Exemption 4.  FOIA Exemption 4 protects from disclosure “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.” 5 U.S.C. § 552(b)(4).

The OFCCP outlines the information it will need to evaluate a contractor’s objection to the disclosure.  Contractors should include the first and last name of their company’s point of contact (“POC”), the POC’s phone number and email address, the company’s name and address and the parent company’s EEO-1 unit number.  Contractors should also provide as much information as possible addressing why they believe their Type 2 EEO-1 Report data should not be released under FOIA, including whether the information is commercial/financial and confidential. At a minimum, OFCCP suggests that written objections address the following questions:

• Do you consider information from your EEO-1 Report to be a trade secret or commercial information? If yes, please explain why.
• Do you customarily keep the requested information private or closely held? If yes, please explain what steps have been taken to protect data contained in your reports, and to whom it has been disclosed?
• Do you contend that the government provided an express or implied assurance of confidentiality? If yes, please explain. If no, skip to the next question.
• If you answered “no” to the previous question, were there expressed or implied indications at the time the information was submitted that the government would publicly disclose the information? If yes, please explain.
• Do you believe that disclosure of this information could cause harm to an interest protected by Exemption 4 (such as by causing genuine harm to your economic or business interests)? If yes, please explain.

Objections must be received by the OFCCP by September 19, 2022.  If OFCCP does not receive a written objection by the deadline, the agency will assume that the company has no objection to disclosure and will begin the process of sending the contractor’s Type 2 EEO-1 Report data to the FOIA requester.

New Construction Contract Award Portal Announced

Construction contractors and subcontractors will soon have an easier means to submit notice to the OFCCP of an award of a federal or federally assisted construction contract.  The Notification of Construction Contract Award Portal (“NCAP”) launched on August 26, 2022.  The OFCCP touts the portal as a more efficient and secure electronic means for a contractor to submit notice to the OFCCP within 10 working days of an award of a federal or federally assisted construction contract or subcontract that exceeds $10,000.

According to the OFCCP’s website, contractors will be able to securely upload details of awarded construction contracts, including contract value, estimated start and completion dates of the contract, contact information, the contract awarding entity, the contract receiving entity, and contract place(s) of performance, using a single or bulk upload.

NCAP will be the primary source for entering, tracking, and submitting contract award notifications for review by OFCCP. This will reduce or eliminate the need to submit contract award notifications via mail or email to OFCCP.

The NCAP website includes helpful information, such as an OFCCP webinar, Frequently Asked Questions, and How-To Videos for your assistance.

If you are not a construction contractor, however, you do not have to worry about this obligation.