Over two years ago, the Northern District of California issued an order requiring the OFCCP to disclose EEO-1 Type 2 reports to the Center for Investigative Reporting (“CIR”) over the objections of thousands of employers, as previously reported. In the interim, OFCCP did not release the reports for those employers who had objected as they appealed the District Court’s decision to the Ninth Circuit. In 2025, the Ninth Circuit affirmed the District Court’s decision that the EEO-1 reports did not contain “commercial” information that would be protected from disclosure pursuant to an exemption under the Freedom of Information Act (“FOIA”). The case remains pending in the District Court with other issues to be resolved. However, the Ninth Circuit’s decision became final after the OFCCP chose not to seek rehearing of the issue – and the parties filed a stipulated proposal with the District Court regarding the end of the stay of the release of the reports. The District Court granted the stipulation on February 9, 2026, which will allow for the release of the reports from 2016-2020. The District Court has now ordered the following by February 11, 2026: OFCCP shall release the reports of five “bellwether” objecting contractors which were considered in making the determination of whether the reports contained “commercial information.” OFCCP shall provide notice to the additional 4,500+ objecting contractors that their reports will be released on February 25, 2026. Contact your Polsinelli attorney for further guidance regarding the release of the reports, the potential effect of the release on your organization, and other government contractor matters.

Key Highlights The U.S. Department of Justice (DOJ) filed a lawsuit against the State of Minnesota challenging its affirmative action hiring program. It alleges that Minnesota’s requirement to consider race, sex and other protected characteristics in public employment decisions violates Title VII of the Civil Rights Act of 1964. The case is poised to test the limits of affirmative action in employment and could become a bellwether for similar policies nationwide and across public and private employers. DOJ Targets Minnesota’s Use of Race and Sex in Public Hiring Minnesota law mandates that state agencies take proactive steps to recruit and hire individuals from historically underrepresented groups, aiming to address workforce disparities. In a complaint filed on Jan.14, 2026, the DOJ asserts that this practice unlawfully favors certain applicants based on protected characteristics. Federal lawyers argue that the mandate amounts to intentional discrimination in violation of Title VII’s ban on making employment decisions because of race, color, religion, sex or national origin. The lawsuit acknowledges past U.S. Supreme Court decisions, such as United Steelworkers v. Weber and Johnson v. Transportation Agency, that permitted limited affirmative action plans to remedy persistent inequality. The DOJ, however, contends that those decades-old precedents are outdated and conflict with both Title VII’s text and the Supreme Court’s 2023 decision ending race-conscious college admissions. By certifying the Minnesota case as one of “general public importance,” the DOJ also seeks a special three-judge panel to hear the matter pursuant to 42 U.S.C. § 2000e-6(b), which would fast-track any appeal directly to the Supreme Court. Broader Implications for Employers and State Diversity Initiatives The Department’s challenge signals increased scrutiny of government-mandated diversity, equity and inclusion initiatives. Many employers have already grown more cautious with voluntary diversity programs following Executive Orders issued in 2025, but they were left with some uncertainty on conflicting obligations between federal and state laws. A ruling against Minnesota could further imperil similar state or local requirements for affirmative action in hiring or contracting. If the Supreme Court ultimately curtails or eliminates affirmative action in the employment context, public-sector workforces and contractor practices nationwide may need to adjust accordingly. Polsinelli Labor and Employment attorneys are closely monitoring this case and will advise clients as appropriate as developments unfold.

Key Highlights Under Section 503 of the Rehabilitation Act (Section 503) (extending protection to individuals with disabilities), the basic coverage threshold increased from $15,000 to $20,000. Under the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) (extending protection based on veteran status), the basic coverage threshold increased from $150,000 to $200,000. Although the Affirmative Action Program (AAP) coverage remains the same for Section 503, the AAP coverage requirements increased accordingly for the VEVRAA and now apply to contractors and subcontractors with at least 50 employees and a single contract of $200,000 or more. On October 1, 2025, the Office of Federal Contract Compliance Programs (OFCCP) increased the jurisdictional thresholds for two key federal contractor laws: Section 503 and the VEVRAA. These higher thresholds affect whether a contractor is covered by each law and, as a result, whether it must maintain written AAPs for individuals with disabilities and protected veterans. The increases result from the Federal Acquisition Regulatory Council’s periodic review and inflationary adjustment of “acquisition-related” thresholds in federal procurement statutes as required by Section 807 of the Ronald Reagan National Defense Authorization Act (41 U.S.C. § 1908). As part of its assistance efforts, the OFCCP has issued a “Jurisdictional Thresholds” infographic and updated its webpage with additional guidance and tools. While federal affirmative action plan requirements for women and minorities have changed significantly in 2025, federal contractors are reminded that affirmative action requirements for individuals with disabilities and veterans remain in effect for covered contractors. If you have questions about how these updated thresholds apply to your organization—or whether your contracts and workforce size trigger written AAP obligations—Polsinelli’s Labor and Employment attorneys are available to assist.

Key Takeaways The U.S. Equal Employment Opportunity Commission 2024 EEO-1 Component 1 Report filing opened on May 20, 2025, with a submission deadline of June 24, 2025, and no extensions being granted. Employers must select a workforce snapshot from October 1, 2024, to December 31, 2024. Filing is mandatory for private employers with 100 or more employees, federal contractors with 50 or more employees and certain affiliated private employers. As anticipated, 2024 EEO-1 Component 1 Report filing officially opened May 20, 2025, on the EEO-1 Data Collection website. The EEOC has expressed that, as part of cost savings, the filing period for EEO-1 data will be shorter than in the past. Specifically, employers will have a deadline for submission of June 24, 2025. It is important to note that no extensions will be granted this year, making timely compliance essential. In addition to the shorter time period for submission, there are additional changes to the 2024 EEO-1 reporting as discussed here. Filing Requirements The EEO-1 Report is a mandatory annual data collection that requires certain employers to submit demographic workforce data, including data by race/ethnicity, sex and job categories. The following entities are required to file: Private employers with 100 or more employees; Federal contractors with 50 or more employees; and Private employers with fewer than 100 employees who are affiliated through centralized control or ownership with other entities, totaling 100 or more employees. To complete their report, employers must select a workforce snapshot from any pay period between October 1, 2024, and December 31, 2024, for both full-time and part-time employees. Compliance Assistance Polsinelli understands the complexities involved in the EEO-1 reporting process and are committed to helping employers meet their obligations efficiently and effectively. If you have questions about EEO-1 reporting, contact Erin Schilling, Shivani Bailey or your Polsinelli attorney.

Key Takeaways The 2024 EEO-1 Report is expected to open May 20 pending approval of the instruction book and justification. The EEO-1 is expected to eliminate the option to report non-binary employees. Employers should confirm how their system collects data on the sex of employees to comply with binary-only gender reporting. On April 15, 2025, the Equal Employment Opportunity Commission (EEOC) submitted its 2024 EEO-1 Component 1 Instruction Booklet and justification to the Office of Information and Regulatory Affairs (OIRA), containing potential changes that may impact employers. This booklet indicates that 2024 EEO-1 Component 1 reporting will begin on Tuesday, May 20, 2025, with the deadline to file on Tuesday, June 24, 2025. The 2024 report will cover employee data from the payroll period between October 1, 2024, through December 31, 2024. These reporting dates remain tentative as OIRA must approve the booklet, which can take 30-60 days from the date of submission. Final dates will be posted on the EEO-1 reporting page. Understanding the EEO-1 Reporting Requirements The EEO-1 is an annual requirement that certain employers submit demographic workforce data, including information on race, ethnicity and sex by job group. The EEO-1 report is required for employers with 100 or more employees and employers with less than 100 employees who are related to other entities, such that combined, there are over 100 employees. Changes are Expected to the 2024 EEO-1 Executive Order 14168: Defending Women From Gender Ideology Extremism And Restoring Biological Truth To The Federal Government could have an impact on EEO-1 reporting, particularly concerning the recognition of sex. Executive Order 14168 reinforced the federal government's stance on recognizing only two sexes—male and female. In recent reporting periods, employers were instructed to report non-binary employees by footnote. EEOC is seeking approval to remove the option for employers to voluntarily report on employees who have self-identified as “non-binary” in order to comply with Executive Order 14168. This change would mean that the booklet’s instructions on “Reporting by Sex” would be restated to: “The EEO-1 Component 1 data collection provides only binary options (i.e., male or female) for reporting employee counts by sex, job category, and race or ethnicity.” What Employers Should Do Now? To ensure compliance with the new EEO-1 reporting requirements, employers should review and update their data collection processes. This includes auditing current systems to ensure they can accommodate the reporting of sex as needed. Employers should also stay informed about any updates or clarifications issued by the EEOC regarding the implementation of these changes. Polsinelli will continue to monitor developments with the EEO-1 report. If you have questions about EEO-1 reporting, contact Erin Schilling, Shivani Bailey or your Polsinelli attorney.

On March 14, 2025, President Trump issued an Executive Order rescinding 18 previous orders, including Executive Order 14026, which had raised the minimum wage for federal contractors to $17.75 per hour, higher than both the federal and most state minimum wages. The rescission ends the legal uncertainty around this wage increase, which had been invalidated by the Ninth Circuit but upheld by the Fifth and Tenth Circuits. While the new order does not rescind Executive Order 13658, which set a lower minimum wage, it creates uncertainty about federal contractors' obligations under existing contracts that included the $17.75 wage. Read the full update.

On January 21, 2025, President Trump issued an Executive Order revoking Executive Order 11246, which imposes anti-discrimination and affirmative action requirements on federal government contractors and subcontractors. This action, part of the new administration’s broader assault on DEI efforts in the federal government and private sector, may eliminate a significant compliance obligation for federal contractors. However, much remains uncertain about the going forward status of affirmative action requirements in federal contracting.  The new Executive Order requires the Office of Federal Contract Compliance Programs (OFCCP), which administers Executive Order 11246 among other laws, to immediately cease promoting diversity, stop federal contractors and subcontractors from taking affirmative action and end workforce balancing by federal contractors based on race, color sex, sexual preference, religion or national origin. The Executive Order also states that federal contractors shall not consider race, color, sexual preference, religion or national origin “in ways that violate the Nation’s civil rights laws” when making employment, procurement and contracting decisions. The Executive Order states that federal contractors may continue to comply with the regulatory scheme required by Executive Order 11246 until April 20, 2025. OFCCP did not immediately issue guidance on how the new Executive Order impacts contractors’ obligations. Given that OFCCP’s regulations provide that affirmative action goals are not quotas or set-asides, do not supersede merit selection and do not justify making employment decisions in a discriminatory manner, it is unclear how they conflict or would interact with the Executive Order’s prohibition of illegal discrimination and workplace balancing.  With that said, the now-revoked Executive Order 11246 is the source of those OFCCP regulations and contractor race and gender affirmative action obligations. It does not appear that the Executive Order would affect veteran affirmative action plan obligations under the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA) or disability affirmative action plan obligations under Section 503 of the Rehabilitation Act, given the statutory basis for those requirements. In addition to eliminating Executive Order 11246, the new Executive Order requires that every federal contract or grant award must now include a term certifying that the contractor or award recipient will not operate any programs promoting DEI that violate federal anti-discrimination laws, and a term requiring compliance “in all respects with all applicable Federal anti-discrimination laws.” The Executive Order states that this term is material to the government’s payment decision. This raises the specter of potential whistleblower actions under the False Claims Act against contractors operating allegedly discriminatory programs. The revocation of Executive Order 11246 underlines the extent to which DEI efforts are in the Trump administration’s crosshairs. On the same day as the new Executive Order, the Office of Personnel Management issued a memorandum immediately suspending with pay all federal employees working in agency DEI offices. As other agencies continue to take actions based upon President Trump’s DEI-related executive orders, companies that do business with the federal government will need to pay close attention. While much remains unclear, the new Executive Order will undoubtedly be a sea of change for federal contractors and subcontractors. Polsinelli is available to assist contractors in navigating the changing landscape surrounding affirmative action and other DEI requirements.

On November 15, 2024, the Office of Federal Contractor Compliance Programs (OFCCP) published its Corporate Scheduling Announcement List (CSAL) online, identifying contractors who will be receiving an audit scheduling letter in the coming year. Contractors were selected based on a variety of considerations, including higher employee count. This CSAL includes 2,000 establishments of supply and service contractors with federal contracts. The list identifies the specific review types that contractors will be subject to, including 1,880 standard establishment reviews, 60 corporate management compliance evaluations, 48 functional affirmative action program reviews, and 12 university reviews. A full copy of the lists can be found here. OFCCP does not make any promises regarding how soon each compliance review will be initiated and has stated it depends on the agency’s workload. Contractors on the CSAL can expect to receive a scheduling letter at any point after the CSAL is posted with some receiving notice quickly and others waiting many months. Contractors will have only 30 days to respond to the scheduling letter once received. Accordingly, the advance notice provided by the CSAL can be a valuable opportunity for contractors to prepare for an upcoming audit, collect the data and documents the contractor will be required to submit to OFCCP within a relatively short period after receipt of the scheduling letter, and identify any potential compliance vulnerabilities that may need to be addressed during the audit process. Contractors named in the CSAL should consider consulting with experienced counsel to assist in preparing for the forthcoming audit scheduling letter and to take advantage of this valuable preparation time. Polsinelli regularly represents federal contractors and subcontractors in OFCCP audits, and is available for consultation with contractors identified in the CSAL. 

On October 29, 2024, the Office of Contract Compliance Programs (“OFCCP”) published a notice in the Federal Register about a request for Type 2 Consolidated EEO-1 Reports (the “Consolidated Reports”) for 2021. (The request is also for 2022 reports, but OFCCP does not currently have those reports.) This request has been made by the University of Utah and a non-profit organization named “As You Sow” – and is separate from the 2022 request made by the Center for Investigative Reporting, which sought the same reports for 2016-2020. An appeal of the proposed release of the objected-to data remains pending in the Ninth Circuit. The Consolidated Reports contain demographic data for all employees at headquarters as well as all establishments, categorized by race/ethnicity, sex, and job category. With the publication of the Notice by OFCCP, government contractors now have until December 9, 2024, to object to the release of this sensitive data. If contractors miss that deadline, their data could be automatically released. The OFCCP has provided a list of contractors subject to this request.  As occurred with the prior FOIA request for Consolidated Reports, contractors must submit their objections to the release of the data to OFCCP through the OFCCP’s Submitter Notice Response Portal (or certain other specified means). The portal provides specific questions for contractors to answer, which address whether the Consolidated Reports and their data should be withheld pursuant to FOIA Exemption 4, which specifically addresses the withholding of trade secret or commercial or financial information. The OFCCP has provided FAQs to aid contractors in determining whether they are covered by the request and how to object, as well as providing contact information for reaching out to the OFCCP FOIA Help Desk. If a contractor submits an objection, OFCCP will independently evaluate the objections and make a determination regarding withholding the Consolidated Reports under Exemption 4. Both the objector and the requesting entities will receive notice of a determination to withhold data. Accordingly, if there is data in your Consolidated Reports that you don’t want published or accessible to competitors, act quickly to submit objections prior to the December 9th deadline. Otherwise, you should expect that your report’s data may be provided to an entity who will make it public. For questions or assistance in evaluating whether you should file an objection to the FOIA request, or in preparing an objection, please contact your Polsinelli attorney.

On June 7, 2024, the Office of Federal Contract Compliance Programs (OFCCP) released its first Corporate Scheduling Announcement List (CSAL) for fiscal year 2024. Specifically, this list identifies around 500 federal supply and service contractors and subcontractors that will be audited. The CSAL can be found here and the OFCCP answers to CSAL-related questions can be found here. Of the 500 contractors and subcontractors identified, 440 are establishment-based reviews, 30 are corporate management compliance evaluations (CMCE) focused on the contractor’s headquarters, 24 are functional affirmative action plan (FAAP) reviews, and 6 are university reviews. The release of the CSAL does not indicate that audits are beginning but rather, informs contractors and subcontractors that they have been identified for audit. This allows contractors and subcontractors advance notice and can be very helpful in providing time to prepare for the audit, gather data and documents necessary for the audit, and identify any potential issues that may need to be addressed before or during the audit. Before formally initiating an audit, OFCCP sends contractors and subcontractors a Scheduling Letter. Scheduling Letters are often issued around 45 days after the CSAL is released, and as such, it can be difficult and rushed for contractors and subcontractors to prepare for the audit. Polsinelli regularly represents federal contractors and subcontractors in OFCCP audits and is available for consultation with contractors and subcontractors identified in the CSAL.

Tuesday, June 4, 2024, is the deadline to submit and certify the 2023 EEO-1 Component 1 Report to the Equal Employment Opportunity Commission (EEOC). While the deadline has been extended occasionally in prior years, no such announcement has been made to date. Accordingly, all covered employers should take steps to comply by the deadline. The importance of meeting this annual reporting requirement was further emphasized this week when the EEOC filed suit against 15 employers in various industries across 10 states for failing to submit their EEO-1 Component 1 Reports for past years, including for the years 2021 and 2022. Additional information regarding reporting requirements and whether your company is required to submit and certify can be found here. Polsinelli will continue to monitor developments with EEO-1 reporting and the above-referenced EEOC lawsuits. If you have questions about EEO-1 reporting or need assistance preparing this report, contact your Polsinelli attorney.

The Office of Federal Contract Compliance Programs (OFCCP) announced that the Contractor Portal for federal contractors and subcontractors to certify compliance with their affirmative action plan (AAP) obligations will open on April 1, 2024, with contractors and subcontractors having until July 1, 2024, to submit the required certification. This is the third year of OFCCP’s annual certification requirement. Contractors must again certify that they have developed and maintained annual affirmative action plans for each of their workplace establishments or functional/business units, as applicable.  Beginning last year, contractors and subcontractors were required to enter the start date of their currently maintained AAP. For the current 2024 certification period, contractors are certifying compliance for its most recent AAP start date.  In addition, covered federal contractors must disclose the number of employees which are included in each establishment AAP.  OFCCP continues to stress the need to meet this reporting deadline. The agency has indicated that contractors who fail to certify compliance (due to either failing to complete the certification or stating in the certification they have not complied) “will be more likely to appear on OFCCP’s scheduling list” for annual compliance audits. The certification requirement applies to existing federal contractors. OFCCP encourages new contractors to register as soon as possible after entering a contract and then update certification within 90 days of developing their AAP. Polsinelli assists many federal contractors and subcontractors in completing the Contractor Portal certification requirement and assists many entities doing business (directly or indirectly) with the federal government in determining whether they are subject to AAP obligations. Polsinelli’s OFCCP & Affirmative Action Plans practice is available to provide practical assistance to contractors and subcontractors with the certification process.

On Tuesday, April 30, 2024, the Equal Employment Opportunity Commission (EEOC) will open the 2023 EEO-1 Component 1 Report for employers to report the race, ethnicity and gender of their employees. The EEO-1 reporting period is scheduled to remain open until Tuesday, June 4, 2024. This reporting is mandatory for private sector employees with 100 or more employees and certain federal contractors with 50 or more employees. In addition, employers with less than 100 employees who are related to other entities, such that combined, there are over 100 employees, may also be required to file. The EEOC anticipates posting updates regarding the 2023 EEO-1 Component 1 data collection by Tuesday, March 19, 2024, including the 2023 EEO-1 Component 1 Instruction Booklet and the 2023 EEO-1 Component 1 Data File Upload Specifications. Polsinelli will continue to monitor developments with the EEO-1 report. If you have questions about EEO-1 reporting or need assistance preparing this report, contact your Polsinelli attorney.

On January 31, 2024, several U.S. government agencies released proposals and guidance aimed at imposing new pay transparency and salary history requirements upon federal government contractors and subcontractors. These proposals, should they go into effect, will subject federal contractors and contractors to a suite of pay equity regulations mirroring those recently enacted in progressive states like California and New York. Proposed FAR Clause Implementing Salary History Restrictions Most significantly, the FAR Council, which consists of the Administrator for Federal Procurement Policy and the heads of the Defense Department, NASA, and the General Services Administration, published a proposal to amend the Federal Acquisition Regulation (FAR) to implement a new pay equity clause. Under the new proposal, the new clause would be applicable to the bulk of federal government contracts that are performed in the United States and its outlying areas, and will also flow down to subcontractors at any tier.  The proposed clause applies to recruitment for any position that works “on or in connection with” a federal contract – an established standard covering not just the employees who perform the direct services called for under the contract, but also support services that are necessary for the contract’s performance. The proposed FAR clause prohibits several actions in connection with an employer’s use of an applicant’s prior compensation level in past positions during the recruiting process: Contractors cannot seek an applicant’s compensation history from the applicant or the applicant’s former employer, or require the applicant to disclose compensation history. Contractors cannot retaliate against or refuse to interview or hire applicants who do not respond to an inquiry about compensation history. Contractors cannot rely on an applicant’s compensation history (if known or discovered) as criteria for screening applications or in determining the applicant’s new compensation upon hire. Notably, the prohibition on using prior compensation in setting an applicant’s new compensation applies even if the applicant voluntarily discloses their compensation in pay negotiations. The proposed clause would also impose compensation disclosure requirements for contractors’ job advertisements. The clause requires that all advertisements for positions that work on or in connection with a federal contract must disclose the range of salary or wages the contractor believes in good faith that it will pay for the position. Job listings must also disclose a “general description” of benefits and other types of compensation (i.e., commissions, bonuses, etc…) offered. If more than 50% of compensation will come from non-wage or salary compensation, then the contractor must specify the percentage of overall compensation or dollar amount of each other form of compensation. Job advertisements must also include a notice of rights under the new FAR clause and information about how to submit claims of discrimination. New OFCCP Guidance on Salary History Concurrently with the proposed FAR clause, the Office of Federal Contract Compliance Programs (OFCCP) issued Frequently Asked Questions guidance about the use of salary history in setting compensation. The guidance does not, at least directly, impose new obligations on contractors, but does suggest that OFCCP will view an employer’s use of salary history in setting compensation as a potential indicia of pay discrimination. OFCCP’s guidance does not explicitly take the position that contractors may not use or rely upon salary history in setting compensation. Rather, the guidance states that “the practice may contribute to unlawful discrimination, depending on the specific facts and circumstances at issue.” The guidance also does not treat the use of salary history data voluntarily provided by an applicant in negotiations as different from information collected or required to be provided by the employer. The guidance suggests that the use of salary history by a contractor may be reviewed by OFCCP in compliance evaluations as part of its examination of the employer’s broader compensation policies. The FAR Council is accepting comments on its proposed rule until April 1, 2024, which could lead to changes in its scope prior to implementation. Still, federal contractors and subcontractors should review their compensation and recruiting practices to identify whether salary history data is collected and how it is used in setting compensation, as even absent these proposals, the use of salary history in setting compensation is a potential vulnerability that may expose an employer to equal pay claims.

Despite objections by thousands of employers and its continuing review of records, the OFCCP has been ordered by a federal court to produce all EEO-1 Type 2 reports of federal prime contractors and first-tier subcontractors from 2016-2020 as requested by the Center for Investigative Reporting (“CIR”) through multiple FOIA submissions. CIR filed litigation to enforce its FOIA request in December 2022 in the Northern District of California. On December 22, 2023, that court issued an order requiring OFCCP to produce the EEO-1 Type 2 reports, determining that the information included in the reports was not the type of “commercial” information protected from release under FOIA. Specifically, the court found that the reports were not exempt from disclosure under Exemption 4 of FOIA as the information in the reports is not “intrinsically valuable business information” and the headcounts in all industries and across broad job categories do not provide “commercial insight…specific to the operations of a federal contractor.” The court also rejected OFCCP’s assertion the data constituted trade secrets protected from disclosure and found no substantial risk of harm through the disclosure of competitive business secrets. While the court initially required OFCCP to produce the EEO-1 Type 2 reports by January 19, 2024, the parties agreed to extend the deadline to February 20, to give OFCCP an opportunity to determine whether to appeal the decision. It is anticipated that an appeal of the decision will delay any required disclosure of the reports. Contact your Polsinelli attorney for further guidance regarding this anticipated disclosure and other government contractor matters.

Under Title VII of the Civil Rights Act, private sector employers with 100 or more employees and certain federal contractors with 50 or more employees are required to provide demographic information of their workforces—otherwise known as EEO-1 Component 1 reporting. This includes data such as sex, race, ethnicity, and job categories. The 2022 reporting period has been delayed. It is currently scheduled to open in the fall of 2023—with no date set in stone. The EEOC is in the process of doing a three-year renewal of EEO-1 Component 1 reporting with the Office of Management and Budget (“OMB”) which is required by the Paperwork Reduction Act. While the Biden administration has expressed support for collecting compensation data with the EEO-1 report, EEOC has made clear on the EEO-1 Component 1 page that it is not making changes to the EEO-1 Component 1 data collection categories.  Rather, EEOC is seeking to update how the data is collected from employers and to reduce the burden of this collection on employers, including no longer requiring “multi-establishment filers” to submit separate reports based on the size of establishments. While EEOC has not announced a deadline for 2022 EEO-1 Component 1 reporting, required employers and contractors should continue ensuring they are collecting the necessary demographic data to be ready for the deadline. Once a deadline is determined, it will be posted on the EEO-1 Component 1 page, and employers should note that the actual reporting process may look different (and may be less burdensome) if the OMB approves changes to the data collection methods. If you have questions about required notices, contact your Polsinelli attorney.

On April 25, 2023, the Office of Federal Contract Compliance Programs (OFCCP) issued an updated self-identification form for applicants and current employees to voluntarily self-identify as an individual with a disability.  Federal contractors and subcontractors subject to Section 503 of the Rehabilitation Act must invite applicants for employment to self-identify at the pre-offer and post-offer stages, as well as invite current employees to update their self-identification every five years.  Contractors and subcontractors must use the information provided in this form in their Section 503 affirmative action program for individuals with disabilities. The revised form implements updates based on the preferred language for disabilities and includes additional examples of disabilities, among other changes.  The changes are relatively non-substantive in nature and do not materially alter the contractor’s obligation to invite applicants and employees to self-identify. Employers are required to begin using the revised form by July 25, 2023.  Employers must continue using the prior version of the form until they implement the revised form. The revised form is set to expire on April 30, 2026. Employers can get the new form in English here. The OFCCP is expected to provide the form in additional languages in the coming months. The self-identification requirement for individuals with disabilities is just one of the unique requirements that OFCCP imposes on federal contractors and subcontractors in the recruitment and onboarding processes.  The updated self-identification form presents a good opportunity for employers that have newly become federal contractors or subcontractors, or that have not reviewed their processes for a number of years, to bring their recruiting and onboarding processes into greater compliance (including requirements for third-party recruiters acting on the contractor’s behalf), as failure to collect the sometimes granular information required by OFCCP can have negative consequences in the event of a compliance evaluation. If you have any questions about the updated Voluntary Self-Identification of Disability form, please contact Polsinelli’s OFCCP and Affirmative Action Plans team.

On March 20, 2023, the Office of Federal Contract Compliance Programs (OFCCP) announced that the Contractor Portal for federal contractors and subcontractors to certify compliance with their affirmative action plan (AAP) obligations will open on March 31, 2023, with contractors and subcontractors having until June 29, 2023, to submit the required certification. This is the second year of OFCCP’s annual certification requirement. As for 2022, contractors must again certify that they have developed and maintained Affirmative Action Compliance for each of their workplace establishments or functional/business units, as applicable.  This year, contractors and subcontractors must also disclose the start date of their AAP coverage period.  OFCCP is seeking to add weight to the certification requirement, as the agency’s announcement indicates that contractors who fail to certify compliance (due to either failing to complete the certification or stating in the certification they have not complied) “will be more likely to appear on OFCCP’s scheduling list” for annual compliance evaluations. The certification requirement applies to existing federal contractors. Entities that newly become federal contractors or subcontractors have 120 days to develop an AAP and must certify compliance through the Contractor Portal within 90 days. In 2022’s certification cycle, Polsinelli assisted many federal contractors and subcontractors in completing the Contractor Portal certification requirement and assisted many entities doing business (directly or indirectly) with the federal government in determining whether they are subject to AAP obligations. Polsinelli’s OFCCP & Affirmative Action Plans practice is again available to provide practical assistance to contractors and subcontractors with the certification process.

On March 1, 2023, the Office of Federal Contract Compliance Programs (OFCCP) published a Final Rule rescinding a prior rule the agency published late in the Trump administration that broadened the scope of Executive Order 11246’s religious exemption. As a result of the new rule, fewer federal contractors or subcontractors will likely qualify for the religious exemption, and the scope of conduct exempted from Executive Order 11246’s anti-discrimination requirement will likely be reduced. Since the Bush 43 administration, Executive Order 11246 and OFCCP’s implementing regulations have provided that the Equal Employment Opportunity clause required by Executive Order 11246 would not apply to “a Government contractor or subcontractor that is a religious corporation, association, educational institution, or society, with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution, or society of its activities.” The 2020 rule provided definitions of the terms “religion,” “particular religion,” “religious corporation, association, educational institution, or society,” and “sincere” that arguably broadened the scope of the exemption beyond the corresponding exemption in Title VII of the Civil Rights Act. The 2020 rule also provided that OFCCP’s should be construed in favor of broad protection of religious exercise. With the 2020 rule’s definitions, and the broad construction provision now eliminated, the interpretation of the religious exemption reverts back to Title VII standards. This will likely make it more difficult for some organizations (particularly those that are for-profit) to claim the exemption. In addition, there will likely be less protection for actions taken based on religion-adjacent tenets, as opposed to membership in a particular sect. The practical effect of the 2020 rule was limited, and the effect of its rescission will likely also be limited. Religious contractors remain subject to Executive Order 11246’s other requirements, such as its affirmative action obligations. In addition, contractors are also covered by other federal, state, and local laws prohibiting discrimination on the basis of religion. Federal contractors who wish to consider religious factors in making personnel decisions should work carefully with legal counsel to evaluate their status as a religious entity under the exemption’s new scope and other applicable laws and ensure the religious nature of each position is well documented in order to lessen the risk of discrimination claims in making religion-influenced personnel decisions.

On November 21, 2022, OFCCP proposed a new Scheduling Letter and Itemized Listing that will greatly increase the amount and specificity of documents and information that federal government contractors must provide in compliance evaluations.  The Scheduling Letter is the notice that OFCCP issues to contractors and subcontractors selected for the agency’s annual compliance evaluations.  These changes highlight the agency’s increased focus on enforcement, and the need for contractors to carefully document their performance of affirmative action plan requirements. OFCCP’s new proposed Scheduling Letter seeks to add numerous additional document requirements beyond those the agency currently requests in its audits.  These new requirements fall into several categories: Focus on Action-Oriented Programs and Outreach Activities:   OFCCP’s regulations have long required that contractors implement action-oriented programs to seek to increase the representation of minority, female, individuals with disabilities, and military veteran employees, and engage in outreach activities to effectively recruit members of those groups.  The proposed Scheduling Letter increases the level of specificity of the information OFCCP will be seeking from contractors about these efforts, as OFCCP is proposing to require contractors to provide documentation of outreach and recruitment activities, as well as the criteria that the contractor uses to evaluate the effectiveness of the activities and implement alternative efforts in the event that existing outreach is deemed ineffective. Scrutiny of Artificial Intelligence in Hiring Decisions:   The proposed Scheduling Letter seeks to add a new document request for documentation of the contractor’s policies and practices regarding the use of artificial intelligence, algorithms, automated systems, and other technology-based procedures in recruiting, screening and hiring.  With recent legislation in New York City and elsewhere, the use of AI in personnel decision-making is becoming an area of interest to legislators, and OFCCP appears to be joining that trend. More Detailed Data on Personnel Transactions:   OFCCP is also proposing to require contractors to provide additional data about personnel transactions over the prior affirmative action plan year.  For promotions, a stated area of focus for the agency in recent years, OFCCP proposes to require contractors to state whether each promotion was competitive or non-competitive, provide documentation about policies and practices concerning promotions, and also identify the supervisors involved in the promotion and the effect of the promotion on compensation.  For terminations, employers under OFCCP’s proposal would be required to provide information about the reason for each employee termination (i.e., retirement, resignation, conduct) over the previous plan year. Additional Data on Employee Compensation:    OFCCP similarly is proposing to require more contractors to submit more detailed data about employee compensation.  First, OFCCP has expanded the scope of the compensation data production by requiring two years of compensation data, up from one under the current Scheduling Letter, and also requiring information about the compensation of individuals provided by staffing agencies.  Second, whereas under the current Scheduling Letter, contractors may submit information about factors used to determine compensation (such as education, experience, etc.) and compensation policies, this submission would become a requirement under OFCCP’s new proposal. Providing Information About Compensation Analyses:   On the heels of OFCCP’s directive earlier in 2022 requiring federal contractors to perform pay equity audits (later rephrased by the agency as a “compensation analysis”), OFCCP is proposing to require contractors to provide certain information about their performance of the analysis.  Notably, OFCCP’s directive on compensation analyses stated that such information would be required only where OFCCP’s audit revealed pay disparities, but OFCCP is now proposing to require all contractors selected for audit to provide the information up-front in response to the Scheduling Letter.  Under the proposal, contractors must provide documentation showing that they satisfied the obligation to evaluate their compensation systems, including documentation demonstrating when the analysis was completed, the number of employees included or excluded in the analysis, what forms of compensation were reviewed, confirming that compensation was analyzed by race, gender, and ethnicity, and identifying the method of analysis used. Production of Policies and Arbitration Agreements:   Finally, OFCCP is proposing to require contractors to produce equal opportunity, harassment, and similar employment policies.  Interestingly, the agency is proposing to require employers to also provide employment agreements containing arbitration clauses. OFCCP’s current Scheduling Letter does not expire until April 30, 2023, and the new letter, if approved, would take effect after that point.  Contractors and others may submit written comments as part of the approval process through January 20, 2023.  Although it remains to be seen whether the proposed Scheduling Letter will ultimately be approved in its proposed form, OFCCP’s proposals highlight the need for federal contractors and subcontractors to take the outreach and evaluation (including compensation analysis) requirements in OFCCP’s affirmative action plan regulations seriously, as OFCCP is signaling that it intends to take a hard look at contractors’ efforts in meeting these obligations.

The Equal Opportunity Clause in federal contracts requires employers to post a notice for employees regarding nondiscrimination. The Officer of Federal Contractor Compliance Programs (OFCCP) adopted a new updated poster. In order to maintain compliance, all covered federal contractors should update their posters as soon as possible. In recent years, OFCCP designated the EEO is the Law and its Supplement as the required poster.  Earlier this month the Equal Employment Opportunity Commission (the “EEOC”)  released an updated workplace nondiscrimination notice. The new notice is titled “Know Your Rights: Workplace Discrimination is Illegal” and is available on the EEOC website and OFCCP website. Per the Equal Opportunity Clause, the notice must be placed in “conspicuous places, available to employees and applicants”. With many applicants applying digitally and more employees working remotely, federal contractor employers should also consider sharing the notice digitally to share the notice with applicants and remote or hybrid workers. While a deadline has not been set for employers to post the updated notice, employers, especially those with a pending or upcoming OFCCP audit, should post the updated notice soon to ensure that they satisfy the posting requirements. Additionally, employers that use a subscription service for required workplace notices should contact their service provider to ensure that they receive the updated version. If you have questions about required notices, contact your Polsinelli attorney.

As we previously reported, on August 26, 2022, the U.S. Court of Appeals for the Eleventh Circuit issued a decision narrowing the nationwide injunction against the COVID-19 vaccination mandate for federal contractor employees set forth in President Biden’s Executive Order 14042. Although the Eleventh Circuit found the vaccination mandate to be unlawful, it found the nationwide injunction (applicable to all federal contractors across the country) to be overbroad and reduced the scope of the injunction to apply only to the States and parties that challenged the mandate in the case. This allows the vaccination mandate to go into effect for federal contractors in the majority of the country. On October 14, 2022, the Safer Federal Workforce Task Force issued guidance about its intentions and course of action following the Eleventh Circuit’s decision. The new Task Force guidance strongly implies that the federal government will resume enforcing Executive Order 14042’s vaccine mandate. Before the government does so, however, the Task Force outlines a three-step process that will occur: First, the Office of Management and Budget will notify federal agencies regarding their obligations to comply with the remaining injunctions against Executive Order 14042, which continue in effect. Second, the Task Force will update its guidance regarding COVID-19 safety protocols for federal contractor and sub-contractor workplaces. Due to the injunctions, the Task Force has not updated its contractor guidance since November 2021, despite great changes in the state of the COVID-19 pandemic since that time. The October 14, 2022, notice does not provide any hints as to what types of updates the Task Force may make. Third, and finally, OMB will provide additional guidance to federal agencies regarding the resumption of enforcement of contract clauses implementing Executive Order 14042’s requirements. Prior to this notice, the federal government will continue not to enforce any of Executive Order 14042’s requirements. The timeframes under which these steps will occur are not defined by the Task Force’s notice. As noted above, the Eleventh Circuit’s decision did not affect other pending injunctions prohibiting enforcement of the vaccination mandate against contractors and subcontractors in the States of Missouri, Nebraska, Alaska, Arkansas, Iowa, Montana, New Hampshire, North Dakota, South Dakota, Wyoming, Kentucky, Tennessee, Ohio, and Florida. In addition, members of the Associated Builders and Contractors also retain the protection of the former nationwide injunction. All other contractors not covered by pending injunctions will need to resume their efforts to comply with Executive Order 14042. That said, it is unknown at this time how the Task Force will modify its guidance. For example, will the Task Force now require that covered contractor employees obtain booster shots in addition to the initial vaccination. Although the exact contours of the modified guidance are important, there are steps federal contractors can take to begin preparing now, to avoid being caught under potentially short deadlines as the three-step process unfolds over an unknown timeline.

Today OFCCP announced that it is extending the deadline to respond to and submit objections pursuant to its August 19, 2022, Notice in the Federal Register regarding a Freedom of Information Act (“FOIA”) request from Will Evans, a Senior Reporter and Producer with the Center for Investigative Reporting (“CIR”). The request seeks federal contractors’ Type 2 Consolidated EEO-1 Report Data. For a discussion of the scope of the request and additional details about the substance and process of objecting, click here. What Has Changed? OFCCP indicated that after publishing the Notice in the Federal Register, it had received numerous requests from contractors and contractor representatives to extend the time period for submitting objections. In addition, during this same time period, some federal contractors have reached out to OFCCP seeking to verify whether they are included in the universe of “Covered Contractors” during the requested timeframe for the reports. To accommodate these concerns, OFCCP has extended the deadline to submit objections by a month – from September 19, 2022, to October 19, 2022. Further, OFCCP will also be taking the additional step of emailing contractors that OFCCP believes are covered by the FOIA request. OFCCP will use the email addresses provided by contractors registered in OFCCP’s Contractor Portal, as well as the email addresses provided as a contact for the EEO-1 report when submitted. This undertaking should provide some clarity to contractors who are unsure if they are within the scope of the FOIA request. Important Reminders OFCCP has created a Portal for submitting objections to the FOIA request, and has provided FAQs to aid in determining if a contractor is covered by the request and how to object to the request. In addition, OFCCP has provided direction for seeking assistance by contacting the OFCCP FOIA Help Desk by phone or email. What Happens Next? If you do not submit an objection to the FOIA request, then OFCCP will release the data to CIR as a part of a rolling production after October 19. If you do submit an objection, OFCCP will independently evaluate the objections and make a determination regarding withholdings under Exemption 4. Both the objector and CIR will receive notice of a determination to withhold data. If there is information in your EEO-1 Reports that you don’t want published or accessible to competitors, act quickly to submit objections to OFCCP prior to the October 19 deadline. Otherwise, you should expect that your report’s data may be provided to a reporter who will make it public. For questions or assistance in evaluating whether you should file an objection to the FOIA request, or in preparing an objection, please contact your Polsinelli attorney.

On August 19, 2022, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) published a Notice in the Federal Register regarding a Freedom of Information Act (“FOIA”) request from Will Evans, a Senior Reporter and Producer with the Center for Investigative Reporting (“CIR”).  The FOIA request seeks the disclosure of certain government contractor compliance reports submitted to the Equal Employment Opportunity Commission. The OFCCP is allowing affected contractors to submit objections to the FOIA request if they fear confidential commercial information may be disclosed and ultimately published. The Scope of the Request The FOIA request was initially made in January 2019 but has been amended multiple times and now seeks all Type 2 Consolidated EEO-1 Report demographic data submitted by federal contractors and first-tier subcontractors from 2016-2020. The request does not include EEO-1 requests from single-establishment (Type 1) contractors, other EEO-1 reports filed by Type 2 (multi-establishment) contractors or Component 2 reports with compensation data. Type 2 Consolidated EEO-1 Reports are consolidated reports of demographic data for all employees at headquarters as well as all establishments, categorized by race/ethnicity, sex, and job category. OFCCP estimates that nearly 15,000 companies filed reports subject to the FOIA request. A company can use the EEO-1 Online Filing System’s historic data to determine if they filed EEO-1 Reports between 2016 and 2020. What If I Don’t Want My EEO-1 Reports Made Public? FOIA grants the public the right to request access to records from any federal agency. However, there are certain exemptions that allow agencies to redact – or entirely withhold – certain requested information. In its Notice, the OFCCP states it believes that the information requested may be protected from disclosure under FOIA Exemption 4 – which protects disclosure of confidential commercial information. Accordingly, OFCCP is now requesting that any federal contractor who filed a Type 2 Consolidated EEO-1 Report as a federal contractor between 2016 and 2020 and who wishes to object to the disclosure of the information submit an objection to the OFCCP by September 19, 2022. How Do I Submit an Objection? Because of the large number of affected companies, OFCCP has established a portal for contractors to submit written objections. While the OFCCP encourages the use of the portal, objections may also be submitted via email to OFCCPSubmitterResponses@dol.gov, or by mailing to “ATTN: FOIA Officer (FRN), Office of Federal Contract Compliance Programs, Division of Management and Administrative Programs, 200 Constitution Avenue NW, Room C3325, Washington, DC 20210. All objections, however submitted, must be received by OFCCP by September 19, 2022. What Must I Include in the Objection? The OFCCP specifically requires the objection to include the contractor’s name, address, and contact information, and should, at a minimum address the following questions to determine if information should be withheld pursuant to FOIA Exemption 4: What specific information in the Report does the contractor consider to be a trade secret or commercial or financial information? What facts support the contractor’s belief that this information is commercial or financial in nature? Does the contractor customarily keep the information private or closely-held, what steps are taken to protected the confidentiality of the information, and to whom has it been disclosed? Does the contractor contend the government provided an express or implied assurance of confidentiality, or were there express or implied indication that the government would publicly disclose the information? How would disclosure of this information harm an interest of the contractor? Will it, for example, cause foreseeable harm to economic or business interests? How Do I Know if My Information Is Covered Under FOIA Exemption 4? The OFCCP Notice points contractors to two recent court decisions that should be considered in determining whether information may be withheld pursuant to Exemption 4. In Food Marketing Institute v. Argus Leader Media, 139 S. Ct. 2356 (2019), the Supreme Court determine the term “confidential” in FOIA means what it did at the time of its enactment: “private” or “secret.” Following this, the Department of Justice issued a step-by-step guide for determining whether information is confidential under Exemption 4. Further, in a case involving CIR, a district court determined that Type 2 Consolidated EEO-1 Reports were not protected from disclosure under Exemption 4 – finding that conclusory and verbatim rationale about the data contained in the reports did not support a finding that they were commercial. Center for Investigative Reporting v. U.S. Dep’t of Labor, 424 F. Supp. 3d 771 (N.D. Cal. 2019).  The OFCCP notes this is the only case discussing the commerciality of the EEO-1 Report data. What Happens Next? If you do not submit an objection to the FOIA request, then OFCCP will release the data to CIR as a part of a rolling production after September 19. If you do submit an objection, OFCCP will independently evaluate the objections and make a determination regarding withholding the information under Exemption 4. Both the objector and CIR will receive notice of a determination to withhold data. The Bottom Line If there is information contained in your EEO-1 Reports that you don’t want published or accessible to competitors, act fast to submit objections to OFCCP. Otherwise, you should expect that your report’s data may be provided to a reporter who will make it public. For questions or assistance in evaluating whether you should file an objection to the FOIA request or how to present your objection, please contact your Polsinelli attorney.

On August 26, 2022, the Eleventh Circuit Court of Appeals issued its long-awaited decision in the federal government’s appeal of a lower court order striking down the Biden Administration’s COVID-19 vaccination mandate for federal contractors and subcontractors.  Although the Eleventh Circuit agreed with the district court that the vaccination mandate exceeded the President’s authority to issue, the appellate court found that the district court’s nationwide injunction was too broad in scope and limited the scope of the injunction to apply only to the parties before the court.  This means that the vaccine mandate could resume in many other states that are not covered by an injunction from another court. A brief history may be helpful:  On September 9, 2021, President Biden issued Executive Order 14042, directing federal agencies to include a COVID-19 vaccination mandate in new federal government contracts, renewals and extensions of existing contracts, and, where possible, existing contracts even in the absence of a renewal or extension.  On September 24, 2021, the Safer Federal Workforce Task Force issued guidance implementing the Executive Order’s requirements.  Several lawsuits were filed in federal district courts across the country challenging the vaccine mandate, leading to the issuance of numerous injunctions of varying scope.  One of these injunctions was issued by the U.S. District Court for the Southern District of Georgia and barred the vaccine mandate in all federal contracts and solicitations nationwide. In assessing the federal government’s appeal of the nationwide injunction, the Eleventh Circuit rejected the government’s argument that Congress had delegated the President authority to impose a vaccine mandate under the Federal Property and Administrative Services Act, also known as the Procurement Act.  Instead, the court held that the Procurement Act only provided limited authority to address the government’s procurement process, not impose health-related measures of vast, national significance. More significantly, however, the court found that the nationwide scope of the Georgia court’s injunction was overbroad and that the injunction should provide relief only to the parties in the lawsuit – i.e., the States of Alabama, Georgia, Idaho, Kansas, South Carolina, Utah, and West Virginia, and the members of the Associated Builders and Contractors (“ABC”).  As a result, the Georgia injunction is now limited to prohibiting the federal government from imposing the vaccine mandate requirement in new or existing contracts with those states or ABC members or considering the mandate in solicitations for which those states or an ABC member is a bidder.  Several other injunctions remain in effect, but cover only contractors in the States of Missouri, Nebraska, Alaska, Arkansas, Iowa, Montana, New Hampshire, North Dakota, South Dakota, Wyoming, Kentucky, Tennessee, Ohio, and Florida.  The federal government can now enforce the vaccine mandate with respect to federal contractors and subcontractors outside of those states and ABC’s membership. As of the morning of August 29, 2022, the Safer Federal Workforce Task Force has not yet updated its website to account for the Eleventh Circuit ruling.  However, contractors outside of the states that remained covered by court injunctions must resume preparations to ensure that all “covered contractor employees,” as defined by the task force’s guidance, are vaccinated against COVID-19 or have a religious or medical exemption from vaccination.

In March 2022, we reported on a controversial directive issued by the Office of Federal Contract Compliance Programs (OFCCP) that appeared to assert, for the first time, that federal contractors and subcontractors are required to conduct statistical pay equity audits on an annual basis, and also took an aggressive position that documents relating to these audits are likely not protected by the attorney-client privilege or work product doctrine.  In response to widespread criticism from the contractor community, OFCCP, on August 18, 2022, issued a new, “revised” directive that yields ground on some of the prior directive’s more aggressive positions.  That said, the new directive makes clear that OFCCP is not relaxing its focus on pay equity, and contractors and subcontractors similarly should not relax their efforts in this area. First, OFCCP clarified that the compensation analysis that its regulations require contractors to perform is not necessarily a statistical regression analysis of the type preferred by OFCCP.  The revised directive replaces the term “pay equity audit” with “compensation analysis” and clairifies that various methods may suffice.  However, contractors should not take this as a license to perform only cursory analyses.  When OFCCP reviews the information about the compensation analysis that is required to be provided (described below), it could conclude that an employer’s chosen method of analysis was insufficient.  In addition, conducting rigorous pay equity analyses has its own business case independent of OFCCP’s requirements, as ensuring pay equity aids significantly in an employer’s talent acquisition and retention efforts, helps maintain workplace morale and mitigates the risk of private-plaintiff pay discrimination litigation. Most importantly, OFCCP’s revised directive abandons the agency’s prior position that it would seek “a complete copy” of a contractor’s pay equity audits and that such audits conducted for the purpose of complying with OFCCP regulations are, by definition, not privileged.  OFCCP’s revised directive provides contractors with three options to provide in lieu of the full analysis: A redacted version that removed privileged material. A separate, non-privileged analysis to be provided in full. A detailed affidavit describing the contractor’s efforts. Regardless of which of these options the contractor elects, the information provided to OFCCP must describe: when the analysis was conducted, the number of employees included and number and categories of any employees excluded from the analysis, what forms of compensation the contractor analyzed and how different types of compensation were separated or combined for analysis, a confirmation that compensation was analyzed by gender, race, and ethnicity, and the method of analysis used by the contractor. OFCCP also “recommends” that contractors provide additional information about their compensation analyses.  The revised directive states that OFCCP would also like to receive information about the employee pay groupings evaluated, how and why employees were grouped into these groupings, and what variables, factors, and controls the contractor used (such as time in the role, degrees, performance ratings, etc…), and the model statistics for any regression analyses conducted.  Unlike the prior directive, OFCCP recognizes that many contractors consider these types of information to be privileged.  That said, there can be value in providing these types of information to the agency – for instance, OFCCP may accept a contractor’s pay analysis groups if provided, rather than forming its own (typically overbroad) groups.  The decision on whether to provide this information will need to be made after careful analysis with counsel of the benefits and drawbacks of doing so. Finally, OFCCP’s revised directive also requires contractors to disclose certain information about any corrective measures it takes in response to disparities found during the compensation analysis.  The contractor must provide information regarding the nature and extent of any disparities, whether the contractor investigated the root cause of the disparities, what types of “action-oriented programs” the contractor implemented to correct the disparities, and how the contractor intends to measure the impact of its programs. Although OFCCP’s revision to its controversial directive is a welcome sign for contractors, it does not signal any reduction in OFCCP’s emphasis on combatting actual or perceived pay discrimination.  Nor does it imply that contractors should reduce their efforts to proactively monitor their compensation systems.  Pay equity is an area in which an ounce of prevention is worth a pound of cure, and it benefits employers to stay on top of their data to identify and redress the potential disparities that may inevitably develop over time.  However, even the more limited revised directive makes clear that federal contractors and subcontractors must carefully structure these analyses to satisfy OFCCP’s requirements and maintain the protection of attorney-client privilege.

In a July 28, 2022 e-mail communication, OFCCP emphasized the need for federal government contractors to certify their compliance with the affirmative action plan (AAP) requirements of Executive Order 11246 through OFCCP’s Contractor Portal. Although the June 30, 2022 deadline for AAP certification has passed – and OFCCP’s e-mail makes clear the deadline was not extended – contractors who have not yet certified compliance should do so immediately to avoid additional consequences. OFCCP’s e-mail asserts that federal contractors and subcontractors who do not certify compliance with the applicable AAP requirements will “be more likely to appear on OFCCP’s scheduling list than those who have certified their compliance.” Reducing the likelihood of being audited by OFCCP provides a strong incentive for contractors to ensure they are compliant with any AAP requirements and to certify those requirements. OFCCP’s e-mail also clarifies that both contractors who fail to certify and those who state in their certification that they have not developed or maintained an AAP will face an increased risk of audit. Accordingly, businesses that work for or with the federal government – whether directly or indirectly – should immediately ascertain whether they are subject to AAP requirements, implement any required AAP and certify compliance. Contractors who do not certify compliance by September 1, 2022 will face additional consequences. OFCCP’s e-mail states that the agency will send a list of non-certifying contractors to federal agency contracting officers for the purpose of those contracting officers assisting OFCCP in achieving compliance. Notably, penalties under OFCCP’s regulations for failure to maintain an AAP include withholding of progress payments due under a federal contract, cancelation or termination of contracts and debarment from federal contracting. Even if a contractor avoids these drastic penalties, it may be faced with the requirement to enter a conciliation agreement with OFCCP that imposes burdensome recordkeeping and reporting obligations. The certification requirement applies to all federal supply and service contractors and subcontractors who are required to implement an AAP - i.e., those with 50 or more employees and contracts of $50,000 or greater in value. OFCCP has not yet imposed a certification requirement on construction contractors. Although the June 30, 2022 deadline for contractors to certify AAP compliance via the Contractor Portal has passed, federal contractors and subcontractors still have time and incentive to belatedly comply with the certification requirement. However, that time is running short with the September 1, 2022 deadline fast approaching, and contractors will need to act expediently to identify and comply with their AAP obligations.

On May 20, 2022, the Office of Federal Contract Compliance Programs (OFCCP) released its Corporate Scheduling Announcement List (CSAL), which identifies 400 federal supply and service contractor and subcontractor establishments that will be audited by the agency in fiscal year 2022. The CSAL does not commence OFCCP’s compliance evaluation, but does notify the identified contractors that they will soon receive a scheduling letter requiring the production of affirmative action plan (AAP) documents and data. The timing under which scheduling letters will issue may change as the Biden OFFCP moves away from certain Trump administration practices.  Under the Trump OFCCP, the agency built in a 45-day delay between the publication of the CSAL and the mailing of scheduling letters, to allow contractors to prepare for the compliance evaluation. In a recent directive, OFCCP eliminated that delay period. In addition, the Trump OFCCP allowed contractors to produce the written portion of their AAP in response to the scheduling letter while obtaining a 30-day extension of time to produce the voluminous personnel transaction data that the scheduling letter requests.  OFCCP also eliminated that extension in most cases.  These changes mean that contractors may face a dramatically reduced period of time in which to compile their AAP materials, review them, and make any necessary corrections prior to submission to the agency. Also of note is that OFCCP identified only 400 supply and service contractor establishments in the FY2022 CSAL.  For FY2021, the CSAL scheduled 750 supply and service contractor establishments for audits.  Consistent with OFCCP’s renewed focus on enforcement, the smaller number of contractors selected for audit may indicate that the agency intends to take a deeper dive in each audit into reviewing the contractor’s compliance. In light of the changes to the audit process, contractors who find themselves listed on the CSAL should consult with counsel regarding their response to the agency in order to ensure that their AAPs are fully compliant with OFCCP regulations and their personnel data does not show potential gender or race-based disparities in hiring, termination, promotions, or compensation.  There is much to be gained for contractors in identifying and addressing these issues before submitting documents or data to OFCCP.  Polsinelli regularly represents federal contractors and subcontractors in OFCCP audits, and is available for consultation with contractors identified in the CSAL.

On March 31, 2022, the Office of Federal Contract Compliance Programs (OFCCP) issued its second Directive, No. 2022-02, of the Biden Administration.  The new Directive implements both procedural and substantive changes to OFCCP compliance evaluations that signal that the agency will seek to act more aggressively in identifying and prosecuting alleged discrimination in its compliance audits.  In the Directive, OFCCP rescinds four Directives (2018-06, 2018-08, 2020-02, 2021-02) issued under the Trump administration to increase the certainty, efficiency, and transparency of the agency’s operations, a major priority of former OFCCP Director Leen.  By eliminating these safeguards, the new Directive increases the risk that federal contractors and subcontractors face from OFCCP compliance evaluations. Some of the major changes implemented by the Directive include: Reducing Time for Contractor Response to Scheduling Letter:   The new Directive expedites the early stages of an OFCCP compliance evaluation, and reduces contractors’ opportunity to prepare for an evaluation after the publication of OFCCP’s Corporate Scheduling Announcement Letter (CSAL) listing the contractor establishments selected for audit.  First, the Directive rescinds the prior 45-day delay between the publication of the CSAL and OFCCP’s issuance of scheduling letters requiring the production of documents and data.  Second, the Directive requires that all affirmative action plan data be provided within 30 days of receipt of the scheduling letter, where previously contractors were entitled to a 30-day extension of time to provide granular, employee-level data regarding personnel transactions like hiring, firing, promotions, terminations, and compensation.  Contractors will now be losing the opportunity for advance notice of a compliance evaluation and will face tight timelines to collect, review, and analyze data that often can be voluminous. Coordination of Multi-Establishment Evaluations:  The Directive also provides that when a contractor has multiple establishments undergoing compliance evaluations, the agency will coordinate its reviews of “common policies and practices.”  Although this change could benefit contractors by providing certainty and streamlining multiple evaluations, it also poses the potential that OFCCP may seek to bootstrap alleged violations at one establishment into broader, multi-establishment relief by asserting the existence of a common policy or practice. Broader Scope of Supplemental Requests: The Directive also changes OFCCP’s approach to supplemental requests for documents and data outside the scope of the initial scheduling letter.  Although the Directive purports to retain the requirements that the agency “reasonably tailor” supplemental requests to areas of concern, allow a “reasonable time” to respond, and include the basis for the request, it broadens the scope of documents and information that OFCCP may request.  Although previous Directives limited the scope of supplemental requests to the types of data outlined in OFCCP’s scheduling letter at the desk audit stage, the new Directive omits this limitation and states that “supplemental requests do not limit the agency’s ability to request additional information or expand the investigation.”  OFCCP also claims the right to seek documents for a period of 2 years preceding the date of the scheduling letter, and also to seek documents post-dating the scheduling letter in order to “fully investigate and understand the scope of potential violations.” Increased Interviews Outside of the Onsite Process:   The Directive signals OFCCP’s intention to request witness information and conduct more witness interviews.  In conducting these interviews, OFCCP states its plan to “directly contact these individuals without the contractor serving as an intermediary.”  OFCCP limits the contractor’s right to have an attorney or representative present at an interview to its discussions with “upper-level managers and directors,” and denies the contractor the opportunity to be present for interviews with non-management personnel.  Although employees are given the opportunity to request to have “a personal representative, such as a union representative or personal legal counsel” present, it is not clear whether non-management employees could choose to be represented by their employer’s counsel.  OFCCP also reiterates its position that the contractor is not entitled to have counsel present in the agency’s interviews with former employees in most cases. Enhancements to the Neutral Selection Process for Evaluations:   The Directive indicates that OFCCP will “enhanc[e]” its methodology for scheduling compliance evaluations in order to “reach a broader universe of contractors and subcontractors” and “identify those with greater risk factors.”  The specifics of this effort are not outlined in the Directive. Emphasis on Contractor Self-Auditing Obligations:  Finally, the Directive hints that OFCCP will place enforcement priority on contractor self-auditing obligations to review and analyze their workforce data for potential roadblocks to equal employment opportunity.  In the previous Biden OFCCP Directive, OFCCP declared that the requirement that contractors perform an “in-depth analysis” of the “total employment process” imposed a requirement for annual quantitative pay equity analyses to identify and resolve disparities in compensation.  The new Directive continues this approach by emphasizing the need for “a proactive approach to compliance where federal contractors actively self-audit employment systems.”  This suggests that OFCCP may review whether contractors are sufficiently analyzing their employment systems in the “in-depth” nature OFCCP requires.  Contractors should ensure they are performing and documenting these analyses as OFCCP seems to be placing emphasis on the self-audit obligation. The new Directive is the latest indication that the Biden OFCCP intends to take a more aggressive enforcement approach than the Trump OFCCP under Director Leen.  The agency’s new approach of providing little advance warning of compliance evaluations and quick initial productions of full affirmative action plan data heightens the need for contractors to ensure they are actively maintaining their affirmative actions plans throughout the year, and not just in response to a scheduled evaluation.

The emerging trend of laws banning inquiries into salary history and promoting pay transparency will soon expand to federal contractors.  On March 15, 2022, President Biden issued an Executive Order titled “Executive Order on Advancing Economy, Efficiency, and Effectiveness in Federal Contracting by Promoting Pay Equity and Transparency.”  The Executive Order directs the FAR Council to issue a proposed rule that “enhances pay equity and transparency,” and to specifically limit or prohibit federal contractors from inquiring about and considering salary history information when making employment decisions.  Once issued, this regulation will be the first salary history law with national application at the federal level. While the Executive Order does not outline the specific restrictions on salary history inquiries for federal contractors, employers can look to the various state and local salary history laws that have been enacted over the past decade to get a flavor of the potential requirements of the forthcoming rule.  Most state salary history laws, at a minimum, prohibit inquiring about salary history on job applications, making it likely that the forthcoming rule will include such a provision.  Other elements of the rule may address (1) whether employers can rely on voluntary salary history disclosures provided by applicants during negotiations; (2) whether the prohibition on inquiring into salary history will apply to both applicants and current employees; and (3) whether there will be a requirement that salary ranges be provided in job postings (similar to the pay transparency laws in Colorado and New York City) or upon an applicant’s or employee’s request. Federal contractors should consider reviewing their job applications and hiring and promotion policies to determine what, if any, impact such a rule will have on their employment decisions. Even without a legal restriction on the use of salary history in setting compensation, reliance on an applicant’s salary history to set their new compensation is laden with risk as many courts find that salary history is not alone a legitimate justification for any resulting pay differentials.

On March 15, 2022, the Office of Federal Contract Compliance Programs (OFCCP) issued its first directive of the Biden Administration to address the requirement that federal government contractors and subcontractors perform pay equity audits. Consistent with predictions that the Biden OFCCP would focus on pay equity enforcement, the new Directive 2022-01 highlights the requirement that federal contractors and subcontractors perform regular pay equity audits as part of their affirmative action program (AAP) obligations, and indicates that OFCCP will closely scrutinize the results of these audits during its compliance evaluations. OFCCP’s AAP regulations have long required that a federal contractor “perform in-depth analyses of its total employment process to determine whether and where impediments to equal employment opportunity exist,” including evaluation of “compensation system[s] to determine whether there are gender-, race-, or ethnicity-based disparities.” However, OFCCP has not previously provided specific guidance about the scope of this requirement.  In the new directive, OFCCP appears to take the position that the AAP regulations require that contractors perform a regular, in-depth pay equity audit of their workforce to identify potential disparities. More importantly, OFCCP’s directive also makes clear that the agency intends to request and scrutinize contractor pay equity audits in its compliance evaluations.  Under the directive, if a compliance evaluation “reveals disparities in pay or other concerns about the contractor’s compensation practices,” then OFCCP intends to request documentation of the contractor’s pay equity audits.  Some circumstances that OFCCP identifies as triggering a request for this follow-up information include: 1.     Pay disparities or evidence of pay discrimination among similarly-situated employees. 2.     Employee complaints of pay discrimination or other anecdotal evidence of discrimination. 3.     Inconsistencies in how the contractor is applying its pay policies. 4.     Statistical analyses or other evidence that a group of workers is disproportionately concentrated in lower paying positions or pay levels based on a protected characteristic. If one of these circumstances occurs, OFCCP will seek “a complete copy” of the pay equity audit showing all pay groupings that were evaluated, any variables used, and the results of the analyses. OFCCP will also seek information about model statistics if a statistical analysis is employed and the frequency of audits, communication to management, and how the results were used. The directive also takes an aggressive position regarding the privileged status of contractor pay equity audits.  Contractors commonly perform pay equity audits with the assistance of legal counsel in order to ensure the audit is protected from disclosure by the attorney-client privilege.  In the directive, however, OFCCP takes the position that because its regulations require that contractors maintain and provide OFCCP with evidence of their compliance with the AAP obligations, “contractors cannot withhold these documents by invoking attorney-client privilege or the attorney work-product doctrine.”  The directive does recognize, however, that a contractor may conduct a “separate” pay equity audit for the purpose of obtaining legal advice, not for compliance with OFCCP obligations, which remains privileged.  The directive asserts that the failure to provide pay equity audits in response to an OFCCP request will be considered “as an admission of noncompliance with these regulatory requirements.” The new directive ups the ante for federal contractors and subcontractors to perform regular pay equity audits as part of their AAP compliance efforts.  Such audits have always been advisable as a best practice to identify and rectify potential compensation disparities before they ripen into litigation, but are now a required exercise for those doing business with the federal government.  In light of OFCCP’s aggressive positions about the application of the attorney-client privilege to pay equity audits, contractors and their counsel will also need to carefully structure their audits in order to ensure that at least a portion of the audit remains protected from disclosure.

On February 17, 2022, the United States Department of Agriculture (USDA) published a Notice of Proposed Rulemaking updating USDA’s Agriculture Acquisition Regulation (AGAR), the agency’s counterpart to the Federal Acquisition Regulation (FAR).  In the proposed rulemaking, USDA included a requirement to add two new clauses that would revive and expand the Obama-era “blacklist rule” requiring contractors to disclose violations of certain labor and employment laws, and certify compliance with labor laws during the term of the contract. USDA’s new AGAR regulation requires the agency to include two clauses in every supply and service (including construction) acquisition above the simplified acquisition threshold.  The first clause, entitled “Labor Law Violations,” requires the contractor to certify compliance with 15 specified labor laws, and equivalent state-law enactments, and promptly report to the contracting officer any future adjudications of noncompliance. Contractors must also certify, to the best of their knowledge, that their subcontractors and suppliers are in compliance with the specified laws.  Under the clause, these certifications may give rise to False Claims Act liability if untrue. The second clause, entitled “Past Performance Labor Law Violations,” requires contractors submitting offers to certify that they and any subcontractors are in compliance with all previously required corrective actions for adjudicated labor law violations, and to provide a list of any such violations prior to award. The labor laws that are subject to the certification requirement include: Fair Labor Standards Act (FLSA), Occupational Safety and Health Act (OSHA), National Labor Relations Act (NLRA), Service Contract Act (SCA), Davis-Bacon Act (DBA), Title VII of the Civil Rights Act, Americans with Disabilities Act (ADA), Age Discrimination in Employment Act (ADEA), and Family and Medical Leave Act (FMLA), among others. USDA’s move brings to mind the saying that “everything old is new again,” and in that vein, it is worth reviewing the prior history of the Obama-era efforts to impose a similar certification requirement across federal contracting.  On July 31, 2014, then President Obama issued Executive Order 13673 requiring contractors to disclose alleged labor law violations in connection with contracting proposals, ostensibly for the purpose of assisting agencies in their “responsible source” determination.  However, the Executive Order’s implementation was enjoined by a federal judge in October 2016.  Congress then repealed the implementing regulations on March 27, 2017, using a procedure that barred the FAR Council from issuing a similar rule without Congress’s affirmative approval. USDA’s proposed rulemaking could be the start of individual agency-level efforts to impose Executive Order 13673’s requirements on an agency-by-agency basis.  Given the history of the Obama Administration’s similar blacklisting rule, one can expect legal challenges if the rule is eventually finalized.

The Equal Employment Opportunity Commission (EEOC) announced that it will open the 2021 EEO-1 Component 1 Report on April 12, 2022 with a due date of May 17, 2022.  The EEOC’s announcement indicates that both dates are “tentative” and EEO-1 opening and closing dates have been subject to modification by EEOC in recent years. The EEO-1 requires covered employers to report by job category the race, ethnicity and gender of its employees.  Covered employers include those with 100 or more employees and federal contractors with 50 or more employees and a federal contract of $50,000 or more.  Note that employers with less than 100 employees who are owned or affiliated with another entity such that the combined employee count is over 100 employees may also be required to file this report. Covered employers are encouraged to confirm that all employees have had the opportunity to voluntarily self-identify their gender, ethnicity and race.  If employees who have not responded to this voluntary invitation, employers may re-extend the invitation and/or rely on employment documents such as an I-9 or visual observation.  If an employer needs to rely on visual observation, it will be easier to gather this information now rather than waiting until April 2022. EEOC has already announced one change for the 2021 report.  EEOC will discontinue the EEO-1 Component 1 Type 6 Establishment List Report for establishments with fewer than 50 employees.  These establishments must now use the Type 8 Establishment Report for the 2021 filing cycle. Polsinelli will continue to monitor developments with the EEO-1 report.

On November 18, 2021, President Biden issued Executive Order 14055 that requires successor contractors under federal government service contracts to offer employment to certain employees of the predecessor contractor whose employment would otherwise be terminated as a result of the predecessor’s loss of the contract.  Executive Order 14055 reinstates provisions of Executive Order 13495, which was issued under the Obama administration but revoked by President Trump in 2019. The Executive Order applies to contracts covered by the Service Contract Act (SCA).  A successor contractor who obtains an SCA-covered contract must provide the predecessor’s employees the option to continue working on the successor contract, before staffing the contract with other employees (commonly referred to as a “right of first refusal”).  Successor contractors must give predecessor employees a minimum of 10 business days to accept the offer of employment.  To ensure predecessor employees receive a right of first refusal, the predecessor contractor is required to provide a list of all SCA employees, working under the contract within the last month of the contract term, at least 10 business days prior to the end of the contract.  The list must also include the anniversary dates of the covered employees. The non-displacement requirement applies only to SCA-defined “service employees,” and therefore will generally encompass only employees who are non-exempt under the Fair Labor Standards Act.  In an interesting departure from the Obama-era executive order, however, Executive Order 14055 does not exclude managerial and supervisory employees from the right of first refusal.  The order does retain the Obama-era order’s exceptions for employees who perform work on both federal and commercial contracts and employees for whom the successor contractor reasonably believes, based on evidence of the employee’s past performance, there would be just cause for the employee’s termination. The Executive Order instructs the Department of Labor to issue regulations implementing the non-displacement requirement.  We expect that the forthcoming regulations will mirror the Department of Labor’s prior regulations implementing Executive Order 13495, which were the subject of some controversy upon their issuance.

On December 7, 2021, Judge R. Stan Baker of the U.S. District Court for the Southern District of Georgia enjoined the federal government from enforcing Executive Order 14042’s COVID-19 vaccination mandate for federal government contractors and subcontractors on a nationwide basis pending a further order from that court.  This ruling follows a November 30, 2021 order that similarly enjoined the contractor vaccine mandate in the states of Tennessee, Ohio, and Kentucky.  This is the latest in a growing number of  court decisions enjoining President Biden’s vaccine mandates, as the federal government has been barred, at least for now, from enforcing each of the three federal vaccination mandates applicable to private sector employers – the federal contractor mandate, the Center for Medicare & Medicaid Services (CMS) mandate, and the OSHA Emergency Temporary Standard. The Georgia litigation challenging the federal contractor vaccination mandate was brought by the States of Georgia, Alabama, Idaho, Kansas, South Carolina, Utah, and West Virginia, with the Associated Builders and Contractors (ABC) trade organization also intervening as a plaintiff.  In comparison to the earlier Kentucky ruling, the court based its award of injunctive relief on relatively narrow grounds, finding that the Federal Property and Administrative Services Act’s delegation of authority to the President to set federal procurement policy to achieve the objectives of “economy and efficiency” did not reach so far as to authorize the issuance of public health regulations.  Unlike the Kentucky ruling, the court did not address additional arguments asserting procedural and constitutional deficiencies in Executive Order 14042.  However, the court granted a broader scope of injunctive relief than the Kentucky injunction, finding that the nationwide scope of ABC’s membership required that enforcement of the mandate be enjoined nationwide in order to grant complete relief. We expect that the government will appeal the preliminary injunction to the U.S. Court of Appeals for the Eleventh Circuit.  Notably, on December 6, 2021, the Eleventh Circuit rejected the State of Florida’s challenge to the CMS vaccine mandate, finding that mandate to be within the government’s authority, though the predictive weight of that ruling could be limited because the two mandates were based on independent statutory grants of authority. Pending a contrary ruling from the Eleventh Circuit or the U.S. Supreme Court, the federal government is barred from enforcing Executive Order 14042’s vaccine mandate in any state or territory.  Given the potential that the injunction could be reversed, and the lack of clarity regarding what if any adjustments the federal government would make to the vaccine mandate in that event,  contractors may wish to continue their preparations in order to avoid being caught off-guard.  In addition, the court’s ruling does not prohibit federal contractors who wish to voluntarily implement their own vaccine requirement for their workforces from doing so, though the lack of an enforceable federal mandate means that such employers will need to carefully consider the effect of state laws which limit or prevent employers from requiring vaccination.

On December 2, 2021, OFCCP announced that its Affirmative Action Program Verification Interface (also referred to as the Contractor Portal) is now operative. Through the Contractor Portal, federal government supply and service contractors and subcontractors will be required to certify on an annual basis that they have developed and maintained affirmative action plans (AAP) for each of their establishments or functional units. Construction contractors are not required to certify compliance or register for the Contractor Portal. Beginning February 1, 2022, contractors will be able to register their companies through the Portal. The AAP certification period will then begin on March 31, 2022, and contractors and subcontractors must complete the certification by June 30, 2022.  OFCCP has issued FAQs on the Portal and will also be issuing a user guide in the upcoming months to provide contractors with additional information regarding registration and the certification process. The certification requirement applies to both establishment-based and functional affirmative action plans (FAAPs). Although it is not clear whether a contractor’s failure to make the required certification will flag the contractor to undergo an OFCCP compliance evaluation, the certification requirement appears to raise the stakes for contractors and subcontractors to ensure their compliance with the affirmative action plan requirement.  Some companies doing business with the federal government or with a government contractor may not realize that they have a federal government contract or subcontract that is subject to OFCCP’s equal opportunity clause and the AAP requirement.  Notably, OFCCP’s regulations provide that the equal opportunity clause is deemed to be included in all covered contracts or subcontracts, regardless of whether the clause is explicitly incorporated in the actual contract document.  Accordingly, contractors potentially subject to the AAP requirement (generally, those with federal contracts or subcontracts exceeding $50,000 in value and 50 or more employees) should carefully consider whether they are required to implement an AAP, and do so, ahead of the upcoming certification requirement.

On November 30, 2021, the U.S. District Court for the Eastern District of Kentucky threw a wrench into the federal government’s efforts to enforce Executive Order 14042’s COVID-19 vaccination mandate against federal government contractors by issuing a preliminary injunction barring the government from enforcing the mandate in Tennessee, Ohio, and Kentucky.  The court’s order is the latest development that government contractors must address in attempting to comply with Executive Order 14042 while minimizing litigation risks from employees who are unable or unwilling to become fully vaccinated. The Eastern District of Kentucky litigation challenging the federal contractor vaccination mandate was brought by the States of Tennessee, Ohio, and Kentucky, as well as two individual plaintiffs.  In granting the preliminary injunction requested by the States, the court relied upon three grounds to find that the Biden Administration exceeded its authority in issuing Executive Order 14042.  First, the court determined that Congress’s grant of authority under the Federal Property and Administrative Services Act for the President to promote “economy and efficiency in federal contracting” did not authorize the imposition of a vaccination mandate on federal government contractors, because the mandate is not closely tied to the statute’s objectives.  The court noted that if FPASA did provide the President the authority to mandate vaccination, such a grant of authority would violate the constitutional nondelegation principle.  Second, the court ruled that the vaccination mandate violated the Competition in Contracting Act, as contractors who “represent the best value to the government,” but do not follow the vaccine mandate, would be barred from competing for government contracts.  Finally, the court found the vaccine mandate to be a federal intrusion on powers reserved to the States, violating the Tenth Amendment of the Constitution. The court’s ruling applies only to prohibit enforcement of the vaccination mandate against contractors and subcontractors on covered contracts in Tennessee, Ohio, and Kentucky, rather than nationwide.  We expect that the government will appeal the preliminary injunction.  The appeal will be heard by the U.S. Court of Appeals for the Sixth Circuit, which is also hearing the challenges to OSHA’s Emergency Temporary Standard requiring COVID-19 vaccination or testing for employers with more than 100 employees. The Safer Federal Workforce Task Force guidance implementing Executive Order 14042’s mandate did not require that covered employees become fully vaccinated until January 18, 2022, which means that the employee receive the final shot in the applicable vaccination series by January 4, 2022.  Unless and until the mandate is enjoined in other jurisdictions, federal contractors outside of Tennessee, Ohio, and Kentucky should move forward in ensuring that their relevant employees are fully vaccinated by the deadline, as an employee receiving the Moderna or Pfizer vaccine will need to receive the first shot in early December to stay on track to become fully vaccinated by January 18, 2022.  Contractors in the three states covered by the injunction should also continue preparations in order to avoid being caught off-guard if the Eastern District of Kentucky’s injunction is stayed or reversed.

On November 16, 2021, the Department of Labor published a Final Rule implementing Executive Order 14026 and raising the federal contractor minimum wage to $15 per hour under most federal government contracts entered into after January 30, 2022.  The Final Rule also increases the minimum wage for employees who regularly receive tips to $10.50 per hour and will eliminate the ability of contractors to take a tip credit effective January 30, 2024. Beginning January 30, 2022, federal agencies will be required to include a contract clause imposing the increased minimum wage in the following types of government contracts: Procurement contracts for construction covered by the Davis-Bacon Act; Contracts for services covered by the Service Contract Act; Concessions contracts; Contracts with the federal government in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public. Contractors subject to the clause must flow the minimum wage requirement down to subcontractors who work on the covered contract.  The clause will not be included in federal grants, certain contracts with Indian Tribes, contracts excluded from the Davis-Bacon Act or Service Contract Act, contracts performed outside the United States, and contracts for manufacturing or furnishing materials, supplies, articles, or equipment. As in the Notice of Proposed Rulemaking preceding the Final Rule, employees are entitled to receive the increased minimum wage if they perform services “on or in connection with” a federal contract.  Employees perform services “on” a federal contract when they directly perform the services called for by the contract. Employees perform services “in connection with” a federal contract when they perform services that are not required by the contract, but are necessary to the performance of the contract’s services, such as security, maintenance, or janitorial work at facilities that perform federal contract work. Workers who only perform “in connection with” a federal contract are not subject to the minimum wage requirement if they perform less than 20% of their work time on performing services “in connection with” the contract. As in the Notice of Proposed Rulemaking, the final rule does not create a private right of action for employees to sue contractors for unpaid wages.  However, employees can submit complaints to the Department of Labor, which may result in sanctions for failing to pay the increased minimum wage. These sanctions can include withholding of contract payments from the prime contractor, the termination of contracts, and debarment from federal contracting.

On November 9, 2021, the Office of Federal Contract Compliance Programs (OFCCP) published a proposed rule rescinding its December 2020 Final Rule broadening the religious exemption from Executive Order 11246’s nondiscrimination requirements for federal contractors, which went into effect on January 8, 2021.  The rescission of the Trump-era religious exemption regulation was not unexpected, as OFCCP previously announced its intention to rescind the rule in February 2021.  The proposed rule will reinstate the pre-2020 language of OFCCP’s religious exemption regulation. The current OFCCP religious exemption regulations, enacted in the waning days of the Trump administration, widen the availability of the religious exemption to federal contractors, especially those who operate on a for-profit basis, and also broadly construe the protection offered to religious contractors. The current regulations also include a rule of construction requiring OFCCP to enforce contractor non-discrimination obligations in a manner that provides the broadest protection of religious activity.  In the new proposed rule, OFCCP proposes eliminating the Trump-era regulations in their entirety and instead aligning OFCCP’s religious exemption with the existing body of case law construing Title VII’s religious exemption. The return to OFCCP’s pre-Trump religious exemption based on Title VII precedents will certainly reduce the availability of the religious exemption to federal contractors as a defense against discrimination claims asserted by OFCCP.  That said, the practical impact of the change will likely be minimal, as federal contractor employers who might have been protected by the broader religious exemption would nonetheless be subject to the Title VII standard in any related private litigation brought by the employees alleged to have been discriminated against.  The DOL will accept public comments on the proposed rule for 30 days, until December 9, 2021.

On November 10, 2021, the Biden Administration announced another change to the deadline for federal contractors to become fully vaccinated against COVID-19 as required by Executive Order 14042.  The deadline is now January 18, 2022, meaning that employees must receive their final vaccine dose by January 4, 2022. This is now the third deadline for vaccination set by the Safer Federal Workforce Task Force.  In its initial Guidance, the Task Force established a December 8, 2021 deadline.  However, when the Biden Administration issued the Occupational Safety and Health Administration (OSHA) Emergency Temporary Standard and Center for Medicare and Medicaid Services (CMS) vaccination mandate on November 4, 2021, it also pushed back the deadline for federal contractor employees to become fully vaccinated until January 4, 2021 in order to conform Executive Order 14042’s deadline to OSHA’s and CMS’s deadlines. The Task Force did not provide any explanation for the disparity between the January 4 and January 18 dates.

On November 4, 2021, the Biden Administration issued a Fact Sheet announcing the release of its long-awaited Occupational Safety and Health Administration (OSHA) and Center for Medicare and Medicaid Services (CMS) COVID-19 vaccination mandates.  The Fact Sheet delivered significant news for federal government contractors by announcing that the December 8, 2021 deadline for compliance with Executive Order 14042’s COVID-19 vaccination mandate for contractors will be extended to January 4, 2022, the same deadline set forth in the OSHA Emergency Temporary Standard and CMS mandate. The Fact Sheet also announced that the new OSHA mandate is inapplicable to workplaces that are subject to Executive Order 14042’s vaccination mandate in order to streamline compliance and avoid the need to track multiple vaccination requirements for the same employees.  This will allow some federal contractors to avoid the substantial documentation and recordkeeping requirements imposed by the new OSHA standard.  However, it also means that federal contractors cannot offer employees who work on or in connection with a federal contract the testing option that is available under OSHA’s Emergency Temporary Standard.  Some contractors that have purely commercial workplace locations not subject to Executive Order 14042 may be subject to both the Executive Order’s and OSHA’s mandates. The announcement follows closely on a November 1, 2021 update to the Safer Federal Workforce Task Force’s Frequently Asked Questions on the contractor mandate that provided additional flexibility to federal contractors in implementing the requirement.  Specifically, the new FAQ guidance clarified that employees with pending religious or disability-based accommodation requests may continue to work – subject to the masking and social distancing protocols applicable to unvaccinated employees – while their requests are adjudicated.  The new FAQs also provide contractors with some additional flexibility in addressing covered employees who refuse to become fully vaccinated by the deadline.  It is unclear whether the Task Force will eliminate this flexibility in light of the delay in the Executive Order’s deadline. As of 2:00 PM EST on November 4, 2021, the Safer Federal Workforce Task Force had not updated its Guidance or FAQs to incorporate the new deadline announced in the Fact Sheet.  We expect that additional guidance from the Task Force will follow in the near future.

On September 24, 2021, the Safer Federal Workforce Task Force (Task Force) published its expected guidance regarding the COVID-19 vaccination mandate for federal government contractors.  This Guidance defines the specific parameters of the vaccine mandate, as well as other safety protocols that contractors must follow. The Guidance clarifies that all “covered employees” must be fully-vaccinated by December 8, 2021.  An employee is fully vaccinated two weeks after he or she receives all doses of an approved vaccine.  Employees are not required to receive any vaccine booster to qualify as fully vaccinated.  Contractors are required to obtain documentation of each employee’s vaccination status – an employee’s attestation is not sufficient.  In addition, the Guidance provides that prior COVID-19 infection or antibody test results may not be substituted for vaccination.  After December 8, 2021, contractors must ensure that employees are fully vaccinated by the first day of performance on a federal contract. The Guidance provides for accommodations from its mandate for employees who communicate that they are not vaccinated due to a sincerely-held religious belief or disability.  Contractors are responsible for determining accommodations, even when the employee performs his or her services at a federal worksite. As suggested by the Executive Order announcing the mandate, the vaccination requirement will apply to some employees of federal contractors who do not work on or in connection with a federal contract, and instead perform only commercial work.  A “covered employee,” for purposes of the mandate, includes any full-time or part-time employee who works at a location at which an employee working on or in connection with a contract “is likely to be present.”  So, an employee performing solely commercial work in a facility, building, or campus where contract work is also being performed would likely be subject to the mandate.  The Guidance has a limited exception for situations where commercial and contract workers perform services in distinct areas of the same facility, but the contractor must “affirmatively determine” that there will be “no interactions,” including in common areas like lobbies, elevators, and parking garages, between contract and commercial employees at the facility in order to avoid extending the vaccine requirement to all employees at the facility.  Fully remote workers who perform work on federal contracts from home are also subject to the vaccination mandate. In addition to the vaccine mandate, federal contractors are also subject to new masking and social distancing protocols.  Unvaccinated employees (i.e., those who obtain accommodations from the mandate) are required to wear masks in indoor and crowded outdoor areas and maintain a distance of six feet from others at all times to the extent practicable.  Vaccinated employees are required to wear masks indoors in areas of high or substantial community transmission, as determined by the CDC.  In areas of low or moderate transmission, fully vaccinated employees do not need to wear a mask.  Regardless of the transmission level, fully vaccinated employees are not required to socially distance. Contractors are required to check the CDC’s transmission level for any covered work locations on a weekly basis to determine the proper safety protocols. Contractors are also required to ensure that visitors comply with applicable masking and social distancing requirements. Contractors must also designate a specific employee to coordinate COVID-19 workplace safety efforts at covered workplaces.  Fully remote employees who work from home are not required to follow masking or social distancing protocols. Contractors with federal contracts or subcontracts pre-dating October 15, 2021 will be required to comply with the Guidance when an extension or option is exercised with respect to the contract.  After November 14, 2021, most new federal contracts will contain the clause requiring compliance.  For contracts issued between October 15, 2021 and November 14, 2021, agencies appear to have some leeway with respect to inclusion of the contract clause, though the Guidance and prior Executive Order strongly encourage the clause’s inclusion. COVID-19 vaccine mandates present complex issues for employers, especially when employees request religious or disability-based accommodations.  The proliferating COVID-19 vaccine mandates – from the Guidance, OSHA’s forthcoming emergency temporary standard, and, in some jurisdictions, state and local authorities – only add additional complexity to this rapidly-developing issue.  Given the short timeframe between the October 15, 2021 date on which the clause will start being included in contracts and the December 8, 2021 vaccination date, contractors who expect to receive covered contracts in the near future should begin preparing now to ensure their workforce’s compliance with the vaccination mandate.

In an attempt to contain the continuing COVID-19 pandemic, President Biden issued two Executive Orders on September 9, 2021 that mandate COVID-19 vaccines for federal government employees and employees of federal government contractors. Although key details of these vaccine mandates have yet to be defined, the new measures appear to build on the administration’s recent mandate for vaccination or testing of contractor employees who work on-site at federal locations.  As a result of these new mandates, federal government contractors will soon be presented with complex and risk-laden decisions as employees seek exemptions, to the extent available, from the vaccine mandate. The Basics of the Executive Orders The first executive order is applicable to federal government employees, and requires the Safer Federal Workforce Task Force (Task Force) to issue guidance requiring a vaccine mandate for federal agency employees.  Federal agencies are then required to implement the Task Force’s guidance “with exceptions only as required by applicable law.”  The second executive order is applicable to federal government contractors, and provides that new government contracts and contract-like instruments must include a clause requiring the contractor and “any subcontractors (at any tier)” to comply with “all guidance” issued by the Task Force.  Pursuant to the terms of the contractor Executive Order, the clause’s requirements are applicable to “any workplace locations (as specified by the Task Force Guidance) in which an individual is working on or in connection with a Federal Government contract or contract-like instrument.”  The Executive Order applicable to federal contractors provides that the Task Force will issue its guidance by September 24, 2021, and outline “definitions of relevant terms,” “explanations of protocols required of contractors and subcontractors,” and “any exceptions” to the vaccination mandate. What Types of Federal Contracts Trigger the Vaccine Mandate? The vaccine mandate is applicable to any contract or contract-like instrument that is entered into, extended, renewed, or has an option exercised on or after October 15, 2021. However, the Executive Order is effective immediately and agencies are “strongly encouraged, to the extent permitted by law” to extend the vaccine mandate to existing contracts not otherwise subject to the Executive Order.  The Executive Order adopts the definition of “contract or contract-like instrument” from the Department of Labor’s minimum wage regulations, and thus presumably excludes procurement contracts excluded from the Davis-Bacon Act and service contracts excluded from the Service Contract Act.  The Executive Order explicitly excludes federal grants, contracts with Indian Tribes, employees who perform work outside of the United States, contracts equal or less than the simplified acquisition threshold (generally $250,000), and subcontracts solely for the provision of products. Which Employees are Covered By the Mandate? The new contract clause will “apply to any workplace locations (as specified by the Task Force Guidance) in which an individual is working on or in connection with a Federal Government contract or contract-like instrument.”  The “on or in connection with” standard is borrowed from the federal contractor minimum wage requirement.  Employees perform services “on” a contract when they perform the work required by the contract, and perform “in connection with” a federal contract when they perform services that are not required by the contract, but are necessary to the performance of the contract’s services, such as custodial, security, or maintenance services at facilities that perform both commercial and government work.  The executive order applies to “any workplace locations . . . in which an individual is working on or in connection” with a contract.  On its face, this would apply the vaccine mandate to full-time remote workers who do not interact in-person with any other co-workers. The Executive Order is ambiguous about several important issues, which will need to be fleshed out by the Task Force’s guidance.  First, in the context of the federal contractor minimum wage requirement, employees who work only “in connection with” a contact are not covered unless more than 20% of their work time is spent performing contract-related services.  Will the same 20% threshold apply to the vaccine mandate?  Second, the Executive Order is phrased to apply to “any workplace locations” where contract work is performed, rather than to employees performing the work.  Arguably, the mandate may cover workers performing only commercial work if there is also government contract work performed at the employee’s “workplace location,” which is itself a potentially ambiguous term pending further guidance from the Task Force. What Exemptions are Applicable? The Executive Order provides that the Task Force should permit only exceptions “required by applicable law.”  Presumably, this would include disability, religious, and pregnancy accommodations that are required by federal statutes. To date, many employers implementing vaccine mandates have struggled with these accommodation requirements, which present complex and nuanced legal issues.  To the extent the Task Force’s guidance regarding exemptions is different than generally-applicable federal law, it will only add to the complexity. Moreover, state law may impose different or additional requirements, including laws in some states protecting workers against mandatory vaccine mandates, which may conflict with the mandate required by the Executive Order.  To the extent there is ambiguity as to which employees are actually covered by the Executive Order, the potentially conflicting obligations under the Executive Order and state laws may pose challenging dilemmas for employers. COVID-19 vaccine mandates present complex legal issues for employers, especially when employees claim a right to religious, disability, pregnancy, or other accommodations. Federal contractors should begin working with counsel now to prepare for the new mandate required by the executive orders, including implementing procedures to communicate with employees regarding the mandate, ascertain employees’ vaccination statuses, and process and address requests for accommodations.

On September 1, 2021, the Office of Federal Contract Compliance Programs (OFCCP) announced that it would “evaluate” using compensation data reported by federal contractors in annual EEO-1 filings to guide its enforcement efforts in the area of pay equity.  This decision reverses a Trump-era decision that OFCCP would not request, accept, or use the data, and is a step towards the agency’s expected heightened enforcement activity in the area of pay equity. OFCCP’s reversal appears to be the next chapter in the protracted history of the Obama-era EEOC’s effort to collect compensation data from federal contractors and other employers through a new “Component 2” of the annual Employer Information Report, more commonly known as the EEO-1, submission. In September 2016, EEOC obtained approval from the Office of Management and Budget (OMB) to collect pay data for calendar years 2017 and 2018, but the Trump administration OMB later attempted to revoke the authorization.  The Trump OMB’s revocation was invalidated by the U.S. District Court for the District of Columbia, which ordered the EEOC to conduct the previously approved pay data collection.  However, in September 2019 the EEOC announced it would not seek renewal of OMB’s authorization for later years.  OFCCP followed with its own announcement on November 25, 2019 that it would not “request, accept, or use Component 2 data, as it does not expect to find significant utility in the data,” because the Component 2 data was not collected at a level of detail sufficient to make comparisons of similarly-situated employees. Now, OFCCP has reversed its position and announced that it will “evaluate the data’s utility because the joint collection and analysis of compensation data could improve OFCCP’s ability to efficiently and effectively investigate potential pay discrimination.”  OFCCP’s announcement also indicates that the agency may consider the Component 2 data “in conjunction with other available information, such as labor market survey data” in selecting contractors for compliance evaluations. OFCCP’s EEO-1 announcement appears to set the table for enhanced enforcement in the area of pay equity and compensation discrimination, as OFCCP is signaling it will use the EEO-1 pay data to select contractors for compliance evaluations.  Given the agency’s discontinuance of disability- and veteran-oriented focused reviews in favor of full compliance evaluations, OFCCP will be collecting employee-level compensation information in all of its compliance evaluations.  The announcement may also signal that OFCCP is coordinating with the EEOC on reinstating the Component 2 requirement, as the 2017 and 2018 data collected by EEOC would appear to have limited utility on a going forward basis.

On July 29, 2021, the Biden Administration announced a COVID-19 vaccination mandate for certain employees of federal government contractors. The announcement, released in a Fact Sheet, imposes new safety protocols on the federal contractor workforce, but does not flesh out key details, including the specific responsibilities of federal contractors to obtain and ensure compliance. The Fact Sheet states that every “onsite” employee of a federal contractor “will be asked to attest to their COVID-19 vaccination status.” If an employee does not attest to being fully vaccinated, then that employee will be required to wear a mask on the job “no matter their geographic location,” physically distance from other employees and visitors, and comply with weekly or twice weekly screening testing requirements. Unvaccinated employees would also be subject to restrictions on official travel. The Fact Sheet also states that the administration is “directing” that “similar standards” be applied “to all federal contractors.” The Fact Sheet leaves many key questions unanswered, including: Who are the “onsite” contractor employees subject to the new mandate? Presumably the mandate applies to contractor employees who work on federal premises, but the Fact Sheet does not explicitly define this category. What obligations do federal contractors have to determine the vaccination status of their employees or conduct the required testing? What specific physical distancing protocols will unvaccinated employees be required to follow and who is responsible for ensuring compliance? Which agency will be issuing further requirements for “all federal contractors,” and under what statutory authority? Federal contractors, especially those whose employees work on federal premises, should begin immediately preparing to ensure their personnel comply with the new requirements. Contractors may wish to begin taking action to determine the vaccination status of their workforces and encourage employees to obtain a COVID-19 vaccination. Because vaccination issues are rapidly developing and involve complex determinations under the Americans with Disabilities Act, Genetic Information Non-Discrimination Act, and other federal and state laws, contractors should consult with counsel about these requirements. Polsinelli will continue to update the contractor community as additional details are announced.

On July 21, 2021, the Department of Labor issued a Notice of Proposed Rulemaking to implement President Biden’s Executive Order 14026 increasing the minimum wage for certain employees of federal government contractors and subcontractors to $15.00 per hour. As expected, the proposed regulations are generally consistent with the regulations previously issued by the Obama administration in 2014 to implement President Obama’s increase in the federal contractor minimum wage. Under the proposed regulations, the minimum wage for workers performing services on or in connection with a federal contract will increase to $15.00 per hour as of January 22, 2022, with inflation-based adjustments on January 1 of 2023 and each successive year. The increased minimum wage applies to contracts that are entered, renewed, or extended (including extensions through the government’s exercise of an option) after January 30, 2022. The regulations provide contractors with a short grace period, however, as contracts entered into between January 30, 2022 and March 30, 2022 that result from pre-January 30, 2022 solicitations are not covered by the regulations until the contract is renewed or extended. The regulations include a minimum wage of $10.50 per hour for tipped employees, but the ability to take a tip credit will phase out on January 1, 2024, after which point tipped employees will be entitled to the same minimum wage as other covered employees. Notable exclusions from the increased minimum wage include federal grants, contracts with Indian Tribes, procurement contracts excluded from the Davis-Bacon Act, service contracts excluded from the Service Contract Act, contracts that are not performed in the United States, and contracts for manufacturing or furnishing materials, supplies, articles, or equipment to the federal government. As in the previous regulations, employees perform services “on” a federal contract when they directly perform the services called for by the contract, which should be a relatively straightforward determination. Employees perform services “in connection with” a federal contract when they perform services that are not required by the contract, but are necessary to the performance of the contract’s services. Common examples of services “in connection with” a contract include custodial, security, or maintenance services at facilities that perform work on federal contracts. Workers who only perform “in connection with” a federal contract are not subject to the minimum wage requirement if they perform less than 20% of their work time on performing services “in connection with” the contract. Both prime contractors and subcontractors of any tier are covered by the higher minimum wage. The regulations do not create a private right of action for employees to sue contractors for unpaid wages, but instead provide for the Department of Labor’s Wage and Hour Division to investigate complaints of violations. Employers are prohibited from retaliating against employees who make such complaints. Possible sanctions for failing to pay the increased minimum wage include withholding of contract payments from the prime contractor, the termination of contracts, and debarment from federal contracting.

On July 1, 2021, OFCCP issued its Corporate Scheduling Announcement List (CSAL) scheduling 750 federal contractor and subcontractor establishments for compliance evaluations in fiscal year 2021.  The CSAL identifies contractors and subcontractors that will receive a Scheduling Letter formally initiating an OFCCP audit.  Scheduling Letters are typically issued about 45 days after the CSAL’s publication. The FY2021 CSAL is limited to supply and service contractors, and does not include construction contractors, whose audits will presumably be scheduled pursuant to a separate announcement.  With OFCCP’s elimination of focused reviews and compliance checks earlier this year, significantly fewer contractors will be subject to OFCCP audits in fiscal year 2021 than in recent years.  Overall, the FY2021 CSAL schedules 668 contractor establishment for establishment-based reviews, 57 for functional affirmative action plan (FAAP) reviews, 19 for corporate management compliance evaluations (CMCE) focused on the contractor’s headquarters, and six (6) for university reviews.  In prior years, OFCCP has identified over 2,000 contractors for audits. The CSAL’s publication provides contractors with a valuable opportunity to prepare for the upcoming audit.  OFCCP’s Scheduling Letter requests over 22 categories of data and documents, including full employee-level compensation data, with a relatively short timeframe for response.  Contractors named in the CSAL can begin working immediately, in advance of receipt of the Scheduling Letter, to collect and analyze the requested data and documents in order to identify and, if possible, resolve any potential compliance vulnerabilities before they become more significant issues in the audit process. By identifying potential compliance vulnerabilities now prior to the issuance of a Scheduling Letter, contractors can ensure they are not caught flat-footed by OFCCP allegations arising from the contractor’s initial submission of documents and data.  Although contractors should take this opportunity to ensure that all aspects of their OFCCP compliance are in order, we anticipate that pay equity and gender pay gaps as well as potential race or gender based disparities in reductions in force undertaken during the COVID-19 pandemic will be areas of focus for OFCCP.

On April 27, 2021, President Biden signed Executive Order 14026, which increases the minimum wage for workers on or in connection with a federal government contract to $15.00 as of January 30, 2022.  This Executive Order increases the minimum wage level set by President Obama’s 2014 Executive Order 13658, which has been set at $10.95 per hour since January 1, 2021. The new minimum wage applies to most new federal contracts, contract-like instruments, solicitations, extensions or renewals of existing contracts or contract-like instruments, and exercises of options on existing contracts or contract-like instruments that are entered into or exercised on or after January 30, 2022.  However, the Executive Order “strongly encourage[s]” agencies to ensure, to the extent permitted by law, that the wages paid under existing contracts are consistent with the Executive Order’s requirements.  The Executive Order provides that compliance with the increased minimum wage will be a condition of payment on the government contract, raising the potential for False Claims Act liability if a government contractor accepts payment on a federal contract while failing to pay covered workers the required wage.  The Executive Order’s requirements must, in many circumstances, be included in subcontracts. Although the Executive Order does not elaborate on which employees work “on or in connection” with a federal contract, it is likely that the Department of Labor’s forthcoming regulations implementing the Executive Order will follow the lead of its previous regulations implementing Executive Order 13658.  Under those regulations, workers perform services “on” a contract if they directly perform the services called for by the contract’s terms, and they perform services “in connection with” a contract if they perform work activities that, although not specifically called for by the contract, are necessary to the contract’s performance. The Executive Order also addresses the cash portion of the tipped minimum wage for covered workers.  The cash wage for covered workers who qualify as tipped employees will increase to $10.50 as of January 30, 2022.  The wage will then increase as of 85% of the general minimum wage as of January 30, 2023, and 100% of the general minimum wage as of January 30, 2024, at which point the tip credit will be eliminated. The Department of Labor is required to issue regulations implementing the Executive Order by November 24, 2021.  Federal contractors and subcontractors should consider beginning preparations for the increased minimum wage now, in advance of the regulations, by identifying potentially covered workers whose wages may require adjustment.  Polsinelli will continue to update the contractor community when regulations are issued.

On March 31, 2021, in United States ex rel. Felten v. William Beaumont Hospital, the Sixth Circuit Court of Appeals held that an employer’s allegedly retaliatory conduct directed at an employee after the employee’s termination can give rise to a False Claims Act (FCA) retaliation claim.  In doing so, the Sixth Circuit embraced a minority position among courts nationwide and created a split with the Tenth Circuit, which held in 2018 that only retaliation against someone who is a current employee at the time can support an FCA claim. The facts of Felten are relatively straightforward.  Mr. Felten believed that his employer, a hospital, was violating the FCA and an analogous Michigan statute by paying kickbacks to physicians and physicians’ groups in exchange for referrals of Medicare, Medicaid, and TRICARE patients.  Mr. Felten filed a qui tam action against his employer, and also asserted that his employer retaliated against him by threatening and marginalizing him for insisting on compliance with the law. After the federal and state governments intervened and settled the qui tam claim, Mr. Felten amended his complaint to add new claims that he was terminated from his employment and, after termination, had been unable to obtain a comparable position because his now-former employer disparaged him to nearly 40 institutions in retaliation for his reports of unlawful conduct.  The district court granted the hospital’s motion to dismiss Mr. Felten’s claims based on the alleged post-termination disparagement, finding that the FCA’s anti-retaliation provision only applied to retaliatory conduct occurring during the employment relationship, and not to disparagement of an employee occurring after his employment has ended. The Sixth Circuit reversed this ruling, finding that an “employee,” for purposes of the FCA, includes both current and former employees of a government contractor.  The court noted that the Tenth Circuit held otherwise in its 2018 Potts v. Center for Excellence in Higher Education, Inc., 908 F.3d 610 (10th Cir. 2018) decision, but departed from its sister circuit’s reasoning.  Instead, the Sixth Circuit relied heavily on the Supreme Court’s decision in Robinson v. Shell Oil Co., 519 U.S. 337 (1997), holding that under Title VII former employees may bring retaliation claims for actions occurring after the termination of their employment.  The court explained that some of the retaliatory actions prohibited by the FCA – such as, threatening, harassing, and discriminating – can refer to actions against former employees, and that some “terms and conditions of employment” persist after an employee’s termination.  The court also explained that a contrary result would incentivize employers to rush to fire employees who the employees believe may engage in FCA protected activity, undermining FCA’s purpose. Because of the circuit split the Sixth Circuit’s decision created, this may be a decision to watch for future developments.  Regardless of what may happen next, the Felten decision is a useful reminder that when an employee engages in potentially protected activity, whether under the FCA, other whistleblower statutes, or anti-discrimination laws, employers must act with care in personnel actions involving that employee.  In some cases, employers may win the battle but lose the war, showing that the “concerns” the employee reported were non-issues, but facing retaliation liability because of how managers or others treated the employee after he or she made the reports.  Felten emphasizes that this care must continue even after the employee departs the organization.

On March 30, 2021, the Office of Federal Contract Compliance Programs (OFCCP) announced that it was lowering the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) hiring benchmark again this year.  Effective March 31, 2021, the new benchmark is 5.6 percent, down from 5.7 percent in 2020.  This marks the seventh consecutive year that the benchmark has been lowered since its inception in March 2014, when it was set at 7.2 percent. VEVRAA is designed to provide equal opportunity and affirmative action for Vietnam era veterans, special disabled veterans, and veterans who served on active duty during a war or in certain campaigns.  Contractors are required to establish annual hiring benchmarks for protected veterans and assess their progress against that benchmark. Contractors have the option of establishing their own benchmark or adopting OFCCP’s annual national benchmark. Additional information regarding VEVRAA compliance and the national benchmark can be found on the OFCCP website.

On March 2, 2021, the Office of Federal Contract Compliance Programs (OFCCP) amended its Corporate Scheduling Announcement List (CSAL) for supply and service contractors for fiscal year 2020 to remove all of the contractor establishments previously selected for Section 503, accommodation, and promotions focused reviews and compliance checks. This leaves only the 500 compliance evaluations listed in the previous CSAL scheduled for audit at this time. OFCCP also published an amendment to its scheduling methodology. Although this amendment reduces the number of contractor establishments selected for OFCCP audits in fiscal year 2020 from 2,250 to 500, we anticipate that the amendment may turn out to be the first step in an increase in OFCCP audit activity this fiscal year. It appears OFCCP may be refocusing its resources towards the more extensive compliance evaluations and away from the more limited focused reviews and compliance checks, and may issue another CSAL scheduling additional compliance evaluations at some point later in the year. According to FAQ guidance released by OFCCP in connection with the amended CSAL, the changes will not affect pending focused reviews from CSALs issued prior to fiscal year 2020.  In addition, as confirmed by OFCCP’s FAQs, the amendment to the supply and service CSAL will not affect construction contractors who were scheduled for compliance checks or other reviews on the fiscal year 2020 construction CSAL. The amendment to the supply and service CSAL appears to forecast a reversal of former OFCCP Director Craig Leen’s initiative to refocus OFCCP’s enforcement activity on disability and veteran-related compliance issues, as the focused review program had been an important part of Director Leen’s initiatives.  It appears that OFCCP will now instead conduct more compliance evaluations that review the full range of the contractor’s personnel activity and practices and also expose contractors to greater monetary costs and potential liability.

On February 9, 2021, the Biden administration took another step towards reversing the priorities of the Trump-era Office of Federal Contract Compliance Programs (OFCCP), by notifying the U.S. District Court for the Southern District of New York that it intended to rescind the Trump-era OFCCP January 2021 regulation broadening the religious exemption from Executive Order 11246’s nondiscrimination requirements. The notice came in litigation filed by 14 states and the District of Columbia challenging the issuance of the religious exemption regulation.  The notice indicates that OFCCP “intends to propose rescission of the rule,” and that this process will require notice-and-comment rulemaking that will take “several months.”  Beyond that statement and timeline, the notice did not provide insight into OFCCP’s intentions with respect to the religious exemption.  Contractors will have to await the issuance of a Notice of Proposed Rulemaking to learn if OFCCP intends to simply restore the religious exemption to its pre-January 2021 language, or propose a different, middle-ground approach. This early shift indicates that the new administration will not prioritize issues of religious liberty to the same extent as the Trump OFCCP.  It remains to be seen whether the Trump OFCCP’s focus on disability and veterans issues will also be lessened under the new administration.  Contractors should expect additional changes at OFFCP as the new administration continues to pursue its priorities.

The new Biden administration wasted no time implementing changes at the Office of Federal Contract Compliance Programs (OFCCP).  On January 20, 2021, the day of President Biden’s inauguration, the administration moved promptly to appoint Jenny Yang to serve as the OFCCP’S Director. This appointment does not require Senate confirmation, and went into effect immediately.  The Government Contractor Update previously predicted that contractors should expect heightened pay equity enforcement from OFCCP under the Biden administration, and Director Yang’s appointment appears to be the first step towards the fulfillment of this prediction. Director Yang previously served in the Obama administration on the Equal Employment Opportunity Commission (EEOC) from 2013-2018 and as the EEOC’s Chair from 2014-2017. During her EEOC tenure, Ms. Yang was a fierce advocate for pay equity and closing the gender wage gap, as she spearheaded the Obama administration’s effort to collect pay data from federal contractors and other employers through Component 2 of the EEO-1 form. Although the Trump-era OFCCP disclaimed any intention to review Component 2 data, the Biden OFCCP under Director Yang can be expected to scrutinize this data in search of potential gender-based, or other, pay disparities. Notably, the OFCCP Director serves in the Department of Labor’s hierarchy, and the appointment of Director Yang prior to the Secretary of Labor’s confirmation appears to indicate that the Biden Administration strongly supports her priorities. Additional insight on Director Yang’s potential priorities can be found in her 2019 testimony before the House Committee on Education and the Workforce in support of the Paycheck Fairness Act. In her testimony, Director Yang emphasized her view that existing federal law is insufficient to redress the longstanding gender pay gap. In a point of particular concern for contractors, Director Yang expressed her belief that market compensation rates are not an appropriate justification for salary differentials. This belief is consistent with the views of many OFCCP enforcement personnel, who frequently push back against the use of market compensation studies in contractor compensation systems, even though such studies are widely used by corporate employers in setting salary ranges. OFCCP collected a record amount of settlements from contractors in 2020, but Director Yang’s appointment signals that federal contractors can expect more to come in 2021 and beyond. Contractors should begin preparing now to defend their compensation systems from potential OFCCP evaluations.  Some important steps federal contractors can immediately take include retaining legal counsel to conduct a privileged pay equity audit that will be protected from disclosure in the event of an OFCCP audit or employee lawsuit, bolstering written compensation policies to identify all relevant factors the contractor may seek to rely upon in the event of an audit, and reviewing the use of market compensation studies to ensure they are appropriately conducted and used in a way that does not perpetuate gender-based pay gaps.

The Biden Administration did not waste time in rescinding former President Trump’s controversial Executive Order 13950, which limited the ability of federal government contractors and grantees to conduct certain types of diversity and inclusion training. On January 20, 2021, the first day of the new administration, President Biden issued a new Executive Order on Advancing Racial Equity and Support for Underserved Communities Throughout the Federal Government. Among other initiatives, the new Executive Order rescinds Executive Order 13950 and requires federal agencies to review and consider rescinding any agency actions arising out of or relating to Executive Order 13950.  Executive Order 13950’s prohibitions had previously been paused by a preliminary injunction issued by the U.S. District Court for the Northern District of California on December 22, 2020. Executive Order 13950 had created much uncertainty among federal contractors about the types of diversity and inclusion training that can permissibly be provided. With the order’s rescission, contractors that had suspended or limited their training efforts can now comfortably proceed without facing a risk of OFCCP enforcement.

On January 8, 2021, the Office of Federal Contract Compliance Programs (OFCCP) issued an opinion letter on “Legal Protections for Religious Liberty in the Workplace.” The opinion letter builds on OFCCP’s recent regulations regarding the religious exemption to provide broad protection to employees against discrimination based on their religious practices. The opinion letter appears to signal that OFCCP leadership is concerned that certain aspects of religious faith may be deemed controversial, leading to adverse employment actions against employees who hold these views. Although LGBTQ issues are not directly addressed in the opinion letter, the opinion letter’s principles could conflict with the increasing protections that federal and state employment discrimination laws provide to LGBTQ employees. The primary guidance provided by the opinion letter comes in the form of answers to several hypothetical questions. These answers state that a federal contractor violates OFCCP’s non-discrimination regulations if it subjects an employee or applicant to an adverse employment action because: The contractor assumes the individual holds beliefs that others may find offensive; The individual is a member of a religion that has taken public policy positions that others may find offensive (providing, as examples, support or opposition for Israel and opposition to abortions); The individual supports or attends a religious-related cause or event that others may find offensive (providing, as examples, an anti-war rally, the March for Life, or a rally opposing anti-Semitism); The individual states to co-workers that he or she holds religious views others may find offensive (providing, as examples, a belief in traditional marriage). The opinion letter does limit this principle by noting that the individual’s statement could be unprotected if he or she has been told such comments are unwelcome, the comments are objectively hostile, or the comments constitute harassment. The opinion letter also states that as part of the “duty” federal contractors carry to provide equal employment opportunities to individuals of different religious faiths, contractors “should develop reasonable internal procedures” to ensure that religious accommodations are being “fully implemented.” The letter encourages contractors to “voluntarily” implement best practices such as centralized accommodation request systems, collaboration with employee resource groups, and training for managers and employees. It is unclear how lasting this OFCCP guidance will prove, given that it was issued less than two weeks before President-Elect Biden’s inauguration. The OFCCP Director position does not require Senate confirmation, so it can be filled immediately by appointment, and sub-regulatory guidance like opinion letters can be immediately withdrawn or changed by a new Director. To the extent the opinion letter creates tension between contractors’ obligations to employees of faith and other protected groups, contractors must keep in mind that other, non-OFCCP federal, state, and local non-discrimination laws continue to apply.  Still, the opinion letter emphasizes that federal contractors are subject to an additional layer of scrutiny with respect to their employment actions, and must consider OFCCP implications when making personnel decisions.

The Equal Employment Opportunity Commission (EEOC) announced this week that it will open the EEO-1 Component 1 Report in April 2021.  The EEO-1 requires covered employers to report by job category the race, ethnicity and gender of its employees.  Because the EEOC postponed the filing deadline for the EEO-1 in 2020, covered employers will be required to file both the 2019 and 2020 EEO-1 Component 1 Reports beginning in April 2021. Covered employers include those with 100 or more employees and federal contractors with 50 or more employees and a federal contract of $50,000 or more.  Note that employers with less than 100 employees who are owned or affiliated with another entity such that the combined employee count is over 100 employees may also be required to file this report. Covered employers are encouraged to confirm that all employees have had the opportunity to voluntarily self-identify their gender, ethnicity and race.  If an employer identifies employees who have not responded to this voluntary invitation, employers may re-extend the invitation and/or rely on employment documents such as an I-9 or visual observation.  If an employer needs to rely on visual observation, it will be easier to gather this information now rather than waiting until April 2021. Polsinelli will continue to monitor developments with the EEO-1 report.

Come Jan. 20, former Vice President Joe Biden will be inaugurated as the U.S.' 46th president. In the run-up to the election, the Biden campaign focused on pay equity issues and closing the wage gap as part of its platform to appeal to female voters. For federal government contractors, this focus is likely to translate to renewed enforcement efforts on pay discrimination issues from the Office of Federal Contract Compliance Programs. Contractors should expect this increase in enforcement activity notwithstanding the fact that the Trump-era OFCCP extracted a record amount of discrimination settlements from federal government contractors in 2020. Although the OFCCP focuses on countering alleged discrimination by federal contractors in a variety of personnel transactions — such as hiring, promotions, pay and terminations — its compensation audits have been a source of particular frustration for contractors. The Obama-era OFCCP, which is the best predictor for the expected behavior of the upcoming Biden OFCCP, aggressively pursued pay discrimination enforcement against federal contractors. Contractors, and the attorneys who represent them, frequently complained that the agency operated in a nontransparent and unpredictable manner, issuing findings of sex and race-based compensation discrimination based on purely statistical analyses that contractors could not replicate and that did not consider important features of the contractor's compensation frameworks. This approach to compensation audits recently received a stunning rebuke from Administrative Law Judge Richard M. Clark, in the form of a 278-page order squarely rejecting an OFCCP enforcement action against Oracle America Inc., which alleged systemic pay discrimination against employees at its headquarters. The Oracle enforcement action was filed in the last days of the Obama administration and, in seeking to recover $400 million in wages allegedly underpaid to female, Asian and Black employees, was the OFCCP's largest-ever action. The administrative law judge's ruling against the OFCCP reads as a laundry list of common contractor complaints, noting the OFCCP's failure to identify an actual discriminatory practice causing the alleged pay disparity, lack of relevant anecdotal — i.e., nonstatistical — evidence of discrimination, disregard of important elements of Oracle's compensation framework and aggregation of dissimilar groups of employees for statistical comparison without addressing major nondiscriminatory factors that led to differences in their pay. As contractors frequently complain, the OFCCP focused on a statistical pay disparity without showing any credible evidence of pay discrimination, i.e., the illegal action or motive causing the disparity. The OFCCP's Oracle defeat followed a 2019 ruling against the agency in OFCCP v. Analogic Corp., rejecting its Obama-era enforcement action against Analogic that was based on similar deficiencies in the OFCCP's evidence and statistical analyses. On Dec. 9, 2020, OFCCP Director Craig Leen announced that the agency would not appeal the Oracle decision and promised that the "OFCCP will learn from the decision in an effort to continue improving the efficacy of its critically important compensation program." Leen devoted much of his tenure toward attempting to rein in some of the excesses in the OFCCP's compensation practices, which were on display in Oracle through a series of subregulatory directives and, ultimately, new regulations that became effective on Dec. 10, 2020. Among other things, the new OFCCP compensation regulations require the agency to control for major, measurable criteria used by the contractor in determining compensation, produce nonstatistical evidence of discrimination supporting alleged violations in addition to identifying statistical compensation disparities, and identify specific contractor practices that allegedly cause statistical disparities in disparate impact cases. The regulations also require the agency to provide contractors with a predetermination notice prior to issuing a notice of violation and pursuing enforcement, and to disclose with the predetermination notice the agency's qualitative and quantitative evidence, as well as its statistical model and the reason for excluding any factors proposed by the contractor from its statistical analysis. The predetermination notice provides the contractor with an opportunity to address and refute the agency's claims, or seek resolution, prior to the commencement of formal enforcement proceedings. Despite Leen's statement that the OFCCP has learned from its Oracle defeat, and similar comments about the prior Analogic case, it is not clear whether this sentiment is widely held among the agency's staff. At least one key career employee in the Department of Labor's Office of the Solicitor, which litigated Oracle on behalf of the OFCCP, has filed a whistleblower complaint alleging that the OFCCP's decision to forego an appeal of the administrative law judge's decision in Oracle was based on unlawful political influence and interference. Moreover, as the old Washington, D.C., adage goes, "personnel is policy." Unlike other Department of Labor posts like the administrator of the Wage and Hour Division, the OFCCP's director does not require U.S. Senate approval. Under Biden, a progressive OFCCP director could immediately begin undoing Leen's subregulatory directives. Although it would take significantly longer for a new director to amend or eliminate the recent compensation audit regulations through a new round of notice and comment rulemaking, the regulations would also be vulnerable to change under a new administration. Even if Leen's regulations are not formally amended by the Biden OFCCP, they may not prove to be significant guardrails tempering the aggressiveness of the new administration's enforcement activity against federal contractors. The regulations are somewhat limited in scope, and do not address several agency practices that limit contractors' ability to counter the agency's pay discrimination analyses. For example, the regulation's listing of contractor compensation factors for which the agency should control in its statistical analyses does not include market compensation studies, which are often a significant factor used by private-sector employers in setting salary ranges for positions. The OFCCP frequently compares employees across positions while resisting controlling for the market compensation of the respective positions, claiming that market compensation is a tainted variable. Although the regulation's listing of factors is nonexclusive, the inclusion of market compensation would have bolstered contractors' legitimate reliance on market studies against the OFCCP's skepticism. The regulation also does not address the formation of pay analysis groups that aggregate groups of employees for statistical analysis. Contractors commonly argue that such groups result in pay comparisons among employees who would not be deemed similarly situated or perform equal work under Title VII and other federal nondiscrimination laws. Because these issues are not addressed in the regulation, the Biden OFCCP could use such methods to evade the spirit of the regulations even without repealing them. The new compensation regulations also contain ill-defined exceptions that could be broadly construed by a new administration. For example, the requirement that the OFCCP confirm its findings of statistical disparities with nonstatistical, qualitative evidence of discrimination is inapplicable if the statistical disparity is extraordinarily compelling. This standard could be watered down to attempt to justify cases based on purely statistical disparities without relevant non-statistical evidence of discrimination. Another example is the suspension of the requirement that the agency identify a specific discriminatory policy or practice in disparate impact claims where the OFCCP demonstrates that the different elements of the contractor's selection procedures cannot be separated for analysis. One tempering factor on the OFCCP's ability to aggressively interpret these exceptions, however, is the existence of the Oracle and Analogic decisions, which provide powerful arguments for contractors seeking to oppose defective statistical analyses and weakly supported pay discrimination claims. In addition, the OFCCP's well-publicized losses in those cases could lead more contractors to dig in their heels and resist the agency's discrimination findings. Contractors could also face more aggressive OFCCP action under a Biden administration due to the new administration's expected revival of the requirement for federal contractors — and others — to submit employee pay data as part of their annual EEO-1 submission. The Obama administration first implemented the requirement that contractors and other employers submit compensation data with the EEO-1 filing, and despite the Trump administration's attempt to discontinue the requirement, the U.S. District Court for the District of Columbia ordered the collection to go forward for the calendar years 2017 and 2018. The Trump-era OFCCP disclaimed any intention to review or rely upon EEO-1 pay data, claiming that it would not be useful to the OFCCP's mission. The Biden administration is expected to reinstate the requirement, and the Biden OFCCP could decide to review contractors' EEO-1 submissions to locate potential pay discrimination issues. This would present another avenue for contractors to face OFCCP scrutiny, in addition to the agency's annual compliance evaluations, and potentially give rise to increased Fourth Amendment litigation as contractors resist any OFCCP reviews that may be initiated based on EEO-1 submissions. Contractors should prepare for four years of increased OFCCP enforcement in the area of compensation. Even during the Trump administration, the agency prioritized enforcement efforts in the financial services, professional services and technology industries, and those dynamic and growing sectors of the economy will likely continue to face heightened scrutiny. Federal contractors should proactively prepare for an uptick in OFCCP activity by regularly conducting privileged pay equity audits to identify and resolve gender and race based compensation disparities. Doing so will not only assist contractors in escaping OFCCP enforcement but will also provide a valuable boost to the contractor's diversity, equity and inclusion efforts.

On December 7, 2020, the Office of Federal Contract Compliance Programs issued a Final Rule codifying an expansion of the agency’s exemption from Executive Order 11246’s nondiscrimination requirements for federal contractors who are religious corporations, associations, educational institutions, or societies.  The new rule, which goes into effect on January 8, 2021, defines certain key terms in a way that provides a broader scope of exemption than recognized by the EEOC under Title VII’s corresponding religious exemption. The pre-existing religious exemption in OFCCP’s regulations provided that certain of Executive Order 11246’s non-discrimination obligations did not apply to a contractor or subcontractor “that is a religious corporation, association, educational institution, or society, with respect to the employment of individuals of a particular religion to perform work connected with the carrying on . . . of its activities.”  OFCCP’s Final Rule provides definitions of the previously-undefined terms “religious corporation, association, educational institution, or society” and “particular religion” that broadens the scope of the exemption. The new rule implements a four-part test for contractors to establish that they are a religious entity within the scope of the exemption. Contractors must establish that they: Are organized for a religious purpose, as typically shown by the entity’s governing documents (i.e., articles of incorporation, bylaws, or a mission statement); Hold themselves out to the public as carrying out a religious purpose; Engage in activity consistent with, and in furtherance of, the religious purpose; and Either (1) operate on a non-profit basis, or (2) present strong evidence that the entity’s purpose is “substantially religious.” The new regulation instructs that an organization’s satisfaction of these standards is to be measured by reference to the organization’s own sincere understanding of its religious tenets, and that religious entities may, but are not required to, be affiliated with a house or worship or composed of individuals sharing the same religious tradition. The regulation’s comments make clear that OFCCP should defer to the contractor’s view that an activity has religious meaning, providing the example of a drug rehabilitation center that sincerely believes that its work is a form of ministry. Although the regulation itself refers to an exemption “with respect to the employment of individuals of a particular religion,” OFCCP’s new definition of “particular religion” broadly construes the exemption.  The exemption applies not only to a particular employee’s religion, but also to the employee’s “acceptance of or adherence to sincere religious tenets as understood by the employer as a condition of employment,” even if the employee is not a member of the employer’s particular sect. Finally, the Final Rule adds a rule of construction provision to OFCCP’s regulations requiring that they be construed in favor of a broad protection of religious exercise. Even as expanded by the Final Rule, the religious exception will likely be inapplicable to the bulk of contractors, and does not fully exempt even religious contractors from OFCCP’s requirements. In addition, religious contractors will remain subject to other federal, state, or local non-discrimination laws not enforced by OFCCP that may not provide the same exemption. Nonetheless, contractors who believe they may qualify for the exemption should work with counsel to review its requirements and ensure they have documentary evidence clearly demonstrating the organization’s compliance with each of the four requirements for the contractor to obtain religious status under the regulation.

On November 10, 2020, OFCCP published its Final Rule on “Nondiscrimination Obligations of Federal Contractors and Subcontractors: Procedures to Resolve Potential Employment Discrimination.”  We previously covered OFCCP’s Notice of Proposed Rulemaking on the subject, which promised to provide additional certainty to contractors regarding OFCCP’s standards for finding discrimination-based violations. In the Final Rule, OFCCP made significant changes to the Notice of Proposed Rulemaking, the most significant of which are described below: OFCCP replaced the concepts of “statistical evidence” and “nonstatistical evidence” from the Notice of Proposed Rulemaking with “qualitative evidence” and “quantitative evidence” in the Final Rule.  Qualitative evidence largely corresponds to the previous category of “nonstatistical evidence” and encompasses testimony and other documentary evidence giving rise to an inference of discrimination.  In a positive note for contractors, OFCCP has somewhat backed away from the Notice of Proposed Rulemaking’s classification of manager discretion or subjective decision making as qualitative/nonstatistical evidence of discrimination, and now considers the existence of discretion or subjectivity to be qualitative evidence only where there is additional evidence showing the discretion has been used in a discriminatory manner.  Given that subjectivity is an almost inherent aspect of performance evaluation, this is a welcome development.  The Final Rule also makes clear that an employee’s subjective belief that he or she has been discriminated against does not constitute qualitative evidence. The Final Rule’s new category of “quantitative evidence” is broader than the “statistical evidence” of the Notice of Proposed Rulemaking.  The prior category of statistical evidence focused on OFCCP’s preferred tool of linear regression analysis, and required OFCCP to find disparities of two standard deviations or greater in order to provide evidence of discrimination.  The Final Rule retains the two standard deviation threshold, but now also includes cohort analyses in which OFCCP compares the outcomes of specific employees as “quantitative evidence.”  Troublingly, the Final Rule does not provide standards for conducting cohort analyses, leaving the door open for OFCCP to pursue enforcement actions based on cherry-picked comparisons. The Final Rule establishes specific standards for findings of discrimination in disparate treatment and disparate impact cases.  For disparate treatment cases, OFCCP must provide quantitative evidence of discrimination, provide qualitative evidence that supports a finding of discriminatory intent and a finding that the discriminatory intent caused the disparate treatment, and show that the disparity is practically significant.  This move to require qualitative evidence in nearly all cases is a welcome development.  However, the Final Rule contains an exception to the qualitative evidence requirement in cases where the quantitative evidence is “extraordinarily compelling,” without defining that standard (as opposed to the Notice of Proposed Rulemaking’s three standard deviation threshold for purely statistical violations).  It remains to be seen how strictly OFCCP will apply the “extraordinarily compelling” standard in practice. For disparate impact cases, OFCCP must provide quantitative evidence of discrimination, identify the contractor’s specific policy or practice causing the adverse impact, and show that the disparity is practically significant.  The requirement for identification of a specific policy or practice is a positive development, as OFCCP previously brought claims based on statistical disparities without identifying how the contractor allegedly discriminated.  Again, however, the Final Rule contains an exception for situations where “the elements of a contractor’s selection procedures are incapable of separation for analysis.”  As with disparate treatment cases, it remains to be seen whether the exception will swallow the rule. The Final Rule codifies many aspects of OFCCP Director Leen’s 2018 directives in a form that will be more binding on the agency. Contractors facing preliminary findings of discrimination can evaluate OFCCP’s evidence against the Final Rule’s standards to seek to rebut the agency’s claims .As noted, however, the Final Rule does contain exceptions that lack specific standards for their application and could allow OFCCP to evade the Final Rule’s requirements. That said, OFCCP is likely to take a more aggressive approach to enforcement under a Biden administration, and the Final Rule provides contractors with tools to refute some OFCCP allegations of discrimination.

On October 21, 2020, the Office of Federal Contract Compliance Programs (OFCCP) continued to address the highly-controversial diversity and inclusion (D&I) training restrictions in Executive Order 13950.  Specifically, OFCCP issued a Request for Information (RFI) regarding contractor D&I training efforts, as required by the Executive Order, and also held a stakeholder call in which Director Craig Leen addressed several issues surrounding OFCCP’s response to the Executive Order. In the RFI, OFCCP provided some hints as to its enforcement and compliance assistance efforts for the Executive Order’s D&I training restrictions.  Echoing its prior guidance, OFCCP clarified that “training is not prohibited if it is designed to inform workers, or foster discussion, about pre-conceptions, opinions, or stereotypes that people – regardless of their race or sex – may have regarding people who are different, which could influence a worker’s conduct or speech and be perceived by others as offensive.”  As with prior agency guidance, this statement makes clear that while discussions of implicit bias are not absolutely prohibited, those discussions cannot single out specific racial or sex groups as being more likely to harbor biases than others, and must focus on the workforce as a whole. The RFI also invited federal contractors who are unsure about the compliance status of their D&I training materials to seek compliance assistance from OFCCP.  According to the RFI, if a contractor voluntarily submits materials to OFCCP for review, OFCCP will “exercise its enforcement discretion and not take enforcement action” if the contractor “promptly comes into compliance with the Executive Order as directed by OFCCP.”  However, OFCCP reserves the right to pursue enforcement action if it determines that the contractor refused to correct any identified issues.  The RFI also hints that OFCCP may begin requesting D&I training materials in its neutrally-scheduled compliance evaluations, though this request may require OFCCP to obtain approval to modify its OMB-approved Scheduling Letter.  As of October 21, 2020, OFCCP has not requested OMB approval to update its Scheduling Letter in light of the Executive Order. If a contractor wishes to respond to the RFI, the deadline is December 1, 2020. The RFI makes clear that responses are entirely voluntary and contractors may choose not to respond.  However, if someone other than a contractor representative authorized to submit the materials on behalf of the contractor provides information to OFCCP, for example an employee who attended a training session, OFCCP will not exercise its enforcement discretion and could pursue an enforcement action.  Accordingly, there is some risk that a contractor may be subjected to an enforcement action as a result of this RFI even if it does not choose to participate. Director Leen stated similar themes in the October 21, 2020 stakeholder call. Director Leen emphasized that there is overlap between Executive Order 13950’s restrictions on D&I trainings and the pre-existing non-discrimination obligations in Executive Order 11246.  Director Leen characterized Executive Order 13950 as clarifying Executive Order 11246’s prohibition of race or sex stereotyping in the specific area of training programs, and noted that OFCCP would act on any employee complaints it received under the new Executive Order.  This means that all federal contractors must comply with Executive Order 13950, even if they do not have a contract containing the Executive Order’s required clause.  Director Leen closed his remarks by expressing that every employee should feel “completely welcome and included” in contractor diversity efforts, and that “merit and merit alone” should govern contractors’ personnel actions. Although the RFI and stakeholder call provided some insight into OFCCP’s views and enforcement strategy on Executive Order 13950, they did not provide the specific guidance that contractors have sought.  Polsinelli has worked with several government contractor clients to assess their obligations and the compliance status of their D&I efforts under Executive Order 13950, and will continue to update the contractor community on developments regarding the Executive Order.

To make the platform more user friendly and conveniently accessible, the Office of Federal Contract Compliance Programs (OFCCP) has revamped the Employment Referral Resource Directory (ERRD). The OFCCP created the ERRD as a compliance tool to assist federal contractors in identifying job referral services for veterans, individuals with disabilities, women, and minority groups. Federal contractors can use the ERRD to find government and nonprofit organizations as references to assist in identifying and hiring qualified applicants. The agency desires to expand its directory as widely as possible and encourages referral organizations who are not in the directory to submit their information. The updates to the ERRD include: Search component and search results now merged on one page for a more seamless experience. Multi-selection now available when using the search fields. User friendly on mobile and desktop browsers. With the updates to the ERRD, federal contractors will be able to navigate the directory more easily to meet their compliance obligations. They will now be able to make more efficient and convenient searches for referral organizations on a variety of media, including mobile phones. These changes will help contractors more readily identify organizations that will help with recruitment efforts and assist them in meeting their regulatory obligations.

The September 22, 2020, issuance of Executive Order 13950 limiting federal government contractors’ ability to conduct diversity, inclusion, and unconscious or implicit bias training has roiled the contractor community. Although the Executive Order provided broad categories of themes that it prohibits as subjects of diversity training, it does not provide contractors with substantial guidance as to what specific types of training the Executive Order prohibits. On October 7, 2020, the Office of Federal Contract Compliance Programs (OFCCP) issued an FAQ guidance document regarding the Executive Order, which provides some, but far from sufficient, guidance to contractors. OFCCP’s FAQ guidance largely quotes directly from the Executive Order without providing additional insight into the Executive Order’s terms. That said, the FAQ does clarify two points: First, even if a federal contractor does not have a government contract subject to the Executive Order (generally, one issued after November 21, 2020), “OFCCP may investigate claims of sex and race stereotyping pursuant to its existing authority under Executive Order 11246.” To that end, OFCCP earlier established a hotline for employees of contractors to submit complaints of prohibited diversity training programs. Accordingly, all federal contractors should ensure their training programs comply with the Executive Order, regardless of whether their contracts contain the Executive Order’s prohibition. Second, OFCCP addressed the scope of unconscious or implicit bias trainings. The FAQ clarifies that such trainings are not necessarily prohibited. However, bias trainings cannot single out a single group as being unconsciously or implicitly racist, sexist, oppressive, or biased. Instead, the training must be “designed to inform workers, or foster discussion, about pre-conceptions, opinions, or stereotypes that people – regardless of their race or sex – may have regarding people who are different, which could influence a worker’s conduct or speech and be perceived by others as offensive.” Although OFCCP’s FAQ may not have provided the details sought by contractors, a September 28, 2020, memorandum from the Office of Management and Budget (OMB) regarding similar restrictions on federal sector diversity trainings provides some additional guidance. OMB emphasizes that trainings must promote “fair and equal treatment.” The memorandum advises agencies to search for concepts like critical race theory, white privilege, intersectionality, systemic racism, positionality, racial humility, and unconscious bias as potentially prohibited.  Although these are also broad concepts, the OMB memorandum provides some additional guidance on what contractors should look for and avoid. Notably, neither OMB nor OFCCP addresses the thornier question of what contractors must do if employees themselves discuss prohibited topics or themes during discussion portions of trainings. Given the lack of clear guidance to date from the Executive Order, OFCCP, OMB, or any other official source, contractors should conduct a close review of any diversity and inclusion training materials they use to ensure that they are consistent with the “fair and equal treatment” principle and do not include the themes described in the Executive Order. The effect of the Executive Order remains an evolving issue that contractors should closely follow.

On September 22, 2020, President Trump issued an Executive Order Combating Race and Sex Stereotyping that will prohibit federal contractors and grantees from engaging in many forms of diversity, inclusion, and implicit bias training that have gained popularity in recent months. The new Executive Order announces a federal policy “not to promote race or sex stereotyping or scapegoating” and not to permit contractors to “inculcate such views in their employees.”  To that end, the order requires agencies to include in most new federal government contracts a clause prohibiting contractors from using any workplace training program that includes the concepts that: One race or sex is inherently superior to another race or sex; An individual, by virtue of his or her race or sex, is inherently racist, sexist, or oppressive, whether consciously or unconsciously; An individual should be discriminated against or receive adverse treatment solely or partly because of his or her race or sex; Members of one race or sex cannot or should not attempt to treat others without respect to race or sex; An individual’s moral character is necessarily determined by his or her race or sex; An individual, by virtue of his or her race or sex, bears responsibility for actions committed in the past by other members of the same race or sex; An individual should feel discomfort, guilt, anguish, or any form of psychological distress on account of his or her race or sex; or Meritocracy or traits such as a hard work ethic are racist or sexist, or were created by a particular race to oppress another race. The Executive Order also prohibits trainings that “assign[] fault, blame, or bias to a race or sex, or to members of a race or sex because of their race or sex.”  These prohibitions follow a previous Executive Order prohibiting similar trainings by federal agencies. Contractors are required to post a notice with the substance of the Executive Order in a conspicuous place in the workplace, and include the Executive Order’s prohibitions in any subcontracts.  The Office of Federal Contract Compliance Programs (OFCCP) is directed to establish a hotline and investigate complaints of prohibited training programs.  As sanctions for noncompliance, the Executive Order requires agencies to consider such drastic measures as terminating, suspending, or canceling contracts, or even debarring contractors.  The Executive Order does provide that it does not prevent contractors from promoting racial, cultural, or ethnic diversity and inclusiveness in a manner consistent with the Order. The Executive Order appears to target diversity and inclusion training programs like the popular White Fragility that focus on concepts of implicit bias.  These trainings have gained prominence in the wake of the George Floyd killing earlier this year.  New federal contracts or grants would prohibit contractors from implementing these types of efforts with severe consequences.  It is anticipated that the constitutionality and validity of the Executive Order will be challenged in litigation.  Federal contractors and grantees should keep close track of these developments due to the heavy potential penalties for noncompliance.

On September 14, 2020, the Office of Federal Contract Compliance Programs (OFFCP) requested approval from the Office of Management and Budget to require government contractors to certify on an annual basis that they are in compliance with their affirmative action program (AAP) obligations.  Under OFCCP’s proposal, federal contractors are required to certify on an annual basis that they have complied with applicable AAP requirements.  The certification would be done through a new Affirmative Action Program Verification Interface online platform developed by OFCCP. OFCCP’s request for approval is not completely clear about how the agency intends to use this information, but it appears reasonable to expect an uptick in enforcement activity against contractors who fail to certify compliance with their AAP obligations. In one portion of the request, OFCCP notes that its new platform will allow OFCCP to “run a comprehensive and informative report identifying the AAP status of covered federal contractors.”  The request does not address whether a contractor will face additional consequences, such as for false claims, if it certifies its AAPs are in compliance but OFCCP later determines that certification was incorrect. Also on September 14, 2020, OFCCP published a Comment Request in the Federal Register about the new certification requirement.  OFCCP expressed particular interest in comments addressing: 1.      The proposed frequency and level of the information collection; 2.      Whether the proposed collection of information is necessary for OFCCP’s enforcement and compliance assistance functions, including whether they will have practical utility; 3.      The accuracy of OFCCP’s estimate of the burden of the proposed information collection; 4.      Proposals to enhance the quality, utility, and clarity of the information to be collected; and 5.      Proposals to minimize the burden of the information collection to respondents. This new certification likely signals an increase in OFCCP enforcement activity, at least against the low hanging fruit of contractors who fail to certify their compliance with AAP requirements.  The impending requirement that contractors affirmatively certify AAP compliance only emphasizes the need for contractors to proactively review their AAPs and ensure compliance with all of OFCCP’s requirements.

On September 11, 2020, the Office of Federal Contractor Compliance Programs (OFCCP) released its Corporate Scheduling Announcement List (CSAL) online for public access.  The CSAL identifies contractors who will be receiving an audit scheduling letter. This CSAL includes 200 construction contractors and 2,200 supply and service contractors.  The supply and service list includes multiples different types of reviews.  A full copy of the lists can be found here. Historically, contractors receiving a CSAL received a scheduling letter formally initiating the audit after about 45 days.  The advance notice provided by the CSAL can be a valuable opportunity for contractors to prepare for an upcoming audit, collect the data and documents the contractor will be required to submit to OFCCP within a relatively short period after receipt of the scheduling letter, and identify any potential compliance vulnerabilities that may need to be addressed during the audit process.  As we raised in an earlier blog post here, OFCCP plans to review and evaluate any reductions in force during the time period under audit so contractors should in particular be prepared to defend selection decisions in any layoffs. Contractors named in the CSAL should consider consulting with experienced counsel to assist in preparing for the forthcoming audit scheduling letter.

The Office of Federal Contract Compliance Programs (“OFCCP”) recently issued new FAQ guidance on how federal government contractors should treat non-binary employees (i.e., those who do not exclusively identify as either male or female) in their affirmative action programs (“AAP”).  OFCCP instructs that contractors should include non-binary employees in AAP documents, but should exclude their data when conducting the gender-based analyses required by OFCCP’s AAP rules.  This means that non-binary employees should not be considered when determining gender-based placement goals and analyzing potential gender-based disparities in personnel activity and compensation systems. The new guidance also reminds contractors that they may not ask applicants or employees for documentation to prove their stated gender identity.  As a refresher, some other gender identity-related guidance from prior FAQs include that: OFCCP does not require contractors to collect data about the non-binary gender identification of applicants or employees, but contractors may voluntarily choose to do so. Contractors’ AAP obligations do not require outreach activities towards LGBT applicants or employees, but contractors may voluntarily choose to do so. If an employee self-identifies their gender, including as non-binary, the contractor may not override that identification based on its visual observation or other records. Under EEOC guidance, data regarding non-binary employees may be separately reported in EEO-1 form submissions. The new OFCCP FAQ provides some certainty for contractors and helps alleviate the conflict between OFCCP’s prior gender-binary framework and society’s rapidly-advancing understandings – often reflected in state, and now federal Title VII, law – of gender identity.  However, many thorny questions about the treatment of non-binary employees for AAP or other OFCCP compliance purposes remain unaddressed.  Because OFCCP accepts gender identity-based complaints from employees, and those complaints can now potentially be raised in a federal lawsuit under Title VII, contractors should take care in addressing these evolving issues.

On August 31, 2020, the Department of Labor’s Wage and Hour Division published its annual update to the minimum wage for federal government contractors.  As of January 1, 2021, employees performing services on or in connection with certain types of government contracts will be entitled to a minimum wage of $10.95 per hour.  The minimum cash wage for employees who are eligible for the tip credit will increase to $7.65 per hour.  The current minimum wages for 2020 are $10.80 and $7.55 per hour, respectively. The increased minimum wage stems from Executive Order 13658, which in 2014 established a special minimum wage for certain federal contractors.  Each year, the Wage and Hour Division is required to update the contractor minimum wage levels based on the CPI-W consumer price index for urban wage earners and clerical workers.  Employees are entitled to the heightened minimum wage if they work on or in connection with a construction contract covered under the Davis-Bacon Act, a service contract covered under the Service Contract Act, a concessions contract, or a contract to provide services to federal employees or the general public on federal lands or property. Contractors should ensure that any employees covered by Executive Order 13658 are paid the required amounts.  Polsinelli is available to assist contractors in determining whether specific contracts or employees are subject to the Executive Order.

The Department of Labor (“DOL”) settled a claim of gender pay discrimination against Boehringer Ingelheim Animal Health USA Inc., a pharmaceutical company, on August 18, 2020. The Office of Federal Contract Compliance Programs (“OFCCP”) investigated allegations that Boehringer paid female scientists and technicians less than males in the same positions at a facility in St. Joseph, Missouri where the Company manufactures biological animal vaccines. To resolve the claim, the Company agreed to pay 75 current and former scientists and technicians $379,089 in back pay and interest. The OFCCP noted that Boehringer “worked cooperatively” with the agency during its compliance review to resolve the claim and prevent future discrimination. In addition to the monetary penalty, the Company agreed to revise its policies and procedures to ensure they are not discriminatory. Specifically, the Company agreed to ensure that its pay schedules did not discriminate against women and to train managers and supervisors who are involved in determining compensation.  Carmen Navarro, the OFCCP Midwest Regional Director, stated that the DOL “is committed to combating pay discrimination and ensuring fair compensation of all employees.” Federal contractors must constantly evaluate their pay practices to ensure that they are not discriminating against women. In addition, they should maintain accurate records and document voluntary efforts to correct pay disparities. When faced with an OFCCP compliance evaluation, contractors must consult with legal counsel to ensure that their rights are fully protected. UPDATE - After our original posting, Boehringer Ingelheim requested that we include with our post the following statement regarding the settlement: “Boehringer Ingelheim provides a workplace free of discrimination and harassment to all employees and equal employment opportunity is a core principle at the Company. We are committed to ensuring that our employees are fairly compensated, based on business-related factors and regular market survey analyses. The current settlement relates to an Office of Federal Contract Compliance Programs (OFCCP) audit of 2014 data of the then Boehringer Ingelheim Vetmedica employees in St. Joseph, MO. Boehringer Ingelheim does not agree with the OFCCP’s allegations that, while unintentional, there was a gender-based wage discrepancy for a limited number of employees. Given the age of this matter, the Company decided to resolve in a collaborative manner with the OFCCP. The settlement discussions have now concluded, and both parties have come to an amicable resolution. The OFCCP has not made any additional allegations against Boehringer Ingelheim since 2014.”

On August 3, 2020, President Trump issued an Executive Order titled “Aligning Federal Contracting and Hiring Practices with the Interests of American Workers,” signaling that the administration may seek to limit the ability of federal government contractors and subcontractors to use H-1B visa holders and other temporary foreign laborers on federal government contracts. The Executive Order requires the head of each federal government agency and executive department to study the contractors’ use of temporary foreign labor on the contract as well as the “offshoring” of services previously performed in the U.S. to foreign countries.  Through this study, the agency and department heads must review the performance of contracts and subcontracts awarded in fiscal years 2018 and 2019 to assess: (i)   whether contractors (including subcontractors)  used temporary foreign labor for contracts performed in the United States, and, if so, the nature of the work performed by temporary foreign labor on such contracts; whether opportunities for United States workers were affected by such hiring; and any potential effects on the national security caused by such hiring; and (ii)  whether contractors (including subcontractors) performed in foreign countries services previously performed in the United States, and, if so, whether opportunities for United States workers were affected by such offshoring; whether affected United States workers were eligible for assistance under the Trade Adjustment Assistance program authorized by the Trade Act of 1974; and any potential effects on the national security caused by such offshoring. As part of this study, agency and department heads must assess the impact of contractors’ foreign labor hiring and offshoring practices on (1) the economy; (2) the efficiency of federal procurement; and (3) national security.  The agencies must report back to the Office of Management and Budget within 120 days if they have recommendations for corrective action. Separately, the Executive Order launches the Trump administration’s latest attack on the H-1B visa program for specialized foreign professionals.  It directs the Department of Labor and Department of Homeland Security, within 45 days of the Executive Order, to take action to protect U.S. workers from adverse effects caused H-1B visa holders: Within 45 days of the date of this order, the Secretaries of Labor and Homeland Security shall take action, as appropriate and consistent with applicable law, to protect United States workers from any adverse effects on wages and working conditions caused by the employment of H-1B visa holders at job sites (including third-party job sites), including measures to ensure that all employers of H-1B visa holders, including secondary employers, adhere to the requirements of section 212(n)(1) of the Immigration and Nationality Act (8 U.S.C. 1182(n)(1)). Although both of the initiatives in the Executive Order are preliminary in nature, they suggest that the administration intends to prohibit or substantially limit the use of non-American labor on federal contracts, whether through prohibitions on foreign labor sources or by favoring American labor sources in the procurement process.  Contractors and subcontractors should closely follow any developments as the federal agencies with which they contract complete their studies.  Contractors should also make certain that their subcontractors are prepared to comply with any resulting prohibitions on the use of foreign labor, whether through offshored services or H-1B and other temporary labor providers.

Craig Leen, Director of the Office of Federal Contract Compliance Programs (OFCCP) at the U.S. Department of Labor spoke on Monday, July 6, 2020 to lead off the National Industry Liaison Group’s 2020 Virtual Conference.  Director Leen spoke extensively on OFCCP’s upcoming plans and areas of focus in compliance reviews.  Highlights of Director Leen’s presentation include: 1.       During compliance reviews contractors should be able to show efforts to work with Historically Black Colleges and Universities (HBCUs) and members of the Hispanic Association of Colleges and Universities (HACU). 2.       Contractors should explore and understand OFCCP’s Indian and Native American Employment Rights Program (INAERP), which allows contractors to give preference to Indians and Native Americans if the contractor is working on or near an Indian Reservation. 3.       Audit scheduling letters for Vietnam Era Veterans Readjustment Assistance Act (VEVRAA) Focused Reviews are scheduled to be released in the next couple of weeks.  OFCCP released a list of contractors who can expect to receive an audit scheduling letter in November 2019. Practice tip:  Contractors on OFCCP’s audit scheduling list should contact counsel as soon as possible to pre-audit their VEVRAA compliance to evaluate, and fix, potential compliance deficiencies, and prepare to assemble the documentation and data that OFCCP will request. 4.       During OFCCP audits contractors should be prepared to defend impacts of any recent layoffs, furloughs and pay reductions. Practice tip:  To proactively defend decisions, contractors should consider performing a disparity analysis and making sure documentation is in order to defend selections that may have an adverse impact on protected groups. 5.       Accommodations will be a big focus for OFCCP this fiscal year.  OFCCP plans to initiate Accommodation Focused Reviews to evaluate both disability and religious accommodation efforts.  OFCCP also plans to publish guidance on accommodation best practices. Practice tip: Contractors should continue to document all requests for accommodations and the contractor’s response to each such request. 6.       OFCCP will prioritize evaluating discrimination based on sexual orientation and gender identity.  While both sexual orientation and gender identity have been protected under Executive Order 11246 for several years, following the Supreme Court’s decision in Bostock, OFCCP plans to engage with EEOC on enforcing these protections. 7.       OFCCP plans to begin Construction Contractor Compliance Reviews by the end of 2020 or the beginning of 2021. Practice tip:  Construction contractors should prepare accordingly now to identify potential compliance issues and fix them before facing an OFCCP review. 8.       OFCCP will continue to focus on disability discrimination and accommodation.  Director Leen recommends contractors focus not just on activity recruiting individuals with disabilities, but also promoting and supporting employee resource of affinity groups for individuals with disabilities. 9.       Director Leen believes OFCCP is on pace this year for its second highest total settlement recovery as the agency prioritizes Early Resolution Programs. 10.   Director Leen encouraged contractors to keep in mind all ten areas of protection under the laws enforced by OFCCP:  sex, race, color, religion, national origin, sexual orientation, gender identity, disability, veterans and compensation.

To increase its efficiency in ensuring the regulatory compliance of supply and services contractors, the OFCCP implemented Early Resolution Procedures (ERP) in 2018. The ERP allows contractors to proactively correct violations during compliance evaluations and quickly enter into agreements with the OFCCP without incurring the time and expense of a full compliance evaluation. The ERP requires compliance officers to resolve non-material violations that can be corrected immediately during a desk audit if there are (1) no additional indications of discrimination violations; (2) no evidence of a lack of good faith; and (3) no immaterial technical violations. For material technical violations, including recordkeeping violations and applicant tracking deficiencies, the agency resolves audits by offering an Early Resolution Conciliation Agreement with Corporate-Wide Corrective Action (ERCA). The ERCA requires contractors to review all of their establishments, correct any violations, and submit progress reports with the results of their efforts. Contractors agreeing to the terms of the ERCA will avoid a new compliance evaluation for five years. If a compliance officer discovers material violations involving discrimination during a desk audit, the OFCCP will prepare a refined analysis to confirm the results of the desk audit and offer an ERCA. Since the implementation of the ERP in 2018, the agency has signed 18 ERCAs, covering about 312,000 employees under monitoring and reporting at over 850 contractor establishments. The ERCAs have resulted in the payment of $31 million in back pay, and an additional $5 million in salary adjustment commitments. The agency projects that it will have an additional 30 ERCAs signed by September 2020, securing more than $50 million in back pay. Moreover, the ERP contributed to a reduction in the aged case rate from 22.8% in 2018 to 18.1% in 2019 and to 12% in March 2020, which met the agency’s efficiency goal. The success of the ERP has positive implications for contractors. Contractors have an opportunity to correct violations quickly during desk audits and, if they enter into an ERCA, may provide assurance against compliance evaluations for five years.  It also allows contractors to avoid the process of having to receive Predetermination Notices or Notices of Violation and proceed directly to conciliation, minimizing the potential impact of multiple violations. Contractors should consider taking advantage of these procedures to quickly resolve any compliance irregularities.

On June 24, 2020, a Department of Labor Administrative Law Judge (ALJ) denied J.P. Morgan Chase & Co.’s motion for summary judgment seeking to dismiss an OFCCP enforcement action.  The ALJ’s decision was preliminary in nature, but contains important guidance on the temporal scope of OFCCP’s compliance reviews and the agency’s ability to prosecute alleged pay discrimination that allegedly occurred years after the two-year compliance review period. The enforcement action arose from a 2012 compliance evaluation into J.P. Morgan’s Investment Banking, Technology, and Market Strategies functional affirmative action program (FAAP).  J.P. Morgan provided OFCCP with compensation data based on a 2012 snapshot of the FAAP’s employees, as well as a data file listing compensation changes during the two-year review period preceding the snapshot.  J.P. Morgan refused to provide post-2012 compensation data in response to OFCCP’s request.  J.P. Morgan contended that it disbanded the FAAP at issue in 2012 in a corporate reorganization, with the FAAP’s employees dispersed into 18 different business units and their corresponding FAAPs.  In 2017, without receiving additional post-2012 data, OFCCP issued a Notice of Violation and filed an Administrative Complaint asserting that J.P. Morgan discriminated against female employees in the FAAP from 2012 and that the discrimination “continues to the present.” J.P. Morgan challenged OFCCP’s post-2012 findings based on the agency’s failure to reasonably investigate the impact of the reorganization or use available mechanisms to obtain the post-2012 data J.P. Morgan had refused to provide.  J.P. Morgan also argued that OFCCP’s regulations limit a contractor’s liability in an OFCCP evaluation to the two-year period preceding the start of the evaluation.  Although the ALJ agreed with prior decisions holding that OFCCP may prosecute violations that begin in the review period and continue unremedied into the future, he expressed concern about the scope of OFCCP’s open-ended discrimination findings.  The ALJ noted that contractors have a due process right to fair notice of OFCCP’s claims against them, and an enforcement action with no established end-date to the violation period infringed due process.   He also explained that J.P. Morgan’s corporate reorganization could impact OFCCP’s ability to pursue alleged violations occurring after the reorganization.  Because OFCCP had not sought discovery about the reorganization and elimination of the FAAP, however, the ALJ declined to issue a firm decision. This decision continues an ongoing trend of ALJ rulings permitting OFCCP to seek and rely upon alleged evidence of discrimination outside of the review period.  Because OFCCP can take years to complete complex audits, a contractor’s potential post-review period liability can extend longer than its liability for the actual review period.  Although this evidence should only have possible relevance if OFCCP first (and independently) establishes a violation during the period under review, OFCCP frequently seeks to use post-review evidence to bolster its evidence for the review period.  Contractors should carefully consider events like reorganizations or changes to their compensation structures that cut off continuing violation allegations and limit the contractor’s potential liability.

The first round of VEVRAA focused reviews is on the horizon.  Last year, OFCCP released its scheduling list identifying the federal contractors who were selected for focused reviews of their compliance with the Vietnam Era Veterans Readjustment Assistance Act.  The start of the focused reviews was delayed, however, because OFCCP did not have Office of Management and Budget approval for its Scheduling Letters that commence the reviews. In April 2020, OFCCP obtained the required OMB approval, which gives the green light for the agency to move forward.  In anticipation of the agency’s issuance of the Scheduling Letters to the selected contractors, OFCCP released new FAQ guidance on May 5, 2020 that provides contractors with insight into the new focused review process.  Some of the highlights are summarized below: Limited Scope of Review:   OFCCP confirmed that VEVRAA focused reviews will focus on the contractor’s compliance with VEVRAA, and not on other obligations under Executive Order 11246 or Section 503 of the Rehabilitation Act.  Although the VEVRAA Scheduling Letter requires the contractor to submit its Executive Order 11246 affirmative action plan (AAP), OFCCP will not conduct a full compliance review of that AAP or analyze whether there is evidence of discrimination based on race, sex, or ethnicity.  Instead, OFCCP will use the Executive Order 11246 AAP to help understand the contractor’s organizational structure and how the contractor’s VEVRAA efforts fit within its broader affirmative action program.  That being said, the FAQs do reserve the right for OFCCP to “take appropriate actions, beginning with technical assistance” if elements of the Executive Order 11246 are “missing or insufficient on their face.”  Accordingly, contractors should ensure that all of their AAPs are in order, even if the contractor has been selected for a limited scope VEVRAA focused review. On-Site Investigations:   The FAQs disclose that every VEVRAA focused review will include an on-site investigation in which OFCCP investigators will interview managers responsible for VEVRAA compliance, employees affected by VEVRAA policies, and evaluate the handling of accommodation requests.  In addition, OFCCP reserves the right for its first round of interviews to take place at both the contractor’s corporate headquarters and its establishment locations.  This contrasts with OFCCP’s guidance for Section 503 focused reviews, in which the first round of interviews is limited to the contractor’s headquarters.  Notably, the FAQ notes that OFCCP may revisit its policy of conducting an on-site investigation in every VEVRAA focused review in future years. Focus on Policy Assessment and Data Analysis:   Although the FAQs explain that OFCCP will assess the contractor’s compliance with “all elements” of the VEVRAA regulations, two aspects are explicitly noted as focuses for the review: “whether the contractor conducted the required assessments of its employment policies and tracked appropriate data concerning protected veterans.”  These data analysis and policy assessment obligations are often overlooked aspects of OFCCP compliance.  Contractors should be sure to engage in these exercises and document their occurrence to ensure they are in a position to produce evidence of compliance to OFCCP. Exemption from Other Reviews:   Finally, the FAQs clarify that while a VEVRAA focused review is pending, the contractor establishment is exempt from being scheduled for other compliance evaluations.  In addition, awardees of the 2018 HIRE Vets Medallion, for exceptional efforts in compliance, are also exempted from VEVRAA focused reviews. OFCCP will likely issue VEVRAA Scheduling Letters to contractors and subcontractors on its scheduling list in the very near future.  Contractors should take efforts now to pre-audit their compliance and identify and address any potential concerns before receiving a Scheduling Letter.  Polsinelli is available to assist the contractor community with VEVRAA and other OFCCP compliance obligations and guide contractors through V

On Friday Office of Federal Contractor Compliance Programs (OFCCP) released an updated Voluntary Self-Identification of Disability Form (CC-305).  The new form is much shorter than the previous form and now fits on a single page.  The announced purpose of the change is to increase the response rate to the form. Covered federal contractors are required to invite all applicants and new hires to self-identify as an individual with a disability using this form.  Once every five years, a contractor must re-extend the invitation to self-identify disability status to current employees.  While covered federal contractors have some discretion with the format and content of invitations to self-identify race, ethnicity, gender and veteran status, there is little to no discretion with the format and content of the invitation to self-identify disabilities. Covered federal contractors have until August 4, 2020 to implement the new form into their applicant and employee self-identification process.

The Equal Employment Opportunity Commission (EEOC) announced May 7, 2020 that it will delay until March 2021 the annual filing of the EEO-1 Component 1 Report, which requires covered employers to report by job category the race, ethnicity and gender of its employees. At that time, pending approval from the OMB, covered employers will be required to file both the 2019 and 2020 EEO-1 Component 1 Reports. Covered employers include those with 100 or more employees and federal contractors with 50 or more employees and a federal contract of $50,000 or more. Note that employers with less than 100 employees who are owned or affiliated with another entity such that the combined employee count is over 100 employees may also be required to file this report. Covered employers are encouraged to confirm that all employees have had the opportunity to voluntarily self-identify their gender, ethnicity and race and to make sure records are kept of this information for future reporting in 2021. If an employer identifies employees who have not responded to this voluntary invitation, employers may re-extend the invitation and/or rely on employment documents such as an I-9 or visual observation. If an employer needs to rely on visual observation, it will be easier to gather this information now rather than waiting until 2021. Polsinelli will continue to monitor developments with the EEO-1 report.

On April 17, 2020, OFCCP released three new directives that aim to advance outgoing Director Craig Leen’s longstanding focus on increasing the agency’s transparency and efficiency.  The new directives are: 1.      Directive 2020-02:  Efficiency in Compliance Evaluations 2.      Directive 2020-03:  Pre-Referral Mediation Program 3.      Directive 2020-04:  Ombuds Service Supplement Although these directives are agency policy statements that do not create binding legal rights or obligations, the issuance of these three directives is a promising sign to the contractor community that Director Leen’s agenda may continue following his eventual departure from the agency. Directive 2020-02 – Efficiency in Compliance Evaluations Directive 2020-02 is arguably the most important of the three new directives to contractors.  The directive seeks to build on prior efforts to reduce the number of aged audits and expedite the resolution of OFCCP compliance evaluations.  This has been one of Director Leen’s major priorities, and the directive notes that between FY 2018 and FY 2019 the agency reduced the average time to complete a compliance evaluation from 516 days to 399 days, a 23% reduction.  The directive defines “aged cases” as those that have not resulted in administrative closure, a conciliation agreement, or referral to the Office of the Solicitor within two years, and states OFCCP’s new goal of reducing the number of aged cases below 15% of the agency’s total case load. The new directive implements both internal and external measures to reach this goal.  Internally, the agency will seek to close compliance evaluations within 180 days of the issuance of a Scheduling Letter if there are no preliminary findings of discrimination and issue a Pre-Determination Notice (PDN) within one year of the Scheduling Letter if OFCCP finds discrimination.  OFCCP’s National Office will receive “detailed monthly reports” about the progress of aged evaluations.  Regional directors will required to implement an action plan to expedite the completion of these evaluations.  Compliance officers will also be required to provide monthly status reports to contractors on the progress of aged evaluations. Externally, the directive provides contractors with a mechanism to escalate aged evaluations to the National Office’s attention.  If an evaluation remains open for more than a year after the issuance of a Scheduling Letter without a PDN, or more than two years without referral to the Office of the Solicitor, contractors may petition the OFCCP’s Director and Ombudsman to review the evaluation.  Prior to submitting a petition, the contractor must first confer with the applicable Regional Director about the evaluation.  In response to a petition, the Ombudsman will review and report upon the status of the evaluation, and the Director will determine how to appropriately proceed. Directive 2020-03 – Pre-Referral Mediation Program Directive 2020-03 builds upon the Early Resolution Program created by Directive 2019-02 to seek amicably to resolve compliance evaluations short of enforcement actions.  The directive creates a new, additional alternative dispute resolution program that will take place before findings of discrimination are referred to the Office of the Solicitor for review.  Mediation will be conducted by members of the Ombudsman’s office or other neutral third parties agreed upon by the contractor and OFCCP.  Importantly, the new mediation program is not a substitute for the agency’s current conciliation procedure that occurs between the issuance of a Notice of Violation and a Show Cause Notice.  The directive reserves OFCCP’s right to dispense with the mediation requirement in cases where the alleged violations concern a contractor’s failure to provide OFCCP with access to records or information or in the “very rare case” where OFCCP elects to proceed directly to enforcement without the issuance of a Show Cause Notice due to the existence of “exceptional circumstances.” Directive 2020-04 – Ombuds Service Supplement This directive expands and clarifies the role of OFCCP’s Ombudsman.  The Ombudsman is generally responsible for understanding and addressing the concerns of OFCCP’s stakeholders, addressing those concerns with the agency, and identifying potential areas for improvement.  According to the directive, the Ombudsman is not a member of other OFCCP work teams and should not be influenced or incentivized based on other OFCCP divisions or the agency’s broader goals.  The directive implements a new Protocol for the Ombudsman’s operations.  The Protocol emphasizes the principles of confidentiality, neutrality, independence, and informality. Before contractors submit sensitive information or documents to the Ombudsman, however, they should consult with counsel to understand whether such materials may be subject to disclosure under FOIA or other applicable law. These directives should provide contractors with some hope that Director Leen’s reforms will be institutionalized within OFCCP and will survive his departure from the agency.  Contractors facing long-running, unresolved evaluations should consider whether the new procedures set forth in the directives may be effective in moving those evaluations towards a resolution.

E-Verify has announced that it is temporarily extending the timeframe to take action to resolve Tentative Nonconfirmations (TNC) from the Social Security Administration or Department of Homeland Security due to office closures to the public. Under the new temporary policies, employers are still required to create E-Verify cases for new hires within three business days from the date of hire.  If the E-Verify case creation is delayed due to the employer’s office closure or other COVID-19 precautions, the employer should select “Other” in E-Verify and enter COVID-19 as the reason. If an employee receives a TNC, the employer must still notify the employee of the TNC result as soon as possible.  If the employee decides to take action to contest the TNC, the employer should notify E-Verify of the employee’s decision. E-Verify works by comparing the information employees provide for Form I-9, Employment Eligibility Verification, against records available to SSA and DHS.  If the information provided by the employee does not match, the case will receive a TNC result, and the employer must give the employee an opportunity to take action to resolve the mismatch.  Employees who choose to take action on a TNC are referred to SSA or DHS. In ordinary times, an employee taking action to resolve a TNC must visit the SSA or DHS office within eight (8) federal government workdays to begin resolving the discrepancy.  Provided the employee has timely visited an SSA field office or contacted DHS, the E-Verify case will be in interim status until a final result is issued. Because of government office closures due to COVID-19, an employee contesting a TNC may not be able to visit an SSA or DHS office within eight business days.  Under the new temporary guidelines, the E-Verify case will then be in an extended interim status.  Once government offices reopen, the employee must then visit the appropriate office to resolve the TNC, ultimately leading to a result that either the employee is authorized or a final noncofirmation result that the employee is not authorized to work. DHS reminds employers not to take any adverse action against an employee because the E-Verify case is in an interim status, including while the employee’s E-Verify case is in an extended interim case status due to COVID-19 precautions. Employers should consider these rapidly developing changes and consult Polsinelli counsel for updated guidance for specific issues related to immigration compliance. Visit Polsinelli’s COVID-19: What Your Business Needs to Know blog for more updates.

On February 21, 2020, OFCCP announced the launch of its new Contractor Compliance Institute as part of its ongoing efforts to provide guidance and training to aid federal government contractors in meeting their compliance obligations.  The Institute provides free, interactive tools and courses to educate contractors about their compliance obligations and help them evaluate the sufficiency of personnel practices and affirmative action efforts.  At its launch, the Institute offered one course providing a two-hour basic overview of the legal authority governing OFCCP’s enforcement activities, required job listings, postings, and notices for federal contractors, and applicant tracking. Along with other OFCCP compliance assistance efforts, such as its issuance of opinion letters and technical assistance guides, the Institute is a sign of OFCCP leadership’s focus on transparency and cooperation with contractors.  Polsinelli will continue to track and report on developments at OFCCP.

Polsinelli attended the February 18, 2020 Compensation Roundtable jointly hosted by OFCCP and the National Industry Liaison Group (NILG).  The event provided valuable insight into the thought processes of senior OFCCP officials as they fielded questions from federal contractor compliance professionals.  The frank discussion during the roundtable highlighted contractors’ ongoing concerns regarding OFCCP’s approach to the evaluation of the compensation of small groups of specialized employees and smaller AAP groups. OFCCP’s preferred method of evaluating compensation and other personnel practices is the regression analysis, a statistical tool that seeks to control for various non-discriminatory factors and identify statistically-significant disparities that may be based on race, gender, or other protected characteristics.  Regression analyses can be effective for evaluating large groups of employees performing the same job, such as entry-level or line employees at larger organizations, but is an ineffective tool for addressing employees in higher-level, specialized positions, which may have only one or a small handful of employees or smaller AAP establishment groups consisting of relatively few employees.  Two common contractor complaints regarding OFCCP’s statistical analysis were highlighted in the Roundtable: (1) OFCCP’s combination of groups of employees across job titles, salary grades, job functions, or other relevant groupings into pay analysis groups (PAGs), and (2) OFCCP’s failure to properly consider and control for non-discriminatory factors relied on by the contractor in setting compensation. Both of these concerns stem from OFCCP’s reliance on the regression tool, which OFCCP contends requires a large number of data points to provide reliable results.  It is OFCCP’s position that valid PAGs must contain at least 30 employees.  For specialized or higher-level positions, this rule can result in PAGs containing numerous different positions having different job functions in different departments.  The contractor advocates at the Roundtable urged OFCCP to drop its insistence on 30-member PAGs in every case and instead analyze more focused “similarly-situated employee groups” (SSEGs) that do not consolidate employees in dissimilar positions. Although OFCCP indicated that it will control for differentiating factors among PAG members, two other statistical principles relied upon by the agency hinder its ability to effectively do so.  First, OFCCP requires that for each control factor, the PAG contain at least 10 employees (i.e., to control for 5 different factors requires a PAG of at least 50 employees).   This creates a Catch-22 in which the creation of a PAG requires consolidating dissimilar positions, but including additional controls necessary to account for the dissimilarity requires adding still more employees in other positions to the PAG.  The second rule applied by OFCCP is that any variable must have at least 5 observations or data points or OFCCP will combine that variable with the next closest variable.  For example, if an employer’s performance evaluation system rates employees into three categories – Needs Improvement, Meets Expectations, and Exceeds Expectations – and only four employees in the PAG are rated as “Needs Improvement,” those four employees will be combined with the employees in the “Meets Expectations” category, eliminating consideration of a factor that is likely significant to the employer’s decisions.  Although the OFCCP officials at the Roundtable expressed some openness to considering small group analysis techniques, they showed little willingness to move away from the agency’s current approach to these principles. In addition to recommending that OFCCP adopt a more flexible approach and reduce its rigid adherence to these statistical principles, the contractor advocates at the Roundtable also criticized the agency for failing to consider two factors commonly relied upon by employers in setting compensation: job grades and market rate.  The contractor representatives noted that an employer’s salary or job grades represent the employer’s holistic business judgment about the relative value of each position within its organization. OFCCP, on the other hand, contended that if the agency has data regarding the underlying factors that inform the assignment of employees to grades (i.e., job responsibilities, seniority, etc…) then the agency should more reliably analyze those underlying factors.  As the contractor representatives noted, however, OFCCP’s independent assessment of those factors to the exclusion of the grades actually used by the employer may be inconsistent with OFCCP Directive 2018-05’s emphasis on conducing compensation evaluations using the same factors relied upon by the employer. The Compensation Roundtable provided a forum for a frank discussion of OFCCP’s compensation evaluation practices.  Although there is a wide gulf between the views of OFCCP officials and contractor advocates regarding OFCCP’s analytical techniques, the agency’s consideration of contractors’ concerns is a step in the right direction.  OFCCP’s apparent reluctance to move away from some of its current practices identified as contractor concerns highlights the need for contractors to rigorously self-audit their compensation practices to identify potential agency concerns and address them prior to being selected for a compliance evaluation.

On February 3, 2020, President Trump announced that OFCCP Director Craig Leen will be nominated to the position of Inspector General of the Office of Personnel Management.  The press release did not provide any details about the timing of Director Leen’s formal nomination or the appointment of a successor director. During his tenure at OFCCP, Director Leen sought to bring transparency to OFCCP’s compliance evaluations, to clarify the standards for the review of compensation data, and to focus the agency’s efforts on disability issues under Section 504 of the Rehabilitation Act and veterans issues under VEVRAA.  So far, the administration has not announced a potential successor and it is unclear whether new leadership will advance a similar agenda.

2019 has been a year of pivotal developments for defense contractors in the realm of cybersecurity compliance. The Department of Defense (DoD) issued six guidance memoranda to assist its acquisition personnel in developing “effective cybersecurity strategies to enhance existing protection requirements,” including a mandate for the Defense Contract Management Agency to include cybersecurity compliance as a part of a contractor’s purchasing system audit and approval. 2019 also saw the first False Claims Act whistleblower litigation related to contractors’ compliance with DoD cybersecurity contracting provisions. Beyond merely focusing on enforcement of existing compliance obligations, the DoD upped the ante in June 2019 with its announcement of its forthcoming Cybersecurity Maturity Model Certification (CMMC). CMMC is the next step in the DoD’s efforts to protect the government’s sensitive, unclassified information against data exfiltration, and once it goes into effect CMMC will be a mandatory, third-party certification for allDoD contractors and subcontractors. While there remain many unanswered questions surrounding the details and implementation of CMMC, the DoD has made clear that CMMC is coming and the defense contracting community must be ready to implement these requirements in order to continue receiving defense contracts, subcontracts and other DoD-funded agreements. What Will CMMC Require? As currently drafted, CMMC will require all defense contractors and subcontractors to undergo a third party assessment of their internal cybersecurity technical practices and process maturity against published standards. This assessment will result in certification at one of five levels – 1 being the lowest and 5 the highest – or no certification. Each subsequent level is cumulative, meaning a company must meet the requirements of all lower levels to qualify for a higher level of certification. In addition, an organization must satisfy boththe defined practices and process maturity criteria within a given level across all areas of the model to achieve certification at that level (e.g., having a Level 3 assessment on technical practices and Level 2 on process maturity results in an overall Level 2 certification). The DoD expects contractor CMMC assessments to begin in early June 2020. CMMC requirements will start appearing in DoD Requests for Information around this same time, and they become mandatory in all DoD solicitations beginning fall 2020. Once implemented, each DoD solicitation will identify the minimum required CMMC level a company must have to be eligible for that contract award. On December 6, 2019, the DoD released Version 0.7 of the draft CMMC framework. This update refines the technical practice requirements for Levels 1-5 and provides further guidance regarding process maturity expectations. Level 1 identifies 17 basic requirements, mostly consistent with existing general government contractor cybersecurity requirements, while Level 3 aligns with full NIST SP 800-171 Rev 1 compliance. Levels 4 and 5 require “proactive” and “progressive” cybersecurity programs, respectively, and impose additional practices derived from Draft NIST SP 800-171B and other heightened cyber standards. These top two levels are expected to be reserved for companies handling information related to critical technologies. The CMMC model will not be static, however: it will be adapted and revised whenever and however needed as the DoD identifies new threat vectors. While a company’s certification is generally expected to last for  three years, including interim spot checks, model revisions could necessitate earlier reassessment. Who Is Affected by the Upcoming CMMC Requirements? The DoD states that all contractors and subcontractors – including commercial item subcontractors – at any level of the defense supply chain will need to be certified at a minimum of Level 1 in order to be eligible to receive DoD-funded contracts and agreements. The DoD has also left open the possibility that the CMMC qualification requirements may apply to other types of contractual agreements, including DoD-funded grants, cooperative agreements, and other transactions. A company may meet a specific CMMC level across its entire enterprise network or particular segment(s) or enclave(s). At the subcontractor level, the DoD anticipates limiting CMMC application to companies providing products and services in direct support of a defense program, thereby excluding ‘back office’ products and personnel supporting general corporate overhead functions from these requirements. If performance of a contract or subcontract necessitates access to any Controlled Unclassified Information (CUI), a Level 3 minimum certification will be required. CUI includes export controlled information, “For Official Use Only” information, and other information created or possessed by a contractor that is subject to government-mandated safeguarding or dissemination controls. The DoD is still drafting a formal CUI baseline definition to clarify the specific types of information that must be protected, as well as guidance regarding how the government will assign CMMC levels to individual procurement. How Does This Differ from Today’s DoD Cybersecurity Requirements? DoD contractors and subcontractors are currently required in every procurement contract to self-certify their compliance with DFARS 252.204-7012. This DFARS clause mandates that contractors provide “adequate security” – generally equivalent to full compliance with NIST SP 800-171 Rev 1 – on all of its unclassified information systems that process, store or transmit Covered Defense Information (“CDI,” the current DoD-equivalent of CUI). The clause also imposes reporting and cooperation requirements in the event of defined “cyber incidents.” Importantly, the DFARS clause, while mandatory in all contracts, does not apply if no processing, storing, or transmitting of CDI occurs within a contractor’s information system. In addition, in practice, the DoD has allowed companies that have not yet but are working to achieve full compliance with the NIST standards to receive contracts and subcontracts, so long as the contractor can demonstrate it has an acceptable System Security Plan and Plan of Action and Milestones (POAM) in place to achieve full compliance. While NIST SP 800-171 Rev 1 continues to form the substantial baseline for CMMC compliance up to Level 3, the above three key hallmarks of DFARS 252.204-7012 – self-certification, applicability caveats, and flexibility for in-process compliance – are effectively eliminated under CMMC. An independent third party assessment and certification process will replace self-certification, allDoD contractors and subcontractors must be certified at least at Level 1 in order to qualify for award, and the CMMC approach as currently drafted does not include a waiver or deviation process for individual control gaps. In addition, as previously noted, CMMC imposes additional requirements over and above those mandated by NIST SP 800-171 for Level 4 and 5 critical technology contracts, and certification may also become mandatory for research, prototype, and other non-procurement instruments. What Are My Recommended Next Steps to Prepare for CMMC? The DoD has not yet published draft regulations implementing CMMC and many details remain unclear.  Despite this, the agency continues to state that the final CMMC framework (version 1.0) will be published in late January 2020, and its requirements will begin to appear in Requests for Information beginning in June. The DoD has also indicated that it expects to issue an interim rule to accelerate implementation. Companies should begin preparing for the new accreditation system by ensuring compliance with the appropriate NIST SP 800-171 Rev 1 requirements, depending on the level of CUI they expect to handle: Determine if your company receives federal funds from the Department of Defense either directly as a prime contractor or indirectly via subcontracts, purchase orders, or other contractual agreements.  If so, you should be prepared to obtain at least a Level 1 or 2 certification. Determine whether your company currently or in the future expects to electronically process, store, or transmit Controlled Unclassified Information in the performance of its defense contracts. If so, you should be prepared to obtain at least a Level 3 certification. If you are a subcontractor, consider reaching out to your major higher-tier contractor customers to understand how they are preparing to implement CMMC across their supply base. Review your company’s current NIST SP 800-171 Rev 1 compliance level against your expected certification level requirements. If you currently have a POAM in place or identify additional concerns, dedicate appropriate resources to ensure that progress is being made to close any gaps as quickly as possible. CLICK HERE to subscribe to receive new blogs, event information and industry updates directly to your email inbox.

On December 30, 2019, OFCCP issued a Notice of Proposed Rulemaking on Nondiscrimination Obligations of Federal Contractors and Subcontractors: Procedures to Resolve Potential Employment Discrimination.  The proposed rulemaking codifies aspects of several of OFCCP 2018 directives, including Directive Nos. 2018-01 (Use of Predetermination Notices), 2018-05 (Analysis of Contractor Compensation Practices During a Compliance Evaluation), and 2018-08 (Transparency in OFCCP Compliance Activities). Perhaps most importantly for contractors, the proposed regulation elaborates on the statement in OFCCP’s Directive 2018-05 concerning compensation reviews that “OFCCP will be less likely to pursue a matter where the statistical data are not corroborated by non-statistical evidence of discrimination unless the statistical evidence is exceptionally strong.” The proposed rulemaking adds specificity to this statement, clarifying that in the absence of non-statistical evidence, OFCCP will issue a Predetermination Notice (PDN) only where the statistical evidence is significant at a confidence level of 99% or higher, equating to three or more standard deviations. This appears to be a positive development for contractors, as OFCCP currently pursues compensation audits based solely on alleged statistically-significant disparities falling below this threshold. The proposed rulemaking also defines statistical and non-statistical evidence. The definition of statistical evidence echoes the focus in OFCCP’s recent directives of “controlling for the major, measurable parameters and variables used by employers” in making compensation and selection decisions. The definition identifies several exemplary control factors that OFCCP may consider, including performance evaluations, years of experience or service, and location.  This may provide additional weight to contractors’ arguments that OFCCP must consider contractor’s control factors in its compliance evaluation analyses. The proposed rulemaking defines non-statistical evidence to include testimony about workplace bias, non-statistical cohort analyses, testimony about individuals being denied or given misleading information about employment practices, testimony about subjective or discretionary decision-making, and other anecdotal evidence. Overall, this specificity about the types of non-statistical evidence OFCCP will rely upon is beneficial to contractors.  However, the focus on discretionary elements in compensation systems as evidence of discrimination is problematic as the U.S. Supreme Court has held that giving managers discretion in making employment decisions is not inherently discriminatory. Finally, the proposed regulations will codify OFCCP’s current practice, described in Directive 2018-01, of using of PDNs and Notices of Violation when a compliance review shows preliminary findings of discrimination. Noticeably absent from the proposed regulations, however, is Directive 2018-05’s pledge that OFCCP will attach to the PDN the individual-level data necessary for the contractor to replicate OFCCP’s statistical analyses. Contractors should welcome OFCCP’s effort to formalize these aspects of its Directives into regulations.  Contractors will have until January 29, 2020 to comment on the proposed regulations. Polsinelli will continue to monitor and report on the proposed rulemaking as it proceeds through the regulatory process.

On December 5, 2019, the National Law Review awarded Government Contractor Update author Jack Blum its “Go To Thought Leader” award “for the excellent work they do keeping NLR readers informed on OFCCP compliance matters.”  As NLR noted, the Government Contractor Update’s articles “demonstrate a deep understanding of the forces at work within the OFCCP and provide excellent analysis of the changes within the agency.” The award recognizes 75 authors across 35 practice areas for exceptional contributions to NLR, one of the nation’s oldest and most widely-circulated law journals.  Mr. Blum was the only author selected for the Government Contracts practice area. Contractors can continue to count on the Government Contractor Update for more award-winning coverage of developments at the OFCCP and otherwise affecting government contractors’ workforce compliance efforts.

Companies that bid on government contracts should take note of a new federal enforcement initiative. Earlier this month, the Department of Justice’s Antitrust Division announced the formation of an interagency “Strike Force” dedicated to detecting and prosecuting “bid rigging” and other antitrust crimes involving public procurement—an area of the economy that DOJ has described as “particularly vulnerable to collusion.” The Strike Force will combine the resources of the Antitrust Division and 13 U.S. Attorneys’ Offices, as well as investigators from the FBI, Department of Defense Office of Inspector General, the U.S. Postal Service Office of Inspector General and the General Services Administration Office of Inspector General. The Strike Force will focus on prosecuting procurement crimes at all levels of government, including federal, state and local. In a speech last month, Deputy Assistant Attorney General Richard A. Powers explained that the public procurement space is “uniquely” and “particularly” vulnerable to collusion because of the “sheer monetary value of government projects.” Enforcers have also faced monitoring challenges as a result of the rapid growth of government spending in recent years, which has made it difficult for enforcers to catch up, he explained. The new Strike Force will build upon DOJ’s already active antitrust enforcement in the public procurement space. The Antitrust Division has led numerous bid-rigging prosecutions involving public procurement in recent years, including prosecutions in the construction and defense industries, among others. At present, “more than one third of the Antitrust Division’s 100-plus open investigations relate to public procurement or otherwise involve the government being victimized by criminal conduct,” said Assistant Attorney General Makan Delrahim, who heads the Antitrust Division. Outreach and training to “key constituencies” will be a core part of the Strike Force’s work. To facilitate the detection of antitrust violations, the Strike Force “will conduct outreach to federal, state and local government procurement officials to educate them on how to identify potential indicators, or ‘red flags,’ of collusion.” There will also be outreach to government contractors, their trade associations and public contract lawyers to deter violations going forward. To improve detection, the Strike Force will work on using “data analytics” technology to identify possible collusion based on pricing data and other market information. “Many investigative agencies individually have made great strides on this front, and the [Strike Force] will serve to facilitate collaboration and the sharing of best practices between these agencies,” said Delrahim. Takeaways for Companies in the Public Procurement Space The new enforcement initiative presents new risks to companies in the public procurement space. To minimize these risks, companies in the public procurement space should take a fresh look at their antitrust compliance efforts. Having a robust antitrust compliance program in place can prevent violations from happening in the first place and may give companies the opportunity to minimize or even avoid criminal sanctions, if a violation occurs. According to DOJ’s recent guidance on antitrust compliance programs, an “effective” compliance program should be tailored to each company’s risk profile. Antitrust counsel can help conduct a risk assessment to allocate compliance resources to each company’s highest-risk activities. DOJ has urged companies to include regular antitrust compliance training for employees in high-risk positions, such as those responsible for setting the terms of competitive bids. Companies should also consider setting up a mechanism that allows employees to report antitrust concerns to the company. The new initiative is also notable for its planned use of technology to monitor public procurement markets for evidence of antitrust violations. Some companies may benefit from proactively monitoring procurement markets in which they are involved for bidding and pricing trends that are suggestive of antitrust problems.

CP opined that participants in the Department of Defense’s SkillBridge Program are not government contractors subject to the obligations of Executive Order 11246, as amended, Section 503 of the Rehabilitation Act, or VEVRAA. The SkillBridge Program aims to provide service members with opportunities to gain civilian work experience and training by matching service members with civilian employers and allowing service members to receive civilian on-the-job training during their last 180 days of military service.  OFCCP reasoned that the SkillBridge Program does not qualify as a procurement contract because the government does not obtain property or services for its direct benefit.  Accordingly, the program is more akin to a cooperative or grant agreement, which is not a government contract. As in its earlier opinion letter regarding Pell Grants, OFCCP in the SkillBridge Program opinion letter takes a more conservative approach to its jurisdiction in the context of government programs that are not traditional procurement contracts.  Polsinelli will continue to update the contractor community on OFCCP developments.

The Office of Federal Contractor Compliance has been busy this year.  In 2019, it has obtained over $40M in settlements from federal contractors to resolve claims of hiring and compensation discrimination.  This figure tops the next highest year’s record by more than $16 million. Increased enforcement efforts and proactive compliance assistance account for the rise, OFCCP Director Craig Leen said in a statement released on Friday, October 25.  Over the past two years, OFCCP has issued a series of new directives aimed at encouraging contractors to self-audit, providing transparency in the auditing process and expediting the audit and resolution process. In particular, OFCCP’s Early Resolution Procedures, discussed here, permit a contractor to enter into an early reconciliation process to resolve issues company-wide and forgo an additional audit at the establishment or functional unit in question for five years.  According to the Department of Labor, several large contractors have elected to participate in this program, including Bank of America NA, Goldman Sachs & Co., and Dell Technologies.  These contractors alone account for over $21M of the settlements obtained in 2019, discussed here. It is highly advisable that any contractor with questions regarding its hiring and compensation practices contact outside counsel to review and update its programs before OFCCP comes knocking.  Given the additional resources and guidance that OFCCP has recently released, OFCCP is less likely to overlook any deficiencies by contractors who have turned a blind eye to their affirmative action and pay equity obligations.

It has become almost routine for employees pursuing whistleblower and other employment-related claims against their employer to engage in "self-help discovery," using their access to files and databases to collect and gather, in violation of company policy, documents and data relating to their claims. The company often becomes aware of this type of misconduct during internal investigations, when a forensic review of the complainant's computer or statements by witnesses reveal that the complainant has collected or is collecting evidence. Or, the misconduct may not become evident until after the employee has filed a charge or a lawsuit, when confidential company documents are referenced in the charge or complaint or the employer undertakes discovery. This misconduct appears to be fueled by the belief — on the part of both claimants and at times even their counsel —that current employees have an unfettered, protected "right" to engage in self-help discovery to develop evidence supporting their claims. Indeed, it appears that plaintiffs' counsel still encourage this behavior, requesting that their clients gather "the goods" while they are still employed so that counsel can use the fruits of their efforts in demand letters, draft complaints and litigation. In one recent case, a prominent D.C. plaintiff's attorney proudly touted that her client had gathered and retained over 10,000 proprietary emails and other documents that allegedly supported her client's claims. When a company learns or suspects that an employee is engaging in such behavior, it may feel paralyzed from taking action, fearing that the employee will claim that her termination for stealing records was retaliatory. But, as with any other form of employee misconduct, the employer should undertake an investigation to determine whether the employee has violated company policy and carefully consider a termination is justified and defensible. There is an emerging (although not entirely consistent) body of case law recognizing that, except in certain circumstances, employees do not have the right to engage in self-help discovery and that employees who do can be terminated, even if the evidence was gathered to support their anticipated or pending claims. Courts had struggled with the issue of whether this "self-help" discovery rises to the level of "protected activity" that insulates the employee from termination. Some courts have been willing to offer at least some protection to the employee, as long as the documents or data related to his claim and were not obtained through "improper" means. However, other courts have recognized that an employee's right to pursue a valid complaint or claim does not license him to plunder his employer's files and databases looking for evidence relevant to it.   The analysis of an employee’s self-help efforts necessarily depends on the types of claims the employee is asserting, the types of information the employee takes, and how the employee uses the purloined information. The factors considered by courts in determining whether self-help discovery is protected activity vary depending on the claims asserted by the whistleblower.  False Claims Act cases, for instance, provide a sharp contrast in approaches to the issue.  For instance, in Cafasso v. General  Dynamics C4 Systems, Inc., 2009 WL 3723087 (D. Ariz. Nov. 4, 2009), a terminated employee removed eleven gigabytes of documents from her employer's databases without permission before her computer access was suspended.  When her former employer, GDC4S, brought a breach of contract claim against her, she filed qui tam and retaliation claims under the False Claims Act.  The court explained that the "False Claims Act required [the whistleblower] to give the Government substantially all material evidence and information she possessed." However, the court noted, the whistleblower was not required to show the Government evidence that she did not properly possess and did not have the right to possess evidence unlawfully. The court concluded that confidentiality agreements between defense contractors and their employees serve vital economic and national security interests, including "protect[ing] the secrecy of new technologies that play a part in the nation's military and domestic security operations." The court explained that the whistleblower “willfully compromised these interests for no legitimate litigation purpose, only the speculative pursuit of self-help discovery.... In short, every principle of substantive and procedural law cut against [the whistleblower's] self-help discovery tactic....” On appeal, the Ninth Circuit affirmed judgment in favor of the employer, noting that even if a public policy exception existed, “it would not cover Cafasso’s conduct given her vast and indiscriminate appropriation of GDC4S files.”  Cafasso v. General Dynamics C4 Systems, Inc., 637 F.3d 1047, 1062 (9th Cir. 2011).  The court explained that were it to adopt a public policy exception for FCA cases “those asserting its protection would need to justify why removal of the documents was reasonably necessary to pursue an FCA claim” through a “particularized showing.”  Id. However, as the Ninth Circuit’s Cafasso decision recognized, the False Claims Act endorses some forms of self-help discovery by employees, as long as it is reasonably tailored to their claims and does not constitute unrestrained pilfering.  In Head v. Kane Co., 668 F. Supp. 2d 146 (D.D.C. 2009), a False Claims Act qui tam action, the whistleblower signed a separation agreement agreeing that all records were the sole property of the company and acknowledging that he had returned all records to the company.  In subsequent qui tam action, the employer brought asserted counterclaims for failing to return a confidential email.  The court held that the counterclaim was void as against public policy, explaining that "[e]nforcing a private agreement that requires a qui tam plaintiff to turn over his or her copy of a document, which is likely to be needed as evidence at trial, to the defendant who is under investigation would unduly frustrate the purpose" of the False Claims Act, which requires relators to disclose to the Government all material evidence and information in their possession.  See also United States v. Duke University, 2018 WL 4211372 (M.D.N.C. Sept. 4, 2018) (self-help discovery is “a goal contemplated by the False Claims Act” as “the FCA contemplates and condones gathering and producing documents prior to service of the complaint and the beginning of formal discovery”); United States v. Boston Scientific Neuromodulation Corp., 2017 WL 6403853 (D.N.J. Dec. 15, 2017) (granting summary judgment in favor of FCA claimant on employer’s counterclaim for breach of confidentiality agreement). As these decisions reflect, there are circumstances where employers may, consistent with their contracts, policies and prior practices, have the right to address theft and other misconduct by a current employee, even if she is pursuing a whistleblower complaint against it. An employer, however, should first undertake a full investigation and consider the circumstances surrounding the removal and use of the documents or data. The employer should also make certain that any action it takes against the employee is consistent with its policies and practices and its treatment of employees who have engaged in comparable misconduct. Also, it is important for an employer to take action promptly when it discovers the misconduct so that its decision is not viewed as retaliatory or pretextual. With respect to claims by former employees, self-help discovery should be explored by an employer as soon as it anticipates claims. Through the forensic review of the former employee's computers, devices, databases and accounts, an employer should be able to determine whether the former employee engaged in self-help discovery conduct while employed by the company. If the employer determines that the former employee stole documents or data in violation of company policy, it may be able to establish a defense to liability or a limitation on damages under an after-acquired evidence or "unclean hands" theory. In addition, the employer may be entitled to assert counterclaims or obtain discovery sanctions against the former employee based on his or her misconduct.

Maintaining its recent focus on compliance issues particular to educational institutions, OFCCP published a technical assistance guide for educational institutions on October 11, 2019.  The guide follows a flurry of OFCCP guidance for institutions of higher learning, including an opinion letter regarding the agency’s jurisdiction over such employers, a directive that student employees need not be considered in fulfilling AAP obligations, and an FAQ providing guidance on the definition of AAP “establishments” in campus settings.  OFCCP is also holding a town hall on issues particular to academic institutions on October 23, 2019 in Washington, D.C.  Contractors can review Polsinelli’s coverage of OFCCP’s prior guidance by following the links in the previous sentence. The guide recognizes that educational institutions present “unique challenges” for OFCCP compliance and enforcement purposes because they have “numerous methods of governance, various organizational structures, and multiple workforces,” as well as “elements that can be difficult to quantify” in their hiring, promotion, and compensation structures.  These subjective criteria can include “the prestige of publications, research, discipline, and contributions to the institution.”  OFCCP also recognizes in the guide that it must apply different analyses to three major areas of an educational institution’s workforce: tenured instructional staff, non-tenured instructional staff, and non-instructional staff. Although it is a good omen for educational institution contractors that OFCCP recognizes that their employment decisions involve idiosyncratic factors and differ from those of a commercial employer, that does not mean OFCCP is abdicating its oversight over educational institutions.  The guide clearly telegraphs OFCCP’s intention to scrutinize the tenure selection process due to the historical and continuing disparities in tenure selection rates for female and minority instructors.  Though OFCCP recognizes that many of the factors going into the tenure analysis are subjective and difficult to quantify, the guide states OFCCP’s intention to evaluate whether a contractor applies these factors consistently and in a neutral, non-discriminatory manner.  It is therefore essential for educational institutions to clearly outline the factors relevant to tenure selection and document how those factors are applied in each selection or non-selection decision.  OFCCP will also look at structural issues in the tenure selection process such as “the process by which the contractor composes the departmental committees responsible for granting tenure” as well as historical tenure data. A second issue of interest to educational institution contractors is the guide’s discussion of disparities in compensation by academic discipline.  OFCCP will only control for differences in discipline areas that have a “substantial impact on determining instructional staff salaries.”  Much like a private sector contractor’s use of “market rate” data in setting compensation, it is essential for educational institutions to be able to explain how differences in compensation by discipline factor into compensation and to have defensible data supporting discipline-based compensation disparities.  The need for careful analysis is heightened because discipline-based disparities can potentially correlate to gender or race based disparities to the extent that members of different genders or races are disproportionately represented in disciplines that command different levels of compensation. Educational institutions should review the new technical assistance guide as it provides useful guidance and a window into OFCCP’s priorities in this field.  Polsinelli will continue to monitor developments in OFCCP’s approach towards educational institutions and other types of contractors and provide updates on new developments.

The OFCCP opened the month of October by announcing three multimillion dollar settlements with major government contractors.  The agency entered into early resolution conciliation agreements with Goldman Sachs & Co. LLC and Dell Technologies, Inc. to resolve claims that they engaged in race and gender discrimination in compensating employees.  Also, Bank of America NA will pay $4.2 million to resolve claims that a predecessor company engaged in hiring discrimination. Goldman Sachs will pay nearly $10 million to approximately 600 workers at its New York City headquarters and Dell will pay $7 million (with a credit for $1.5 million previously paid in another settlement) to resolve 20 ongoing OFCCP compliance evaluations.  Goldman Sachs will also move from establishment-based to functional affirmative action programs (FAAPs) as part of the settlement.  Because Goldman Sachs and Dell settled through OFCCP’s early resolution program, the establishments in question will not be subject to further compliance evaluations for five years. In each case, the employer released a statement noting that OFCCP’s claims resulted from statistical analyses by the agency that the contractor disputed.  These major settlements emphasize the need for thorough self-auditing to identify and fix potential compensation and hiring vulnerabilities before contractors are required to submit data for OFCCP review and analysis as part of compliance evaluations.

Following closely on its release of guidance for higher education institutions, and its promise of a forthcoming technical assistance guide for contractors in this field, OFCCP announced it will hold a town hall forum for academic institutions in Washington, D.C. on October 23, 2019.  Contractors can register for the town hall here. This event follows town hall events focused on veterans issues, the financial and legal industries, and the tech industry, among others.  In past events, OFCCP officials have announced new areas of emphasis, so these events can be a source of insight for contractors into the agency’s views and priorities.

After devoting its first opinion letter to addressing aspects of its jurisdiction over higher education institutions, OFCCP recently provided additional guidance about the AAP obligations of educational institutions.  In addition, the agency pledged to publish a technical assistance guide to provide further assistance to government contractors in the higher education field. First, OFCCP released a new Directive 2019-05 addressing the employment status of student employees, such as graduate research or teaching assistants.  The employment status of these types of workers has been a hotly litigated issue under Title VII, the FLSA, and other employment statutes.  In its directive, OFCCP announced that it would exercise its enforcement discretion to permit educational institutions to exclude student employees from their AAP job groups and personnel activity data submissions.  OFCCP noted that the available data for these employees is typically not robust enough to support reliable statistical analyses and distracts OFCCP and contractors from focusing on their resources and attention “on individuals whose primary relationship with the educational institution is work-related.”  This exclusion is a win for contractors as they are relieved from tracking personnel activity for employees whose employment is typically short-tenured with high year to year (or semester to semester) turnover. OFCCP also released a new FAQ regarding the definition of “establishment” in the context of campus-like settings in which employees work in multiple, closely-situated buildings.  The FAQ addresses whether the entire campus should be combined into one AAP or whether separate AAPs should be maintained for different locations on the campus.  Unfortunately, the FAQ provides little definitive guidance and instead emphasizes that the AAP organization of a campus-type facility is a fact-specific inquiry.  Generally, contractors maintaining campus facilities must look to the level of interaction and interdependence of the employees and units in the various buildings on the campus. With this flurry of guidance, OFCCP appears to be following through on Director Leen’s pledge to focus on compliance assistance. Polsinelli will continue to track OFCCP guidance releases.

On August 27, 2019, the Department of Labor announced that government contractor Cintas Corp. has agreed to pay nearly $650,000 to settle claims of sex and race discrimination in its Philadelphia, PA facility and end compliance evaluations at five other facilities.  OFCCP alleged that the company’s Philadelphia facility discriminated against female production workers regarding pay, against black and male applicants for garment inspector/hanger positions, and against minority applicants for service sales representative positions since September 2011. In the consent decree, Cintas agreed to pay $354,463 in back pay and interest to the compensation class members and $70,000 in back pay and interest to the hiring class members.  The company also agreed to hire two eligible class members for garment inspector/hangers positions.  In addition, Cintas must update its hiring and compensation practices and provide progress reports to OFCCP regarding its compliance with Executive Order 11246. Separately, Cintas also signed a corporate-wide conciliation agreement with OFCCP that will end compliance evaluations at five other Cintas Corp. establishments.  The agreement provides back pay of $190,000 and interest of $34,984 plus a commitment to hire to 205 female applicants.  Cintas also agreed to (1) enhance its employment opportunities for female workers; (2) to hire a consultant to review its outreach, hiring, placement, and compensation policies; and (3) to report the results to OFCCP over a 5-year period. Cintas said in a statement “[w]hen OFCCP approached us with the possibility of entering into an agreement under its new early resolution procedures, we saw it as an opportunity to work collaboratively with the agency.”  They explained that “[e]ntering into this voluntary partnership with OFCCP will help further our goal of being a model employer and federal contractor.” The substantial settlement paid by Cintas to end OFFCP’s audits illustrates the potential exposure that companies can face if its affirmative action, non-discrimination and compliance programs are not effectively implemented.  Likewise, Cintas’ conciliation agreement under the new early resolution procedures, discussed here, provides an example where it may be advisable to settle potential claims discovered during compliance audits to avoid enforcement proceedings and potential litigation. Polsinelli will continue to monitor developments as more contractors and subcontractors participate in OFCCP’s new early resolution procedures.

On August 15, 2019, the Office of Federal Compliance Contract Programs (OFCCP) proposed a new rule broadening the religious exemption that applies to its equal employment opportunity regulations.  The proposed rule is based on recent Supreme Court opinions addressing religious protections and OFCCP’s stated perception that religious organizations are “reluctant to participate as federal contractors because of uncertainty regarding the scope of the religious exemption contained in section 204(c) of Executive Order 11246.” The proposed rule states that it should be construed to provide the broadest protection of religious exercise permitted by the Constitution and other laws.  The proposed rule clarifies that: The exemption applies to “not just churches but employers that are organized for a religious purpose, hold themselves out to the public as carrying out a religious purpose, and engage in exercise of religion consistent with, and in furtherance of, a religious purpose” Religious employers can “condition employment on acceptance of or adherence to religious tenets without sanction by the federal government, provided that they do not discriminate based on other protected bases” To find a violation of Executive Order 11246, OFCCP must find by “a preponderance of the evidence that a protected characteristic other than religion was a but-for cause of the adverse action” Religious organizations will continue to be required to comply with OFCCP’s prohibitions on discriminating based on race, color, sex, disability, protected veteran status, and other characteristics as well as the requirement to maintain affirmative action programs.  Contractors covered by the exemption should also note that it may not protect them from liability under Title VII or applicable state or local anti-discrimination laws if those laws do not have similarly broad religious exemptions. Acting U.S. Secretary of Labor Patrick Pizzella stated in a press release that the proposed rule “helps to ensure the civil rights of religious employers are protected.”  “As people of faith with deeply held religious beliefs are making decisions on whether to participate in federal contracting, they deserve clear understanding of their obligations and protections under the law.”  OFCCP will accept public comments on the rule for 30 days, until September 16, 2019.  Polsinelli will continue to monitor this issue and provide updates on the new developments.

On July 31, 2019, OFCCP Director Craig Leen gave the opening remarks at the National Industry Liaison Group conference in Milwaukee, Wisconsin.  Director Leen described several new and renewed areas of focus for OFCCP and provided some insight into the agency’s priorities.  Polsinelli attended Director Leen’s speech and several panels at the conference in which OFCCP officials weighed in on compliance and enforcement trends. Disability Issues Director Leen emphatically stated that OFCCP will begin treating discrimination against individuals with disabilities in the same way it treats discrimination against other protected classes like race and gender and will begin to focus the same level of resources as are devoted to other types of discrimination.  He described this focus as a “fundamental  principle” in the agency’s future planning. The most immediate sign of this renewed focus on disability issues is the Section 503 focused review process that OFCCP is undertaking for the first time this year.  In a panel, OFCCP Deputy Director Tina Williams and other officials described a robust focused review process.  To the surprise of many in the audience, Deputy Director Williams explained that every focused review will include an on-site interview component that is expected to last a week or longer.  OFCCP regional directors on the panel stated that compliance officers performing focused reviews will seek broad-based information about the contractor’s handling of disability accommodation and leave requests and interview individual employees about their experiences with the accommodation process. Veterans Issues Director Leen advised that the first list of contractors scheduled for VEVRAA focused reviews will be released around Veterans Day.  He also expressed OFCCP’s desire to evaluate whether contractors are discriminating against veterans on a systemic basis.  Director Leen also stated that OFCCP is interested in whether statistically-significant pay disparities for veteran employees may indicate violations of USERRA’s requirement that employees be held harmless for taking military leave and receive the same raises and promotions they would have received had they not taken the lease. Compensation Director Leen directly addressed the recent Analogic decision in which an OFCCP administrative law judge strongly criticized the agency’s compensation audit approach.  He noted that the agency did not appeal the decision and pledged that senior officials have “internalized” its criticisms.  Director Leen stated that he believed Analogic’s principles are consistent with the agency’s compensation directive (2018-05), which states that compliance officers should consider how the employer actually sets compensation.  Director Leen also noted that OFCCP is preparing additional compensation guidance for public release. Director Leen also explained that OFCCP will focus on identifying actual discriminatory policies or practices that cause pay disparities, rather than asserting that the mere existence of a statistically-significant disparity alone shows discrimination.  That said, Director Leen hedged on whether the agency will continue to find violations in the absence of anecdotal evidence of discrimination, stating that such evidence was necessary in “most” cases.  This qualification implies that OFCCP will find violations based solely on statistical evidence in at least some instances.  Two senior OFCCP economists echoed this focus in a panel, noting that the agency is moving to the use of “descriptive statistics” that seek to identify the root causes of disparities and hone in on whether those causes are the result of discrimination. Transparency, Certainty, and Efficiency Director Leen identified transparency, certainty, and efficiency as being OFCCP’s “bedrock” principles.  Director Leen committed to continuing to provide compliance guidance to contractors through the issuance of additional opinion letters and FAQ documents.  He also noted that the agency plans to establish an online help desk through which contractors can anonymously seek compliance guidance with the agency’s answers posted for public reference.  OFCCP will also release technical assistance guidance on Section 503, VEVRAA, and promotions after it undertakes its first rounds of focused reviews in those areas. Director Leen expressed his desire for OFCCP to take a more collaborative approach with contractors, particularly at the desk audit and conciliation stages.  OFCCP intends to pursue settlements and Early Resolution Programs to seek to resolve alleged discriminatory practices and quickly bring relief to affected employees.  Director Leen generally rejected OFCCP’s former “active case enforcement” methodology and stated that the agency will now focus on reviewing the practices of a greater number of contractors in a quicker and more efficient manner. While Director Leen’s comments provided some reassurance for the contractor community, they also identified several new areas of focus that contractors should seek to address before they face an in-depth focused review.  Polsinelli will continue to monitor and report on developments at the OFCCP.

On August 2, 2019, OFCCP published six new compliance guides on its website.  The new guides include: OFCCP At A Glance, which provides an overview of the functions performed by OFCCP What Federal Contractors Can Expect, which provides general expectations that guide interactions between contractors and OFCCP Posting and Notices Guide & Checklist, which focuses on the posting and notice requirements of federal government contractors and subcontractors VEVRAA Recordkeeping Guide, Section 503 Recordkeeping Guide, and Equal Opportunity (EO 11246) Recordkeeping Guide, which identify which records must be kept by covered contractors and how long the records must be kept The publication of these compliance guides follows OFCCP Director Craig Leen’s commitment during his July 31 remarks at the National ILG conference that OFCCP will maintain a “laser focus” on transparency and regulatory certainty.  Director Leen stated that OFCCP intends to publish additional technical assistance guidelines on Section 503 and disability issues, VEVRAA compliance, and promotions after the OFCCP undertakes its first round of focused reviews on those subjects.  He also noted that OFCCP will soon open an online help desk that will allow contractors to anonymously seek guidance from OFCCP with responses posted for public reference. Contractors would be well served to review these compliance guides and consider whether they are meeting all applicable requirements.  In particular, OFCCP officials at the National ILG conference noted OFCCP will have a renewed focus on recordkeeping requirements, which have not been a focus for several years during compliance evaluations.  If contractors are unable to offer proof that they are complying with their recordkeeping obligations, they face  penalties for technical violations.  With the assistance of counsel, contractors should identify and address potential issues before they are discovered in an OFCCP audit. Polsinelli will continue to monitor this issue and provide updates on available compliance assistance tools.

In a welcome development for federal government contractors, OFCCP issued its second opinion letter on July 22, 2019.  The opinion letter endorsed a process through which contractors can submit proposed pay analysis groups (PAGs) to OFCCP for pre-approval for future audits. PAGs are groups of employees who OFCCP deems comparable for purposes of the contractor’s pay practices.  The PAG is the building block of an OFCCP compensation audit as OFCCP compares the compensation of PAG members to assess whether there is systemic discrimination in employee compensation.  PAG members need not have the same job title, work in the same departments, or be members of the same affirmative action plan job group.  Because OFCCP demands PAGs consist of a certain number of employees for statistical purposes, creating PAGs for non-entry level positions that do not have a large number of employees with the same title or performing the same functions requires careful analysis. By permitting contractors to gain pre-approval of their PAG composition, the opinion letter provides an opportunity for contractors to obtain certainty about how their employees will be grouped and analyzed in compensation audits.  Contractors can then self-audit and identify and address potential compensation disparities before they face the pressure of an OFCCP compliance audit.  Contractors should note, however, that OFCCP reserves the right to dispense with the pre-approved PAGs if there is a material change in the contractor’s compensation system between the pre-approval and the time of the audit. This development is the latest in a trend of OFCCP efforts to work cooperatively with contractors to obtain compliance.  Similarly to the Voluntary Enterprise-Wide Review Program announced earlier this year, PAG pre-approval may provide contractors with an opportunity to work more collaboratively with OFCCP to avoid or reduce the cost and uncertainty of random annual compliance evaluations. Contractors should consider taking advantage of this procedure to obtain certainty that their self-audits are consistent with the analysis that OFCCP will perform in a compliance evaluation.  That being said, contractors should work with counsel before submitting data or information to the OFCCP to ensure that the submission does not contain information that would draw unwanted OFCCP scrutiny. Polsinelli will continue to report on OFCCP developments.

On July 15, 2019, the EEOC opened its online filing system for the submission of EEO-1 Component 2 pay data.  Employers that are required to file EEO-1 reports can now submit pay data broken down by job category, pay band, race, ethnicity, and sex for the calendar years 2017 and 2018.  This submission is due by September 30, 2019. As of now, the filing system only allows the manual entry of the Component 2 data by employers.  The EEOC previously reported that it is working to finalize a data file upload function for the Component 2 reports.  That function should be available to employers by August 15, 2019. To access the EEO-1 Component 2 filing system, employers will need log-in information that EEOC mailed and e-mailed to them on July 12, 2019 and July 15, 2019.  The EEOC has also posted a 44-page user guide to assist employers in preparing the Component 2 report. Polsinelli will continue to monitor developments on the Component 2 data submissions and has staff available to assist employers with their filings.

On August 7, 2019, OFCCP and the Veterans’ Employment and Training Service (VETS) will hold a joint town hall focused on VEVRAA and USERRA compliance issues. This town hall meeting comes as the OFCCP continues to focus its attention on VEVRAA and Section 503 compliance issues.  Earlier this year, OFCCP sought approval for a scheduling letter for VEVRAA focused reviews and also projected that the number of focused reviews would increase from 500 in fiscal year 2019 to 1,500 by fiscal year 2021. The town hall is anticipated to address “the challenges federal contractors and employers face in recruiting, promoting and retaining veteran talent.”  Like earlier OFCCP town halls, it is open to the public.  As OFCCP gears up for its first round of VEVRAA focused reviews next year, this town hall could provide insight into the agency’s expectations for contractors. Stay tuned for a summary of the guidance provided by OFCCP during the town hall meetings.

On June 24, 2019, the Supreme Court issued its opinion in Food Marketing Institute v. Argus Leader Media, broadening the protection from disclosure under the Freedom of Information Act (FOIA) for confidential information provided by private parties to federal government agencies.  This decision is a win for government contractors that are required to provide sensitive workforce and compensation data in connection with compliance audits, such as audits by the OFCCP and DCAA, and that provide confidential information to federal agencies as part of their contracting activities. In the case, a grocery store trade association challenged lower court decisions compelling FOIA disclosure of information concerning food stamp purchases at the individual store level.  The association claimed that the information was exempt from FOIA disclosure under FOIA’s Exemption 4, which prevents the disclosure of “trade secrets and commercial or financial information obtained from a person and privileged or confidential.”  The association argued that its members closely guard their store sales information, which is important in modeling projected individual store sales and deciding where to open new locations.  The lower court, applying prior authority, held that the association had not met an additional requirement under Exemption 4 to demonstrate that disclosure of the sales data would cause “substantial competitive harm.” As reported in a prior blog, Polsinelli attended oral argument in the case on April 22, 2019.  As predicted in that blog, a seven-member majority of the Supreme Court had little difficulty dispensing with the “substantial competitive harm” requirement, finding it unsupported in either Exemption 4’s text or the plain meaning of the word “confidential.” The Court noted in its decision that there were two potential conditions to confidentiality: (1) that the information is kept private or closely held by the person providing it, and (2) that the person receiving it provides some assurance that the information will be kept secret.  The Court noted it was uncontested that grocers met the first requirement by not sharing store-level sales data and providing access to the data only to small groups of employees.  The Court did not resolve whether the second requirement, an assurance of confidentiality from the government, was necessary because it was also uncontested that the USDA consistently assured grocers that their data would be kept confidential.  The level of government confidentiality assurances required, if any, remains an open question. In situations like compliance audits, contractors sometimes do not have a choice whether to provide confidential information to the government.  However, they can reduce the risk of disclosure of confidential information in response to a FOIA request by implementing best practices to safeguard their data.  When disclosure is not compelled in an audit, contractors should carefully evaluate any confidentiality requirements in their contracts and negotiate, if possible, appropriate confidentiality assurances from the government to avoid running afoul of the unresolved potential second requirement for confidential treatment under Exemption 4.

This year, OFCCP will for the first time be conducting focused reviews that hone in on contractors’ compliance with disability-related obligations under Section 503 of the Rehabilitation Act.  Because Section 503 compliance is a priority for OFCCP’s new leadership, contractors should undertake an internal audit to confirm that it complies with these obligations, including the compliance resources offered by OFCCP. To help contractors prepare for focused reviews, on June 11, 2019, OFCCP posted a notice to contractors highlighting the resources and tools available to assist contractors in preparing for focused Section 503 reviews: OFCCP’s Section 503 Focused Review webpage provides an array of links to additional information, including links to the relevant regulations in the Code of Federal Regulations, a copy of the form Scheduling Letter, factsheets, FAQ’s, and best practices.  Additional information regarding the Section 503 Review process can be found here. OFCCP also encourages contractors to use the resources made available by its partner agency, the Office of Disability Employment Policy (ODEP).  The ODEP provides webinars and training regarding the best practices for ensuring that employers create and maintain workplaces that are inclusive for people with disabilities.   The ODEP also provides a workplace accommodation toolkit, which provides guidance for employees and employers alike regarding the process of evaluating and providing an employee with a workplace accommodation. OFCCP expects that contractors to use these resources in developing its compliance programs and undertaking compliance self-audits.  During audits, OFCCP compliance officers are unlikely to be sympathetic to claims that a contractor was not aware of its compliance obligations under Section 503 and the Rehabilitation Act.  To assist contractors and subcontractors’ compliance efforts and audit responses, Polsinelli has developed compliance tools that comply with OFCCP obligations and guidance materials, including those listing in OFCCP’s posting.

On May 22, 2019, the Trump administration released its Spring 2019 Unified Agenda of Regulatory and Deregulatory Actions.  This agenda reports on the actions that administrative agencies plan to issue in both the near and long term.  Most notably for government contractors, OFCCP announced three regulatory priorities: TRICARE and Other Healthcare Providers OFCCP’s first planned regulatory initiative is entitled “Affirmative Action and Nondiscrimination Obligations of Federal Contractors and Subcontractors: TRICARE and Certain Other Healthcare Providers.”  The abstract states that this initiative “would include limiting and otherwise altering the obligations of TRICARE and other healthcare providers” that are subject to OFCCP’s jurisdiction.  Although the agenda states that OFCCP would issue a Notice of Proposed Rulemaking in May 2019, the agency appears to have missed that deadline. OFCCP identifies this initiative as being “deregulatory” and a “major” regulation, i.e., one having an economic impact of $100 million or more.  Last year, in Directive 2018-02, OFCCP extended a moratorium on the enforcement of compliance obligations against TRICARE subcontractors to May 7, 2021.  It is possible that the contemplated regulation will extend make permanent some or all of Directive 2018-02’s moratorium. Religious Exemptions In its second item, OFCCP announced that it “plans to update its regulations to comply with current law regarding protections for religion-exercising organizations.”  This initiative is also listed as “deregulatory” and its priority to the agency is described as “significant.”  The agenda states that OFCCP will issue a Notice of Proposed Rulemaking in June 2019. Again, this regulatory initiative follows on a 2018 directive concerning religious freedom.  In Directive 2018-03, OFCCP noted several prominent Supreme Court decisions that “addressed the broad freedoms and anti-discrimination protections that must be afforded religion-exercising organizations and individuals” and instructed its staff “to take these legal developments into account in all their relevant activities.”  Now, it appears the agency may be planning to codify formal religious exemptions into its regulations. Resolving Potential Employment Discrimination Finally, OFCCP announced that it would publish “Procedures to Resolve Potential Employment Discrimination.”  The goal of this initiative is to “increase clarity and certainty for OFCCP stakeholders, and enhance the agency’s efficiency in remedying employment discrimination.”  Although the description in the agenda is sparse, this initiative appears to follow OFCCP Director Craig Leen’s stated goal of increasing the agency’s transparency and cooperation with the contractor community. OFCCP intends to issue a Notice of Proposed Rulemaking for this initiative in September 2019.  The initiative is described in the agenda as non-major and “nonsignificant.” Polsinelli’s Government Contractor Update will continue to track these developments and alert the contractor community if and when OFCCP provides more detail about its proposals.

On May 23, 2019, the OFCCP -- without fanfare -- issued its first opinion letter since its announcement last year that it would begin issuing opinions to provide guidance to the contractor community. In its opinion letter, OFCCP concluded that Pell Grants, under which the federal government provides funds to higher education institutions as supplemental financial aid, do not qualify as government contracts because they do not acquire property or services for the direct benefit of the federal government.  Accordingly, higher education institutions do not become subject to the obligations imposed on government contractors under Executive Order 11246, Section 503, or VEVRAA solely by receiving Pell Grant funds. Polsinelli will keep you apprised of future opinion letters and other compliance guidance issued by OFCCP.

On April 30, 2019, the U.S. Court of Appeals for the Tenth Circuit in United State ex rel. Reed v. KeyPoint Government Solutions affirmed the dismissal of an employee’s False Claims Act (FCA) whistleblower retaliation claim.  In its ruling, the Tenth Circuit confirmed that employees with compliance responsibilities bear a heightened burden to show that their alleged protected activities were not simply the performance of their assigned job responsibilities. Ms. Reed, the plaintiff, worked as a Senior Quality Control Analyst for KeyPoint Government Solutions, a company that conducted federal background check investigations.  Amid a series of scandals that rocked the broader background investigation industry, Ms. Reed claimed that she observed systemic violations of KeyPoint’s federal government contract as investigators allegedly made false background check reports, omitted information from reports, and failed to follow proper background check procedures.  Ms. Reed alleged that these violations formed the basis of fraudulent requests for payment from the government.  Ms. Reed claimed that she discussed the issues with several people within the company, but ultimately her efforts were unsuccessful and KeyPoint terminated her employment. The Tenth Circuit affirmed the dismissal of Ms. Reed’s FCA whistleblower retaliation claim.  The court noted that to face FCA whistleblower liability, an employer must know that the relator-employee’s actions were connected to a claimed FCA violation.  Where the employee’s job involves compliance and fraud investigations, it must be clear that the employee is engaging in FCA protected activity and “not just doing her job” to report suspected fraud internally.  Critically, the court found that the requirement for this heightened showing from compliance employees was not affected by the 2009 and 2010 amendments to FCA that expanded whistleblower protections.  Because Ms. Reed’s allegations did not show that she went outside of the established chain of command or beyond the scope of KeyPoint’s ordinary reporting procedures, the court held that she could not establish KeyPoint’s knowledge of her claimed FCA protected activity. Compliance employees are in a prime position to report corporate activities that may trigger whistleblower protection under FCA or other statutes.  However, their internal reports of fraudulent activities should not be protected under the FCA whistleblower protections unless they go beyond their job duties and either report the alleged violation outside of her ordinary chain or tie their concerns to violations of the FCA.  Employers should exercise caution when taking adverse action against employees in their compliance, HR, legal, contracting and finance departments to ensure that (1) the action is justified, well-documented, consistent with policy and prior actions against employees; and (2) the employee did not “blow the whistle” through means or mechanisms outside of their normal job duties.

The Equal Employment Opportunity Commission (EEOC) has announced that employers covered by the EEO-1 reporting obligation must submit pay data broken down by job category, pay band, race, ethnicity and sex for both calendar years 2017 and 2018.  This pay data, which is referred to as Component 2 of the EEO-1, is due on September 30, 2019. As previously reported, on April 25, 2019, the U.S. District Court for the District of Columbia issued a ruling requiring employers to file Component 2 pay data for 2018 and left it up to the EEOC to also require one additional year of pay data from either 2017 or 2019.  The Court has now published its Order. The EEOC stated on its website that it expects to begin collecting Component 2 data for calendar years 2017 and 2018 in mid-July and will give notice when it has a more precise date. Covered employers should begin planning collection of pay data by race, ethnicity and sex for both 2017 and 2018. Polsinelli will continue to monitor this issue and provide updates on reporting requirements.

On April 25, 2019, the U.S. District Court for the District of Columbia gave an oral ruling from the bench reportedly accepting the EEOC’s proposal to make employers submit their 2018 pay data by September 30, 2019.  This is consistent with the proposal the EEOC submitted on April 3, 2019 on which we previously reported. The pay data is referred to as Component 2 of the EEO-1 report and includes detailed data on employee compensation and hours worked from covered employers sorted by job category, pay band, race, ethnicity, and gender. The pay data is required to be from the 2018 calendar year. All employers who are required for 2018 to file an EEO-1 report will be required to submit pay data. This includes: All private employers with 100 or more employees that are subject to Title VII of the Civil Rights Act of 1964, as amended. Some private employers with fewer than 100 employees, if the employer is owned or affiliated with another employer -- or there is centralized ownership, control or management -- so that the employers together legally constitute a single enterprise, and the entire enterprise employs a total of 100 or more employees. Federal contractors that employ 50 or more employees and are prime contractors or first-tier subcontractors and have a single contract, subcontract or purchase order amounting to $50,000 or more. According to the Court’s docket, a written order is forthcoming. It is also expected that the EEOC will be updating its website to provide instructions on the collection and reporting of this pay data. Polsinelli will continue to monitor this issue and provide updates on reporting requirements.

On April 12, 2019, the OFCCP submitted new forms of its scheduling, compliance check, and Section 503 focused review letters to the Office of Management and Budget (OMB) for approval.  OFCCP also sought OMB’s approval of a new scheduling letter for VEVRAA focused reviews.  OMB’s authorization of the current versions of the scheduling and compliance check letters is scheduled to expire on June 30, 2019.  Government contractors and other interested parties have until June 11, 2019 to submit comments to OMB regarding the new form letters. If approved, the changes to the OFCCP’s letters will impose significant new data reporting requirements on contractors.  Some of the major changes are described below: Scheduling Letters Contractors must identify their three largest subcontractors to OFCCP. In addition to the percentage of minority and female incumbents within each job group, contracts must also submit the specific race of each employee within the job group. In addition to placement goals for minorities and women generally, contractors must submit data from which OFCCP can determine disparities in the utilization of particular minority groups, or men or women of particular minority groups, to create separate goals for these groups. Significantly, OFCCP will require contractors to submit the results of their most recent compensation system analysis. Contractors must identify the pool of candidates from which promotions were selected by gender and race/ethnicity. In submitting data regarding terminations, contractors must state whether terminations were voluntary or involuntary. Section 503 Focused Review Letter Contractors must submit information provided by each applicant or employee who self-identifies as an individual with a disability. Contractors must submit applicant and employee-level employment activity data concerning applicant flow, hires, promotions, and terminations of disabled and non-disabled employees and applicants. Contractors must submit employee-level compensation data of disabled and non-disabled employees. In addition, all of the data required to be submitted to OFCCP must now be submitted electronically to facilitate OFCCP’s analysis. OFCCP’s supporting statement for the proposed letters reveals that OFCCP intends to increase the number of audits it conducts.  For fiscal year 2018, OFCCP audited 3,500 contractor establishments, divided between full compliance audits, compliance checks, and Section 503 focused reviews.  In its submission to OMB, OFCCP stated that it anticipates conducting 2,500 full compliance audits and 1,000 compliance checks, and that the number of Section 503 and VEVRAA focused reviews will increase from 500 in fiscal year 2019 to 1,500 by fiscal year 2021. OFCCP’s submission shows that the agency intends to seek increasing amounts of data, at an increasingly granular level, from an increasing number of contractor establishments and functional units.  Contractors would be well served to reevaluate their data collection and analysis and other compliance procedures with the assistance of experienced counsel to ensure that they are meeting all applicable requirements and identify and address potential issues before they are discovered in an OFCCP audit.

On April 22, 2019, the U.S. Supreme Court heard argument in Food Marketing Institute v. Argus Leader Media.  Polsinelli attended the oral arguments to provide insight concerning the potential implications for federal government contractors that submit data to OFCCP. In that case, a grocery store trade association challenged lower court decisions requiring the disclosure through Freedom of Information Act (FOIA) of data concerning food stamp purchases at the individual store level.  Although the case does not involve disclosures by OFCCP, a victory for the challenger would enhance the ability of contractors to protect confidential workforce data submitted to OFCCP from FOIA disclosure. Contractors facing OFCCP audits are required to provide sensitive employment-related data, including compensation data.  To prevent this data from being disclosed to competitors or others pursuant to a FOIA request, contractors and their counsel typically rely on FOIA’s Exemption 4, which prevents the disclosure of “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” In the Food Marketing Institute case, the trade association is challenging lower courts’ rulings concerning Exemption 4, which require that a party resisting the disclosure of confidential information under it show that the disclosure would cause “substantial competitive harm.”  If the Supreme Court rules that such a showing is not required, a contractor submitting data to OFCCP would only be required to show that it takes steps to protect its compensation and other workforce data from disclosure to fall within the exemption. Although it is difficult to forecast the Supreme Court’s ultimate decision based on the justices’ questions and comments, several justices appeared skeptical of the “substantial competitive harm” requirement, noting that it lacks support in Exemption 4’s text.  The questioning also suggested that several of the justices believe that Exemption 4 requires the information holder to take affirmative steps to maintain confidentiality, rather than simply deeming or labeling it as confidential without more. Polsinelli will continue to monitor the case in anticipation of the Supreme Court’s decision.  In the meantime, contractors should consult with experienced counsel to ensure that they are implementing best practices to safeguard sensitive data and support a claim of confidentiality under Exemption 4.

“Glaring,” “concerning,” “troubling,” “problematic,” and “systemic” were some of the words used by OFCCP Director Craig Leen to describe the underrepresentation of women, minorities, and individuals with disabilities at large law firms at an April 10, 2019 town hall meeting in New York City.  Director Leen announced that representation and pay equity issues at law firms and other professional services providers will be an area of focus for OFCCP as early as next fiscal year. Director Leen indicated that OFCCP will focus on investigating and redressing disparities in the promotion of law firm associates to partner.  OFCCP is also expected to examine whether law firm billable hours policies act as an impediment to the advancement of female lawyers and the ability of employees of all genders to take family leave.  OFCCP also plans to issue guidance regarding its ability to police practices involving attorneys who are equity partners. OFCCP’s 2019 listing of contractors selected for audit included five AmLaw 100 law firms for compliance audits.  Law firms that are not government contractors may also unexpectedly fall within OFCCP’s jurisdiction if they provide services to government contractor clients that are deemed “necessary” to the performance of a federal government contract. Director Leen’s announcement comes against the backdrop of several high-profile lawsuits filed by female attorneys, both partners and associates, against some of the nation’s largest firms.  These developments show that pay equity and gender discrimination at law firms are in the crosshairs of both private litigants and government agencies.  Rather than wait to be the target of a government investigation or lawsuit, law firms should retain outside counsel and undertake comprehensive compliance audits, including reviewing pay equity and promotion rates reviews.

On April 3, 2019, the EEOC announced in a court filing that it will require employers to submit 2018 EEO-1 pay and hours data by September 30, 2019.  With EEO-1 reports currently due by May 31, 2019, this announcement gives employers four additional months to collect and submit this information.  The extension of the EEO-1 deadline appears only to apply to Component 2 pay and hours data because EEOC’s website still lists the deadline for submission of the Component 1 demographic data as May 31, 2019.  The EEOC’s filing states that employers will not be required to report 2017 pay and hours data at this time. The EEOC’s filing came in response to a March 19, 2019 order from Judge Chutkan of the U.S. District Court for the District of Columbia requiring the agency to state its position on the filing of the Component 2 submission in light of her prior summary judgment ruling reinstating the Component 2 obligation.  A link to our blog summarizing the March 4, 2019 summary judgment order is included here.  The plaintiffs in the case will now have until April 8, 2019 to respond to the EEOC’s announcement. In another development in the case, a coalition of employer advocacy groups (including, among others, the U.S. Chamber of Commerce, Society for Human Resources Management, and Associated Builders and Contractors) on April 4, 2019 filed an amicus curiae brief requesting that employers be provided at least 18 months to comply with the reinstated pay and hours data submission requirement.  The coalition also raised concerns about the EEOC’s ability to maintain the confidentiality of Component 2 pay data it receives. Polsinelli will continue to monitor these developments closely.

On March 27, 2019, the Office of Federal Contract Compliance Programs (OFCCP) announced that it was lowering the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) hiring benchmark again this year.  Effective March 31, 2019, the new benchmark is 5.9 percent, down from 6.4 percent the previous year.  This marks the fifth consecutive year that the benchmark has been lowered since its inception in March 2014, when it was set at 7.2 percent. VEVRAA is designed to provide equal opportunity and affirmative action for Vietnam era veterans, special disabled veterans, and veterans who served on active duty during a war or in certain campaigns.  Contractors are required to establish annual hiring benchmarks for protected veterans and assess their progress against that benchmark.  Contractors have the option of establishing their own benchmark or adopting OFCCP’s annual national benchmark. Contractors should be especially diligent in ensuring compliance with VEVRAA and retaining related documentation in light of OFCCP’s announcement in August 2018 that it would begin conducting focused reviews. Moreover, this documentation may also be requested during other scheduled compliance evaluations. Additional information regarding VEVRAA compliance and the national benchmark can be found on the OFCCP website.

On March 25, 2019, the OFCCP released its Corporate Scheduling Announcement List (CSAL) online for public access.  Contractors can access the CSAL here.  The CSAL identifies 3,500 contractor establishments that will be audited by OFCCP, with a portion of those audits being Section 503 focused reviews. Historically, contractors receiving a CSAL received a scheduling letter formally initiating the audit after about 45 days.  The advance notice provided by the CSAL can be a valuable opportunity for contractors to prepare for an upcoming audit, collect the data and documents the contractor will be required to submit to OFCCP within a relatively short period after receipt of the scheduling letter, and identify any potential compliance vulnerabilities that may need to be addressed during the audit process.  Contractors named in the CSAL should consider consulting with experienced counsel to assist in preparing for the forthcoming scheduling letter.

On March 4, 2019 Judge Chutkan of the U.S. District Court for the District of Columbia issued a ruling that immediately reinstated the EEO-1 pay data reporting requirement.  The government has not yet appealed or sought to stay the ruling, leaving employers unclear about their EEO-1 reports, which are due by May 31, 2019. On March 18, 2019 the EEOC issued a statement that it would only require the submission of Component 1 data regarding the demographics of employer workforces.  With respect to the Component 2 pay and hours data addressed in the Court’s ruling, the EEOC has stated only that it “is working diligently on next steps in the wake of the court’s order” and “will provide further information as soon as possible.” After the EEOC issued its statement, the National Women’s Law Center and Labor Council for Latin American Advancement, the plaintiffs in the case challenging the withdrawal of approval for the collection of Component 2 data, filed a motion with the court asserting that the EEOC’s statement was not compliant with the March 4, 2019 decision and requesting an emergency hearing.  At the hearing this morning (March 19, 2019), Judge Chutkan required further briefing from the government and the plaintiffs, which must be filed by April 8, 2019. Accordingly, while the EEOC is not requiring the submission of Component 2 data for now, it is unclear whether the Court will find this approach to be compliant with its prior order.  Nor is it clear what action the Court would take if it finds the EEOC’s statement non-compliant.  With EEO-1 submissions due by May 31, 2019 and seemingly little chance of clarity before April 8, 2019, at the earliest, we will continue to follow these developments closely. UPDATE: While no written order has yet issued, some sources have reported that Judge Chutkan required that the EEOC provide guidance by April 3, 2019 as to whether, when, and how employers will have to submit pay data as part of the 2018 EEO-1 submission.  The plaintiffs will then have until April 8, 2019 to respond to the EEOC’s guidance.

Building off the two town halls it held for the tech industry last month, the OFCCP has announced that it will hold two more town halls in New York City in April.  The first will focus on the financial industry and will be held on April 9, 2019.  The second will focus on the legal industry and will take place on April 10, 2019. Like the previous town hall meetings, these meetings are open to the public and tickets are available by registering through OFCCP's website.  Tickets are limited to two per organization on a first come, first served basis. The town halls will be of particular interest to human resource managers, equal employment opportunity specialists, chief compliance officers, and other personnel in the legal and financial industries who are directly involved with ensuring their company’s compliance with OFCCP’s requirements.  These events are designed to ensure that contractors have the resources needed to comply with their obligations, and also provide the contractor community with an opportunity to be heard and express valuable opinions on how OFCCP can help contractors achieve compliance.

On March 4, 2019, the United States District Court for the District of Columbia caught the employer community by surprise by ordering the EEO-1 pay data reporting requirement immediately reinstated. Background In September 2016, the U.S. Equal Employment Opportunity Commission (EEOC) announced plans to collect employee pay data from covered private employers and contractors, as an additional component to the annual Employer Information Report, or EEO-1 report.  According to the EEOC, collecting W-2 wage information and total hours worked by gender, race, and ethnicity will enable the Commission to evaluate employers’ pay practices and ultimately to “prevent pay discrimination and strengthen enforcement” of federal anti-discrimination laws. However, on August 29, 2017, the White House Office of Management and Budget (OMB), which had previously approved the EEOC’s rule changes in 2016, put an immediate stay on the EEOC’s plans to collect the additional pay data. The OMB indicated that some aspects of the expanded collection were unnecessarily burdensome for employers, and it needed time to further review the change (citing the Paperwork Reduction Act, which directs federal agencies not to overload business with paperwork).  In November 2017, the Labor Council for Latin American Advancement and the National Women’s Law Center (NWLC) sued OMB, alleging that it violated the Administrative Procedure Act by moving to review a rule it had already approved. What is happening now? Now, just 12 weeks before employers’ submissions are due to the EEOC, the district court found the OMB provided inadequate reasoning to support its decision to stay the data collection and ruled that the previously approved revised EEO-1 form “shall be in effect.” Unless the ruling is stayed pending appeal, employers will be required to collect not only W-2 wage information and total hours worked by gender, race, and ethnicity, but also the number of employees falling within each of 12 pay bands for each job category, ranging from $19,239 and under to $208,000 and over. Employers have been providing race and gender information, but have not been required to provide the pay data. The looming question is whether the pay data will be required for this year’s reporting period. The EEO-1 reporting deadline is currently set for May 31, 2019 following a delay due to the government shut down. As of now, the EEO-1 survey portal has not yet been opened, and the EEOC has not issued any new instructions or guidance that is typical with the opening of the report. It remains to be seen whether OMB will appeal the district court’s decision and seek a stay of the use of the form by EEOC pending the appeal.  The EEOC could seek to further revise the reporting guidelines, but the EEOC does not currently have a quorum to act. Polsinelli will continue to monitor developments in this area.  In the meantime, employers should continue to prepare to file their 2018 EEO-1 report including taking steps to be prepared to file the pay data components required by the revised form.

Polsinelli shareholder Erin Felix will moderate the upcoming Ethical Restrictions on Federal Employees/Counsel panel at the American Bar Association Public Contract Law Section’s Federal Procurement Institute at 3:15 pm EST on March 15, 2019.  The panel will explore pre- and post-departure restrictions on the conduct of federal employees from both the government employee as well as the private sector perspective.  These restrictions are significant to government contractors because while contractors frequently seek to hire agency personnel to gain their insight on agency procurement processes, the failure to abide by applicable civil service and conflict of interest laws can invite bid protests and agency investigations.  The high-profile, ongoing protest of Amazon’s proposal to provide cloud computing services under the Defense Department’s $10 billion Joint Enterprise Defense Initiative (JEDI) competition is but one example of the high stakes that contractors face in ensuring that their employees comply with these restrictions.  Register for the Federal Procurement Institute here.

On February 13, 2019, the OFCCP issued Directive 2019-04, which provides the framework for the agency’s new Voluntary Enterprise-Wide Review Program (VERP). The program is designed to incentivize federal contractors to complete voluntary compliance evaluations. It is part of a broader effort by OFCCP to find innovative ways to ensure that federal contractors comply with equal employment opportunity laws company-wide. While the requirements for the program have not yet been finalized, VERP is worth monitoring because it may prove to be a useful vehicle for contractors with strong, corporate-wide diversity and inclusion programs to obtain certainty and avoid random audits through OFCCP’s neutral compliance evaluation selection process. Although the directive does not provide the final details of the program, it provides a framework of what federal contractors can expect. OFCCP will conduct compliance reviews of the contractor’s headquarters location as well as a sample or subset of establishments. Contractors will be required to demonstrate that they meet established criteria that not only basic compliance with OFCCP’s requirements, but also a demonstrated commitment to and application of successful equal employment opportunity programs on a corporate‐wide basis. The promise of the program to contractors is that if a contractor is accepted into VERP, OFCCP will enter into an agreement that removes the contractor from OFCCP’s neutral scheduling process for the duration of the agreement. VERP will recognize two tiers of contractors. Contractors that are found to be OFCCP compliant will be removed from OFCCP’s list for random compliance evaluations for a period of three (3) years. Top‐performing contractors with model corporate‐wide diversity and inclusion programs will be receive five (5) years of relief from random compliance evaluations. The directive promises individualized compliance assistance to contractors in VERP’s second tier to assist them in becoming top performers. Applicants who are not accepted into the program will return to the pool of contractors that OFCCP may schedule for compliance evaluations through OFCCP’s neutral selection process. The directive states that OFCCP will not automatically place rejected applicants on a scheduling list for a compliance evaluation. That being said, contractors should not expect OFCCP to ignore perceived violations identified during the VERP application process, so it is critical for contractors who seek to take advantage of VERP to rigorously self-audit their compliance with the assistance of experienced counsel prior to submitting an application. This new program presents federal contractors with a significant cost-saving opportunity, particularly for those contractors with multiple establishments. Contractors with strong diversity and inclusion programs can potentially achieve cost-stability and predictability by submitting to a single audit through the VERP process, rather than being selected multiple times through OFCCP’s neutral selection criteria for separate audits at different establishments. OFCCP plans to begin accepting applications from federal contractors in fiscal year 2020. Polsinelli will keep the contractor community updated as OFCCP releases additional details about the VERP process.

On January 22, 2019, a new rule went into effect providing much-needed guidance on the definition of “recruitment fees” under the FAR human trafficking prohibition.  Many government contractors may be surprised to learn that a wide range of seemingly-innocent policies requiring employees or applicants to pay (whether upfront, through deduction, or in any other way) the employer for costs relating to hiring, recruitment, or training may now qualify as impermissible “human trafficking” and subject the contractor to potentially rigorous penalties under the FAR. Since March 2015, all federal government contracts and solicitations have included a clause prohibiting human trafficking pursuant to FAR 22.1705 and 52.222-50.  One of the proscribed forms of trafficking-related conduct is charging “recruitment fees” to employees or potential employees.  While “recruitment fees” were previously undefined in the FAR, the new rule makes clear that the term has a sweeping definition, encompassing “fees of any type” that are “associated with the recruiting process.” The rule takes a functional approach and makes clear that the manner, form, or timing of the payment is not relevant.  Charges can be recruitment fees if they are paid up front by the employee or potential employee, deducted from the person’s wages, or even if they are collected by a third-party such as a labor broker, recruiter, staffing firm, or agent.  The rule and its agency commentary are clear, however, that contractors may require employees or applicants to incur charges themselves in connection with the recruiting process, so long as the payment is not made to the contractor or any of its agents. The new rule lists several categories of exemplary recruitment fees, including fees for: Soliciting, identifying, considering, interviewing, referring, retaining, transferring, selecting, training, providing orientation to, skills testing, recommending, or placing employees or potential employees; Advertising; Obtaining labor certifications, visas, or processing applications or petitions; Acquiring photographs and identity or immigration documents, such as passports; Medical examinations and immunizations; Background, reference, and security clearance checks and examinations; The employer’s recruiters, agents, or attorneys; Language interpretation or translation; Government-mandated fees such as border crossing fees, levies, or worker welfare funds; Transportation and subsistence costs; Security deposits, bonds, and insurance; and Equipment charges. Contractors should note that the listed categories are only examples, and other charges “associated with the recruiting process” qualify even if the specific type of charge is not listed. Because every federal government contract prohibits contractors from charging these fees and some require annual certifications and compliance plans, contractors should review their hiring processes to ensure that no such fees are being charged to employees or potential employees, including applicants.  The penalties for non-compliance with the human trafficking clause can range from the suspension of contract payments to contract or subcontract termination or even debarment. Because contractors are responsible under the rule for fees charged by agents like recruiters (or even sub-recruiters), contractors should ensure that their contracts with recruiters, staffing agencies, or others prohibit passing along any recruitment costs to employees or applicants. The need to audit the recruitment process is only the tip of the iceberg of new issues created by the new rule.  In a subsequent blog, Polsinelli will analyze some potential contractor responses to the new, broad definition of “recruitment fees” and other, less obvious implications of the rule.

With the posting of 2019 CSAL notices possibly imminent, government contractors should prepare for the fact that a portion (approximately 500 out of 3,500 total) of the OFCCP’s FY 2019 compliance evaluations will be Section 503 focused reviews.  Attached is the scheduling letter that will be used for OFCCP’s focused reviews. Unlike the typical OFCCP audit, a focused review will audit contractor’s compliance with the protections for individuals with disabilities under Section 503 of the Rehabilitation Act.  Because Section 503 compliance has not been the focus of many of OFCCP’s recent compliance audits, it is important that contractors should proactively self-audit to ensure they are in compliance with all of the various requirements of Section 503. If a contractor receives a Section 503 focused review scheduling letter, it will have 30 days to collect and provide OFCCP with an array of information about its Section 503 compliance efforts.  In order to effectively respond to and avoid violations, covered government contractors should review their Section 503 compliance to ensure they have the following for their current affirmative action plan year: ·         A current Section 503 affirmative action plan for individuals with disabilities. ·         An assessment of outreach and recruitment efforts for qualified individuals with disabilities.  This assessment is typically prepared separate from the contractor’s affirmative action plan and some vendors and firms do not include this assessment with the Section 503 affirmative action plans they prepare. ·         The actions taken to audit and measure the effectiveness of the contractor’s Section 503 affirmative action plan.  Like the assessment of outreach and recruitment, this usually is separate from the affirmative action plan and may not have been prepared by your vendor or firm. ·         The statistical data collected and retained by the contractor for the total number of job openings and jobs filled, the total number of applicants hired, the total number of applicants with disabilities hired, and the total number of applicants who identify as individuals with disabilities. ·         The contractor’s utilization analysis, evaluating the representation of individuals with disabilities across its job groups or workforce. ·         The contractor’s reasonable accommodation policies and documentation of any accommodation requests received and how the requests were resolved. ·         The contractor’s assessment of its personnel processes and use of physical and mental qualifications. Also, contractors should be prepared to demonstrate, through a walkthrough, that its facilities comply with federal accessibility requirements. We recommend that contractors contact qualified counsel to make sure they are fully prepared to respond to these focused reviews.

The OFCCP recently announced that it will hold two town hall meetings in the coming weeks to provide compliance assistance to federal government contractors in the tech industry.  The town halls are free and open to the public, and are intended to ensure that contractors have the tools and resources needed to comply with their equal employment opportunity and affirmative action obligations.  These events also provide the contractor community with an opportunity to be heard and express valuable opinions on how OFCCP can help contractors achieve compliance. The meetings will be held in San Jose, California on February 26, 2019 and Seattle, Washington on February 28, 2019.  Tickets are available on a first come, first serve basis, and are limited to two tickets per organization.  Registration is available on the OFCCP’s website.   Based on attendance at recent town hall meetings held by OFCCP, it is advisable to register soon. Federal contractors in the tech industry should consider whether it would be valuable to attend these meetings.   The meetings may be of particular interest to human resource managers, diversity and equal employment opportunity specialists, chief compliance officers, and other personnel in the technology industry who are directly involved with ensuring compliance with OFCCP’s requirements.

On February 1, 2019, the Equal Employment Opportunity Commission (“EEOC”) announced that it would postpone the opening of the submission period for EEO-1 survey responses until “early March 2019” and extend the deadline for submission of EEO-1 data until May 31, 2019.  According to the EEOC, more specific information about the EEO-1 filing schedule will be published “in the coming weeks.”  The full EEOC announcement can be found here. The reason for these postponements is the lapse in the EEOC’s appropriations due to the partial government shutdown.  Because the January 25, 2019 agreement to end the partial government shutdown only funded the affected agencies (including the EEOC) through February 15, 2019, it is possible that the EEO-1 period could again be pushed back if President Trump and Congress cannot reach a longer-term agreement to fund the federal government. The EEO-1 seeks demographic data regarding the workforces of large employers.  Government contractors or first-tier subcontractors with 50 or more employees and a federal contract, subcontract, or purchase order exceeding $50,000 are required to file an EEO-1 report, as are all private employers with more than 100 employees.

It has been reported that the Office of Federal Contract Compliance Programs (OFCCP) will be issuing Corporate Scheduling Announcement Letters (CSAL) in February. A CSAL is a notice to an establishment that it has been selected to undergo an audit by the OFCCP. CSALs do not initiate an audit – only a scheduling letter can do that.  In the past, a CSAL gave recipients at least 45 days’ notice before receipt of an audit scheduling letter. While in prior years CSALs were mailed to contractor establishments, there is information that new this year the CSAL list will be posted on the OFCCP website only.  Federal Contractors will then need to check the posting to determine whether they have an establishment on the list. In 2018, 1,000 CSAL letters were mailed in February, with audit scheduling letters following in March.  Then a second wave of 750 CSAL letters were sent in September.  It is unknown whether the 2019 CSAL notice will be announced in waves or all at once. The OFCCP website currently has prior year CSAL lists only.  Polsinelli will continue to monitor whether 2019 CSAL list been posted.

For the second year in row, the federal government could be headed towards a partial shutdown.  The shutdown would be smaller in scale than those in recent years because appropriation bills have been passed to fund numerous departments and agencies through September 2019. On December 21, 2018, funding expires for the Department of Homeland Security, the Justice Department, the State Department, the Interior Department, and the Department of Agriculture, among others.  Thus, government contractors may once again face difficult questions regarding how to comply with applicable employment-related laws while their work for and with the federal government is paused. The below discussion is designed to assist contractors in navigating common issues that arise during a shutdown, but is not inclusive of all potential legal issues. Exemption Status Under the Fair Labor Standards Act During a shutdown, government contractors must be careful to remain in compliance with applicable federal and state wage and hour laws.  Unlike non-essential government employees who are typically furloughed during a shutdown, a contractor must decide whether to pay employees while their contracts and work are put on hold.  When making this decision, contractors must be aware that failing to pay employees can affect an employee’s exempt status under the federal Fair Labor Standards Act (“FLSA”). In general, an employee who is exempt from overtime under the FLSA must be paid on a salary basis of at least $455 each work week, regardless of the number of hours or days worked.  If an employer only pays exempt employees for the days or hours they work during the furlough, the employee may be deemed non-exempt.  This scenario presents a host of problems that most contractors would prefer to avoid. Accordingly, contractors must be vigilant in instructing and preventing employees from performing any work while on furlough.  A non-exempt employee should be paid for each work week they perform any work.  Even simple tasks such as reading and responding to emails would be considered work, thereby entitling the employee to pay for the entire week.  Some contractors may want to consider confiscating company laptops and other devices to avoid this issue. One solution to this problem that government contractors have used during past shutdowns is to require employees to use paid time off or vacation leave for days during partial furlough weeks.  Although this approach complies with the FLSA, it may also present unforeseen conflicts with contractual obligations and state and local law, which must also be reviewed. Another alternative that contractors have considered is requiring exempt employees to work a reduced workweek.  The DOL has approved of reduced work-hours programs for employers during periods of economic hardship.  In opinion letters, it has stated “a fixed reduction in salary effective during a period when a company operates a shortened workweek due to economic conditions would be a bona fide reduction not designed to circumvent the salary basis payment. Therefore the exemption would remain in effect as long as the employee receives the minimum salary required by the regulations and meets all the other requirements for the exemption.”  Opinion Letter FLSA2009-18.  Implementing a reduced work-hours program can present a host of issues, and experienced employment counsel should be consulted to avoid any costly mistakes. Pay Rate Issues for Foreign Workers During a shutdown, contractors need to be mindful of their obligation to pay foreign workers on visas. When employers sponsor foreign workers under H-1B, H-2B and E-3 visas, they are required to pay the rate set forth in the labor condition applications certified by the Department of Labor (“DOL”).  Even foreign workers placed on a non-productive status or reduced work schedules must be paid at the certified pay rate. Issuing WARN Act Notices to Furloughed Employees The federal Worker Adjustment and Retraining Notification (“WARN”) Act notice requirements may be triggered if a contractor furloughs a large number of its employees.  The WARN Act requires that employers provide 60 days’ notice to employees affected by a “plant closing” or “mass layoff.”  However, this requirement only applies if there is a qualifying “employment loss,” which is satisfied by one of the following:  (1) an employment termination, other than a discharge for cause, voluntary resignation, or retirement; (2) a layoff exceeding six months; or (3) a reduction in work hours of more than 50 percent during each month of any six-month period.  Thus, a mass furloughing of employees only triggers the WARN Act if it exceeds six months.  Like previous shutdowns, it is not anticipated that the looming government shutdown will exceed six months.  Nevertheless if the shutdown does extend for four months, contractors must consider issuing WARN Act notices.  In addition, contractors must also review analogous state laws that may be triggered. Compliance with E-Verify Requirements When a government contractor hires a new employee, it is required to confirm the employment eligibility of the employee using the government’s E-Verify system.  During prior shutdowns, the E-Verify system went offline for the duration of the shutdown.  That will likely be true in this case as well unless the Department of Homeland Security announces otherwise.  While E-Verify is unavailable, employers will not be able to access their E-Verify accounts and will be unable to enroll in E-Verify, create E-Verify cases, and run reports. Although the program may be unavailable, government contractors should continue to complete and maintain records of its I-9 paperwork.  The “three-day rule,” which requires employers to create a case in the E-Verify system within three business days after an employee begins working, will likely be suspended for cases affected by the shutdown.  Employers should submit the I-9’s as soon as the system comes back online. Likewise, the deadline for responding to “Tentative Non-Confirmation” notices will likely be extended for the duration of the shutdown.  If an employee has received such determination, the employer should not take any adverse action during the shutdown period due to the notice. Benefits for Furloughed Employees In the unlikely event that the government shuts down for an extended period of time, employee benefits may also be affected.  For example, some employees may lose coverage under the terms of the employer’s COBRA covered plan if their hours are reduced below certain thresholds.  In such a scenario, the employer would be required to send qualifying event notices and offer continuation coverage to impacted employees and their dependents. In addition, in some states, furloughing employees may make them eligible for unemployment benefits.  Contractors should review state and local law to determine potential eligibility. Conclusion A government shutdown would present government contractors with a slew of challenging compliance and legal issues.  It is critical for contractors to review the options available to them and consider, in consultation with counsel, the legal challenges and HR considerations raised by each. 

Acting OFCCP Director Craig Leen announced at the National Industry Liaison Group annual conference in early August that OFCCP would start conducting focused reviews of federal government contractors. A week later, on August 10, 2018, OFCCP issued Directive 2018-04 (the "Directive"), directing that a portion of OFCCP’s scheduling lists include reviewed focused on compliance with the three laws enforced by OFCCP: Executive Order 11246 (equal employment opportunity regardless of race, color, religion, sex, sexual orientation, gender identity, or national origin); Section 503 of the Rehabilitation Act (equal employment for individuals with disabilities), and the Vietnam Era Veterans' Readjustment Assistance Act ("VEVRAA") (equal employment for protected veterans). Starting in Fiscal Year 2019, a portion of each year's compliance evaluation scheduling lists will include focused reviews. The Directive anticipates that for Section 503 focused reviews, compliance officers would: Review policies and practice related solely to Section 503 compliance; Interview managers responsible for equal employment opportunity and Section 503 compliance; Interview employees impacted by the contractor's Section 503 policies; and Evaluate hiring and compensation data, as well as documents addressing the handling of requests by employees for accommodation. The Directive anticipates a "similar" approach would be used for Executive Order 11246 and VEVRAA focused reviews. The Directive states that OFCCP staff will "develop a standard protocol for conducting the focused reviews" and make the protocols available prior to the issuance of the next scheduling list. In addition, OFCCP will conduct training for OFCCP staff and contractors "to provide guidance as to the focused reviews." The Directive serves as an important reminder to contractors regarding the need to comply (and document compliance) with all of the laws enforced by OFCCP. Recent compliance reviews of OFCCP generally have not focused on contractors’ compliance with VEVRAA or Section 503.Contractors should anticipate that, even if they are not selected for a focused review, OFCCP is likely to focus on compliance with these laws.It is critical that contractors undertake a self-audit process to ensure that they are in compliance, including the benchmarks and analytics recently adopted by OFCCP.

Last Friday, OFCCP issued its first three directives of the 2019 fiscal year. With its new Compliance Review Procedures Directive (2019-01), OFCCP rescinds the Obama administration’s Active Case Enforcement (ACE) Directive (2011-01). ACE brought with it a fundamental shift in OFCCP audits with more focus on deeper dive audits that tended to take longer and impose significant burden and cost on contractors. Among other things, the ACE Directive required OFCCP to increase the frequency of random, mandatory onsite audits. OFCCP’s new Compliance Review Procedures Directive seeks to improve the efficiency of audits and increase the number of audits.  To further efficiency, the Directive requires early proactive corrections to resolve non-material violations. The Directive also clarifies that during an audit OFCCP may limit onsite reviews to the nature and scope of the indicators or concerns identified in the initial desk audit phase. Consistent with other recent directives issued by OFCCP, this new Directive emphasizes transparency. The Directive requires OFCCP to publish its scheduling methodology, much like it did earlier in the year with CSAL letters. The Directive also exempts contractor establishments from audit for 24 months from the date of closure of a neutrally scheduled audit for that establishment, unless OFCCP and the contractor have agreed to a different exemption period.

On November 30, 2018, the OFCCP made true on OFCCP Acting Director Leen’s comments in October that OFCCP was planning to implement an opinion letter program, issuing the Opinion Letters and Desk Help Directive (2019-03). This Directive is also consistent with the OFCCP’s earlier Transparency Directive covered here. Under this Directive, the OFCCP will implement both a help desk to answer contractor questions and an opinion letter program similar to that in place with the Department of Labor’s Wage and Hour division.  The Directive places some restrictions on the opinion letters: Opinion letters do not establish any legally enforceable rights or obligations Opinion letters should not be used to provide legal advice or to resolve questions that are the subject of ongoing or expected litigation OFCCP should not provide opinion letters to a contractor during the pendency of a compliance evaluation of that contractor’s establishment While the opinion letters do not establish legally enforceable rights or obligations, OFCCP will consider whether a contractor complied in good faith with the guidance provided in opinion letters in determining whether to proceed with an enforcement recommendation in a given matter.

The Early Resolution Procedures (ERP) Directive (2019-02) appears to be designed to address a long-standing frustration of OFCCP regarding the structure of the compliance audit process:  that it is generally limited to a single establishment or functional unit. Through its compliance audits, OFCCP reviewed a single establishment or functional unit of a contractor, focusing on its technical compliance, progress towards goals, and hiring, promotion, termination and compensation data.  When OFCCP identified a technical violation or a discriminatory practice, it did not have a mechanism for addressing similar violations at other establishments or functional units of the contractor. The ERP Directive offers OFCCP and contractors a mechanism for undertaking a mini-audit focused on specific technical violations or findings of discrimination uncovered during the desk audit phase.  After the desk audit (for technical violations) or a truncated on-site (for potential findings of discrimination), OFCCP would propose an Early Resolution Conciliation Agreement (ERCA) that resolved the violation at both the establishment under audit and at other establishments of the contractor covered by the ERCA.  The OFCCP would not issue a Notice of Violation (NOV) if OFCCP and the contractor entered into an ERCA. With an ERCA, OFCCP would agree not to subject the contractor for audit for five years at either (1) the original establishment if the ERCA involved technical violations or (2) all establishments covered in the ERCA if the ERCA resolved discrimination allegations.  However, during this period, the contractor would be required to provide periodic reports to OFCCP consistent with the terms of the ERCA.  Also, OFCCP would have the right to investigate individual claims of discrimination and suspected violations of the ERCA.  OFCCP would reserve the right to initiate an enforcement action and void the ERCA if a contractor violated it.  The five-year moratorium on audits also would not relieve the contractor of its ongoing obligation to comply with OFCCP affirmative action and non-discrimination obligations. The Directive offers advantages for the contractor beyond the potential 5-year moratorium on audits.  Contractors should take advantage of the ERP Directive to try to resolve potential violations early in the audit process.  In addition to conserving resources, the contactor avoids the disruption of on-site inspections, employee interviews and responding to extensive document and data requests. Contractors will likely find that their interest and ability to resolve OFCCP’s concerns through the ERP will depend on the nature of the violation claimed and the number of establishments impacted by it. If OFCCP identifies a technical violation, like the failure properly to collect applicant flow data, a contractor should have an interest in resolving the issue quickly through an ERCA and addressing the compliance problem at all of its establishments. Allegations that a contractor has engaged in discriminatory practices present a more challenging situation.  In many situations, OFCCP’s findings will stem from a fundamental dispute between the contractor and OFCCP regarding the methodology used by OFCCP.  For instance, for compensation discrimination, the contractor may object to the factors or analytical tools used by OFCCP in its multiple regression analyses. It would be a tough pill for a contractor to swallow to require it to make compensation adjustments or changes in its policies at all or a portion of its establishments in that situation.  However, if the alleged violation involves a policy or practice that the contractor is willing to abandon (or perhaps already has), such as a pre-employment test, resolving the audit and entering into a five-year ERCA may be a desirable option. The ERP Directive is applicable to all current OFCCP compliance audits in which a Pre-Determination Notice (PDN), Notice of Violation (NOV) or Show Cause Notice (SCN) has not been issued as of November 30, 2018.

A second wave of the Corporate Scheduling Announcement Letters (CSALs) were released to 750 more contractors.  As we previously reported, 1,000 CSALs were mailed in February, with scheduling letters that followed on March 19, 2018. CSALs do not initiate an audit – only a scheduling letter can do that. However, a CSAL notifies a contractor that their establishment is on the scheduling letter list giving the contractor extra time to get their Affirmative Action Program (AAP) ready for submission. The CSAL gives recipients at least 45 days’ notice of a scheduling letter.  Once the OMB approved scheduling letter arrives, contractors only have 30 days to submit their AAP. The supplement CSALs that were recently issued went to 445 companies, 69 CMCEs, and 66 FAAP functional units. The OFCCP has published a list of the CSAL recipients in its FOIA library, which can be found here. The OFCCP explained that it elected to publish this list because it is a frequently requested document and does not fall into any exemption from disclosure. Like with its spring release, the OFCCP has also released its methodology for selecting contractors for this scheduling letter list. The CSALs were sent to the actual facility identified on the OFCCP’s scheduling list and were addressed to “Human Resources Director” or the company’s designated point of contact.  CSALs were not sent to companies who are subject to evaluation by the OFCCP because of a contract award notice or as a result of a consent decree or other ongoing monitoring by the OFCCP. The OFCCP indicated that actual scheduling letters may go out soon. The OFCCP also published a new FAQ that addresses the one-time 30-day extension a contractor may receive for supporting data related to the E.O. 11246, VEVRAA and Section 503 AAPs. A contractor is eligible, provided that it: Requests the extension before the initial 30-day due date for the AAPs; and Timely submits the basic E.O. 11246, Section 503 and VEVRAA AAPs within the initial 30-day period after receiving the Scheduling Letter and Itemized Listing. Contractors should heed the warning in the FAQ that a “[f]ailure to submit AAPs and/or supporting data timely, with approved extensions, will result in an immediate Notice to Show Cause why OFCCP should not initiate enforcement proceedings.” The OFCCP made clear that the additional CSALs were a supplement to the February 2018 scheduling list, which means we can expect a new scheduling list in “early 2019.” Polsinelli will continue to monitor developments and will provide updates as they become available. In the event your organization received a CSAL, we recommend you contact counsel immediately.

On October 18, 2018, OFCCP Acting Director Craig Leen gave a 2-hour presentation at the National Employment Law Institute’s Affirmative Action Update on “What’s on the OFCCP Director’s Desk”. Acting Director Leen rapidly went through four principles that the OFCCP under his leadership will follow: 1. Transparency The OFCCP has already issued several new directives in an effort to promote transparency in the OFCCP’s compliance audit process. The Transparency Directive (2018-08) is a prime example of this effort. Acting Director Leen pointed out that this Directive applies to pending audits to the extent possible and stated that he has told the entire agency to follow it. He went on to say that he wants to see a more collaborative approach between the OFCCP and the contractor at earlier stages of the audit with both sides treating each other with respect and engaging in good faith discussions to work out disputes. As a second example, Acting Director Leen covered the Ombud Service Directive (Directive 2018-09). The OFCCP is working to hire an Ombud as a GS 15 level employee either in the national office or in a teleworking role. This individual will report to the Deputy Director. The purpose of this new role is to give contractors a path to address any concerns at any point in the audit. For example, Acting Director Leen stated that a contractor may contact the Ombud to ask if events in an audit are typical and/or are consistent with OFCCP protocols. The Ombud may answer a question directly or may direct the contractor to the appropriate person within the agency. Until the Ombud is hired, contractors should follow chain of command in the agency to address concerns. Acting Director Leen also pointed to the publishing of the CSAL list Is a further example of transparency. He noted that this was a controversial step, but that he was told by the Solicitor’s Office that every time 3 FOIA requests are received on an item, the OFCCP is required to post it. As long as Acting Director Leen is at the helm, the agency plans to continue to post the CSAL list. The OFCCP plans to adopt more initiatives in this area, such as expanding the help desk, cleaning up and making OFCCP FAQs more usable and issuing opinion letters similar to the Wage and Hour Division. 2. Certainty The OFCCP wants to set expectations for contractors. Acting Director Leen thinks that if contractors will be held accountable, they should know the stakes. One effort in this area is the new Compensation Directive (Directive 2018-05). The OFCCP remains strongly committed to looking for systemic compensation discrimination. Acting Director Leen shared a few new developments in this area including that the OFCCP plans to look at the intersection between race and gender in compensation. For example, they plan to explore whether minority women have a greater pay gap than all women. He also shared plans to look at compensation for individuals with disabilities. Other examples of providing certainty to the contractor community include the Religious Exemption Directive (Directive 2018-03), the Tricare Moratorium Extension, and mandatory use of Predetermination Letters when the OFCCP is alleging discrimination. 3. Efficiency Acting Director Leen commented that it is abusive to hold contractors in audit for long periods of time. To change this, Leen cited as examples the 45-day desk audit in the Transparency Directive and the AAP Verification Initiative (Directive 2018-07). Under the Verification Initiative, it is Acting Director’s goal that contractors will no longer wait for receipt of a CSAL letter before seeking compliance guidance. The OFCCP is also working with the Government Services Administration (GSA) to gain access to the verifications that federal contractors currently make to GSA about their affirmative action plans when bidding for contracts and is exploring the possibility of auditing contractors that answer “no” on whether they have an affirmative action plan and potentially pursuing contractors who answer “yes”, but cannot timely submit an affirmative action plan in an audit. He also discussed a planned proposal that would require every contractor to be audited at least once every five years. 4. Recognition Acting Director Leen discussed the Contractor Recognition Program (Directive 2018-06) as an opportunity to recognize federal contractors who excel at compliance. He also mentioned the Excellence in Disability Inclusion Award, which is currently open for public comment and hinted that additional awards are in the works. Acting Director Leen explained that he has a personal interest in disability inclusion because he has a child with special needs. Contractors should expect some special focus on Section 503 compliance as evidence by the Focused Review Directive (2018-04). While Acting Director Leen has an ambitious “to do” list in front of him, he has already accomplished a lot during his three-month tenure as Acting Director, as evidenced by the steady stream of Directives issued during that period.

For traditional AAP programs, federal contractors and subcontractors are required to develop, implement and self-audit affirmative action programs for every establishment with 50 or more employees. Traditional AAPs contemplate that the employees in that establishment (and reporting into it from other locations) will be in a hierarchical structure centered on a single set of products or services (e.g., manufacturing, consulting services, retail operations).  Recognizing that contractors are not always organized based on establishments, the OFCCP adopted FAAP regulations 20 years ago that allow contractors to enter into agreements with OFCCP to organize its AAP programs based on the functions performed by employees, rather than the establishments where they physically work or are based. For contractors that are organized based on functions (e.g., lines of service, discrete types of operations), the FAAP program can offer a lot of benefits.  Contractors whose operations are organized based on function or lines of business have found that FAAPs allow them to organize and analyze data more easily, establish lines or responsibility for developing, implementing and auditing FAAPs, and more effectively monitor compliance and progress towards goals.  But even more importantly, the consultation and approval process allow contractors to develop a relationship with the FAAP program at the National Office of OFCCP.  They can provide significant help in structuring the contractor’s functional units, in developing compliance programs and during compliance audits. The challenges in the past however, have included delays in the approval process and a lack of harmony between the FAAP program and the process used to select FAAPs for audit and undertake compliance audits.  Contractors feel that they have to work with field officers, who primarily handle establishment based plans, to address the difference between FAAPs and establishment-based programs, including how data requests should be tailored, how regional differences impact compensation, and how “on-sites” should be conducted when the employees in the FAAP are often spread all over the country.  Mindful of the concerns of contractors and to generate additional interest in the program, OFCCP recently issued a proposed directive—which is open to public comment—revising its policies and procedures for approving FAAP agreements and undertaking compliance audits. History of the Program Because the regulation authorizing the FAAP program is vague, the OFCCP has relied on Directives to provide guidance to the OFCCP and contractors regarding the FAAP program.  In 2013, the OFCCP issued guidelines tightening up the approval process and addressing the frequency with which contractors with a FAAP program would be audited.  However, the approval process remained cumbersome and, at times, lengthy, and there was often a disconnect between the National Office and individual District and Regional Offices regarding how audits should be conducted, particularly when the FAAP included employees spread over a large region.  In FAAP audits in which we have been involved in the past several years, the National Office has had to step in and provide guidance to the field office regarding which portions of the company can be audited and the unique analyses that are involved in assessing FAAPs. Over the two years, the FAAP Office at OFCCP has worked to address these issues, providing training to contractors and field officers regarding the FAAP program and removing some of the impediments to efficient approval of FAAP programs.  Members of the FAAP Office have conducted webinars and spoken at national conventions to educate contractors regarding the benefits of the FAAP program and to obtain feedback regarding initiatives the Office is considering, including programs to improve its engagement with contractors and the FAAP approval and audit process.  I spoke at length with Nakish Pugh, the Branch Chief for the FAAP Program, at the National ILG Convention in early August about my experiences with the program over the past 15 years.  She was eager to obtain input regarding my experiences and my recommendations for improvement. The Proposed Directive Consistent with these recent initiatives, OFCCP recently proposed a new Directive for the FAAP Program.  The proposed reforms include a number of changes that will make the program more attractive to contractors that are organized by functions or lines of service.  The proposed revisions would decrease the burdens imposed by FAAP agreements and provide more consistent application of OFCCP’s approval process, audit selection process and audit procedures.  The proposed Directive explains that: OFCCP is encouraging the use of functional or business unit based affirmative action programs (AAPs). A functional AAP agreement can be an attractive alternative to having an establishment-based AAP for several reasons. OFCCP’s FAAP program allows a company that is a covered federal contractor or subcontractor to organize its AAP to reflect how the company operates functionally and not where its facilities and people are physically located.   A company with a FAAP may find that it is easier to organize and analyze data, identify issues, establish clear lines of responsibility for implementing its AAP, and monitor progress. There is also the benefit of having the flexibility to combine the use of FAAPs and establishment-based AAPs. The most significant proposed revisions would: Increase FAAP agreements effective period from three to five years; Eliminate the requirement that FAAP contractors undergo at least one compliance evaluation during the term of the agreement; Expand the exemption period for FAAP units that have undergone a compliance evaluation from 24 months to 36 months; Eliminate the consideration of a contractor's compliance history in deciding whether to approve a FAAP request; Remove the three-year waiting period for reapplying for a FAAP agreement following termination of an agreement; Eliminate the annual requirement for contractors to report on the status of their FAAP agreements; Remove language permitting OFCCP to terminate a FAAP agreement if the contractor has been found in violation of the laws and regulations enforced by OFCCP; and Allow OFCCP to administratively close any establishment-based compliance evaluation received during the 120-calendar-day FAAP implementation period. Input Concerning the Proposed Guidance The notice invites contractors, law firms and consultants to provide feedback concerning the proposed modifications to the Guidance.These public comments are due by November 13, 2018.Polsinelli is in the process of preparing comments concerning the proposed guidance so that its procedures are more streamlined, transparent and fair to contractors.If any contractor would like Polsinelli to incorporate its comments into its comment letter, please feel free to contact me at cbertram@polsinelli.com.

On August 24, 2018, OFCCP released its long-awaited Directive outlining the standard procedures OFCCP will use during the course of compensation audits of federal government contractors. Concerned that it failed to provide clear guidance to contractors, the Directive rescinds and updates Directive 307, OFCCP's most recent guidance concerning compensation audits. OFCCP explained that it "believes that fulsome guidance will further support contractors' ability to conduct meaningful self-audits so that they can proactively identify and address issues with their compensation practices." The Directive and its attachment and the FAQs are attached here. OFCCP explained that the purpose of the new Directive was to (1) provide further transparency to contractors regarding the procedures used by OFCCP in conducting compensation audits; (2) support compliance and self-analysis by contractors; and (3) improve compensation analysis consistency and efficiency during compliance evaluations. The Directive was intended to provide more transparency to contractors regarding OFCCP's procedures and practices for establishing pay analysis groups (PAGs) and conducting statistical analyses and modeling. OFCCP reiterated in the attachment to the Directive that it is focused on identifying and addressing compensation disparities that are the result of systemic discrimination, including pattern or practice discrimination and disparate impact discrimination. If OFCCP believes there are indicators of systemic discrimination, it will seek to understand the contractor's compensation system, policies and practices and undertake what it characterizes as a "holistic" review of the contractor's EEO, diversity and inclusion policies. The attachment explains that, in conducting such a holistic review, it will consider a variety of employment practices that can lead to compensation disparities between similarly-situated employees, including the promotion, training and advancement opportunities, and the assignments offered to employees. OFCCP also described the categories of evidence it will consider during compliance reviews, including statistical and anecdotal evidence. Anecdotal evidence can be derived from the review of policies, compensation records and other documents and interviews with managers and workers. OFCCP explained that, in determining which cases to pursue, OFCCP will be less likely to pursue a matter if the statistical evidence is not corroborated by non-statistical evidence, unless the statistical evidence is especially strong or OFCCP has identified a pattern of compensation discrimination by the contractor in prior audits. OFCCP will continue to use the OMB-approved scheduling letter to collect initial compensation data from contractors. Compliance officers will use the information provided by contractors to develop pay analysis groupings (PAGs) of comparable employees. According to the attachment to the Directive, it is OFCCP's objective to use or create PAGs that mirror the contractor's compensation system. It notes that, if a contractor provides information concerning its compensation hierarchy and job structure in the submission, OFCCP will attempt to design its analysis based on that structure. OFCCP expects the information provided by the contractor concerning its compensation structure to be reasonable and verifiable and will include groups of sufficient size to undertake a meaningful statistical analysis. OFCCP declined to identify in the Directive the size of groupings it considers sufficient. However, in the FAQs issued with the Directive, OFCCP states that it will first review each of the PAGs to determine if they contain at least 30 employees under a similar pay system performing similar job functions. It will then try to determine if there are at least 10 employees per variable (e.g., gender, years in position). Thus, if a pay model had five control variables, the PAG would ideally have at least 50 employees. It also noted in the FAQs that, in rare circumstances, OFCCP may rely on non-statistical, or cohort, data to assess small job groups. If a contractor declines to provide proposed groupings or the information necessary for OFCCP to establish PAGs, OFCCP will conduct its preliminary desk audit based on either EEO-1 or AAP job groups, if they are reasonable and sufficiently large. After it identifies appropriate PAGs, OFCCP will then control for factors that impact pay within the PAGs, such as sub-job groupings, functions, units and titles, as appropriate. During this preliminary analysis, OFCCP will also control for tenure, full-time status and other appropriate factors. If the results of the desk audit warrant additional review, OFCCP will seek additional information to understand the contractor's compensation systems, factors that drive compensation decisions, and job structure. Based on this additional information, OFCCP may broaden or narrow its preliminary PAGs. OFCCP identified principles that it will use to conduct statistical analyses, both during and after the desk audit phase: It will use multiple linear regression analysis (MRA) to help reduce false negative and positive results; It will analyze (1) base pay, (2) total compensation and, if necessary (3) individual components of pay (e.g., bonuses or commissions); It will convert salary to a log of salary using a regression model; and It will analyze statistical outliers to test whether the PAGs have been composed properly. In analyzing pay disparities using these models and principles, OFCCP will evaluate males and females in separate regression models. OFCCP noted, however, that it may evaluate the interaction of sex and race in future models. For race and ethnicity, OFCCP will create a variable for each race and ethnicity category with more than five employees. OFCCP provided the following guidance concerning the factors it will apply in undertaking a MRA: It will control for components of employee tenure (e.g., time in position, time with the company) separately; It will not consider squared terms (factors, such as time in position, that level out over time) until after the initial desk audit phase; It will control for education categories and performance ratings and rakings, combining them as necessary; It may use age as a proxy for prior experience only at the desk audit phase; Per the FAQs, it may control for job title if pay legitimately varies based on job title. It will control for job level or grade, combining them as necessary; and It will evaluate market salary surveys, if provided by the contractor, on a case-by-case basis if job and pay differentials are not sufficiently accounted for. Before OFCCP will apply any of these (or other relevant) factors, it will test them for neutrality to make certain they do not have a disparate impact on any protected category. OFCCP also adopted the "rule of five" recently used by the National Office statisticians in compliance reviews and conciliation negations. It described this rule in the FAQs in discussing the circumstances when job title would be a relevant factor: OFCCP will attempt to control for . . . job title if pay legitimately varies by job title. In many instances, controlling for factors like grade level, department, or business unit sufficiently distinguishes functional differences in job titles . . .. To capture meaningful pay differentials across the categories, OFCCP requires that each category contain at least five observations. If a category has fewer than five observations, OFCCP will join those observations with their ordinal counterpart (e.g., nearest grade or level) or to the category with the nearest average pay. With this approach, OFCCP meaningfully controls for pay differentials across job titles while minimizing the risk of suturing the model with low frequency employee controls. At the end of the attachment, OFCCP identifies three practices it will use to facilitate transparency and consistency and the resolution of findings through conciliation: At the conclusion of the desk audit, OFCCP will notify the contractor in writing of the general nature of any preliminary compensation disparities. For instance, a contractor may be informed that preliminary disparities have been found in "compensation policies and practices with respect to women in production, sales and management." Consistent with Directive 2018-01, OFCCP will attach to any pre-determination notice (PDN) the individual-level data necessary for the contractor to replicate OFCCP's PAGs and regression results. The contractor will have the opportunity to offer a non-discriminatory explanation for the preliminary findings before a violation will be found. The PDN and the contractor's response will be reviewed by the National Office. The individual-level data will also be attached to any Notice of Violation (NOV) issued to the contractor after the National Office's review is completed. To facilitate conciliation, OFCCP will include professional labor economists or statisticians from the Branch of Expert Services in the conciliation process to clarify OFCCP's variable coding, statistical methods and findings and to answer questions about the process and assumptions used in computing back pay. With respect to point 2, OFCCP explained in the FAQs that, if a contractor provides factors that may explain the disparities in pay, OFCCP's statisticians and other field and national office staff will coordinate with representatives from the DOL's Regional Office of the Solicitor to decide on a preliminary analytical model. The contractor will be given an opportunity to provide additional information to OFCCP regarding its compensation systems and practices. Based on the additional information provided by the contractor, the preliminary model may be refined. The Directive went into effect on August 24, 2018. It will apply to all compliance evaluations scheduled on or after that date. The Directive states that it will apply to "open reviews to the extent they do not conflict with OFCCP guidance or procedures existing prior to the effective date" of the Directive. After we have an opportunity to digest the detailed standards set forth in the Guidance and associated documents and obtain input from OFCCP officials, we will provide a series of blogs entitled "Demystifying OFCCP's New Compensation Guidance" that reviews – in plain text – the three key elements of the Guidance and provides practical advice for compliance with them.

In an effort to address the issues raised by the #MeToo movement, Congress and state and local lawmakers have introduced a series of laws aimed at eliminating sexual harassment and abuse in the workplace. By mid-2018, over 125 bills had been introduced to address the challenges raised by workplace harassment.  Many of these statutes and proposed laws have prohibited or limited the use of mandatory arbitration agreements for the resolution of sexual harassment and abuse claims. However, many years prior to the #MeToo movement, Congress enacted the ‘Franken Amendment,' which prohibits government departments and agencies from using Department of Defense appropriations for any contract in excess of $1 million unless the contractor agrees not to require its employees to sign arbitration agreements and to take any action to enforce arbitration of claims under Title VII of the Civil Rights Act of 1964 or tort claims related to or arising out of sexual assault or harassment.  Initially, it was thought that the Franken Amendment would (1) prohibit contractors from entering into employment agreements that would require arbitration of a covered claim, and (2) prohibit contractors from enforcing any such mandatory arbitration provisions in existing employment agreements. However, courts are increasingly ruling that, by its plain language, the Franken Amendment does not prohibit contractors from entering into or enforcing mandatory arbitration provisions, it only prohibits certain federal departments and agencies from contracting with such contractors.  Accordingly, the Franken Amendment is not a defense to arbitration.   Lee v. Google Inc., is the most recent case to reach this conclusion. Lee, a former Google employee, alleged disparate impact discrimination on behalf of a putative class of female Google employees who were required to arbitrate sexual harassment claims, in addition to several individual claims relating to and arising out of alleged sexual harassment. Lee had signed an arbitration agreement and Google moved to compel arbitration. Lee argued that the Franken Amendment prevented Google, as a defense contractor, from compelling arbitration of the former employee’s sexual harassment claims.  However, the court rejected Lee’s argument, holding that the Franken Amendment does not establish a defense to arbitration. The Lee court cited to Ashford v. PricewaterhouseCoopers, LLP, a 2018 case where the United States District Court for the District of South Carolina reasoned that “the Franken Amendment does not prohibit employers from mandating arbitration of Title VII claims. It, instead, prohibits certain government entities from entering certain types of contracts with entities that require employees to agree to arbitrate certain claims as a condition of employment (either by entering new contracts mandating arbitration of such claims or enforcing existing provisions).”  Following this reasoning, the Lee court ruled that the Franken Amendment “does not provide that arbitration provisions executed or enforced in violation of [the Franken Amendment] are void, nor does it establish a remedy for violations in favor of employees.”  Accordingly, the Lee court granted Google’s petition to compel arbitration. In response to the Franken Amendment, many defense contractors and subcontractors modified their arbitration agreements and contractors to carve out sexual harassment claims.Although such a modification may be necessary to secure a defense contract covered by the amendment, it appears that Courts at least have been unwilling to invalidate arbitration agreements of contractors that do not include such carve outs.Although other avenues for relief may be available to prospective claimants, it appears that the Franken amendment alone will not protect them from mandatory arbitration provisions.However, in response to the #MeToo movement, numerous states and localities have adopted or are considering laws that prohibit the mandatory arbitration of sexual harassment claims. It is critical that contractors monitor these developments to ensure that their arbitration agreements comply with these new laws.

On August 10, 2018, OFCCP Acting Director Craig Leen issued Directive 2018-03 in an effort to harmonize OFCCP’s standards with “recent developments in the law regarding religion-exercising organizations and individuals." Directive provides a summary of OFCCP's regulations, Executive Orders and court decisions addressing the standards that apply to religious organizations and claims of discrimination based on religious affiliation, noting the "duty to protect religious exercise – and not to impede it. At the end of the Directive, it instructs OFCCP staff "to take these legal developments into account in all their relevant activities, including when providing compliance assistance, processing complaints, and enforcing the requirements of E.O. 11246."  The Directive states that OFCCP anticipates future rulemaking on this topic. The new Directive may have been issued by OFCCP to address the concerns of religious organizations that contract with the federal government regarding the expansion of Executive Order 11246 to include sexual orientation and gender identity protections. However, given the absence of clear guidance in the Directive, it is unclear how this politically sensitive issue will be handled by OFCCP staff during compliance reviews.

On August 2, 2018, OFCCP issued a publication called "What Contractors Can Expect ." The document provides "the general expectations that often guide interactions between federal contractors and OFCCP." The publication was designed to address concerns of the contractor community concerning the lack of transparency and consistent standards and to improve OFCCP’s relationship with contractors and others regulated by OFCCP. Access to Accurate Compliance Materials.  OFCCP states that it is "committed to providing clear, concise, and practical compliance assistance" in the form of "technical assistance guides, factsheets and brochures, 'Frequently Asked Questions' or FAQs, guidance documents, directives, webinars, and email."  Since the issuance of the publication, OFCCP has issued a series of Directives designed to provide additional information concerning the procedures and standards that apply during compliance reviews and adopted an Ombud program to address contractor concerns. Timely Responses to Compliance Assistance Questions.  The publication states that "[c]ontractors can typically expect a reply to Help Desk inquiries and emailed compliance assistance questions within 3-4 business days." Where more time is needed, contractors "can expect that OFCCP will provide notice of the delay and assurance that OFCCP's reply, when provided, is responsive to the issues raised." Opportunities to Provide Meaningful Feedback and to Collaborate.  OFCCP states that contractors "can expect OFCCP to provide them with opportunities to submit feedback on the quality and quantity of the agency's compliance assistance offerings and, periodically, on their experiences during their most recent compliance evaluations."  OFCCP also indicates that it will engage with contractors "on the development of new compliance assistance material, contractor training, and other matters that may support contractor compliance."  Consistent with this expectation, Ms. Bertram was consulted during the conference by a member of OFCCP's National Office regarding Ms. Bertram's experiences working with the member's program and how the program's performance could be improved. OFCCP has also reached out to representatives of the contractor community to obtain their feedback. Professional Conduct by OFCCP's Compliance Staff.  In response to criticism about what many contractors perceive to be heavy-handed or unfair tactics, OFCCP states that contractors "can expect to receive prompt, courteous, and accurate information during compliance evaluations and complaint investigations."  However, OFCCP notes that professional courtesy works both ways, as "the perceived quality of an engagement with OFCCP staff can be influenced by several factors, including the specificity and accuracy of the information contractors provide, and the timeliness and thoroughness of their responses to document production requests during compliance evaluations and complaint investigations." Neutral Scheduling of Compliance Evaluations. OFCCP states that contractors "can expect OFCCP to use a neutral selection system to identify contractors for compliance evaluations." Addressing concerns raised at its recent town hall meetings, OFCCP emphasized that "individual contractors are never 'targeted' though OFCCP may focus its resources on particular industries or sectors, geographic regions, or types of employment practices," and that "OFCCP never schedules a contractor for a compliance evaluation because that contractor sought compliance assistance." Reasonable Opportunity to Discuss Compliance Evaluation Concerns. The publication also states that contractors "can expect to have a reasonable opportunity to discuss issues that may affect the progress or results of their compliance evaluation or complaint investigation." OFCCP encourages contractors to use the chain-of-command, starting with the local compliance officer and working its way, if necessary, up to the regional or even national level. OFCCP believes that such interactions "can remove uncertainty and clarify areas of misunderstanding." Timely and Efficient Progress of Compliance Evaluations.  Contractors have become increasingly concerned about the length of compliance reviews and the short time-frame provided by OFCCP for responding to information and data requests.  It had become common for OFCCP compliance officers to demand the production of documents within three business days.  The publication states that contractors should expect that they will be provided with "reasonable production timelines ... as determined in light of all relevant facts and circumstances."  OFCCP also commits to providing "clear explanations of OFCCP's compliance evaluation processes and periodic status or progress updates as evaluations progress."  The agency notes that its ability to conduct timely and efficient compliance evaluations is "greatly influenced by the level of cooperation OFCCP receives, and the quantity, quality, and timeliness of the information that contractors provide." Confidentiality. OFCCP states that contractors "can expect that the information they provide during a compliance evaluation will be kept confidential. OFCCP keeps this contractor information, including but not limited to personnel records and salary data, confidential to the maximum extent allowed by law."

On September 19, 2018, the OFCCP issued the most recent in a series of Directives designed to facilitate contractors’ efforts to self-audit and understand their compliance obligations and increase the transparency and accessibility of the enforcement efforts of OFFCP. Through Directive 2018-09, OFCCP adopted an Ombud Service in the National Office to facilitate the resolution concerns raised by external stakeholders, including federal contractors and subcontractors, industry groups, law firms, and complainants. The Directive explains that “transparency is the foundation of a relationship of respect, dialogue and feedback with its stakeholders that will help the agency improve its effectiveness in both compliance assistance and evaluations.”  OFCCP believes that increased transparency will improve operational efficiency and effectiveness and support contractors’ ability to conduct meaningful self-audits that proactively identify and address areas of concern. To respond to concerns raised in a September 2016 report by General Accounting Office (GAO), OFCCP is adopting an independent mechanism through which external stakeholders can share their concerns with OFCCP about a particular open matter or provide general feedback or recommendations. OFCCP will hire an OFCCP Ombud who will report directly to the Deputy Director.  The Ombud will be responsible for (1) listening to the concerns of external stakeholders; (2) promoting and facilitating the resolution of OFCCP matters at the regional and district level; and (3) working with OFCCP regional and district offices as a liaison to resolve issues after stakeholders have exhausted those channels. If the Ombud program operates consistent with the Directive, it should provide contractors with an additional resource when they are facing challenging situations during the course of an audit. For instance, if a district office is demanding extensive records (perhaps for the third or fourth time) from a contractor during a compliance audit without an explanation (or what the contractor considers to be a reasonable one), contractors could reach out to the Ombud for assistance and support.  The Directive emphasizes that the Ombud will not act as an advocate for either side or give advice or opinions. However, he or she may be able to help the contractor and the district or regional office reach a resolution of their dispute. In these situations, it would be advisable for the contractor to work the issue through the “chain of command,” presenting (and documenting) its positions in a constructive and professional manner at each step in the chain. Then, it should be able to reach out to the Ombud with a written record, showing its efforts to reach a resolution and clearly identifying its position and arguments on the dispute.  It would also be advisable to work with the Ombud on constructive, proactive issues, such as suggestions for improvement, so that he or she knows that the contractor supports OFCCP and its compliance efforts.  By developing a good working relationship with the Ombud will put contractors in a better position when they feel they are not getting a fair shake in the audit or conciliation process.

In addition to Directive 2018-09, summarized here, OFCCP issued on September 19, 2018 Directive 2018-08 addressing the OFCCP compliance review process. OFCCP explains that it is the most recent of a series of Directives designed to increase transparency and the quality of compliance reviews, including hosting a series of compliance assistance events, issuing a Directive requiring Pre-Determination Notifications prior to the issuance of Notices of Violation, and publishing OFCCP’s supply and service scheduling methodology.  OFCCP states in the Directive that it “extends OFCCP’s transparency initiative to every stage of a compliance evaluation to facilitate consistency of operations, improve efficiency and resolve collaboratively matters during compliance evaluations.” The Directive announces the following changes to OFCCP’s compliance audit process: Compliance officers will contact the contractor within fifteen days of sending CSALs so that they can provide technical assistance and support to contractors in responding to them. OFCCP will provide a 30-day extension to provide supporting data responsive to the CSAL if (1) the contractor requests the extension prior to the initial 30 day due-date; and (2) the contractor timely submits basic AAPs within the initial 30-day period.  If these conditions are not satisfied, OFCCP will only allow extensions in “exceptional circumstances.” The failure to submit timely AAPs or support data will result in the immediately issuance of a procedural Notice to Show Cause. The contract will have an additional 30 days to submit these materials after the issuance of the Notice. After a compliance officer receives the contractors AAPs and supporting data, he or she will contact the contractor to confirm receipt and start the desk audit promptly, ideally within five days. The compliance officer will initially review the submission to make certain that it is complete and acceptable.  If there are deficiencies the submission, the compliance officer will notify the contractor promptly and provide fifteen days to cure the deficiencies.  OFCCP will issue an immediate procedural Notice to Show cause if the deficiencies are not cured. The compliance officer will then review the submission and contact the contractor to request follow-up information or clarifying information.  Compliance officers may not request information beyond the categories listed in the CSAL (e.g., data to refine indicators, employment applications, manager interviews) until after the desk audit has been completed and the conclusion of the desk audit has been recorded in OFCCP’s case management system. Compliance officers should work to close reviews quickly if there are no indicators of discrimination or other evidence of violations.  The Directive states that ideally and in the majority of cases, OFCCP should complete a typical desk audit within 45 days of receiving complete and acceptable AAPs and supporting data. Prior to an on-site, the compliance officer may request supplemental data to refine indicators and prepare for a potential on-site visit. Critically, the Directive states that “[s]upplemental information requests must include the basis for the request, be reasonably tailored to the areas of concern, and allow for a reasonable time to respond.” Prior to an on-site, OFCCP should provide a “high-level summary” of any preliminary indicators of discrimination in the onsite confirmation letter. Although the Directive does not address the onsite review process, it states that the off-site analysis should begin “immediately” after the onsite is completed and that the OFCCP should maintain regular contact with the contractor (at least every 30 days) to keep it informed of the status of the evaluation. The Directive also does not address the process for reviewing the data and information collected through the desk and on-site review or for determining whether OFCCP should issue a Notice of Violation. However, it addresses new procedures for the conciliation process after the issuance of a Notice of Violation. The Directive states that OFCCP should take a collaborative process in conciliation, including (1) sharing information and essential source data in electronic format so that contractors can understand and replicate OFCCP’s methodology and findings; (2) share the factors used to calculate back pay; and (3) provide an overview or summary of the anecdotal evidence or non-statistical findings that provide support or context for OFCCP’s statistical analyses. The Directive notes that the Branch of Expert Services and/or the staff of the Office of Solicitor may become involved to facilitate the conciliation process.  It also states that OFCCP will work with the contractor to identify innovative remedies, such as apprenticeship programs and proactive corporate-wide solutions. Contractors and their counsel can draw significant guidance from the Transparency Directive.  It is clear that contractors must be prepared to produce immediately their basic AAPs upon the receipt of a CSAL.  To ensure that employees responsible for the preparation and implementation of AAPs are notified immediately of the receipt of CSALs, contractors should confirm that OFCCP has accurate contact information for the contractor and each of its establishments or functional units. Also, with these new deadlines, contractors must stay on top of their AAPs, ensuring that they are prepared on time and implemented effectively.  Contractors should also confirm that they have the applicant tracking (ATS) and human resources information systems (HRIS) and other databases available that will allow it to pull and analyze hiring, promotion, termination and compensation information that is accurate and includes the categories of information necessary to provide the data requested through CSALs. The Directive is designed to address contractors’ complaints that many audits taking too long and do not follow the steps required in the compliance manual.  Many compliance audits have become seemingly endless, with compliance officers repeatedly requesting follow-up information and data without undertaking an on-site review or notifying contractors of their findings at the end of it.  These audits – now referred to by OFCCP – as “aged audits” have become an area of concern for the senior leadership of OFCCP.  Although the Directive is designed to address these concerns, it will be important for contractors to hold Compliance Officers to these standards, requesting that they present the findings required by the Directive and that they not request information beyond the CSAL until they have been provided.  Similarly, if a contractor receives requests for information and data prior to or in connection with an on-site review, it should request the justification for OFCCP’s requests. Although it is the objective of most contractors to be cooperative during audits, they can certainly request that OFCCP comply with its own compliance review standards without being adversarial.