Proposed OFCCP Changes Unlikely to Have Imminent Effect on Contractors

The Trump administration’s budget proposes merging the Office of Federal Contract Compliance Programs (“OFCCP”) with the Equal Employment Opportunity Commission (“EEOC”) by the end of fiscal year 2018, creating a single government agency responsible for combating employment discrimination. The stated aims of the merger are reducing superfluous operations, promoting efficiencies, improving services and strengthening civil rights enforcement. However, it remains unclear when or whether the consolidation of these two agencies will occur, and what shape compliance and enforcement activities at a combined agency would take. Neither the potential merger nor recent public calls for changes to the OFCCP’s approach to compliance evaluations are likely to have immediate effects on federal contractors.

The historically different roles and expertise of the OFCCP and EEOC may complicate the proposed merger. The OFCCP is charged with ensuring that federal contractors comply with nondiscrimination laws and regulations which require contractors to take affirmative action to ensure equal employment opportunity. The EEOC enforces federal discrimination laws by responding to complaints of discrimination. Both agencies are governed by laws or regulations that protect individuals based on race, color, religion, sex, national origin, and disability status. The laws and regulations governing the OFCCP also cover protected veterans, while the laws and regulations governing the EEOC cover discrimination based on age or genetic information. The OFCCP also has an administrative, compliance-based focus while the EEOC’s enforcement is more judicial.

The Acting Director of the OFCCP suggested in August that the start of the proposed OFCCP-EEOC consolidation could be delayed beyond FY2019, as the merger would have to overcome three hurdles: congressional amendments to acts governing federal contractor obligations regarding veterans and individuals with disabilities; rulemaking to implement the statutory changes; and consideration of how to combine the two agencies’ substantially different enforcement structures and approaches. He left open the possibility of interim changes at each agency designed to increase efficiency, such as eliminating existing redundancies to generate cost savings.

Independent of the proposed merger, the OFCCP’s approach to compliance evaluations has shifted substantially in recent years due to two changes. First, in 2013 the OFCCP shifted its compliance protocol to an “Active Case Enforcement” approach which entails more thorough and intensive contractor evaluations than did the OFCCP’s previous approach. Second, in 2014 it revised the “Scheduling Letter and Itemized Listing” it sends to contractors selected for compliance evaluations. The revised letter requires that contractors produce individual compensation data for every employee at the start of an OFCCP audit, plus data relevant to employment decisions separately for each individual racial category. Previously, contractors’ initial data productions consisted of data aggregated by broad job groupings or by salary range with the potential for follow-up requests of individualized data in targeted areas, and contractors were permitted to produce data related to employment decisions for aggregated “minority” and “nonminority” categories.

Due in part to these two changes, the OFCCP has reportedly conducted fewer audits in recent years, increased its focus on pay disparities, requested more data and information from contractors selected for evaluation, increased the number of statistical analyses it conducts as part of an evaluation, and increased its reliance on the statistical significance of test results. Industry groups have voiced concerns that the OFCCP’s statistical models can omit or misrepresent factors that affect contractors’ personnel and pay decisions.

The U.S. House of Representatives, U.S. Senate and industry groups have also raised concerns that the OFCCP’s increased reliance on numerical differences, statistical tests, and statistical significance has blurred its focus on identifying and addressing real employment discrimination. These groups have called on the OFCCP to reduce its reliance on benchmarks, statistical tests and statistical significance in compliance evaluations, broaden its consideration of case-specific information, and consider a wider range of measures of practical – and not just statistical – significance.

For example, suppose the OFCCP analyzes a contractor’s hiring data. Based on its statistical tests, it determines that there is evidence of hiring discrimination against Hispanics for two job titles at the company. However, the contractor’s hiring data show that there are fifty job titles at the company, the OFCCP’s analyses show no evidence of discrimination against Hispanics in the other 48 positions, and Hispanics were hired into a substantial number of the open positions at the company during the period at issue. Broader consideration requires anecdotal evidence, statistical evidence of hiring disparities at all roles and not limited to a single position (or two, as in the example above), statistical evidence over an extended period, and an appropriate statistical model. The appropriateness of a model can be gauged by whether it accurately captures the process by which the company makes personnel or pay decisions, and whether it accounts for information such as applicants’ skills, productivity, and experience.

The recent calls for changes to the OFCCP’s approach to compliance evaluations and the proposed OFCCP-EEOC merger are unlikely to have an imminent effect on existing or potential federal contractors. First, it is uncertain whether or when the merger will happen. Second, it is uncertain whether the OFCCP or a merged compliance/discrimination agency will address the concerns related to the OFCCP’s current approach to compliance evaluations.

Regardless, even if the OFCCP shifted its approach to compliance evaluations to one of less onerous data requirements, fewer statistical tests, and greater consideration of measures other than statistical significance, the federal government will continue to rely on statistical tests in some degree to monitor contractor compliance. The collection and maintenance of employment and compensation data, plus internal analyses of compensation, hiring, promotions and other employment decisions, may be useful should the contractor be selected for a compliance evaluation by the OFCCP. More generally, internal compensation, hiring and employment analyses can assist companies in assessing the extent to which their practices treat all employees equitably.

Erica E. Greulich is an empirical microeconomist who has worked on a wide array of employment matters. Her experience encompasses discrimination claims and numerous wage and hour class actions.