OFCCP Week in Review: July 17, 2017

The Significance: Universities and schools should care about this issue beyond its ramifications for the unionization of student “employees”.

• The decision also has dramatic implications for universities and schools, which are Government Contractors subject to OFCCP’s three programs. While the National Labor Relations Board (NLRB) decided The New School case under the National Labor Relations Act (NLRA) and found the at-issue students to be “employees” under the common law subject to the NLRA’s protections, OFCCP applies the same common law test to determine who are “employees” under Executive Order 11246. Indeed, the NLRA was the font on which President Johnson’s White House drafted Executive Order 11246.
• The New School case thus again rips open the long simmering debate between universities/schools and OFCCP as to whether the many and various forms of student “employees” should be in OFCCP-required Affirmative Action Plans and Disparity Analyses and may enjoy the protections of OFCCP’s three programs.

The New School will undoubtedly appeal into the federal appellate courts, especially since this is the NLRB’s third flip-flop decision on the issue of NLRA coverage of student “employees” in the last 20 years. At the same time, the issue of student “employees” will become an immediate agenda item for the two new Republican NLRB Board Members Nominees (William Emmanuel and Marvin Kaplan) who underwent confirmation hearings on Thursday July 13, 2017 and now await favorable votes of the Senate Health, Education, Labor and Pensions Committee to forward their nominations on to the Senate for a full floor vote.

Bottom Line: The final resolution of the student “employee” coverage issue is likely about 2 years away in either the federal appellate court or at the NLRB.

Additional Support: Contact Jennifer Polcer if you are further interested in PowerPoints Candee Chambers presented in October 2015 at the NELI Affirmative Action Briefing discussing the “Who is an Employee” subject to OFCCP’s jurisdiction and discussing the long running gun battle over coverage of student “employees”.

The Highlights: While not the $17M (~16%) reduction to budget (from ~$105M to $88M) The White House had earlier proposed for OFCCP (see OFCCP Week in Review from May 30, 2017), the House budget proposal for OFCCP for upcoming Fiscal Year 2018 (begins October 1, 2017) is nonetheless a $10M reduction (~10.2%) from ~$105M to $94.5M.

The House is not, however, singling OFCCP out for attack since the proposal for OFCCP’s budget treats OFCCP slightly better than the budget for the Labor Department as a whole. The House wants to cut USDOL’s budget by $1.3B, or about 12% (to $10.8B). House Republicans explained the cuts as an effort to “cut spending” in Washington D.C. and “cut funding to lower priority programs.”

The Significance: This budget proposal would have a devastating effect on the OFCCP, if enacted, and would force the agency to greatly re-shape itself. For example, OFCCP would lose approximately 120 Compliance Officer positions (between its reduced budget and expected increased expenses), a drop in headcount of approximately 21% from the currently budgeted 571 employees to approximately 450 employees. OFCCP’s annual employee attrition rate is unfortunately large, but is rarely 21%. Accordingly, OFCCP would likely have to order a Reduction in Force early in FY2018 or hope for many early retirements (with consequent implications for loss of institutional knowledge and experience).

Also, were the House proposal to go into effect, the OFCCP would have dropped over 40% of its staff over the last 9 years (i.e. from 785 to ~450…or only about 57% of the 2009 staffing level). With almost half of its office space empty, OFCCP would almost undoubtedly be forced to close 8-10 of its 60 offices. Moreover, such a precipitous loss of employee headcount would again bring on more forceful discussion of the GAO’s 2015 suggestion that OFCCP consider whether it even needs any brick and mortar offices scattered across the country given advances in communications technology and the reduction of on-site OFCCP audits to fewer than 1% of OFCCP Compliance Officer time spent at work.

Meanwhile, the Democrats’ plan is to continue to resist and attempt to stall President’s Trump all-out assault on the administrative state, which half of the country thinks has sprawled out of control and the other half wants to keep steady state or expand. So, the political battle lines are set and many expect a very contentious FY2018 budget debate in coming months.

FYI: the new budget is supposed to be in place in 2 1/2 months.

The Highlights: “The bill provides $284 million for VETS, which is $5M above the fiscal year 2017 level [~1.7%]. This includes a $2.5M increase to expand the Homeless Veterans Reintegration Program.”

The Opinion: After a two-day administrative trial (known as a “Hearing”) USDOL Administrative Law Judge Steven B. Berlin—sitting in San Francisco and one of the best in the system–has issued a detailed and thoughtful 42-page opinion. (View OFCCP vs. Google case)

1. After signing a $600,000 Government Contract for advertising and marketing solutions (known as the “AIMS” contract), OFCCP investigators audited Google’s 21,000+ employee Headquarters facility in Mountain View, California and obtained “…1.3 million data points (i.e., cells of data) about its applicant flow; 400,000 to 500,000 data points (i.e. cells of data) on compensation; and 329,000 documents, totaling about 740,000 pages. [fn omitted]”
   • “The project cost Google about $500,000, a significant amount when compared to the $600,000 gross total that GSA paid Google under the AIMS contract from June 2014 through December 29, 2016 [fn omitted].” Google testified it spent “2,300 person hours on these tasks,” half of them spent by lawyers.
   • Significantly, in response to Itemized Listing document request 19 (attached to all OFCCP audit Scheduling Letters OFCCP sends to Supply and Service contractors, Google produced a September 1, 2015 snapshot of compensation data related to its then 21,114 HQ employees including: “gender, race/ethnicity, hire date, job title, EEO-1 category (such as clerical or executive), job group, base salary or wage rate, hours worked in a typical workweek, and other compensation or adjustments to salary (bonuses, incentives, commissions, merit increases, locality pay, and overtime).”
2. OFCCP Wanted More Documents about Google’s compensation practices (not regarding hiring data), Google declined, and OFCCP then sued to get the documents it claimed it needed to complete its compensation investigation.
3. Here’s What OFCCP Now Gets Access to (absent an appeal by either or both parties):
   1. “Within 60 days after this Order becomes final, Google must provide OFCCP with a snapshot for September 1, 2014, limited as described above. (Editor’s Note: In addition, the Court granted OFCCP access to 34 additional categories of information OFCCP requested, but NOT: place of birth, citizenship, visa status; DOB; work locality information (since all employees worked in Mountain View);
   2. After this Order becomes final, when OFCCP provides Google with a list of up to 5,000 employee names and a request for contact information, Google must within 30 days of receiving this request provide for each named person, the personal address, personal telephone number, and personal email address of that person if Google has that information in its records. If Google does not have the information in its records, it need not ask the employees for it, nor need Google ask third parties to supply the information. Google should designate which employees are managers and which, if any, are in Google’s control group. OFCCP may not contact or interview any designated managerial or control group member except consistent with written advice from an attorney at the Solicitor’s office, who will advise OFCCP about applicable ethical requirements. (Editor’s Note: OFCCP had sought contact information for 25,000 Google employees while conceding it might seek to contact not more than perhaps 100-300 of them)
   3. After considering information learned under this Order or from other sources, it may make a request for contact information for up to 3,000 additional employees. The process in the paragraph above applies.”
4. The Legal Time Bomb: Relying on the Lilly Ledbetter Fair Pay Act of 2009 (which changed Title VII law favorably to plaintiff employees as to what acts of discrimination could be timely challenged years after the bad acts in question following the US Supreme Court’s earlier Lilly Ledbetter decision which found her 15 year old claims of unlawful pay discrimination untimely), OFCCP sought pay records for each employee back to the inception of their hire at Google, including as to all intermediate pay increases to the present.
   • While ALJ Berlin denied this request, too, he is clearly leaning to a conclusion later in this case that the Lilly Ledbetter Act amended not just Title VII of the 1964 Civil Rights Act, but also amended Executive Order 11246 by implication:

“It appears to me, however, that the Fair Pay Act legislatively overrules the Ledbetter [decision] to the full extent of that decision. Ledbetter would have applied to the Executive Order only by analogy; the case does not directly concern the Executive Order. Similarly, the legislation addresses only Title VII and statutes related to it. I infer that, to the extent the Court’s decision could by applied by analogy to a case brought under the Executive Order, Congress’ legislation overruling Ledbetter can as well. [fn omitted] I conclude that case [Ledbetter decision] has no bearing on the present dispute. [fn omitted] Nonetheless, if OFCCP eventually makes findings adverse to Google based on a theory of discrimination in starting pay, it will confront this issue again.” [emphases added]

(Editor’s Note: This is an exotic Administrative Law issue which we find few civil judges easily understand. It is abundantly clear, as a matter of administrative law, however, that the Lilly Ledbetter decision in the U.S. Supreme Court applies to Executive Order 11246, but NOT the Lilly Ledbetter Fair Pair amendment to Title VII–and three other statutes none of them the Executive Order.

The application of The Lilly Ledbetter Fair Pay Act to OFCCP compensation audits could be another large flash point in the Government Contractor community because of the ENORMOUS expense and time distraction it will represent if Lilly Ledbetter compensation data claims become the norm in OFCCP audits. So far, this expensive issue has not erupted except aberrational to date in OFCCP audits across the country.)

5. Why did Google Win the Right to Limit OFCCP from Accessing Some Data? While most OFCCP officials, their lawyers and most Government contractors believe that because they signed a Government contract that the contract gives OFCCP an unfettered legal right to access any document in the contractor’s possession potentially relevant to OFCCP’s audit authority. This is ENTIRELY wrong. In fact, Government contractors do not park their constitutional rights at the front door to OFCCP and signing a Government Contract, the courts have held, does NOT waive a company’s constitutional rights.
   • The Fourth Amendment to the US Constitution requires OFCCP to obtain an “administrative subpoena” to obtain documents a Government contractor refuses to supply to OFCCP upon OFCCP’s demand in audit. The subpoena takes the form of OFCCP filing an Administrative Complaint to force access to the documents in dispute, as OFCCP did here. Then, OFCCP must prove in every audit three things to gain access to a Government contractor’s documents:

“It is now settled that, when an administrative agency subpoenas corporate books or records, the Fourth Amendment requires that the subpoena be sufficiently limited in scope, relevant in purpose, and specific in directive so that compliance will not be unreasonably burdensome.” Donovan v. Lone Steer Inc., 464 U.S. 408, 415 (1983).

Bottom Line: So, in the end, the Google case is thus far about whether OFCCP’s requests were “unreasonably burdensome.” Reasonable minds will of course differ on this “lawyers’ line-drawing” challenge. OFCCP has now obtained the legal right to access those specific and particular documents which Judge Berlin found not “unreasonably” burdensome for Google to produce to OFCCP (although most of us would pale at the document production challenge which lies ahead for Google, let alone the ½ million-dollar journey it has already traveled) in an audit which is still just beginning.

However, OFCCP did not obtain the right to access other Google documents Judge Berlin decided were “unreasonably burdensome.” And, either or both parties have the right to appeal Judge Berlin’s “Recommended Decision and Recommended Order.” There are plenty of pain points for both parties in Judge Berlin’s Recommended Order, especially since it punts to another day bigger and more expensive document requests OFCCP will surely demand of Google in coming months. If this were a football game, the location on the field would be that OFCCP now has the ball, first and ten on the 10-yard line, 90 yards to go: plenty of time left in this game to go to the concession stand, get a hotdog and chips and settle in for a good tussle…