OFCCP Week In Review: December 30, 2019

The DE OFCCP Week in Review (WIR) is a simple, fast and direct summary of relevant happenings in the OFCCP regulatory environment, authored by experts John C. Fox, Candee Chambers and Jennifer Polcer. In today’s edition, they discuss:

• Federal Court Orders OFCCP to Disclose EEO-1 Reports Belonging to 20 Federal Government Contractors
• NLRB Now Allows Content-Neutral Limits on Union Insignia on Work Uniforms in Customer Service Areas
• The NLRB Reverts to its Longstanding Policy to Defer to Arbitration Decisions
• OFCCP Issued a Proposed Rule

December 10, 2019: Federal Court Orders OFCCP to Disclose EEO-1 Reports Belonging to 20 Federal Government Contractors

Ho-Hum. Entirely predictable. Federal Government contractors tried unsuccessfully in EVERY case to resist disclosure of EEO-1 Survey reports (Component 1 = race, sex, and ethnicity reporting) in numerous cases in the late 1970s. These cases erupted when the Carter Administration OFCCP started releasing EEO-1 Survey reports wholesale to FOIA requestors, especially from the Press, unions, academic researchers and across-the-street competitors. This “catch and release” program of the Carter Administration OFCCP caused many federal contractors to then go into the federal courts seeking injunctions to stop the agency’s threatened release pursuant to the FOIA and became known as so-called “reverse Freedom of Information Act” cases.

(The results in the courts were different, however, as to FOIA requests for Affirmative Action Plans for Minorities and Women. Indeed, John Fox successfully tried several cases in the federal courts enjoining OFCCP from releasing the AAPs for Standard Oil of Ohio and Indiana (now Chevron), Vistron, Pan American Airways, and the Firestone Tire & Rubber Company, among others, because he was able to show that competitive harm could ensue, were disclosure to occur. No company in the 1970s was ever able to prove, however, that EEO-1 reports were “commercial” or “financial” in nature, a foundation requirement of proof to resist disclosure. Fox did not even try since he observed major law firms in the courts around him losing every one of those battles to the open guffaws of respected federal judges. Proving that the EEO-1 reports were “commercial or financial” documents did not pass the “laugh test,” although some companies fought the battle, they knew they would lose simply to delay access to the information to the Press since “old news is not news.” You just cannot prove, however, at-the-end-of-the-day that EEO-1 Component 1 reports are “commercial” or “financial” information.)

The new case is The Center for Investigative Reporting, et al v. U.S. Department of Labor, Case No. 4:19-cv 01843-KAW federal District Court for the Northern District of California, decided December 10, 2019.

This case moved quickly through the courts, as FOIA cases tend to do since only legal issues (in this case, under Exemption 4 to the FOIA) are typically at-issue. An April 5, 2019 Complaint to the Court resulted in a decision only nine months and five days later.

The case is important as to what it might portend for OFCCP’s release of EEO-1 COMPONENT 2 “hours worked” and “pay data,” should OFCCP take those data into its possession.

WHAT HAPPENED?

A reporter for the Center for Investigative Reporting (CIR) submitted a FOIA request to the U.S. Department of Labor for 2016 EEO-1 (Component 1 = race, sex, and ethnic data) Consolidated Reports for 55 companies. Here is how the CIR reports its case:

“The agency acknowledged receipt of the request and provided an interim response. However, the agency subsequently told CIR that it was delaying its response until the Supreme Court ruled in FMI v. Argus Leader Media, dealing with the standard for determining competitive harm under Exemption 4 (confidential business information). CIR filed an administrative appeal, but after hearing nothing further from the agency, CIR filed suit.”

The EEO-1 reports for only twenty companies were at-issue, nonetheless, in CIR’s court Complaint since only 36 of the companies of interest to CIR were federal Government contractors subject to OFCCP’s jurisdiction, CIR withdrew the name of one company, and fifteen federal Government contractors agreed to the release of their data. The remaining 20 companies objected to disclosure (which objecting companies must do pursuant to the Department of Labor’s Rules (not OFCCP’s Rules): see 29 CFR Section 70) after OFCCP sent two rounds of letters alerting the companies to CIR’s FOIA request and requesting their positions on disclosure. Then, in a unique turn of events as FOIA requests for EEO-1 data go over the last four decades, OFCCP—as the custodian of the EEO-1 reports for these twenty companies—surprisingly supported the EEO-1 filers and withheld release of their EEO-1 reports, and thus provoked CIR’s FOIA Complaint.

THE LEGAL ISSUES

First, the FOIA REQUIRES the disclosure of all documents in the possession of all federal agencies in response to a request, UNLESS one or more of nine exemptions from required disclosure set out in the FOIA attach, AND the federal agency exercises its discretion to invoke one or more of the exemptions to allow it to NOT DISCLOSE.

Second, the only even remotely likely applicable exemption for EEO-1 data would be Exemption 4 to the FOIA. Exemption 4 to the FOIA allows a federal agency to resist otherwise mandatory disclosure of “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” This exemption thus has two parts: “trade secrets” (not applicable to EEO-1 reports) and “commercial” or “financial” information. OFCCP put all of its chips on the “commercial” language and argued that EEO-1 Component 1 Survey reports was “commercial” information.

HERE’S WHAT THE JUDGE RULED:

“At the hearing, the Court asked the Government (OFCCP) how the [EEO-1 Component 1] demographic information was commercial, and the Government argued that the information would reveal each submitting company’s organizational chart, corporate structure, and how it allocates resources. As discussed above, it is impossible to discern a corporation’s structure given the EEO-1s general job categories, and the furnished information is companywide rather than by department.

 

Accordingly, in light of the absence of information pertaining to specific positions or departments, the Court finds that the Government has failed to make a showing that the demographic information contained in the EEO-1 reports is commercial. As a result, the Government was not justified in applying Exemption 4 to the EEO-1 reports, and they must be produced unredacted.”

It appears OFCCP either confused EEO-1 reports with the Workforce Analysis of AAPs for Minorities and Women or tried to inappropriately stretch the description of EEO-1 reports into the descriptions of commercial information the federal Courts had previously applied to AAPs for Minorities and Women and had found to fall within the ambit of Exemption 4 and had protected from disclosure. OFCCP’s argument reminds us of Alice in Lewis Carroll’s “Through the Looking Glass”:

“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.” “The question is,” said Alice, “whether you can make words mean so many different things.”

WHATEVER DOES THE CIR CASE DECISION FORETELL FOR EEO-1 COMPONENT 2 DATA RELEASE?

Answer: Caution; Care. But it should be ok.

OFCCP has now realized that forced disclosure of those EEO-1 reports in its possession is a potent concern and has intelligently positioned itself in three different ways against a future FOIA request for EEO-1 Component 2 data.

[NOTE: The EEOC does not face this concern since Section 709(e) of Title VII  [42 USC Section 2000e-8(e)] makes it a civil and criminal offense for an EEOC employee to release to the “public” any information or documents the Commission receives in the course of its mission. (The federal courts have interpreted the word “public” to NOT INCLUDE Charging Parties and Respondent Employers, which may thus receive each other’s Charge and Statement of Position)].

First, OFCCP has agreed NOT to take possession of the Component 2 data from the EEOC, since it, like the career and political appointee employees at the EEOC, realize they are data useless to the missions of the EEOC and the OFCCP…political chaff chummed in an earlier administration…but now a troublesome legacy, like toxic waste, waiting to be uncovered.

Second, the OFCCP was very careful in the CIR litigation to respond to the CIR as to ONLY those covered federal Government contractors “subject to OFCCP’s jurisdiction.” This is one step away from a related argument at OFCCP’s disposal as to why it need not disclose Component 2 data: that while OFCCP has jurisdiction over many companies which filed Component 2 data, OFCCP lacks jurisdiction over those companies to compel Component 2 Survey reports (since OFCCP did NOT join the EEOC in its “Information Notice” announcing the requirement of “employers” subject to Title VII jurisdiction and employing 100 or more employees to file the Component 2 “hours worked” and “pay data” reports).

Third, if OFCCP were to obtain the Component 2 data pursuant to its 2011 Memorandum of Understanding  (MOU) with the EEOC permitting it to share documents between agencies (perhaps in a Democrat Administration following the Trump Administration in a year or 5 years), OFCCP would step into the shoes of the EEOC’s restrictions on disclosure of data the EEOC has obtained pursuant to its legal authority. See the first sentence of para 5 of the MOU which would transmute Section 709(e)’s disclosure prohibitions to OFCCP’s exercise of its authority under Executive Order 11246: “When EEOC provides information to OFCCP, the confidentiality requirements of sections 706(b) and 709(e) of Title VII, apply to that information.”

NOTE: So, why didn’t this argument offer itself in the CIR litigation?  Answer: Because the OFCCP obtains EEO-1 Component 1 Survey reports independently of the EEOC pursuant to OFCCP’s Rule at 41 CFR Section 60-1.7…but note that 60-1.7 lacks any Component 2 requirement and thus OFCCP has no way, independently of the EEOC, to compel any company to file Component 2 data. This is not controversial. The OFCCP and EEOC agree. Also see the second sentence of para 5 of the MOU: “When OFCCP receives the same information from a source independent of EEOC, the preceding sentence [i.e. sentence 1 of para 5] does not preclude disclosure of the information received from the independent source.”

Finally, giving company lawyers in future Component 2 litigation a chance to factually distinguish her decision as applicable to only EEO-1 Component 1 Survey reports, Judge Westmore, writing in the CIR case decision, specifically noted that the EEO-1 data at issue before her did NOT include salary information:

“Here, the EEO-1 reports require federal contractors to furnish the composition of the workforce broken down by gender, race/ethnicity, and general job category. (citation omitted) There is no salary information, sales figures, departmental staffing levels, or other identifying information in these reports. Rather, the diversity reports required merely disclose the workforce composition to ensure compliance with Executive Order 11246, which prohibits employment discrimination by federal contractors.”

Wednesday, December 16, 2019: NLRB Now Allows Content-Neutral Limits on Union Insignia on Work Uniforms in Customer Service Areas

In a 3-1 decision applying the Boeing Co., 365 NLRB No. 154 (2017) decision legal test for facially neutral (or “content-neutral”) employer policies (i.e., not differentially excluding pro-union information), the Board now permits employers to again limit, but not prohibit, the wearing of union insignia (i.e. “buttons”) in customer sales areas. The new case decision is WAL-MART Stores, Inc. and the Organization United for Respect at Walmart (OUR Wal-Mart), Cases 13-CA-114222 and 32-CA-111715 (12/16/2019).

At issue here were two decisions of a National Labor Relations Board Administrative Law Judge striking down Wal-Mart’s “logos” and “graphics” policies as violative of employee Section 7 rights [i.e., right to unionize] which the National Labor Relations Act protects. Wal-Mart’s policy, while content-neutral, nonetheless limited union employees from wearing insignia on their work uniforms while working unless they were “small and non-distracting,” including union insignia. In practice, Wal-Mart’s logos and graphics policy allowed employees to wear union insignia so long as the logo or graphic was not larger than their employee name badges (2.25 inches by 3.5 inches) and were not distracting to customers.

NOTE: Wal-Mart did not find distracting a 1.5-inch diameter button displaying the following message: “Colossians 4:1 ‘Masters, provide your slaves with what is right and fair because you know that you also have a Master in heaven.’”

Applying a “weighing and balancing” legal test borrowed from the Boeing decision, the Board thus reversed in part and affirmed, in part, the ALJ’s two decisions (one addressing Wal-Mart’s national dress code and the other addressing its dress code in California Wal-Mart stores) applying the following reasoning:

“…if a policy, reasonably interpreted, would potentially interfere with Section 7 rights, the Board considers two factors: “(i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the [policy].” 365 NLRB No. 154, slip op. at 3. The Board will find that “the [policy’s] maintenance . . . violate[s] Section 8(a)(1) if . . . the justifications are outweighed by the adverse impact on rights protected by Section 7.” Id., slip op. at 16. [fn 12 omitted]. Limitations on the display of union insignia short of outright prohibitions will vary in the extent to which they serve legitimate employer interests and the degree to which they interfere with Section 7 rights. [fn 13 omitted] Thus, they will “warrant individualized scrutiny in each case” as Boeing Category 2 rules. Id., slip op. at 4.”

Examining the competing interests of Wal-Mart and employee Section 7 rights, the Board upheld Wal-Mart’s content-neutral logos and graphics policy to the extent the employee was working in customer sales areas, but NOT in-store storage or employee lounge areas or loading docks where customers were not allowed:

“Applying Boeing, we find that the Respondent [Wal-Mart] lawfully maintained its graphics or logos policies on the selling floor of its stores. The policies, when reasonably interpreted, would potentially interfere with employees’ Section 7 right to display some union insignia. Nonetheless, the adverse effect is relatively minor. Employees are free to wear any union message they want, subject to the policies’ size and appearance limitations, and they have done so without interference. Nothing in the Respondent’s logos or graphics policies denies employees that right. The only qualifications are that employees’ union insignia cannot be larger than their name badges (2.25 by 3.25 inches) or distracting. [fn 14 omitted.]

 

On the other side of the balance, the Respondent has offered evidence of its legitimate justifications for its logos or graphics policies: providing its customers with a satisfactory shopping experience by making store employees readily identifiable to customers and protecting its merchandise from theft and vandalism.” [Editor’s Note: Wal-Mart managers testified the company needed the employee badge to be the most prominent logo its employees wore on their uniform because its asset protection employees had had difficulties in the past identifying its employees when thieves, dressed as uniformed Wal-Mart employees, entered their stores and then walked out the front door with expensive merchandise under the guise of assisting customers].

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The Board nonetheless limited Wal-Mart from applying its logo and graphics policy in the “employee-only” areas of its stores since the customer satisfaction and confusion of identity issues were not sufficiently compelling in those contexts to trump employee Section 7 rights:

“The Respondent’s [Wal-Mart’s] interest in making it easier for customers to identify its employees only applies where customers encounter the Respondent’s employees, not in areas away from the selling floor, such as loading docks and other “employees only” areas. And the Respondent’s interest in ensuring that its employees are readily identifiable as such by its security personnel applies primarily on the selling floor.” [fn 17 omitted]

Monday, December 23, 2019: The NLRB Reverts to its Longstanding Policy to Defer to Arbitration Decisions

Brick-by-brick, the new Republican majority at the National Labor Relations Board (NLRB or Board), is now quickly dismantling the Obama-era union legacy at the Board.

The new case decision is United Parcel Service, Inc. and Robert C. Atkinson, Jr., 369 NLRB No. 1 (12/23/19). This new UPS case decision reverses the Board’s 2014 case decision in Babcock & Wilcox Construction Co., Inc., 361 NLRB 1127 (2014) and reinstates the Board’s case decisions as to post-arbitration (often called “post-arbitral”) procedures it had previously handed down in Olin Corp., 268 NLRB 573 (1984) and Spielberg Mfg. Co., 112 NLRB 1080 (1955) and as to pre-arbitration procedures the Board thirty-five years ago handed down in United Technologies Corp., 268 NLRB 557 (1984), and for deferral to pre-arbitration settlement agreements the Board had established in Alpha Beta Co., 273 NLRB 1546 (1985).

Scholars and practitioners all agree that the Babcock & Wilcox restrictions on union and company self-resolution of grievances through custom-designed and self-administered arbitration procedures were a radical departure from over 50 years of settled law and policy under the National Labor Relations Act (NLRA). Self-governance without federal government intervention in employment disputes between unionized employees and companies is a pillar upon which the Congress and President Franklin D. Roosevelt built the 1935 NLRA.

This case and the self-governance principle upon which it relies is also important to discrimination law practitioners in this “Me-Too” era in which arbitration of employee disputes under Title VII of the 1964 Civil Rights Act and the national policy in favor of private dispute settlement outside the federal courts is now under attack.

The legal issue in the new UPS case is this: whether and when the Board should exercise its discretion to defer to post-arbitration procedures a company subject to the NLRA and its union(s) have created and implemented when a union employee has filed a grievance pursuant to the union contract, but which also raises claims that would constitute an unfair labor practice charge that a discharge or discipline has violated the employee’s rights pursuant to the NLRA Section 8(a)(1) [aka 28 U.S.C. Section 157; i.e. makes it unlawful “to interfere with, restrain, or coerce employees in the exercise of their rights to unionize] and/or Section 8(a)(3) [aka 28 U.S.C. Section 158); i.e. makes it unlawful to discourage (or encourage) union activities or sympathies “by discrimination in regard to hire or tenure of employment or any term or condition of employment.”]

In what lawyers call “dicta” (i.e. a decision unnecessary to reach a result in the case before the decision-making tribunal), the Board also took it upon itself to address pre-arbitration procedures and expressed its policy to reinstate the Board’s United Technologies and Alpha Beta precedents even though pre-arbitration procedures were not technically at-issue in the UPS case before the Board. However, they were nonetheless implicated in the Board’s previous Babcock & Wilcox decision, which the Board was reversing and banishing from current Board policy. Accordingly, the Board felt it had to address the entirety of the Babcock & Wilcox decision to clarify current Board policy.

The new UPS decision now simply reinstates the (old) Olin/Spielberg legal standard and will cause the Board to defer to arbitration of an employee’s Section 8(a)(1) and/or Section 8(a)(3) rights when:

1. all parties have agreed to be bound by the arbitrator’s decision,
2. the proceedings appear to have been fair and regular,
3. the contractual issue is factually parallel to the unfair labor practice issue,
4. the arbitrator was presented generally with the facts relevant to resolving the unfair labor practice issue, and
5. the arbitral decision is not clearly repugnant to the Act—i.e., the decision is susceptible to an interpretation that is consistent with the Act.

In addition, under Spielberg/Olin, the burden rests on the party opposing deferral—here, the Charging Party—to show that the above standards were not met.

Monday, December 30, 2019: OFCCP Issued a Proposed Rule

The Office of Federal Contract Compliance Programs (OFCCP) announced a Proposed Rule titled “Nondiscrimination Obligations of Federal Contractors and Subcontractors: Procedures To Resolve Potential Employment Discrimination.” This is a significant and important proposal and deserves special attention. DE will be offering formal written Comments to OFCCP on behalf of DE Members. Apart from a coming Survey to Members, please contact Jennifer Polcer if you would like to join a DE Comments Steering Committee to help formulate the Comments DE will write and submit to OFCCP.

The proposed rule would make the following changes.

1. Codify procedures for two formal notices that OFCCP uses when the agency finds potential violations: the Predetermination Notice (PDN) and the Notice of Violation (NOV);
   • The PDN would replace the NOV as the document putting the contractor on notice of the alleged discrimination violations, although OFCCP would continue to also use NOVs to put contractors on notice of “material violations” (not defined) other than discrimination law violations, both as to liability and as to the remedies OFCCP seeks. The PDN thus would become the document alleging “liability” for a discrimination violation (and for any “material violations” of OFCCP’s Rules if they are also at-issue in OFCCP’s investigation) as OFCCP currently envisions the conciliation process. OFCCP’s currently proposed architecture would then cause the NOV to issue if OFCCP rejected the Contractor’s response to the discrimination liability allegations OFCCP made in its PDN. This architecture, if finalized, would make the NOV the discrimination “damages” document demanding backpay and seeking any other remedies. If conciliation were to then fail, OFCCP would perfunctorily then issue a Show Cause Notice which has, unfortunately, become as useless a tool as an appendix. This is because the Solicitors in the last 15 years have already completed reviews of the file at the time of the issuance of the NOV and now with this Administration’s reinvigorated use of a newly created PDN tool (both before and after the issuance of the PDN). Only new information will cause the Solicitors to change their minds about a case they have already greenlighted three times previously for litigation.
2. Clarify that contractors have the option to expedite OFCCP’s standard resolution procedures for discrimination findings and other “material violations” (not defined) by entering directly into a Conciliation Agreement before issuance of a PDN or NOV. While this sounds like OFCCP’s November 30, 2018 ERP (Early Resolution Procedures) Directive, OFCCP expressly warns it is not now seeking to codify the Directive but is instead offering something similar to the ERPs which the agency has entered into in the last year. (See fn 20 of OFCCP’s Proposed Rule.)
3. Add two definitions. The “Devil is in the details”…and there are many details here.
   • OFCCP’s proposed definition of the term “Nonstatistical evidence” seeks to codify the definition OFCCP uses in its sub-regulatory guidance (particularly in its August 24, 2018 compensation Directive. See fn 29 of OFCCP’s Proposed Rule), but without specifying either the quality or quantity of such evidence or whether OFCCP must share such alleged “Nonstatitical evidence” with the contractor, and when, to allow for “meaningful” conciliation.
   • OFCCP’s proposed definition of the term “Statistical evidence” seeks to reduce Title VII case law definitions of liability to a simple formulaic rubric. OFCCP would use this as its authority to launch broad systemic class compensation and failure-to-hire claims, without differentiating adverse impact (Griggs) claims from class-type intentional discrimination (Hazelwood/Teamsters) claims and thus conflating these two entirely different and antithetical theories of unlawful discrimination despite the rejection of that approach by all federal courts of appeals, the SCOTUS, and the recent OFCCP v. Analogic and OFCCP v. Oracle court decisions.
   • NOTE: The Proposed Rule does not commit OFCCP to refine its statistical regression analyses for either compensation or failure-to-hire audits to include ALL the major factors which affect pay or hiring. Moreover, OFCCP’s Proposed Rule specifically condemns subjective decision-making as a discrimination indicator despite the fact that all federal appeals courts and the SCOTUS (several times recently and emphatically) have heartily endorsed the use of subjective decision-making systems. (Ironically, too, the federal government’s Office of Personnel Management (the hiring arm of the federal government’s over 2 million civilian employees) strongly endorses the use of subjective decision-making systems, and all OFCCP personnel were hired and promoted using subjective selection systems).
4. Replace outdated references to the official title of OFCCP’s agency head, from “Deputy Assistant Secretary” to “Director.”

OFCCP requests comments for improving certainty in setting parameters for statistical evidence, including methodologies, minimum sample sizes, data groupings, methodological limitations, and ways to improve objectivity.

Submit comments by midnight on Wednesday, January 29, 2020.

THIS COLUMN IS MEANT TO ASSIST IN A GENERAL UNDERSTANDING OF THE CURRENT LAW AND PRACTICE RELATING TO OFCCP. IT IS NOT TO BE REGARDED AS LEGAL ADVICE. COMPANIES OR INDIVIDUALS WITH PARTICULAR QUESTIONS SHOULD SEEK ADVICE OF COUNSEL.