OFCCP’s Proposed NPRM Walks Backwards Promising Less Transparency in Audits and Unknown, But Different (to come), Evidentiary Standards in Discrimination Investigations

Contractors Will Not Like OFCCP’s Assault on Their Rights or OFCCP Interpretations of Title VII Law Requirements Changing Like the Weather

But This Will Happen as OFCCP Continues Its New March to be a Highly Politicized Federal Agency Like the NLRB with Enforcement Policies Which Change Depending on Which Party Is in The White House

It is a sad day, but that day is upon us when step-by-step, OFCCP again forfeits its place as a neutral investigator (“Switzerland”) faithfully investigating and prosecuting three statutes the Congress has not changed in 30+ years even while OFCCP now changes its interpretations of these laws with every new Democrat or Republican Administration. It has only been like this for the last three Administrations.

The object of current concern is OFCCP’s announcement it is now going to implement in fact its year-old threat to rescind the November 10, 2020 Trump OFCCP so-called “Predetermination Notice (“PDN”) Rule,” a short-lived breath of transparency and organization of often chaotic OFCCP audits claiming contractors had accomplished “systemic” (statistically based) discrimination.

OFCCP published the following four documents which now draw our interest to the way the agency proposes to (and will) go forward to conduct audits alleging unlawful discriminatory employment practices and conciliate differences with covered federal Government contractors:

• A two-page March 21, 2022 USDOL Press Release on USDOL’s Press Office website: “US DEPARTMENT OF LABOR ANNOUNCES PROPOSED RULE FOR MODIFYING PROCEDURES TO IDENTIFY, REMEDY DISCRIMINATION IN FEDERAL CONTRACTING

  Seeks to improve process, better use resources to promote equal employment opportunity;” and

• What appears to be the earlier draft of the same Press Release which OFCCP pushed to subscribers of the agency’s news alerts titled: “OFCCP Announces Proposed Rule for Modifying Procedures to Identify and Remedy Discrimination in Federal Contracting;”
  • Well, this looks both like a little pushing and shoving going on between OFCCP and the Secretary of Labor’s Press Office as to who is going to take the bow (“US DEPARTMENT OF LABOR ANNOUNCES…” vs. “OFCCP Announces…” and somebody is likely to get a tongue-lashing for not coordinating at least common content between the two dueling Press Releases. (But truth be told, as a former newspaper editor, I prefer the OFCCP version of the Press Release because it is better written. But both Press Release writers need to work hard to get rid of the gerunds. I mean, what is it with those “ing” gerunds…. Need to work on sharpening those up next time….)
• A two-page March 21, 2022 Blog from OFCCP Director Jenny Yang which repeats the content of the Press Releases, although following the OFCCP version of the mantras and titled: “Protecting Workers, Promoting Diversity and Enforcing the Law.” (Notice: this is the marketing and media-hype document seeking to create in the reader mental images of grand and heroic themes and lofty aspirations written for political consumption…it is almost as though the Director’s Blog should have been the Press Release and the Press Release should have been the Blog); and
• A 42-page Federal Register “Notice of Proposed Rule Making” (“NPRM”) titled “Pre-Enforcement Notice and Conciliation Procedures” which confirms and repeats the content of the Press Releases and the Director’s Blog. So, kudos to OFCCP, the USDOL Press Office and the Office of Management and Budget for getting all four writings to consistently make the same substantive (mantra) statements and even despite dueling Press Releases which sometimes used different words to say the same thing. In the end, though, I was worn out with four writings, and would have been more satisfied with just one Press Release and the NPRM. Less is more when there is nothing newer to write.

OFCCP’s NPRM Boils Down to Two Things of Importance to Federal Contractors…

First, OFCCP proposes to delete from OFCCP’s Rules at 41 CFR Section 60-1.3 the definitions of both “Qualitative evidence” and “Quantitative evidence” which OFCCP must gather to BOTH:

• allege and to prosecute unlawful discrimination; and
• to transparently advise the contractor as to what OFCCP’s liability and damages claims are, and the evidence the agency has to support those claims so the contractor may rebut them, if it can, per the Trump OFCCP “Pre-Determination Rule.”
  • OFCCP feels these Trump OFCCP distillations of Title VII law were too rigid and inflexible and not proper characterizations of Title VII law. Here is how OFCCP repeatedly put it:

    “The 2020 rule also imposed inflexible evidentiary requirements early in the compliance evaluation process and attempted to codify complex evidentiary definitions for “qualitative” and “quantitative” evidence and other standards. In some instances, these heightened requirements for the pre-enforcement process go beyond what courts require for proof at trial.” OFCCP Press Release at p. 1, para three.

  • While federal Contractors loved this step-by-step recipe for OFCCP discrimination law analyses, codifying discrimination law standards in a Final Rule which is difficult to change as federal court interpretations of the law change was a bad idea. Moreover, Title VII law is too dynamic to distill down to two short paragraphs. So, the Trump OFCCP should have never done this. The Trump guys did this simply to handcuff the incoming Biden Administration from too soon or too easily changing the evidentiary standards OFCCP would apply in audits to assess non-compliance with one or more of the three statutes OFCCP enforces.

That said, the Trump OFCCP was nonetheless on to a good idea, even if it used the wrong format: a “Rule” instead of a public Directive amending OFCCP’s Federal Contract Compliance Manual and attaching public training materials containing instructions about how to investigate and put forward systemic discrimination analyses.

The Biden OFCCP is on to this formatting issue and has published a statement of its intent to publicly publish the legal standards to replace the Trump PDN evidentiary Rules the Biden OFCCP Rule seeks to “modify:”

“The 2020 final rule was the first time OFCCP sought to codify the specific forms of evidence that the agency must rely upon during its pre-enforcement process. Through this proposal, OFCCP would promote consistency by codifying the required use of the Predetermination Notice and Notice of Violation when the agency identifies preliminary indicators or findings of discrimination, while allowing the agency the flexibility to issue appropriate guidance to field staff on the use of the procedures. OFCCP would continue to ensure transparency by sharing this guidance with the public.” (emphasis added) see page 16140 of the NPRM, 3rd full para

Now, before the Contractor community gets cranked out of shape that the OFCCP has not also now made public whatever those new discrimination investigation and prosecution instructions might be, please realize two things:

First, OFCCP cannot publish those new discrimination investigation and prosecution instructions until the agency has first issued a Final Rule modifying the existing in-force Trump OFCCP Final Rule; and

Second, OFCCP cannot wander too far from the discrimination law evidentiary instructions the Trump OFCCP issued (even though OFCCP has announced its intention to do so). If OFCCP were to do so, it would run the risk of having the federal courts enjoin the Biden OFCCP Final Rule. This is because the Trump OFCCP interpretation of Title VII law was codified only recently and no Congressional changes to Title VII law have occurred, and the federal courts have not handed down any case law decisions departing from the evidentiary standards the Trump OFCCP published.

Please understand that the Biden OFCCP may withdraw the Trump evidentiary standards as a Rule (and convert their use to a Directive or a Federal Contract Compliance Manual instruction). However, that does NOT mean the Biden OFCCP may then willy-nilly also choose to use different Title VII evidentiary standards in audits. Rather, the Biden OFCCP may ONLY withdraw the agency’s interpretation of the Trump evidentiary standards if the Biden OFCCP can prove to any reviewing court that the Trump standards are “arbitrary and capricious” or “not otherwise in accordance with law.” That is a tall legal order for OFCCP. This is because it first raises the ugly question: “Which time was the OFCCP wrong in its interpretation of what Title VII law’s evidentiary standards are?” Second, OFCCP needs to put forward evidence it is right in its new interpretation of Title VII.

The biggest unknown in all of this is whether any federal contractor(s) or contractor association has the gumption to sue OFCCP in federal court (almost undoubtedly in Texas) to set aside the Final Biden OFCCP rule when Director Yang takes it to Final?

Second, OFCCP is proposing a highly controversial change to become less transparent to federal contractors in audits when OFCCP is alleging claims of alleged unlawful employment discrimination or of alleged Affirmative Action violations, or of both. Here is how:

1. The text of Executive Order 11246, as amended, has language (much like that in Title VII of the 1964 Civil Rights Act) requiring OFCCP to conciliate with contractors in audits and in Complaint investigations as a necessary pre-condition to later reaching impasse with a contactor and filing an Administrative Complaint against it involving either claims of alleged unlawful employment discrimination or of alleged Affirmative Action violations, or of both:
   • Section 209, para 6, part (b): “Pursuant to rules and regulations prescribed by the Secretary of Labor, the Secretary shall make reasonable efforts, within a reasonable time limitation, to secure compliance with the contract provisions of this Order by methods of conference, conciliation, mediation, and persuasion before proceedings (emphasis added) shall be instituted under subsection (a)(2) of this Section, or before a contract shall be cancelled or terminated in whole or in part under subsection (a)(5) of this Section.”
     • Note: Of course, OFCCP does not have the legal authority to debar federal contractors from their federal contracts. Rather, Section 208(b) of EO 11246 requires OFCCP to first sue the Contractor by filing an Administrative Complaint with the Office of Administrative Law Judges which will appoint an Administrative Law Judge (“ALJ”) to conduct a trial type hearing which looks much like a trial in federal court. Then, the ALJ may only “recommend,” but not implement, a debarment. There is much more to it beyond the space here to describe it.
2. The SCOTUS ruled in 2015 in the Mach Mining v. EEOC case decision, interpreting Title VII’s similar “conciliation required” language, that the statute required only that the EEOC essentially put the employer on notice of the agency’s dispute with the employer and the agency’s remedial demand but without sharing the agency’s evidence or reasoning or work product in support of either liability or damages.
3. The Equal Employment Opportunity Commission’s then Republican majority (on the five-Member Commission) voted on January14, 2021 to issue a Final Rule committing the EEOC to go beyond the bare-bones Mach Mining conciliation requirement. If you are rusty on the Mach Mining holding, read our prior WIR story discussing it while reporting on the Commission’s (soon to be short-lived) vote for transparency.
4. Congressional Democrats, then in control of the House and with a 50-50 balance of power in the Senate with Republicans, but able to win 50/50 Senate votes with the help of the Democrat Vice President’s tie-breaker vote, on March 23, 2021 introduced legislation to rescind the EEOC’s transparency Rule. On June 28, 2021, The Senate and House finished voting in favor of the rescission and sent the Bill to President Biden for his signature.
5. So, now, the Biden OFCCP is heading down the same path as the Congressional Democrats to rescind the transparency Rules the Trump OFCCP passed in parallel with the EEOC’s transparency bill. The Biden OFCCP’s objective is to now install a requirement that OFCCP need only comply with the bare-bones requirement of Title VII’s conciliation requirement as the SCOTUS’ court decision interpreted it. The OFCCP mechanically accomplishes this in its NPRM by proposing to re-write 41 CFR Section 60-1.20(b) to impose on OFCCP only a “reasonable efforts” standard of conciliation. The newly proposed section 60-1.20(b) would also state that OFCCP will interpret the term “reasonable efforts” to be consistent with the SCOTUS’ Mach Mining decision’s holding which outlined what the EEOC had do to conciliate to meet Title VII’s bare-bones requirement. This re-write of Section 60-1.20(b) would also work hand-in-glove with the rescission of the “evidentiary standards” discussed above because compliance with those standards operated as the transparency federal contractors needed to understand OFCCP’s claims and proof thereof.

Here is what OFCCP’s proposed modified Rule says exactly at page 16152 of OFCCP’s NPRM:

“3. Amend § 60-1.20 by revising paragraph (b) to read as follows:

 60-1.20 Compliance evaluations.

* * * * *

Where deficiencies are found to exist, OFCCP will make reasonable efforts to secure compliance through conciliation and persuasion, pursuant to § 60-1.33. The “reasonable efforts” standard shall be interpreted consistently with title VII of the Civil Rights Act of 1964 and its requirement that the Equal Employment Opportunity Commission “endeavor to eliminate any such alleged unlawful employment practice by informal methods of conference, conciliation, and persuasion.”

OFCCP’s articulated rationale for the proposed modification does not address and carefully avoids the lack of transparency its new proposed Rule will cause. Rather, OFCCP creates a separate discussion attacking the “evidentiary standards” discussed above (which, again, allow for contractors to transparently understand OFCCP’s facts and the law the agency believes applies and to replicate OFCCP’s liability and damages analyses) as going beyond the Executive Order’s requirements of necessary disclosure to meet its obligation to “conciliate.” OFCCP also complains that it burdens the agency to have to put its case together to present it to the contractor as though the agency were ready to go to trial.

But then, to add insult to injury, OFCCP complains that the agency’s Predetermination Notice is only a very preliminary accusation of unlawful discrimination and that is why contractors should not expect the agency to build out its case as though it were ready to go to trial. However, OFCCP first fails to mention that it also seeks (usually substantial) financial recompense at the same time from the contractor. So, on the one hand OFCCP argues that the Predetermination Notice is a trifle and not really a mature or meaningful document in the audit since it is so preliminary, and the agency really does not have its proof, or its case assembled just yet, but nonetheless uses the PDN to annually demand millions of dollars of backpay from contractors.

Second, OFCCP also fails to mention that its practice has been to circulate the draft PDN, prior to presentation to the contractor, throughout the entire OFCCP review chain of command which must approve it. So, once the OFCCP chain of command has approved the PDN for whatever good or bad reasons known only to OFCCP but not the contractor, the subsequent agency issuance of Notices of Violation and Show Cause Notices provide no opportunity for any additional levels of meaningful review of the dispute (as used to happen) since “OFCCP has decided.”

And what exactly is the review process? There is not a meaningful one at OFCCP any longer. The same National Office Enforcement Division which undertook OFCCP’s secret liability and damages analyses are the same individuals reviewing their work product when the contractor pushes back. Investigator, analyst, judge, jury, and executioner all rolled into one. OFCCP discrimination analyses are now a closed loop system with decisions typically reverting to a small group of Labor Economists in the National Office with a few senior administrators signing off on typically technical statistical analyses they have not prepared, do not have the technical training to understand and routinely cannot and will not explain to contractors.

So, What’s Going to Happen When OFCCP Bulls This PDN Roll-Back Through the Regulatory Process to a Final Rule?

Nothing will happen different than what the federal contractor community has already been suffering for the last four years. OFCCP managers never adopted and applied the PDN Rule, even while saying they did. Those in audits knew better from first-hand experience. OFCCP senior managers read the PDN rule, knew they hated it, ignored it, and did not change their refusals in audits to provide contractors with enough information to even allow contractors to replicate OFCCP’s statistical analyses. In the meantime, they hid out from the OFCCP Director and patiently waited for the Republican Administration to leave town.

In the meantime, OFCCP settlements have ground to nearly a complete halt because contractor representatives cannot explain to corporate decision-makers why the company would be paying money for claims no one in the company can replicate, let alone explain. (Just reflect back: how many OFCCP discrimination settlements have occurred in the last year plus? The lowest number and dollar value (both) in OFCCP’s history as we wrote about on January 31, 2022. OFCCP is playing the “long game” hoping contractors will tire of never-ending audits going into their fourth or fifth or sixth year of inactivity and will eventually give up and write a check just to buy peace and end the audit.

And OFCCP wonders why its budget keeps shrinking or not quite keeping up with increasing expenses…with bi-partisan support in every year for the past thirteen years to take OFCCP down. Senior corporate managers, including CEOs and General Counsels, and their lobbyists are in the halls of Congress literally every day, and in the White House. And when Democrat and Republican Members of Congress ask company managers how the Executive Branch is treating them, it does not take long for OFCCP’s name to come up in the discussion.

I remember telling a surprised OFCCP Director in recent years that I had accidentally stumbled onto an anti-OFCCP lobbying effort of a broad coalition of federal contractors which I had understood had a $1M war chest to privately lobby against OFCCP. A few years later, after that Director had left the agency, I learned quite by accident yet again about that same lobbying group but received an updated report that its war chest included approximately $10M to lobby against OFCCP’s audit protocols and analyses which typically left senior corporate lawyers quizzical.

So, the contractor community is in for continued rough sledding until OFCCP again chooses to be transparent and explain what evidence exists to believe that corporate decision-makers committed intentional discrimination (OFCCP’s discrimination claim of choice almost 100% of the time) based on race, sex, gender, or any other protected status. In the next two and half years, OFCCP and contractors will undoubtedly continue to reach impasse on the agency’s unexplained claims of unlawful discrimination. Many contractors will regretfully make the decision to “just write the check” for small claims just to “buy peace” even while feeling “bullied” and telling everyone who will listen. Still other companies will stand their ground as to large and unexplained discrimination demands. OFCCP will hope for the “check writers” and not the Baker DCs or Oracles of the government contractor community which recently chose to stand on their legal rights and make OFCCP prove up their unfathomable (and losing) cases.

Companies these days run on data-driven decisions and are not invested in OFCCP’s style of “bluff poker.” All in all, it ought to be a good time for defense lawyers with companies standing back wondering why OFCCP just cannot lay its cards down on the table if OFCCP has the cards in its hands, in fact.

Comments Anyone?

If you want to comment on OFCCP’s NPRM, you have only 25 days from the NPRM’s publication date = April 21, 2022. (One wonders why the rush since protocol is to set a minimum of 30 days to allow comments). But be prepared…OFCCP will likely ignore most federal contractor comments as to the critical issues, go to final on them and make a few minor changes around the edges to make it appear to have been listening and engaging or to correct the mistakes in its proposal.

Brace for impact.