OFCCP Changes Up Its Audit Selection Methodology: OFCCP Plunged Deeper into New Era of “Drive-Thru Audits”

OFCCP published a new Corporate Scheduling Announcement List (CSAL) for Supply & Service Contractors for FY 2022. As OFCCP Director Jenny Yang previously promised, the new List includes 400 federal contractors and, for the first time in several years, some companies believed to be “covered” “subcontractors” made OFCCP’s audit list. (The Trump Administration dropped the agency’s attempt to audit subcontractors after its first year in office when the administration of the subcontractor program proved more troublesome than it was worth). OFCCP identified over 300 unique federal contractor corporations for audit, all with four or fewer AAP Establishments identified for audits (and OFCCP identified most for one audit, only).

Size Matters: The biggest change came, though, in the size of the establishments being audited. The first dozen AAP Establishments we were able to check which OFCCP identified on this CSAL for future audit were all hovering just above fifty employees in size, and one employed only 20 employees. With a two-year exception from 2012 to 2014, OFCCP has since 1982 not audited, by its choice through eight different OFCCP Directors in a row, those AAP Establishments where 49 or fewer employees are employed. The collective wisdom of the last ten political administrations employing those eight OFCCP Directors has been that auditing such small establishments does not give OFCCP much return on its investment in the audit.

Last week’s new CSAL not only abandoned the “no audits below 50 employees in an AAP Establishment” OFCCP practice (which dates back 40 years to 1982), it also quietly abandoned the Trump OFCCP decision to audit only larger establishments. The Trump OFCCP audit practice was to audit only those AAP Establishments which employed 100 or more employees unless the establishment in question had signed a prime covered federal Government contract. In that case, the establishment could employ as few as 70 employees in the Trump OFCCP audit selection architecture and still remain eligible for audit.

The audits of these small establishments are typically shallow, or even meaningless. Some of the under-fifty employee AAP establishments have no hires for the audit year(s) in question and very few total employment transactions to audit. Systemic analyses bottomed on “meaningfully large” collections of (typically at least) thirty or more similarly situated employees (one of the primary policy reasons the OFCCP exists and the federal government does not leave discrimination matters to the EEOC alone) are virtually impossible to accomplish in such small establishments. Finding approximately at least thirty or more similarly situated employees is typically not possible in an establishment employing a total of only approximately 50 employees (or even in establishments employing ten times that number) typically working small teams in multiple different job titles. (OFCCP’s backpay collections historically have come from very large AAP establishments, for example, employing over one-thousand employees).

Serious Implications Will Follow the Coming of More OFCCP Drive-Thru Audits

1. OFCCP Productivity Will Seem to Magically Increase, Almost Overnight

OFCCP will suddenly increase its audit starts and completions, making the agency suddenly appear more productive. These “Drive-Thru” audits will require far fewer OFCCP analyses, will consume far fewer OFCCP human resources and will cut down both the amount of time spent and the running time to complete the “small headcount” audits. Many contractors will see audits open and close in a matter of only a few weeks because of the paucity of employment transactions available for OFCCP to analyze.

This is also the second back-to-back batch of Drive-Thru OFCCP audits, as noted above. The prior FY 2021 Construction Contractor audit list OFCCP published on September 1, 2021, listed only 400 “Compliance Check” audits. Compliance Checks are a quick-in and quick-out records-check (only). In past years, OFCCP Compliance Checks have lasted less than twenty minutes on-site and have caused contractors to spend fewer than one hour preparing for and “defending” the Compliance Check.

While the recent Compliance Checks are slightly different than their predecessors, these more modern Compliance Checks have also been very quick. They have lasted only a few hours, and enabled OFCCP in September 2021 to start and close in the same month over 25% of the 400 Compliance Checks it announced at the beginning of that month.

What’s Going On? OFCCP has been struggling with increasingly falling audit productivity over each of the last eight years. To counter the steep reduction in the number of audits OFCCP is completing per Full-Time Equivalent employee, OFCCP began to experiment with different resolutions to the problem. First, OFCCP tried to adjust expectations (beginning in 2015) by predicting fewer OFCCP completions per year. Then, the Trump OFCCP, seeing the reality that productivity was calving, and audit production was in free-fall, created the first of the three recent “Drive-Thru” audit tools, this one known as a Focused Review. The purpose of these Drive-Thru style audits, by various names, was to increase the number of audits by reducing the time OFCCP spent on these types of reviews. The number of audits looks more impressive to the outside world even at the expense of stronger OFCCP enforcement results.

Then, the Biden OFCCP resurrected the Compliance Check audit tool the Bush OFCCP (the son) had retired while declaring it to be too expensive for the paltry enforcement results it produced. “Not enough Return on Investment” (“ROI”), then OFCCP Director Charles James announced at a National Employment Law Institute annual Affirmative Action Briefing where he broke the news of his withdrawal of this Drive-Thru audit tool.

And now, the third in the string of Drive-Thru OFCCP audit tools is now debuting with the arrival of “small AAP Establishment” audits. Rather, this new CSAL intentionally includes numerous small employee headcount AAP Establishments going backward from the direction the Clinton through Trump OFCCP Directors were driving OFCCP audits.

2. OFCCP Back-Pay Collections Will Continue to Plummet

As we have predicted for several years now, OFCCP back pay collections will continue to fall, precipitously. There are many intersecting reasons for this surprising result, but this CSAL adds yet another reason to force a decline in OFCCP enforcement statistics and backpay collections.

You need wood to make a fire burn. If there is only a small amount of wood, there will not be a very big fire. Many of OFCCP’s audit targets OFCCP identified in its new CSAL will simply be too small to make for meaningful statistical analyses (or what OFCCP calls “systemic analyses”) …the tool with which OFCCP usually hunts unlawful discrimination in hiring to ring up its backpay collection numbers.

And OFCCP has thus far failed to find “widespread” compensation discrimination and its backpay collections continue to therefore be very modest in that category (one-in-a-million allegations of discrimination per employee whose pay OFCCP has investigated). And, as an aside, OFCCP’s backpay collections for alleged unlawful pay discrimination will continue to shrink as OFCCP has (appropriately) moved away from some of its previous (inappropriate) analyses which had forced many “false positive” findings.

The Trump OFCCP reported no discrimination violations and only two technical affirmative action violations from its first batch of 500 Drive-Thru Focused Review audits (almost half of OFCCP’s audit production for the year). It did not take Biden OFCCP Director Jenny Yang many months on the job at OFCCP to decide the Focused Review was not an effective audit tool and to retract and retire it from OFCCP’s arsenal of audit tools.

The first batch of Biden Administration Drive-Thru audits, fueled by the return of the previously disgraced and retired OFCCP “Compliance Check” audit tool to be used in conjunction with construction audits, is following in the footsteps of the Focused Review audit tool. The first 100+ OFCCP Compliance Checks have produced no discrimination violations (they are not geared to do so as a records-check-only tool), no affirmative action violations, no Conciliation Agreements, and no Consent Decrees.

Ignoring Lessons Learned From OFCCP’s Past: What the Clinton, Bush and Obama OFCCP administrations learned was that OFCCP must do the hard work of full Compliance Reviews, with no short-cuts or truncated Drive-Thru mini-reviews by whatever name (Compliance Check/Focused Review)—to properly investigate and remedy unlawful employment discrimination.

And, what the Bush, Obama, and Trump administrations learned, and translated into effective operating audit policy and practice, is that OFCCP must raise its sights and hunt for “Big Game.” Bush OFCCP Director Charles James used to often advise his OFCCP Compliance Officers to “forget about the onesies and twosies,” or even where we suspect there might be as many as ten individual instances of unlawful discrimination. Leave that to the EEOC and to the Plaintiffs’ lawyers. “We want the Big Game, the employment systems, the companies where we can investigate high number-count employee establishments and can conduct systemic analyses,” Director James used to instruct.

3. OFCCP’s Next CSAL Will Come Faster Than in The Past

The last 800 announced OFCCP audits have been Drive-Thru audits (400 Compliance Checks of Construction contractors:  September 1, 2021), and now this so-named “FY 2022” CSAL with, again, only 400 Supply and Service audit targets AND salted heavily with small-headcount audits and a sprinkling of “closed” audit targets which contractors shuttered in the four years since the 2018 EEO-1 reports on which the OFCCP relied for its FY 2022 CSAL to identify establishments for audit. So, OFCCP will get through these two “easy” audit lists in a hurry.

Also, OFCCP previously announced on July 1, 2021, only 750 Supply and Service audits. So, in the last almost 12 months, OFCCP has announced only a total of 1150 Supply and Service audits and 400 Compliance Check construction contractor audits. That is only about a year’s worth of work for OFCCP even at OFCCP’s currently very slow pace. (OFCCP completed 1125 Supply and Service audits and 117 Construction Compliance Checks (in September 2021 alone) in FY 2021. OFCCP has thus already had a full year to nibble-down its 750 audit targets from last summer (2021) and has already completed (in the month alone of the last Fiscal Year) 25%+ of its announced construction contractor audits. So, there is not much left in OFCCP’s audit pipeline, other than the “aged audits” which seem to be on side burners just staying warm, but still not cooking to completion.

At the current rate of consumption, the fewer than 300 remaining Construction Compliance Checks and the 400 new FY 2022 Compliance Reviews featuring numerous smaller AAP Establishments is likely enough audit fuel to take OFCCP only up to and into the early days of the new FY 2023 Fiscal Year. And since OFCCP is now labeling its CSALs by Fiscal Year dates (i.e., FY 2021 CSAL; FY 2022 CSAL), it appears OFCCP may be positioning itself to now return to the annual Fiscal Year audit lists the Carter through Bush OFCCP Administrations administered. 

So, we are thinking Fall 2022 for FY 2023 CSALs, on both sides of the house (Supply & Service and for Construction). Note: The new federal Fiscal Year 2023 will begin October 1, 2022.

OFCCP’s New Audit Scheduling Methodology Hunted for Companies Which Were Hiring Despite the COVID-19 Pandemic and Despite the Great Resignation

The Agency also continued the previous administration’s tradition of publishing a scheduling methodology, or so-called “transparency letter” explaining how OFCCP picked its audit targets for this new round of OFCCP audits. If a contractor or subcontractor believes it was selected by mistake (given the methodology), it should send an email to ofccp-dpo-scheduling@dol.gov.

Editor’s Note: companies are only covered “subcontractors” subject to OFCCP’s jurisdiction if they either:

• contract to perform a piece of the prime federal contract themselves (common among construction contractors but not so much among Supply and Service contractors), or
• are “necessary” to the at-issue contract pursuant to state or federal law to perform one or more pieces of the prime federal contractor’s or some other covered federal Government subcontractor’s covered federal Government contract.

As a result, VERY few subcontractors are “covered” federal Government subcontractors obligated to comply with OFCCP’s Rules and be subject to audit. OFCCP only knows of the existence of “subcontractors,” for the moment, if your company “checked the box” on the EEO-1 form confessing (whether accurate or not) federal subcontractor status. Because this box is VERY confusing and OFCCP reports an average yearly 33% error rate in contractor use of this check box, companies that erred in “checking the box” may simply explain the error to OFCCP at the time of any attempted OFCCP audit. If your story checks out (that your company is not a “covered” subcontractor, OFCCP will “Administratively Close” the audit with no fuss or muss.

The CSAL is a courtesy notification to merely inform selected contractors that an official audit Scheduling Letter will follow in the future at an unknown date. NOTE: OFCCP previously withdrew the 45-day historical hiatus between the publication of the CSAL and the first day an OFCCP District Office could/would mail an audit Scheduling Letter as we wrote about here discussing OFCCP’s either withdrawal or heavy modification of four significant Trump OFCCP Directives, including Directive 2018-08 (Transparency). In that Week In Review Blog, we quoted OFCCP as follows:

“DIR 2018-08 formalized an additional automatic 45-day scheduling delay after the issuance of a Corporate Scheduling Announcement List (CSAL) to notify contractors that they are included in OFCCP’s scheduling list. As provided below, OFCCP is modifying these policies because they run counter to OFCCP’s goal of conducting comprehensive compliance evaluations that foster consistent accountability and timely submission of required information.”

Accordingly, OFCCP could send an audit Scheduling Letter at any time on or after Friday May 20, 2022, to commence a Compliance Review (i.e., “audit”) at any one or more of the AAP establishments OFCCP identified on its May 20, 2022 CSAL.

The new CSAL consists of:

• 12 Corporate Management Compliance Evaluations (CMCEs or “glass ceiling audits”)
• 12 Functional Affirmative Action Program Reviews (FAAPs)
• 376 Establishment Reviews

Per the announcement, the Agency reminds federal government contractors of the following resources to prepare for a Compliance Evaluation.

• Compliance Assistance Guides
• Virtual Compliance Assistance Events
• Scheduling Letter FAQs