OFCCP Week In Review: April 17, 2023

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 J. Chambers and Cynthia L. Hackerott. In today’s edition, they discuss:

• OLMS Submitted for OMB Review its Final Rule to Revise Union Persuader Reports to “Out” Federal Contractors
• EEOC Vice Chair Samuels & Commissioner Sonderling Told DEAMcon23 Attendees that EEO-1 Component 2 Survey Will Soon Return
• Biden Administration Sought to End Remote Work for Federal Employees
• Federal Judge Alsup Ordered USDOL’s Lawyers to Prepare an Order Setting Dates & Deadlines for Outstanding FOIA Requests as to Contractor EEO-1 Filings
• Senator Sanders Announced His Intention to Hold Julie Su’s Controversial Nomination Hearing on April 20: Tough Political Battle in Progress
• U.S. Supreme Court Issued Unanimous Ruling Allowing Litigants to Go to Federal Court on Certain Constitutional Challenges to Agency Investigations
• OFCCP Published Second Notice Regarding Proposed Changes to Its Supply & Service Contractor Audit Scheduling Letter & Document Demands
• In Brief
• Looking Ahead: Upcoming Date Reminders

Friday, April 7, 2023: OLMS Submitted for OMB Review its Final Rule to Revise Union Persuader Reports to “Out” Federal Contractors

The U.S. Department of Labor’s Office of Labor-Management Standards (“OLMS”) submitted to the White House Office of Budget and Management (“OMB”) its Final Rule to am­­­­end the current Form LM-10 (union “persuader reports”). In September 2022, OLMS proposed amending Form LM-10 to add a checkbox to Item 12 requiring employers obligated to file the Report to identify (a) whether they are federal contractors or subcontractors, (b) the filer’s Unique Entity Identifier, and (c) the federal contracting agency or agencies with which the filer has contracts/covered subcontracts. The proposal did not call for any change regarding which companies must file LM-10 forms or when or how often they must file. The 30-day comment period closed on October 13, 2022, with only 21 public comments.

As we reported in mid-October 2022, OMB temporarily withheld approval of the Final Rule pending the agency’s assessment of public feedback. In its Notice of Action, OMB directed OLMS to provide a “summary of all comments received … and identify any changes made in response to these comments.”

Now that OLMS has submitted the Final Rule, OMB will complete its review process. As per the usual procedure, OLMS will not publish the Final Rule unless and until the OMB approves it. Generally, OMB has 90 days to complete its review of each submission. However, there is no minimum period for review, and OMB may extend the review period.

Wednesday, April 12, 2023: EEOC Vice Chair Samuels & Commissioner Sonderling Told DEAMcon23 Attendees that EEO-1 Component 2 Survey Will Soon Return

Vice Chair Samuels made national news announcing coming new Pregnancy Act Rules

DE Executive Director Candee Chambers served as “the bipartisan middle” to facilitate an insightful “Fireside Chat” (complete with a burning wood fireplace screen image) with Equal Employment Opportunity Commission (“EEOC”) Vice Chair Jocelyn Samuels (Democrat) and Commissioner Keith E. Sonderling (Republican) on the first day of DEAMcon23 in Chicago. (The DirectEmployers Annual Meeting of Member Companies and those from the public is abbreviated as DEAMcon followed by the year date: i.e., DEAMcon23). Both Commissioners spoke as though the return of EEO-1 Survey Component 2 “Hours Worked and Pay Data” reporting requirement for covered employers (in some form) is inevitable. They also both stated explicitly that they want the public to have a robust notice and comment opportunity for any such proposed requirement.

“I am personally committed and I know that the Chair [Charlotte A. Burrows] is as well, to ensuring that we do something that gives everyone the real opportunity for informed public comment. So, that will take place,” Samuels said.

“And you can be assured that I will be screaming for notice and comment through formal rulemaking if we engage in a [Component 2 pay data collection],” Sonderling interjected. [See below for a further discussion of this point.]

How We Got Here

With the 5-Member bi-partisan Commission likely to soon have a majority of Democrats [see more details discussed below], it appears that the then fully-filled Commission will seek to implement (over the dissenting votes of both Republican Commissioners) a new EEO-1 Component 2 pay reporting requirement. (See our story here for background on Component 2 data collection). [Note also that Sonderling told the DEAMcon22 audience to expect its return.]

In July 2022, the National Academies of Sciences, Engineering, and Medicine (NASEM) issued a report (“NASEM report”) evaluating the quality of the limited-run EEO-1 Survey Component 2 data collection for reporting years 2017-2018. The EEOC commissioned the study by a unanimous vote in 2020. “[We commissioned the study] to take a look at the data that we collected to tell us whether it was useful for evaluating the existence of pay discrimination and enabling us to fulfill our enforcement responsibilities,” Samuels explained during the discussion on Wednesday.

Our story detailing the report is here, including how the five EEOC Commissioners sitting at the time responded with notably different takes. “Keith may have a different view [than I] about how to read this report,” Samuels intoned with great understatement.

In our July 2022 story, we reported that the expert panel assigned to conduct the study found that the Component 2 “data as collected have value” as they are unique among federal surveys by providing employee pay, occupation, and demographic data at the employer level. Samuels focused much of her remarks on these aspects of the findings.

However, the panel recommended that “the value be strengthened by both short-term and longer-term improvements in respondent coverage, data collection protocols, measurement implementation, and conceptual coverage.” Shortly after the report’s release, the expert panel behind the report held a webinar expanding on their views. Among other things, the panel noted that although collecting these types of data has some value, the collection instrument used in 2017-2018 had a flawed design and measurement issues and that the data needed “cleaning.” The panel also emphasized that the EEOC should look to other agencies for examples of how to move forward.

“We had suggestions about how to improve pay data collection if we adopt a new instrument, and we’re looking very closely at those,” Samuels reported.

Commissioners Committed to Public Comment Opportunity

Chambers asked the question on everyone’s mind – prior to adopting any new instrument, will the Commission submit its Component 2 pay data reporting proposal for public notice and comment procedures in accordance with the Administrative Procedure Act and thereafter to the White House Office of Management and Budget (“OMB”) for Paperwork Reduction Act approval?

“If in fact we move forward with pay data collection – and that will be of course subject to a vote of the commission – […] there will be robust opportunities for public comment,” Samuels assured the audience. “And we really will want to hear from all of you,” she continued. “Because our goal at the end of the day is, if we adopt this kind of an instrument, to ensure that it is probative in ways that can be useful to all of you to identify disparities that bear further investigation. But also, to make it as minimally burdensome as possible. And you are the people on the ground who can help to educate us about how we can meet those goals. So, this is a continuing dialogue. I’m sure you will hear more from us. But I really look forward to continuing to discuss it.”

Chambers pointed out that under President Biden’s recent “Modernizing Regulatory Review” Executive Order, the economic threshold for a “significant regulatory action” subject to “rigorous” regulatory cost-benefit analyses increased to those actions that have an annual effect on the economy of $200 million or more – up from the previous $100 million. (Note also that the threshold will be adjusted for GDP growth every three years.) Therefore, Candee asked whether the estimated burden for an upcoming Component 2 proposal would meet this new threshold.

“[The NASEM report] suggested that it would be less burdensome for employers to produce individualized data, anonymized of course,” Samuels pointed out. She added: “[w]e want to hear from you. Is that true? Is that correct? Then what steps can we take so that we can address any concerns about our ability to keep the information confidential because we understand that this is sensitive proprietary information. And we want to make sure that we put safeguards in place so that we can respect appropriate confidentiality protections and not in any way create competitive disadvantages as a result of collecting this data. So, you have a wealth of information that can be really helpful to us as we go through this process.”

As noted above, Sonderling emphasized that he would advocate for a formal rule-making process. “I’ll be pushing for a formal Notice of Proposed Rulemaking [published in the Federal Register], he stated.

Don’t Wait to Look at Your Pay Data, Sonderling Advised

“I’m not prejudging anything that the EEOC is going to do or doing related to [a future Component 2 collection],” Sonderling noted. He added: “[b]ut my own personal opinion is for all of you as employers out there you don’t need the federal government collecting your private payroll information, taking that valuable information for you to be able to address this issue internally. You could be doing this through pay equity audits and looking at your payroll in advance of any enforcement or any pay data collection. And I think that is really important not to lose sight of.” “You don’t have to wait to see what Washington, D.C. will do about collecting your private payroll information,” he advised. “You could be doing that now because it is illegal to discriminate in pay as in many other areas.”

He continued, “Component 2 pay data collection will be up for debate like it was before and we will see where it goes. But for now, look at this issue. It is in our strategic enforcement plan. You’re seeing a lot at the state level. And a lot gets confused into the pay transparency issue that is being dealt with across the country. […] Right now, these laws apply. And you can be looking at your own payroll data before the EEOC potentially looks at it.”

Commission Composition – Present and Future

While the Commission has seats for five Members leading it – three for the party currently in the White House, and two for the opposition party – it currently has only two members from each party. On March 28, 2023, the U.S. Senate Committee on Health, Education, Labor, and Pensions (“HELP”) Committee voted to advance the nomination of Kalpana Kotagal to fill the fifth slot. If (and likely when) the full Senate votes to approve the Kotagal nomination, Democrats will, for the first time in the Biden Administration, have a 3-2 voting majority on the Commission.

Samuels described the confirmation process as “kind of Byzantine.” Sonderling reported that it took 14 months for the Senate to confirm his nomination. “Our hope is that she will be considered expeditiously by the full Senate, perhaps as soon as this month,” Samuels said.

“I think that the Commission operates best when we are at full strength,” Samuels remarked. “We work better when we benefit from the perspectives of five really experienced thoughtful people.”

It’s not unheard of to have empty seats on the Commission, Sonderling pointed out, noting that September 2020 marked the first time since 2016 that all five slots were filled. Moreover, “[i]t was the first time there were three Republicans since 2008,” he observed. He further explained that all Commissioner terms end on July 1 in staggered year appointments (one either rolls off every year or is reconfirmed), but a Commissioner may stay through the end of December [or until the Senate confirms a replacement, whichever comes first].

Chambers pointed out that Commission Chair Charlotte Burrows’ term expires on July 1, 2023. In the event that Biden does not renominate Chair Burrows, and Ms. Kotagal is sworn in as a Commissioner, would Vice Chair Samuels be elevated to the position of Chair, Chambers inquired. “That decision is up to President Biden,” Sonderling responded.

Pregnant Workers Fairness Act Proposed Regulations on the Way

The Pregnant Workers Fairness Act (“PWFA”) passed earlier this year had bipartisan support and is “a win-win for employers and employees,” Samuels said. (Read our story on the law here.) She observed that it is “the first new civil rights law that has been passed in the employment space since the ADA Amendments Act back in 2008.”

“The PWFA will take effect June 27, 2023, and the statute provides that the EEOC must issue finalized regulations to implement it by December 29, 2023,” Samuels reported. “So, working backward, my hope is that we will be able to get out a proposed regulation very shortly within a matter of weeks or months,” Samuels stated. This timing will allow for “a robust opportunity for public comment. And then the time to consider those comments as we finalize the rule,” she explained.

“I really do encourage you to weigh in with us to identify the things that you think we should provide more information about or the questions that you have,” she said. “Of course, applause and praise for the proposed regulation that we issue [is] always welcome,” she joked.

What is behind the PWFA?

The PWFA is closely modeled on Title I of the Americans With Disabilities Act of 1990 (“ADA”). The new law – for the first time – requires accommodations for pregnant employees due solely to their pregnancy unrelated to an underlying medical condition. It requires employers with 15 or more employees to provide such accommodations unless it would pose an undue hardship to the employer. The definition of “undue hardship” under the PWFA is the same as the ADA’s definition, Samuels pointed out. “But to the extent that there are questions about what the scope of the obligation is or what undue hardship means, first thing, you’ve got this. You’re already doing it with regard to your employees with disabilities,” she told the audience.

The PWFA fills a gap that had existed in the laws, she explained. “Under Title VII, before [the PWFA], pregnant women could get accommodations, but only if they could identify [non-pregnant] “comparators” [i.e., “similarly situated coworkers” getting a similar accommodation already],” she explained. Samuels continued: “[T]hat comparative standard meant that many people who had real limitations created by pregnancy or a related condition could not get accommodations in the workplace.

Under the ADA, Samuels explained, you have to be a qualified individual with a disability. And most pregnancies, if they are normal, routine pregnancies, do not create disabilities that entitle the pregnant woman to an accommodation under the ADA. “So, there was this vast number of people in the workplace who were often having to choose between doing their jobs and having healthy pregnancies or taking care of themselves. And that is what the [PWFA] was designed to correct.”

“The reason this got bipartisan support and the reason we have a new law for the first time since 2008 [was that there] are pretty significant stories about pregnant workers not being able to take bathroom breaks, not being able to take water breaks,” Sonderling noted. Some employers were already providing such accommodations before, he added, “but now it is required under law.”

Noting the law’s effective date, Samuels advised the audience to “make sure your policies anticipate that the same things you do for [workers with disabilities] are the same things you do for pregnant workers.”

Sonderling Pled for Comments on Specific Industry Impacts

During the public notice and comment period on the upcoming proposed PWFA regulations, it will be “important to hear from you because you’re all in different industries and you all have different needs and may have different questions of how this is going to apply,” Sonderling told the audience. “You have been dealing with the different types of accommodations for years,” he continued. “Tell us how this is going to affect your specific industry so we can address those and give you examples moving forward.”

Lookout for More Action on Artificial Intelligence

“Artificial Intelligence (“AI”) is one of the biggest – if not the biggest – issues facing HR departments,” Sonderling observed. He started off his comments on the topic by giving “a shameless plug” to the recent DE Employment Law Roundtable he participated in on “How to Test Whether the AI You Are Using for Employment Selections Is Lawful.” (The link to this Roundtable is available in DE’s Member-Only portal, “DE Connect.”) “You have two hours of content with DirectEmployers about this topic,” he said. He also noted that he discussed the topic during his keynote address at DEAMcon22.

What’s Been Happening with AI?

We reported in January that the EEOC held a virtual meeting on navigating AI, and the Republican Commissioners expressed frustration over the limited perspectives featured in the choice of panelists. That hearing was held in conjunction with the agency’s AI and Algorithmic Fairness Initiative. That initiative is intended to ensure that the use of software, including AI and other emerging technologies used in hiring and other employment decisions, complies with the federal civil rights laws that the EEOC enforces.

“[I]t is no longer a question [if AI is going to be] in the workplace,” Sonderling said, but rather how an HR practitioner is going to use it, for what purposes, and how do they “comply with the long-standing civil rights laws that apply to [employment] decisions.”

“Ultimately, you will be liable for whatever happens, whatever decision these algorithms or machine learnings or whatever buzzword you want to use related to technology, you bear the liability. That’s how our laws work,” Sonderling cautioned.

“[A]the end of the day, whether it is the AI making the decision or combination of a human making the decision, there will be an employment decision and there will be results. And that’s what we’re going to look at the EEOC,” Sonderling said.

The potential issues with AI in the workplace “are well documented at this point,” he continued. However, “using AI in a sense can actually help us [get to transparency behind employment decisions …]. In short, it can be used to help us with our investigations on transparency [with employers] saying, ‘here are the non-biased metrics we put in’ […]. AI [can] actually help not only eliminate bias but help us with our investigations as well.”

What is Coming Up for AI in the Workplace & the EEOC

Sonderling also told the audience to “be on the lookout’’ because the Commission is “going to be doing more in this space”, especially with the advent of ChatGPT and how that will be used in HR, particularly as to job descriptions.

Noting that she utilized ChatGPT to help write her opening statement for the January 2023 EEOC hearing, Samuels also said “we will be putting out more material on this as we all learn more about how to effectively use these new technologies without running afoul of the EEO laws.”

“There are already a lot of resources out there,” she continued. Among other resources, she noted the White House’s Office of Science and Technology Policy’s Blueprint for an AI Bill of Rights (see our story here), and the National Institute of Standards and Technology’s AI Risk Management Framework (see our stories here and here). While the Commission is not endorsing them, “the more you can consult these kinds of materials, the better educated you will be about the kinds of analyses you need to be doing in order to stay out of trouble,” Samuels said.

Thursday, April 13, 2023: Biden Administration Sought to End Remote Work for Federal Employees

Following President Biden’s signing of the Congressional bill ending the COVID-19 national emergency and public health order, OMB issued guidance on Thursday requiring agencies to develop updated Work Environment Plans that will “substantially increase meaningful in-person work at Federal offices.” The guidance seeks to reduce the amount of telework and remote work federal employees currently engage in as a byproduct of the COVID-19 pandemic. Agencies must now develop policies assessing organizational health and performance, and the impact telework could have on customer experience and service, security, cost to operations, management of property, and the agency’s ability to recruit and retain talent.

While federal employee unions have attempted to increase the use of telework for its members based on the purported rise in employee morale, Republican congressional members have argued that the increase in remote work has resulted in delayed services to the American public. Indeed, on February 1st the Republican-controlled House of Representatives passed legislation requiring federal workers to return to federal offices (though the measure never became law).

The guidance appears to seek a middle ground that begins increasing in-person services while providing greater leeway for remote work than was previously allowed prior to the COVID-19 pandemic. Federal contractors will need to wait and see the proposals agencies issue to determine how much government work, such as OFCCP audits, may continue to be impacted.

Editor’s Note: Return to work in the office has proved unnecessary for many types of professionals. However, in-office work is necessary for OFCCP personnel because of one factor: OFCCP’s training model currently (and for the last five decades) has been based on a mentor-apprenticeship model. It remains OFCCP practice for senior OFCCP investigators to train new hires in person by example “at their knee” in the office and during on-site audits. There are no other OFCCPs supplying ready-trained investigators. Accordingly, OFCCP must train its own.

However, OFCCP has historically chosen NOT to build a training library composed of comprehensive A-Z training modules describing the content of each investigative task springing up from the three programs OFCCP enforces. Nor does OFCCP have certified training materials or videos describing each one of the many investigative analyses the agency needs to undertake, let alone every facet of the agency’s three enforcement programs. Nor does OFCCP have ready at hand comprehensive and up-to-date writings and videos to train new hires in OFCCP’s unique audit and review processes. NOTE: Chapter 3 of OFCCP’s Federal Contract Compliance Manual (“FCCM”) is devoted to OFCCP’s “Construction Industry Compliance Program.” Apart from being entirely too short in content (“introduction to and survey of” material), its first page provides a four-year-old out-of-date definition of a “Mega Construction Project”…the object of OFCCP’s construction focus to help implement the Bi-Partisan Infrastructure Bill and the $65 Billion the Congress has set aside for Mega Construction Projects.

So, of course, OFCCPers have recently shown up at construction audits openly admitting to being confused about how to conduct construction compliance reviews. Many clearly embarrassed and frustrated OFCCP Compliance Officers have explained to initially shocked construction contractors that they do not even understand how the construction industry operates. (One of the first clues to construction contractors about OFCCP’s lack of preparation for their audits was OFCCP personnel showing up in street clothes to conduct onsite audits of active wet mud construction projects. This occurred almost always on the heels of the contractors warning OFCCP ahead of time that the site OFCCP wished to investigate onsite required personal protective equipment including hard hats, steel-toed boots, and eye protection. There are many reports of OFCCP Compliance Officers also telling construction contractors they did not know what questions to ask the contractor and which contractor documents to review. OFCCP simply lacked the ability to train remote workers in the many unique nuances of the construction industry let alone how its investigators might go about their investigative tasks. OFCCP simply pushed its Compliance Officers “out of the nest” without needed training to see if they would fly or plummet to the ground.

The exceedingly small volume of OFCCP audits currently in progress, and the quality of the agency’s work, day in and day out, simply cannot be increased without bringing ALL OFCCPers into the office (full time: 5-days a week) and trained at the knees of more senior and experienced personnel. And even then, there remains the problem that there are increasingly fewer OFCCP District Offices housing investigators with experience with the construction industry. Return to full-time work in the office should be OFCCP’s Strategic Priority Number 1. Partnering with construction industry trade groups (AGC and ABC) to better understand the industry should be OFCCP’s Priority Number 2 as OFCCP readies itself to audit in 2024 the $65 Billion worth of infrastructure construction work the federal government is funding this year.

Thursday, April 13, 2023: Federal Judge Alsup Ordered USDOL’s Lawyers to Prepare an Order Setting Dates & Deadlines for Outstanding FOIA Requests as to Contractor EEO-1 Filings

Judge William Alsup of the U.S. District Court for the Northern District of California (San Francisco) held his initial case management conference in the Freedom of Information Act lawsuit seeking to compel OFCCP to produce to the FOIA requestor/plaintiff (The Center for Investigative Reporting) all Type 2 (consolidated) EEO-1 Report data of federal contractors and first-tier subcontractors for the years 2016-2020. During this conference, Judge Alsup also directed OFCCP’s lawyers from the U.S. Department of Justice to prepare a proposed order it must file by April 18th suggesting dates and deadlines to make any EEO-1 disclosures to the Plaintiffs, resolve contractor objections to disclosure and a trial date for the litigation.

As readers of the DE WIR know, this ongoing OFCCP saga has resulted in several agency false starts and extended deadlines for Contractors to object to OFCCP’s proposed disclosure of that contractor’s EE0-1 Type-2 reports. After initially creating a FOIA Submitter Notice Portal webpage, OFCCP has continuously updated notice to contractors identifying objectors, providing notice to contractors as to their right to object, and evaluating objections it has received. OFCCP is now in the process of evaluating objections it has received to date, which the agency reports will continue through at least the end of September 2023.

Friday, April 14, 2023: Senator Sanders Announced His Intention to Hold Julie Su’s Controversial Nomination Hearing on April 20: Tough Political Battle in Progress

Senator Bernie Sanders (I-VT), Chairman of the Senate Health, Education, Labor and Pensions Committee (“HELP Committee”) announced the Committee will hold its hearing on the controversial nomination of Julie Su to serve as Secretary of the U.S. Department of Labor on Thursday, April 20th. The hearing will be an opportunity for Ms. Su to make her case to become the new head of the U.S. Department of Labor before the HELP Committee votes on whether to send her nomination to the entire Senate for approval.

Note: The HELP Committee is composed of 11 Democrats and 10 Republicans. Ms. Su needs a majority vote of the Senators on the Committee (i.e., 11 Senators of any political party) to vote in favor of advancing her name to the U.S. Senate to hold a full Senate floor vote to confirm her to serve as the next U.S. Secretary of Labor. If Republicans unanimously oppose Ms. Su’s nomination (as is expected despite a record of at least one or more Republicans regularly breaking rank and voting for the Democrat nominee) and even only one Democrat on the Committee either no shows the Hearing (counts as a “no” vote as a practical matter) or “abstains” from voting, or votes “no” to advance Ms. Su’s name to the U.S. Senate, President Biden’s nomination of Ms. Su will fail.

The fact that Senator Sanders has now formally set Ms. Su’s Hearing date for April 20 (a rumor we have heard for the last 10 days despite no formal confirmation of that fact until last Friday) suggests that Senate Majority Leader Schumer (D-NY) either now has the Senate votes he needs to advance her nomination out of Committee and through the full Senate Floor vote, or he needs an “up” or “down” vote on Ms. Su’s nomination so the Biden White House knows whether and how to proceed either with Ms. Su in her new job or that it needs to send forward a new Nominee who could win confirmation. So, there are potentially two more “drama days” as to Ms. Su’s confirmation process in the U.S. Senate: (a) April 20 before the HELP Committee, and (b) if she survives the HELP Committee confirmation vote, the date Senator Schumer will set (with 3-days’ notice) for a full Senate Floor vote.

President Joseph Biden previously successfully nominated Ms. Su to serve as the Deputy Secretary of Labor reporting to Secretary of Labor Marty Walsh. That first nomination of Ms. Su was equally as controversial but was also rancorous in that it delayed the confirmation of Mr. Walsh to become the Secretary of Labor. Ms. Su fought an intra-Democrat party fight to become the United States Secretary of Labor instead of Mr. Walsh. Ms. Su, a civil rights advocate for Asian-Americans, “pulled out all the stops” in her internal battle within the Democrat party to win the top job at Labor two years ago. Among other things, Ms. Su fired up back-pressure from Asian-American Democrats who threatened to withdraw their support for President Biden if he did not select Ms. Su for the top job at Labor over the President’s 30-year friendship with Mr. Walsh. However, Democrat concerns about winning back to the Democrats the white working-class vote which went heavily to former President Trump surpassed the importance of appealing to Asian voters. So, Mr. Walsh took the top job at Labor and Ms. Su got the runner’s up job as the Deputy Secretary of Labor supporting Mr. Walsh.

In response to Secretary Walsh’s unexpected “slap-in-the-face” on February 16, 2023 to President Biden when Walsh suddenly announced his almost immediate departure from the Biden Cabinet only two-years into the President’s Administration, President Biden on February 28th nominated Deputy Secretary Su to replace Walsh when he left Labor, eventually delayed to mid-March, 2023 at the pleading of the President (to make Walsh’s departure look less sudden. (Secretary Walsh left Labor emotionally upset that his friend the President did not select him to become the next White House Chief of Staff to the President when that job opened and the President filled it at the end of January 2023.)

To the consternation of those critical of Ms. Su’s earlier record as Secretary of California’s Labor department (officially known as the “California Labor and Workforce Development Agency”), controversy again immediately began to dog her nomination for the top job at Labor. First, during her time as the California Labor Secretary, Ms. Su aggressively sought to enforce California’s AB5 law reducing the ability of businesses to identify workers as independent contractors. Second, Republican leaders are also exceptionally concerned with her ability to manage large government projects given the approximately $32 billion in unemployment payments stolen from California taxpayers during the COVID-19 pandemic that occurred during Ms. Su’s tenure as California’s Labor Secretary. (Note: The precise number of the billions of dollars of unemployment insurance payments the California state Department of Labor allowed organized crime and federal and state prisoners to steal from California and federal taxpayers is still not known and is the subject of dispute. There does now seem, however, to be a consensus gathering among neutral investigators that Ms. Su’s California Department allowed criminals to steal around “$30 Billion-plus.” Moreover, evidence has emerged that Ms. Su did not approve funding of a third-party information and data protection technology company to protect against the kind of unemployment insurance fraud which the numerous thieves undertook to obtain the Billions and Billions of inappropriate electronic payments of UI funds.)

And, if this were not enough to stir controversy, Ms. Su’s hearing will also be contentious due to the irregular circumstance of Committee Chair Sanders’ decision in recent weeks to deny Republican HELP Committee members an opportunity to have an in-person interview with Ms. Su prior to the April 20th hearing. Nominees customarily meet with members of a committee prior to their hearing on their nomination. (One need only recall media coverage of recent U.S. Supreme Court nominees being led from office to office and the in-office interview last week a dubious Senator Angus King (I-Maine) conducted with Ms. Su. Yet, Republican Senators on Wednesday sent a letter to Ms. Su requesting she make herself available for such interviews. To date, Ms. Su has yet to meet with Republican members of the Senate HELP Committee.

Democrats currently hold a 51-49 control of the U.S. Senate (with 49 Republicans, 48 Democrats, and three Independents who customarily vote with (“caucus” with) the Democrats). No Republican voted in 2021 to confirm Ms. Su to the Deputy Secretary of Labor job. No Republicans are expected to vote for Ms. Su to be Secretary of Labor. President Biden may thus lose only one vote to ensure Ms. Su’s confirmation (given that in the case of a 50-50 “tie vote,” Vice-President Kamala Harris, wearing her hat as President of the Senate, may cast a tie-breaking vote). With 89-year-old Senator Feinstein’s continuing physical incapacitation due to a severe bout of shingles, and given Senator Manchin’s voiced concerns about Ms. Su, this will be a contentious and closely watched nomination process. If Senator Schumer loses the votes of only two Democrat Senators, Ms. Su’s nomination will fail 49-51.

Friday, April 14, 2023: U.S. Supreme Court Issued Unanimous Ruling Allowing Litigants to Go to Federal Court on Certain Constitutional Challenges to Agency Investigations

Decision Could Substantially Alter Administrative Law Judges’ Authority

In a unanimous decision, the U.S. Supreme Court opened the door to a potential new venue for federal contractors in their legal disputes following failed OFCCP Compliance Reviews (i.e., audits). In Axon Enterprise, Inc. v. Federal Trade Commission, et al., Case No. 21-86, the Court held that companies and people facing investigations or complaints from the Securities and Exchange Commission (“SEC”) or the Federal Trade Commission (“FTC”) may proceed directly to federal court to raise constitutional challenges to the agency’s actions. In other words, federal district courts do have jurisdiction to hear constitutional challenges outside of the administrative adjudicatory system the Congress may have prescribed for the agency to use to adjudicate claims the agency has brought pursuant to its authorizing statute(s).

Previously, individuals or companies facing investigation or complaint from the SEC or the FTC had to go through the entire administrative complaint process each agency prescribed before they could file a Complaint in federal court raising a constitutional challenge to even the foundation of the administrative enforcement structure. This change provides legal authority federal contractors may be able to use to initiate constitutional challenges to OFCCP Compliance Reviews in federal court before final disposition (years or decades later) before the U.S. Department of Labor’s Office of Administrative Law Judges (“OALJ”) and its appeal path to a so-called “Administrative Review Board” (“ARB”).

Congress Did Not Intend to Limit Jurisdiction in the Federal Courts to Only Statutorily Created Administrative Bodies When Litigants Raised Claims the Federal Agency Was Proceeding in an Unconstitutional Fashion

The SCOTUS consolidated two different cases (Axon and Michelle Cochran) involving two different federal agencies (FTC and SEC=Cochran) for hearing. The arguments of both aggrieved parties mirrored each other analytically, including that the use of Administrative Law Judges was unconstitutional because the tenure of agency judges, which did not allow for the President to fire them at will, was a violation of the “separation of powers doctrine” since only the Congress could imbue federal judges with lifetime appointments. Axon also attacked as unconstitutional the combination of both prosecutorial and adjudicatory functions in the FTC (i.e., the prosecutors are their own judges).

Both litigants relied on an argument that proceeding first before an administrative agency (before being allowed to have a federal District Court hear their claims challenging the constitutionality of the agency’s actions) provoked what one litigant called a “here-and-now injury.” Both litigants argued that judicial review of their constitutional claims following a two-level administrative enforcement scheme (first before an ALJ and then before an administrative agency appellate body), would thus come too late to be meaningful.

Justice Kagan delivered the opinion of the Court. Chief Justice Roberts, and Justices Thomas, Alito, Sotomayor, Kavanaugh, Barrett, and Jackson joined in the opinion of the Court. Justice Thomas filed a concurring opinion and Justice Gorsuch filed an opinion concurring in the judgment. The SCOTUS agreed with both litigants, contending that the injury would be impossible to remedy once the administrative proceeding was completed. This is because the nature of the injury dealt with constitutional rights.

Note: the SCOTUS did not address itself to the issues whether the constitutional claims both parties raised were winning or losing arguments. Rather, the SCOTUS limited its holding to the conclusion that the litigants had the right to go immediately into federal District Court to have their constitutional claims heard before having to suffer a two-level multi-year and possibly multi-decade administrative enforcement action before they could have their constitutional claims heard (and perhaps obviating the entire regulatory enforcement scheme).

As a result, this is not a SCOTUS decision holding that litigants have a choice as to where to have the federal agency sue them for violations of statutes the federal agency is seeking to enforce in either federal court or before the administrative forum. Nor is the SCOTUS a decision that the use of tenured ALJ’s or the combination of prosecutorial and adjudicatory functions housed in the same federal agency are unlawful. Rather, the underlying constitutional challenges the two litigants put forward remain in the federal District Courts where each litigant brought its/her constitutional challenge.

In sum, the SCOTUS merely held that if a litigant has constitutional claims to the attacking federal agency’s enforcement scheme, the litigant may proceed directly “To Go” and have its constitutional challenge(s) heard immediately in federal District Court. The litigant does NOT have to first slog through the administrative enforcement scheme to eventually raise its constitutional challenges to the federal courts years later.

Furthermore, the Court held that the constitutional challenges the plaintiffs raised had nothing to do with the authority of the SEC or the FTC to enforce the language of their federal regulations, but rather are “collateral” challenges to any SEC or FTC order or rules. The Court found that the Biden Administration’s position that constitutional challenges to an agency’s enforcement scheme could be pursued after completion of the administrative proceeding would “strip the collateralism factor of its appropriate function.” Taking the Biden Administration’s position would mean no claim directed at a pending administrative proceeding could qualify as collateral to it.

Given the Court’s unanimous holding in opposition to the position of the Biden Administration’s uncritical defense of all agency actions again calls into question whether it is dispassionately seeking to enforce the “rule of law,” case-by-case, or merely seeking to enforce pre-determined ideological and political beliefs.

Finally, the Court held that constitutional questions related to whether job protections afforded to Administrative Law Judges (“ALJs”) violate the Constitution’s separation of powers are outside the expertise of the SEC or FTC. Thus, the SCOTUS found that both litigants satisfied all three elements necessary to establish that Congress did not intend to limit jurisdiction of constitutional claims to just the administrative enforcement scheme a Congressional statute had authorized a federal agency to erect to prosecute the Congress’ will.

What Does This Ruling Mean for Federal Contractors?

The SCOTUS’ holding has a potentially substantial impact on OFCCP administrative enforcement proceedings. Those proceedings start when OFCCP files a Complaint in the OALJ and the parties then proceed to trial before a U.S. Department of Labor employee known as an Administrative Law Judge (“ALJ”). Appeals from an ALJ‘s “Recommended Decision and Order” lie to another group of U.S. Department of Labor employees known as Judges on the ARB.

As a result, the Department of Labor’s ALJs and ARB judges are beyond the authority of the President to remove them from office (despite being part of the Executive Branch, judges may only be removed for good cause as determined by the U.S. Merit Systems Protection Board), analogous to the judicial appointment in the SEC and FTC administrative enforcement schemes).

As such, the reasoning behind the decision in Axon Enterprise would apply to any similar challenge to the U.S. Department of Labor’s administrative enforcement proceedings. However, readers should be aware of the Ninth Circuit’s decision in Decker Coal Co. v. Pehringer, 2021 U.S. App. LEXIS 24338 (9th Cir. August 16, 2021). That case decision found the removal of an ALJ only for good cause determined by the Merit Systems Protection Board was constitutional as applied to U.S. Department of Labor ALJs. However, the Ninth Circuit’s decision in the Decker Coal case preceded the SCOTUS’ decision in the Axon Enterprise case so the Decker Coal case decision may no longer be good law.

The Axon Case Addressed One of the Same Legal Issues Involving Seventh Amendment Challenges to Agency Enforcement Schemes Not Allowing Jury Trials

Readers of the WIR may recall we previously discussed a potential challenge to OFCCP’s administrative process based on the Fifth Circuit’s (New Orleans) ruling in Jarkesy, Jr.; Patriot28, LLC v. U.S. Securities and Exchange Commission, No. 20-61007 (May 18, 2022). While that case dealt with a challenge based on the SEC’s process denying a party’s Seventh Amendment right to jury trial, this new ruling relies on the same foundational argument: i.e., challenges based on constitutional questions allow redress before a federal court prior to administrative adjudication.

What this means for federal contractors is the possibility of a complete overthrow of the entire OALJ system. First, a federal contractor would need to file suit in federal court as to whether the OALJ system within the U.S. Department of Labor is legitimate. Should a court decide the Labor Department’s administrative enforcement system is illegitimate (because ALJ’s are improperly tenured, and/or combining prosecutorial and adjudicatory functions within the same agency violates the Due Process clause of the U.S. Constitution), then OFCCP’s primary avenue to initiate suit against a federal contractor would disappear.

If so, OFCCP would still have the option to enforce its claims under the three federal “statutes” OFCCP enforces by way of a referral to the U.S. Department of Justice (“USDOJ”). USDOJ could then go into federal District Court to file a Complaint on behalf of OFCCP. OFCCP has an existing Memorandum of Understanding allowing for such a lateral of its litigation to USDOJ. While OFCCP has used that authority very sparingly, OFCCP has exercised that authority once or twice but with limited success. (Fox, Wang & Morgan defended the last such referral from OFCCP to USDOJ. The Court issued an order rejecting USDOJ’s arguments in federal District Court which forced a settlement achieving all the client’s litigation objectives and, further, a reprieve from OFCCP audits for several years. USDOJ’s adoption of OFCCP’s case backfired on it entirely.)

A second option for OFCCP would be to seek authorization (by way of an Executive Order further amending EO 11246, and statutory authorizations amending OFCCP’s authority under Section 503 of the Rehabilitation Act of 1973 and under 38 USC 4212 (that portion of the Vietnam Era Veterans Readjustment Assistance Act of 1974: VEVRAA) to allow OFCCP to file claims with federal district courts. NOTE: Federal Court Judges are specially trained in civil rights law and the use of statistics to prove up claims, even apart from being a more impartial avenue for review of complex disparate impact discrimination claims and disparate treatment class-type discrimination claims. Note, however, OFCCP’s Solicitors representing OFCCP have no experience in federal District Courts and would find the rules of procedure and evidence to be quite different from the hodge-podge of administrative Rules currently governing OFCCP enforcement actions before ALJs).

The next chess-move in this new drama about OFCCP administrative enforcement authority lies with federal contractors. Will any of them decide to take on litigation to argue that USDOL’s administrative process to enforce OFCCP claims is unconstitutional?

Monday, April 16, 2023: OFCCP Published Second Notice Regarding Proposed Changes to Its Supply & Service Contractor Audit Scheduling Letter & Document Demands

Referencing its earlier November 2022 notice of its proposal to greatly expand the agency’s audit Scheduling Letter and demand for documents to Supply & Service federal contractors and subcontractors, OFCCP published a new notice in the Federal Register. Public comments on the new notice are due on or before May 17, 2023, and may be submitted here or here.

On November 21, 2022, OFCCP published a notice in the Federal Register seeking public comments on several changes to its information collection requirements (“ICRs”) for Supply and Service Contractors in conjunction with its request for the White House Office of Management and Budget’s (“OMB”) approval to continue the ICRs pursuant to the federal Paperwork Reduction Act (“PDA”). OMB’s current approval for these ICRs expires on April 30, 2023. However, if OMB does not approve the proposed new requirements prior to that date, it will continue OFCCP’s existing audit Scheduling Letter approval beyond the April 30th date, typically approving extensions in 30-day increments. Because a new public comment period is now open through May 17, 2023, it is apparent that OMB will not approve any new requirements prior to May 17.

As we previously reported in detail the day OFCCP published the November notice, the OFCCP’s proposal included significant changes to the agency’s Scheduling Letter and Itemized Listing – including five new items. However, the notice itself only listed the substantive proposed changes. Details on the changes were revealed in the 31-page Supporting Statement that OFCCP submitted to OMB. The proposed revised Scheduling Letter is available here. The public comment period for the November 21, 2022 notice closed on Tuesday, January 20, 2023. DirectEmployers Association filed extensive and detailed comments on behalf of its Member companies. Forty-seven other entities also filed comments. We discussed those comments in our story here.

Similar to the notice in November, the new notice itself contained no new substantive information other than the reference to the November notice and the new 30-day comment period. As of our WIR deadline, no Supporting Statements or other documentation providing more insight into the new notice were posted on any of the OMB websites or the USDOL/OFCCP websites.

In Brief

Wednesday, April 12, 2023: OMB Approved OFCCP’s Unchanged VEVRAA Reporting & Recordkeeping Requirements

Following a second comment period that closed on April 7, 2023, the White House Office of Management and Budget (OMB) approved – without change – OFCCP’s Vietnam Era Veterans’ Readjustment Assistance Act (“VEVRAA”) Information Collection Requirements (“ICR”). The previous OMB approval was set to expire on April 30, 2023.

The new OMB approval will expire three years from now on April 30, 2026. OFCCP’s VEVRAA ICR sought a continuation of OFCCP’s authority to impose recordkeeping and reporting requirements associated with the job listing, Affirmative Action Program, Benchmarks for hiring, and self-identifications OFCCP’s Rules at 41 C.F.R. § 60-300 require of covered federal Government contractors as to Protected Veterans.

Note: The Paperwork Reduction Act (PRA) requires federal agencies to obtain approval, via an ICR request, from OMB before collecting the same or similar information from ten or more members of the public (whether orally or in writing).

The second comment period of this ICR followed an initial comment period which had run from November 16, 2022, to January 17, 2023. The notice for the initial comment period not only covered OFCCP’s request to OMB to extend approval of its ICRs of its VEVRAA ICR but also its ICR under Section 503 of the Rehabilitation Act of 1973 (“Section 503”). Regarding the Section 503 ICR, OFCCP proposed making changes to its Disability Self ID Form. That proposal is detailed in our story here. The second comment period for the Section 503 ICR remains open until April 21, 2023, and comments may be submitted here. OMB’s current approval for Section 503 ICR expires on May 31, 2023.

Looking Ahead: 
Upcoming Date Reminders

December 2022: U.S. DOL WHD’s (now overdue) target date to publish a Notice of Proposed Rulemaking to Analyze Public Comments on its proposed rule regarding Nondisplacement of Qualified Workers Under Service Contracts (RIN: 1235-AA42)

December 2022: U.S. OSHA’s (now overdue) target date to publish its Final Rule on Occupational Exposure to COVID-19 in Healthcare Settings (RIN: 1218-AD36) (OSHA submitted this Final Rule to OMB on December 7, 2022)

December 2022: U.S. DOL’s OASAM’s (now overdue) target date to publish Proposed Rule on “Revision of the Regulations Implementing Section 188 of the Workforce Innovation and Opportunity Act (WIOA) to Clarify Nondiscrimination and Equal Opportunity Requirements and Obligations Related to Sex” (RIN: 1291-AA44)

February 2023: U.S. DOL WHD’s (now overdue) target date for its Final Rule on Updating the Davis-Bacon and Related Acts Regulations (RIN: 1235-AA40)

March 2023: OFCCP’s (now overdue) target date for its Notice of Proposed Rulemaking to Require Reporting of Subcontractors (RIN: 1250-AA15)

March 2023: OFCCP’s (now overdue) target date for its Final Rule on Pre-Enforcement Notice & Conciliation Procedures (RIN: 1250-AA14)

March 2023: OFCCP’s (now overdue) target date for its Final Rule on “Technical Amendments” to Update Jurisdictional Thresholds & Remove Gender Assumptive Pronouns (RIN: 1250-AA16)

April 2023: OFCCP’s target date for its Notice of Proposed Rulemaking to “Modernize” Supply & Service Contractor Regulations (RIN: 1250-AA13)

Wednesday, April 19, 2023: Deadline to submit comments on FTC proposal to ban employers from implementing most worker non-compete agreements (previous March 20 deadline extended) – https://www.regulations.gov/commenton/FTC-2023-0007-0001

Thursday, April 20, 2023 (at 2 pm ET): DE Masterclass Employment Law Roundtable | OFCCP Contractor Portal Issues – Register here

Friday, April 21, 2023: Comments due on OFCCP’s proposed changes to its disability self-identification form (the proposed revised form is here) – https://www.regulations.gov/commenton/DOL_FRDOC_0001-2063

Monday, April 24, 2023: Comments due on USDOL Wage & Hour Division’s Proposal to Revise Existing WD-10 Form for Federal Construction Contractors – https://www.regulations.gov/commenton/DOL_FRDOC_0001-2065

Thursday, April 27, 2023: Comments due on the Office of Management & Budget’s “Initial Proposals for Updating Race and Ethnicity Statistical Standards” (previous April 12 deadline extended) – https://www.regulations.gov/commenton/OMB-2023-0001-0001

Friday, April 28, 2023: Deadline for nominations to OMB of experts to peer review draft revisions of Circular A-4 – email nominations to MBX.OMB.OIRA.A4PeerReview@omb.eop.gov (subject line: Peer Review Nomination for Updating Circular A–4)

Sunday, April 30, 2023: Deadline to apply for 2023 HIRE Vets Medallion Award Program – https://www.hirevets.gov

May 2023: U.S. DOL WHD’s target date for its Notice of Proposed Rulemaking on Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees (RIN: 1235-AA39)

May 2023: U.S. DOL WHD’s target date for its Final Rule on Employee or Independent Contractor Classification Under the Fair Labor Standards Act (RIN: 1235-AA43)

Tuesday, May 9, 2023: Public comment deadline on FTC’s “Request for Information” on franchise agreements and franchisor business practices – https://www.regulations.gov/commenton/FTC-2023-0026-0001

Tuesday, June 6, 2023: Comments due on Proposed OMB Circular No. A-4, “Regulatory Analysis” – https://www.regulations.gov/commenton/OMB_FRDOC_0001-0337

Tuesday, June 6, 2023: Deadline for comments due on proposed revisions to OMB Circular A-94 (Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs) – https://www.regulations.gov/commenton/OMB-2023-0011-0001

Tuesday, June 6, 2023: Comments due on OMB’s implementation of Section 2(e) of the “Modernizing Regulatory Review” E.O. – https://www.regulations.gov/commenton/OMB_FRDOC_0001-0333

Thursday, June 29, 2023: Deadline for covered federal contractors and subcontractors to certify, via OFCCP’s online Contractor Portal, that they have developed and maintained affirmative action programs for each establishment or functional unit – https://www.dol.gov/newsroom/releases/ofccp/ofccp20230320

August 2023: U.S. NLRB’s target date for its Final Rule on Standard for Determining Joint-Employer Status (under the NLRA) (RIN: 3142-AA21)

August 2023: U.S. NLRB’s target date for its Final Election Protection Rule (RIN: 3142-AA22)

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.