OFCCP Week In Review: September 28, 2020

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:

• Submit Comments on Paid Leave Under FFCRA & CARES Act
• OFCCP Loses Oracle Case At Trial
• Trump Issues Executive Order 13950 to Combat Race and Sex Stereotyping, Imposing New Requirements on Government Contractors, plus a Bonus Deep Dive Blog Post
• Department of Labor Proposes New Independent Contractor Test Under the Fair Labor Standards Act
• USDOL Break-Out Sessions Now Available
• EEOC Now Fully Staffed With Republican Majority
• OFCCP Defines “Promotion”
• Top Organizations Identified to Oversee IRAPs
• VETS Apprenticeship Pilot Will Help Employers Achieve the VETS Medallion Award

Monday, September 21, 2020: Submit Comments on Paid Leave Under FFCRA & CARES Act

The U.S. Department of Labor’s Wage and Hour Division (WHD) issued an information collection request (ICR) (2 pages) for the review and approval of regulations WHD previously published on April 6, 2020 to implement the Paid Leave under the Families First Coronavirus Response Act.

The Rule as to which WHD is now inviting comment is the one it first published as an emergency “Temporary Rule” dated April 6, 2020 and published at 85 Federal Register 19326-19357 (32 pages). (So, click on the words “Temporary Rule” in the prior sentence if you want to find the Rule as to which WHD is currently asking you to provide Comment. The Rule about which WHD is requesting Comment is NOT contained within the 2 page ICR WHD published in the Federal Register last Monday September 21. You have to go all the way back to the beginning of this journey to find the Rule now on deck for Comment).

WHD published its April 6 emergency Temporary Rule with no Notice or requested Comment from the public at the beginning of a frantic swirl of government activity as the pandemic suddenly fell upon the Nation. Accordingly, a week later, WHD then published a Notice dated April 14, 2020 which solicited comments on the extension of the Temporary Rule to “October, 2020.” So, that extension of the Temporary Rule that went into effect, is now almost exhausted and is coming up for further action.

What’s On the Table?

WHD is now proposing to extend the Temporary Rule implementing the Paid Leave under the Families First Coronavirus Response Act for three years from the date the Office of Management and Budget authorizes the ICR it published last Monday.

Comments are due on or before October 21, 2020, on:

1. Whether the collection of information is necessary for the proper performance of the functions of the Department, including whether the information will have practical utility;
2. if the information will be processed and used in a timely manner;
3. the accuracy of the agency’s estimates of the burden and cost of the collection of information, including the validity of the methodology and assumptions used;
4. ways to enhance the quality, utility, and clarity of the information collection; and
5. ways to minimize the burden of collecting information on those who are to respond, including the use of automated collection techniques or other forms of information technology.

Backstory

On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act (FFCRA)(see WIR Families First Coronavirus Response Act Passed), which created two new emergency paid leave requirements in response to the COVID-19 global pandemic. Division E of the FFCRA, “The Emerency Paid Sick Leave Act” (EPSLA), entitles certain employees to take up to two weeks of paid sick leave. Division C of the FFCRA, “The Emergency Family and Medical Leave Expansion Act” (EFMLEA), amended Title I of the Family and Medical Leave Act (FMLA), and permits certain employees to take up to twelve weeks of expanded family and medical leave, ten of which are paid, for specified reasons related to COVID-19.

On March 27, 2020, (See our Blog) President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which amended specific provisions of the EPSLA and the provisions of the FMLA which the EFMLEA added.

Tuesday September 22, 2020: OFCCP Loses Oracle Case At Trial

The case is OFCCP v. Oracle, Case # 2017-OFC-00006.

USDOL Office of Administrative Law Judges (OALJ) Judge Richard M. Clark handed down a 280-page Recommended Decision and Order in a crushing defeat of OFCCP’s ill-fated three-year odyssey to prove that Oracle allegedly engaged in:

1. intentional compensation discrimination (wage rate, salary, and total compensation) against female employees at its headquarters offices in Redwood City, California in the Product Development, Information Technology, and Support job functions or against Asian and African American employees in its Product Development job function; and
2. unlawful discrimination in assignment and job classification (i.e. “steering”) against female employees at its headquarters offices in Redwood City, California in the Product Development, Information Technology, and Support job functions or against Asian and African American employees in its Product Development job function; and
3. a policy or practice at its headquarters facility relying on prior pay in salary setting and also allegedly having a policy or practice which had an “adverse impact” on women in the Product Development, Information Technology, and Support job functions and against Asian and African American employees in its Product Development job function.

This was a series of statistical cases none of which raised individual claims. As such, OFCCP’s statistical cases then necessarily relied almost exclusively on its outside expert, Dr. Janice Madden. Judge Clark faulted her statistical analyses as to each of OFCCP’s three claims.

As to the first claim (compensation), Judge Clark found:

“Dr. Madden’s analysis is highly aggregated and not attuned to potentially important differences between groups within job functions. Dr. Madden’s analysis does not similarly situate employees with respect to the work performed.”

*           *           *           *

“Dr. Madden’s measures of experience and education are very rough estimates and poorly capture the sort of education and experience that matters for compensation at Oracle. Dr. Madden’s analysis relies largely on assumption about aggregation and the view that it is unnecessary to control for variances between employees at a group level, but this assumes away the important question about potential explanations for the raw disparities and thus undermines the inferential power of the model.”

As to the second claim (assignment and steering), Judge Clark found:

“Dr. Madden’s model is poorly constructed to draw inferences about potential steering since it does not attempt to study steering and does not account for the major factor influencing the job the employee holds. The statistical evidence that might support an inference to discrimination could not support an inference to the systemic discrimination alleged by OFCCP.”

As to the third claim (adverse impact in compensation), Judge Clark found:

“Oracle did not have a policy or practice at its headquarters facility during the relevant time period of relying on prior pay in salary setting and OFCCP did not show a disparate impact attributable to such a policy on female employees…or on Asian employees… .”

*           *           *           *

“OFCCP’s disparate impact claim must be denied because it did not establish the relevant policy or practice or causation. In addition, the underlying disparities that would reflect the disparate impact are based on Dr. Madden’s analysis and given the deficiencies in these models, the record could not support this claim.”

Judge Clark ended his opinion with a simple order recommending that OFCCP’s Second Amended Complaint be dismissed with prejudice. NOTE: Administrative Law Judges like Judge Clark issue a “Recommended Decision and Order.” If neither party timely appeals, the recommended decision and Order automatically convert into a Final Decision and Final Order. If OFCCP appeals to the ARB (see below), the Recommended Decision and Order is held in suspense awaiting a Final Decision and Final Order from the ARB.

What’s Next?

OFCCP may appeal to the court of last administrative resort within the USDOL known as the Administrative Review Board (“ARB”). OFCCP’s Rules give OFCCP 14 calendar days from the date of receipt of the Recommended Decision and Order to file what OFCCP’s Rules call “Exceptions” (i.e. an appeal) of the Recommended Decision and Order. Typically, the parties would graciously agree to extend the other side’s time to consider an appeal since 14 days is TYPICALLY preposterously short a period of time to consider an appeal of complex cases like OFCCP brings these days and which these 1990-era Rules NEVER envisioned. Given the rancor between both the parties and their lawyers in this case, however, it is most likely that OFCCP will need to file a Motion with the ARB to extend the time to determine whether OFCCP wishes to file an appeal, should it wish extra time to consider its next move.

On the other hand, this was a case which OFCCP should have never filed and it is very easy to discern that the trial record supports only a (very) low likelihood of success on appeal for OFCCP. Also, Judge Clark left OFCCP little to challenge in his Recommended Decision and Order. This is especially true since Judge Clark rested his opinion on utterly failed statistical models which OFCCP’s expert advanced but which failed to follow and analyze the pay and assignment systems Oracle used in fact. Judge Clark’s Recommended Decision and Order also catalogues an utter lack of proof of critical and necessary elements of proof necessary to prove up Title VII compensation and assignment claims. These findings also echo a pattern which has developed in the last several years at OFCCP that it simply does not follow Title VII case law in its audits or litigation cases despite now hollow claims to the contrary.

USDOL might nonetheless feign an appeal as leverage to help persuade Oracle to now voluntarily dismiss Oracle’s unrelated lawsuit against USDOL pending in the federal District Court in Washington D.C. That case challenges USDOL’s creation of the OALJ and the ARB as unlawful administrative law divisions unconstitutional in their creation because the Congress did not delegate legal authority to USDOL to create them. OFCCP would surely have to now view it as a “win” at this point of this three-year saga if it did not appeal in exchange for Oracle’s agreement to voluntarily dismiss its lawsuit against USDOL in the federal District Court. Dismissal of that case, even if it is a long shot for Oracle to win, should be considered a valuable result worth achieving from OFCCP’s point of view because Oracle’s case raises OFCCP enterprise-threatening issues: i.e.  no administrative law forum for any of OFCCP’s enforcement programs. As litigators and battle veterans are often wont to say: better to retreat now and live to fight another day.

Tuesday, September 22, 2020: Trump Issues Executive Order 13950 to Combat Race and Sex Stereotyping, Imposing New Requirements on Government Contractors

“By the authority vested in me as President by the Constitution and the laws of the United States of America, including the Federal Property and Administrative Services Act, 40 U.S.C. 101 et seq., and in order to promote economy and efficiency in Federal contracting, to promote unity in the Federal workforce, and to combat offensive and anti-American race and sex stereotyping and scapegoating, it is hereby ordered as follows:…”

With those opening words in a new 10 page “Executive Order on Combatting Race and Sex Stereotyping,” President Trump ignited a firestorm of discussion last week on all sides of the issue concerning the content of diversity and inclusion training in America. DirectEmployers has not seen its Members react with such immediate and forceful opinions on any other OFCCP or EEO topic…with both vocal proponents and detractors of the Order.

Also, for those overwhelmed by the developments of last week, please see our full bonus feature blog post on this controversial Order to see what you and your company/institution must do now and some new and special resources to help DE Member Companies and non-Member companies meet the new requirements and obtain certification through DE’s newly established “D&I Certification Task Force.”

Tuesday, September 22, 2020: Department of Labor Proposes New Independent Contractor Test Under the Fair Labor Standards Act

The Wage Hour Division (“WHD”) of the U.S. Department of Labor published a Notice of Proposed Rulemaking, proposing a new legal test to determine independent contractor status under the Fair Labor Standards Act (“FLSA”).  Loosening the legal standards by which an individual qualifies as an “independent contractor,” as opposed to being an “employee” with rights under the FLSA, shrinks the reach of the FLSA’s imposition of minimum wage and overtime protections that pertain only to employees. WHD’s Rule, if enacted, would also give more workers the freedom not to provide their services as “employees.”

The Proposed Rule’s “Economic Reality” Test

The FLSA long ago adopted a unique definition of the term “employee” to be applied to wage-hour issues known as the “economic reality” test. (This legal test is different from the “common law test” which OFCCP applies under its three statutes.)  If a worker is in business for himself/herself rather than economically dependent on a business, s/he is an “independent contractor” and not an “employee” subject to the protections of the FLSA.  Under its Proposed Rule, WHD would focus on two core factors to determine whether a worker was economically dependent on an employer and thus an “employee”:

• the nature and degree of the worker’s control over the work (whether a worker sets his or her own work schedule, chooses his or her own assignments, works with little or no supervision, and is able to work for others, including the businesses’ competitors); and
• the worker’s opportunity for profit or loss based on the worker’s initiative or investment in resources (does a worker’s opportunity to profit or suffer loss rest on the exercise of the worker’s own managerial skill or business acumen, and the worker’s management of investments in or capital expenditure on helpers, equipment, and materials).

If these two core factors are in conflict when determining independent contractor status, the WHD’s Proposed Rule identifies three other factors analysts may then evaluate as additional considerations in any analysis of whether the worker is an “employee” subject to the FLSA:

1. the amount of skill required for the work (the greater the skill, knowledge, or ability to perform the services, the more likely the worker has autonomy in completing the assignment);
2. the degree of permanence of the working relationship between the worker and the potential employer (is the working relationship definite in duration or sporadic); and
3. whether the work is part of an integrated unit of production of the business (does the individual work in circumstances analogous to a production line; i.e. is the worker “a component of a potential employer’s integrated production process, whether for goods or services” or is the worker working “closely by employees and perform[ing] identical or closely interrelated tasks”).

Difference with Current “Economic Reality” Test

The WHD’s new proposed “economic reality” test thus greatly reduces the factors to consider to determine independent contractor status in comparison to the prior standard.  Currently, the WHD determines independent contractor status using an “economic reality” test that considers seven factors (not two): (1) the extent to which the services rendered are an integral part of the principal’s business; (2) the permanency of the relationship; (3) the amount of the alleged contractor’s investment in facilities and equipment; (4) the nature and degree of control by the principal; (5) the alleged contractor’s opportunities for profit and loss; (6) the amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor; and (7) the degree of independent business organization and operation.  See USDOL Fact Sheet #13:  Employment Relationship Under the Fair Labor Standards Act (https://www.dol.gov/agencies/whd/fact-sheets/13-flsa-employment-relationship).

Thus, the Proposed Rule’s test would make the current test’s first and second factors a consideration only when there is conflict between the Proposed Rule’s two core factors for analysis (related to the nature and degree of the worker’s control and the worker’s opportunity for profit or loss based on initiative or investment).

Furthermore, in a significant change, the Proposed Rule shifts the inquiry from the old test’s requirement that one analyze the employer’s control over how the employee does the work, to analyzing the worker’s control over their work.  In other words, rather than concern itself with what control the business imposes upon the worker, the Proposed Rule would concern itself with what control the worker has over his/her own work (altering the current test’s fourth factor related to the employer’s control). This change in focus would make it easier for employers to prove a worker’s “autonomy.”

No Time for Employers to Celebrate Yet

Employers, however, should remain cautious and should temper their optimism. There are several potential “slips between lip and cup” which could operate to stop this proposal from ripening into an enforceable “Final” Rule.

First, the Proposed Rule is now subject to a 30-day Comment period before becoming Final. This Comment period meets the Administrative Procedure Act’s minimum Comment period. However, federal agencies, by tradition, typically allow greater time for Public Comment on regulatory issues changing long-held regulatory interpretations of a federal statute. This is particularly true if, as here, the proposed change goes to core legal issues central to the statute’s enforcement.

Second, should Joe Biden win in November before the Proposed Rule becomes final, employers can fully expect the new Administration’s WHD to rescind the Proposed Rule or to seek to issue a new Rule if the Proposed Rule has ripened into a Final Rule before Inauguration Day (January 20, 2021).

Third, even if the Proposed Rule were to become a Final Rule, should the Democrats take control of the Senate and maintain their current majority status in the House of Representatives, Democrats would be able to undo the Final Rule pursuant to the Congressional Review Act. That 1996 Act, which sprang to life during the early years of The Trump Administration after lying dormant for over two decades, grants Congress the ability to issue a joint Congressional resolution of disapproval of regulatory Rules a federal agency has published in final form.

• Notice of Proposed Rulemaking: Independent Contractor Status under the Fair Labor Standards Act
• USDOL’s announcement
• Wage & Hour’s landing Page on the NPRM

Wednesday, September 23, 2020: USDOL Break-Out Sessions Now Available

We reported last week, USDOL Agencies Showcase Resources & Award Programs.

The Agency reached out to DirectEmployers to let us know that over 5,200 people registered to join the summit! That said, the panel discussions and “sold out” breakout sessions are now available online.

Panel discussions:

• Voluntary Compliance Assistance and Rewards Programs
• Innovative and Modernized Compliance Assistance Tools 

Breakout Sessions:

• ODEP: Compliance Tools for a Disability-Inclusive Workplace
• VETS: Uniformed Services Employment and Reemployment Rights Act
• OFCCP: VEVRAA Focused Reviews & Ombuds Service
• WHD: Modernized Compliance Assistance Tools

Wednesday, September 23, 2020: EEOC Now Fully Staffed With Republican Majority

We were early on this story last Monday when the Senate suddenly switched it up, took a stutter-step and sent the nominations to Executive Session, setting the stage for confirmation votes the next day of a Republican and a Democrat, and of the remaining Republican two-days later.

With the confirmations of Samuels and Lucas on Tuesday, and Sonderling on Wednesday, the Equal Employment Opportunity Commission (EEOC) finally will have a complete roster of five Members. The Commission is structured to allow a sitting President to appoint three Commissioners of his own party. The Commission is now composed of the following three Republicans and two Democrats:

• Janet Dhillon (R), Chair, term expires July 1, 2022
• Andrea R. Lucas (R), for a five-year term expiring July 1, 2025.  Lucas will take Commissioner Lipnic’s seat, whose term expired on July 1, 2020. Lucas has practiced in the Washington, D.C. office of Gibson, Dunn & Crutcher LLP in the firm’s labor and employment group for almost a decade, a Group which current U.S. Secretary of Labor Eugene Scalia used to Chair before his nomination to head USDOL.
• Keith E. Sonderling (R), for a term expiring July 1, 2024. Sonderling is currently the deputy administrator of the Wage and Hour Division of the U.S. Department of Labor.
• Charlotte Burrows (D), whose second term will expire July 1, 2023.
• Jocelyn Samuels (D), for a term expiring July 1, 2021. Samuels is the Executive Director at the Williams Institute at the University of California, Los Angeles School of Law.

A Note on Term Length

While EEOC Members can be appointed to up to five-year terms, they rarely are because the President is often filling only the remaining portion of an unexpired term.  You saw this with Chair Dhillon, and now see it again with Commissioner Sonderling (filling a term expiring in less than three years) and also with Ms. Samuels (filling a term with less than a year left until expiration). Ms. Lucas is filling a full five-year term since Commissioner Lipnic served out her entire term.

Wednesday, September 23, 2020: OFCCP Defines “Promotion”

The Office of Federal Contract Compliance Programs (OFCCP) announced that in light of the upcoming Focused Reviews on Promotions and Accommodations (see our WIR on the CSAL List), the Agency, following suit with its efforts to provide more transparency and compliance assistance, has launched two new landing pages.

Promotion Focused Reviews

This landing page provides the following resources:

• Frequently Asked Questions currently holds seven Q&As – including the highly anticipated question of – “How does OFCCP define a Promotion?” The answer…

“OFCCP’s Federal Contract Compliance Manual (FCCM) defines promotion as “[a]ny personnel action resulting in, for example, the movement to a position affording higher pay, greater rank, change in job title, or increase in job grade; an increase in pay, requiring greater skill or responsibility; or the opportunity to attain such. A promotion may be either competitive or noncompetitive.” The definition of promotions as inclusive of advancement opportunities recognizes that promotion policies and/or procedures may effectively foster or hinder advancement and, as such, should be examined and corrected if discriminatory.”

• Focused Review Directive
• Focused Reviews
• Executive Order 11246 Resources
• Sample Focused Review Report (Coming Soon, says OFCCP)
• Sample On-Site Review Guide (Coming Soon, says OFCCP)

Accommodation Focused Reviews

It’s important to note that the Accommodation reviews will focus not only on accommodations for individuals with disabilities but also on religious accommodations. This landing page provides the following resources:

• Frequently Asked Questions currently holds nine Q&As
• OFCCP Focused Reviews
• Equal Employment Opportunity Commission Religious Discrimination Guidance
• Best Practices (coming soon)
• Sample On-Site Review Guide (Coming Soon, says OFCCP)

Sample Focused Review Report (Coming Soon, says OFCCP)

Wednesday, September 23, 2020: Top Organizations Identified to Oversee IRAPs

USDOL announced an initial 18 organizations to be Standards Recognition Entities (SREs).

What is an SRE? (Or, I’ll take Federal Acronyms for $500, Alex!)

SREs are third party industry and workforce leaders that will evaluate and recognize high-quality Industry-Recognized Apprenticeship Progams (“IRAPs”) consistent with the Department’s standards. The 18 SREs are the first group of SREs to receive recognition under new regulations the Department published earlier this year (see WIR Final Rule on Apprenticeships Standards) to expand apprenticeship opportunities in industries where apprenticeships have been used less frequently than desired.

The recognition of these entities follows what USDOL described as a rigorous review within the Department to ensure that they have the capacity and quality-assurance procedures needed to monitor IRAPs. SREs can now begin to work with employers and other entities to establish, recognize, and monitor high-quality IRAPs that provide apprentices with industry-recognized credentials.

USDOL’s SRE recognition are valid for five years.

Thursday, September 24, 2020: VETS Apprenticeship Pilot Will Help Employers Achieve the VETS Medallion Award

USDOL’s Veterans Employment and Training Service (VETS) announced that the Apprenticeship Pilot for transitioning service members (see previous WIR) can help employers meet the HIRE Vets Medallion Award criteria through the use of apprenticeship programs. Employers may take advantage of this pilot to start an apprenticeship program or connect an existing apprenticeship program with transitioning service members.

For this pilot, VETS has embedded 16 Apprenticeship Placement Counselors at eight military installations across the United States to work with transitioning service members and their spouses interested in exploring an apprenticeship as a post-separation career pathway. During the pilot, apprenticeship counselors will assist transitioning service members as they select, locate, and apply for apprenticeships across the nation.

If you have an apprenticeship program and would like to connect your program with this pilot, or if you would like to learn how you can develop an apprenticeship program that can attract, train, and retain veterans, email VETSapprenticeship@dol.gov.

Additional Resources

• VETS Apprenticeship Blog Post
• DOL VETS Apprenticeship Pilot High-Level One-Pager
• Employer Flyer

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.