OFCCP Issues New Guidance on Validation, Practical Significance, and Project-Based Workers
The official rules and authority that govern OFCCP’s actions are set forth in the federal regulations at 41 CFR 60. These regulations go through notice and comment, as well as substantive review to ensure the appropriate balance of OFCCP’s jurisdiction and tools against the burden they pose on the contactor community. Due to the formal procedures necessary to amend the regulations, changes can be slow to develop and are long lasting.
But, OFCCP has other tools to change its rules and approach that require less pomp and circumstance. These sub-regulatory mechanisms include issuing new Directives, updates to the Federal Contractor Compliance Manual (often referenced as the FCCM), and publishing new Frequently Asked Questions and Answers (FAQs). Because these methods do not involve public notice and comment periods, they do not actually change contactor requirements—but they do provide guidance on how OFCCP intends to proceed in its mission.
With that background, on July 23, OFCCP announced that it had released new FAQs on Validation of Employee Selection Procedures, Practical Significance in EEO Analysis, and Project-Based or Freelance Workers.
OFCCP’s new FAQs on validation translate the key takeaways from the Uniform Guidelines on Employee Guidelines on Employee Selection Procedures, which are a part of OFCCP’s regulations (41 CFR 60-3), into plain English. In short, “any measure, combination of measures, or procedure that a contractor uses to make employment decisions” is a “an employment test” that must be “validated” by a subject matter expert if it causes adverse impact.
This information is not new, but the FAQs help make it more digestible.
The Agency’s FAQs on practical significance is an important regulator to its statistical approach. Specifically, these FAQs recognize that “served disparity in employment opportunities or outcomes reflects meaningful harm to the disfavored group.” The FAQs also explain how OFCCP will measure practical significance and that the Agency will consider it “as part of a holistic evaluation of the review.”
In our growing “gig-economy” world, these FAQs provide meaningful guidance on who contractors should include in their AAP analyses. Specifically, OFCCP’s new guidance clarifies that project-based or freelance workers are “typically  classified as independent contractors rather than employees” and that “independent contractors should not be included in the contractor’s AAP.”
(OFCCP had previously explained the specific approach it will follow to determine if a worker is an employee or independent contractor – not surprisingly – in another, earlier FAQ.)