OFCCP Proposes New Scheduling Letter Increasing the Documentation Federal Contractors Must Provide in Audits
On November 21, 2022, OFCCP proposed a new Scheduling Letter and Itemized Listing that will greatly increase the amount and specificity of documents and information that federal government contractors must provide in compliance evaluations. The Scheduling Letter is the notice that OFCCP issues to contractors and subcontractors selected for the agency’s annual compliance evaluations. These changes highlight the agency’s increased focus on enforcement, and the need for contractors to carefully document their performance of affirmative action plan requirements.
OFCCP’s new proposed Scheduling Letter seeks to add numerous additional document requirements beyond those the agency currently requests in its audits. These new requirements fall into several categories:
Focus on Action-Oriented Programs and Outreach Activities: OFCCP’s regulations have long required that contractors implement action-oriented programs to seek to increase the representation of minority, female, individuals with disabilities, and military veteran employees, and engage in outreach activities to effectively recruit members of those groups. The proposed Scheduling Letter increases the level of specificity of the information OFCCP will be seeking from contractors about these efforts, as OFCCP is proposing to require contractors to provide documentation of outreach and recruitment activities, as well as the criteria that the contractor uses to evaluate the effectiveness of the activities and implement alternative efforts in the event that existing outreach is deemed ineffective.
Scrutiny of Artificial Intelligence in Hiring Decisions: The proposed Scheduling Letter seeks to add a new document request for documentation of the contractor’s policies and practices regarding the use of artificial intelligence, algorithms, automated systems, and other technology-based procedures in recruiting, screening and hiring. With recent legislation in New York City and elsewhere, the use of AI in personnel decision-making is becoming an area of interest to legislators, and OFCCP appears to be joining that trend.
More Detailed Data on Personnel Transactions: OFCCP is also proposing to require contractors to provide additional data about personnel transactions over the prior affirmative action plan year. For promotions, a stated area of focus for the agency in recent years, OFCCP proposes to require contractors to state whether each promotion was competitive or non-competitive, provide documentation about policies and practices concerning promotions, and also identify the supervisors involved in the promotion and the effect of the promotion on compensation. For terminations, employers under OFCCP’s proposal would be required to provide information about the reason for each employee termination (i.e., retirement, resignation, conduct) over the previous plan year.
Additional Data on Employee Compensation: OFCCP similarly is proposing to require more contractors to submit more detailed data about employee compensation. First, OFCCP has expanded the scope of the compensation data production by requiring two years of compensation data, up from one under the current Scheduling Letter, and also requiring information about the compensation of individuals provided by staffing agencies. Second, whereas under the current Scheduling Letter, contractors may submit information about factors used to determine compensation (such as education, experience, etc.) and compensation policies, this submission would become a requirement under OFCCP’s new proposal.
Providing Information About Compensation Analyses: On the heels of OFCCP’s directive earlier in 2022 requiring federal contractors to perform pay equity audits (later rephrased by the agency as a “compensation analysis”), OFCCP is proposing to require contractors to provide certain information about their performance of the analysis. Notably, OFCCP’s directive on compensation analyses stated that such information would be required only where OFCCP’s audit revealed pay disparities, but OFCCP is now proposing to require all contractors selected for audit to provide the information up-front in response to the Scheduling Letter. Under the proposal, contractors must provide documentation showing that they satisfied the obligation to evaluate their compensation systems, including documentation demonstrating when the analysis was completed, the number of employees included or excluded in the analysis, what forms of compensation were reviewed, confirming that compensation was analyzed by race, gender, and ethnicity, and identifying the method of analysis used.
Production of Policies and Arbitration Agreements: Finally, OFCCP is proposing to require contractors to produce equal opportunity, harassment, and similar employment policies. Interestingly, the agency is proposing to require employers to also provide employment agreements containing arbitration clauses.
OFCCP’s current Scheduling Letter does not expire until April 30, 2023, and the new letter, if approved, would take effect after that point. Contractors and others may submit written comments as part of the approval process through January 20, 2023. Although it remains to be seen whether the proposed Scheduling Letter will ultimately be approved in its proposed form, OFCCP’s proposals highlight the need for federal contractors and subcontractors to take the outreach and evaluation (including compensation analysis) requirements in OFCCP’s affirmative action plan regulations seriously, as OFCCP is signaling that it intends to take a hard look at contractors’ efforts in meeting these obligations.