OFCCP Proposes Rulemaking to Codify Compliance Evaluation Procedures
On December 30, 2019, OFCCP issued a Notice of Proposed Rulemaking on Nondiscrimination Obligations of Federal Contractors and Subcontractors: Procedures to Resolve Potential Employment Discrimination. The proposed rulemaking codifies aspects of several of OFCCP 2018 directives, including Directive Nos. 2018-01 (Use of Predetermination Notices), 2018-05 (Analysis of Contractor Compensation Practices During a Compliance Evaluation), and 2018-08 (Transparency in OFCCP Compliance Activities).
Perhaps most importantly for contractors, the proposed regulation elaborates on the statement in OFCCP’s Directive 2018-05 concerning compensation reviews that “OFCCP will be less likely to pursue a matter where the statistical data are not corroborated by non-statistical evidence of discrimination unless the statistical evidence is exceptionally strong.” The proposed rulemaking adds specificity to this statement, clarifying that in the absence of non-statistical evidence, OFCCP will issue a Predetermination Notice (PDN) only where the statistical evidence is significant at a confidence level of 99% or higher, equating to three or more standard deviations. This appears to be a positive development for contractors, as OFCCP currently pursues compensation audits based solely on alleged statistically-significant disparities falling below this threshold.
The proposed rulemaking also defines statistical and non-statistical evidence. The definition of statistical evidence echoes the focus in OFCCP’s recent directives of “controlling for the major, measurable parameters and variables used by employers” in making compensation and selection decisions. The definition identifies several exemplary control factors that OFCCP may consider, including performance evaluations, years of experience or service, and location. This may provide additional weight to contractors’ arguments that OFCCP must consider contractor’s control factors in its compliance evaluation analyses.
The proposed rulemaking defines non-statistical evidence to include testimony about workplace bias, non-statistical cohort analyses, testimony about individuals being denied or given misleading information about employment practices, testimony about subjective or discretionary decision-making, and other anecdotal evidence. Overall, this specificity about the types of non-statistical evidence OFCCP will rely upon is beneficial to contractors. However, the focus on discretionary elements in compensation systems as evidence of discrimination is problematic as the U.S. Supreme Court has held that giving managers discretion in making employment decisions is not inherently discriminatory.
Finally, the proposed regulations will codify OFCCP’s current practice, described in Directive 2018-01, of using of PDNs and Notices of Violation when a compliance review shows preliminary findings of discrimination. Noticeably absent from the proposed regulations, however, is Directive 2018-05’s pledge that OFCCP will attach to the PDN the individual-level data necessary for the contractor to replicate OFCCP’s statistical analyses.
Contractors should welcome OFCCP’s effort to formalize these aspects of its Directives into regulations. Contractors will have until January 29, 2020 to comment on the proposed regulations.