On December 30, 2019, OFCCP published a notice of proposed rulemaking (NPRM) to the Federal Register.  According to the notice, the agency seeks to:

“codify procedures that the agency currently uses to resolve potential discrimination and other material violations of these laws by federal contractors and subcontractors; [and] add clarifying definitions to specify the type of evidence OFCCP will use to support its discrimination findings…”

In a less substantive action, this NPRM also proposes to correct the title of OFCCP’s agency head from “Deputy Assistant Secretary” to “Director” in its regulations.  This title was changed as part of a restructuring by the Department of Labor in November 2009.

Codifying Resolution Procedures

Based on a directive put into place in February of 2018, OFCCP staff has several steps they must take if they discover material violations during a compliance review or compliance investigation. This includes the issuance of a pre-determination notice (PDN) and/or a notice of violation (NOV).  

PDNs are issued only if the agency finds sufficient evidence during a compliance evaluation that discrimination may have occurred.  A PDN is intended to provide organizations under review by OFCCP with an opportunity to respond to the agency’s preliminary findings before a NOV is issued.  In the event an organization does not sufficiently rebut the findings identified in the PDN, OFCCP issues an NOV. 

An NOV serves as a formal notice by the agency that it has discovered one or more material violations of the agency’s regulations. An NOV also outlines required corrective measures to remedy the alleged material violation.  A “material violation” may involve a finding of discrimination by OFCCP. However, it may also involve a finding that an organization has failed to make sufficient outreach or otherwise fully implement some part of the federal affirmative action regulations. If an organization under review refuses to enter into a conciliation agreement with OFCCP to resolve a material violation, OFCCP may issue a Show Cause Notice (SCN) requiring the contractor to indicate why the agency shouldn’t proceed with formal enforcement mechanisms.

The NPRM would codify requirements for the agency to utilize PDNs and NOVs during compliance investigations. In addition, the NPRM also lays out the procedure OFCCP must follow for findings of material violations that do not involve discrimination.  In cases where OFCCP finds material violations that do not involve discrimination, the agency would be compelled to issue an NOV prior to inviting the contractor to enter into a conciliation agreement.

Finally, the NPRM does allow contractors to bypass these procedures and enter directly into conciliation. This would effectively codify the agency’s directive on Early Resolution Procedures that was issued in November of 2018.

Requirement for Statistical and Non-Statistical Evidence in Discrimination Claims

The NPRM further seeks to clarify evidence thresholds the agency expects to meet prior to alleging a finding of discrimination.  According to OFCCP, it will generally only pursue instances of discrimination where there is both non-statistical and statistical evidence to support the finding. The agency will attempt to collect non-statistical evidence to help bolster claims where there may be statistical evidence of discrimination. 

In doing so, the agency proposes to define non-statistical and statistical evidence in its regulations as follows:

 “nonstatistical evidence may include testimony about biased statements, remarks, attitudes, or acts based upon membership in a protected class; differential treatment through review of comparators, cohorts, or summary data reflecting differential selections, compensation and/or qualifications; testimony about individuals denied or given misleading or contradictory information about employment or compensation practices; testimony about the extent of discretion or subjectivity involved in making employment decisions; or other anecdotal evidence.”

“statistical evidence means hypothesis testing, controlling for the major, measurable parameters and variables used by employers (including, as appropriate, other demographic variables, test scores, geographic variables, performance evaluations, years of experience, quality of experience, years of service, quality and reputation of previous employers, years of education, years of training, quality and reputation of credentialing institutions, etc.), related to the probability of outcomes occurring by chance and/or analyses reflecting statements concluding that a difference in employment selection rates or compensation decisions is statistically significant by reference to any one of these statements:

(1) The disparity is two or more times larger than its standard error (i.e., a standard deviation of two or more);
(2) The Z statistic has a value greater than two; or
(3) The probability value is less than 0.05 ”

The preamble to the NPRM indicates that there are cases where OFCCP would pursue matters where there is little or no corroborating non-statistical evidence, stating: “OFCCP will…pursue [these] matter[s] when discrimination is indicated by statistically significant evidence at the 99 percent confidence level (i.e. three standard deviations)” or higher.  The agency may also pursue discrimination without non-statistical evidence if there are similar findings at other facilities, multiple findings of discrimination, or patterns of discrimination across multiple plan years.

Takeaways for Federal Contractors and Subcontractors

1. Opportunity to Provide Comment: as required by the Administrative Procedures Act, OFCCP must collect and consider comments from the public on the proposed rule.  The comment period for the NPRM will remain open through January 29, 2020.  Comments may be submitted through mail, hand delivery or electronically.
2. More Certainty on OFCCP Audit Procedures: if the proposals in the NPRM are ultimately approved, this would give organizations more certainty as to how the agency will operate in the future.  While current practices under Director Leen will not change significantly with this codification, the revised regulations will continue to bind the agency under future Directors unless they are formally modified.