The Office of Federal Contract Compliance Programs (OFCCP) continues to collect increasing dollars in money damages from the nation's approximately 200,000 government contractors subject to affirmative action obligations - half of whom are construction contractors. In fiscal year 2005, the OFCCP collected over $45 million dollars for workers - a record dollar amount and a 56% increase from fiscal year 2001. Message: Contractors beware!
An OFCCP notice of a compliance review usually allows a contractor only 30 days to submit its affirmative action materials. Evidence of good faith compliance efforts is almost impossible to compile in such a short time. Therefore, contractors are best served by maintaining the required policies and procedures and using the 30 day period to prepare an impressive presentation documenting its compliance efforts.
Are You Covered? A contractor first must determine whether it is covered by OFCCP affirmative action obligations. Although rare, the OFCCP may send a compliance review request to a non-covered entity. Three federal laws cause affirmative action objections: Executive Order 11246 regarding race and sex, Section 503 of the Rehabilitation Act regarding individuals with disabilities, and the Vietnam Era Veterans Readjustment Assistance Act (VEVRRA) regarding certain veterans. Each mandate has a different dollar threshold for coverage and different requirements for compliance. Contractors that provide management, engineering, design or other services related to a federal or federally funded construction project have additional affirmative action obligations under the "supply and service" requirements of these laws.
If a contractor determines that it is not covered by one of the mandates, it should prepare a letter to the investigator who sent the compliance review notice stating that it does not have any government contracts or sub-contracts at the threshold dollar amounts. A contractor should be certain of its position and be prepared to defend that position if challenged by the OFCCP.
What Is the Scope of an Audit? Typically, the OFCCP first requests a desk audit which requires the contractor to send its affirmative action materials to the OFCCP for review. Based on regulation changes, the OFCCP can now end the review at this step if the contractor is in compliance. If not, the OFCCP will schedule an on-site visit to further review the contractor's policies, practices and procedures as well as to interview employees and managers.
Can You Survive a Desk Audit? Contractors can take several steps to ensure that the review ends at the desk audit phase. Although certain statutes, dollar thresholds and/or company size may result in a contractor not being specifically required to have a "written affirmative action plan" per se, a covered contractor nonetheless needs "documents" to substantiate that it is indeed making the required affirmative action efforts. A contractor must follow its polices in actual practice and should document its compliance efforts.
At a minimum, a contractor must have appropriate written policies in place such as an Equal Employment Opportunity (EEO) policy and a comprehensive policy prohibiting harassment, discrimination and retaliation. Other Company documents such as an employee handbook, job application and help wanted advertisements also should contain appropriate EEO language.
Other documents that can indicate good faith efforts include: letters to recruiting sources likely to generate female, minority, disabled or veteran applicants, letters to minority, women's and community organizations regarding apprenticeship or training opportunities, documentation of manager training on EEO, affirmative action and other legal issues, documentation of on-the-job training for women, minorities and individuals with disabilities, job postings, notes from meetings with protected employees encouraging them to apply for promotional opportunities and/or refer other protected applicants to the contractor, etc.
Another excellent way of demonstrating good faith effort is to maintain an employee scrapbook containing pictures and memos documenting important events, particularly when those events involve employees or others who are covered by affirmative action requirements such as women, minorities, persons with disabilities and veterans.
Currently, the OFCCP is completing many audits at the desk audit phase when it determines that further investigating is unlikely to reveal systemic discrimination. This creates further incentive for a contractor to use its best efforts to demonstrate compliance early in the audit process.
Can you Survive an On-Site Audit? A typical on-site audit might go as follows: the investigator arrives and requests a conference with the CEO and the EEO compliance officer as well as a tour of the facility. Next, the investigator reviews any documents or personnel files which most often will have been requested in advance. The investigator then interviews employees and managers. Finally, the investigation ends with a closing conference. To prepare for an on-site audit, a contractor should conduct an internal mock review. A Contractor also should anticipate that the OFCCP has contacted the Department of Labor and the Equal Employment Opportunity Commission to determine if those agencies have processed any complaints.
Since the investigator generally begins an on-site audit by meeting with upper management, all managers must be familiar with the contractor's affirmative action related documents and the good faith efforts taken by the contractor. Managers who are unaware of a contractor's efforts jeopardize the contractor's ability to "pass" the review. Advance planning and preparation are key to surviving this phase of the review.
A contractor should tour its own facility to ensure that all required postings are in place and that no situations exist that might indicate potential harassment or discrimination issues (such as graffiti in the bathrooms) or other areas of legal exposure. Likewise, a contractor should determine the "path" of the tour so that the investigator will see diverse employees including women and minorities. Ideally, a contractor can "showcase" its good faith efforts to comply, such as a bulletin board with job postings or even photographs of promoted employees (especially those in the protected categories).
The investigator will review personnel files, I-9 forms and possibly wage records. Before providing any personnel files to the investigator, a contractor should audit such files for legal compliance. For example, any information related to confidential medical records should not be in the personnel file but in a separate medical file. Likewise, a contractor must review all I-9 forms to be certain that the forms are complete and maintained in accordance with the I-9 retention guidelines. The government can impose fines for erroneous I-9's even if the employee is no longer employed.
To prepare for OFCCP interviews, a contractor should meet individually with each person identified by the investigator. A contractor should explain that the OFCCP will be conducting an investigation and the types of questions the investigator may ask. A contractor also should remind employees of the existence of its affirmative action program and its good faith efforts. Likewise, employees should be instructed that the investigator may request a written statement or to sign notes taken by the investigator. A management representative or the company's attorney may be present during manager interviews but not employee interviews.
The investigator will conclude the on-site audit with a closing conference. In this meeting, the investigator usually will share his or her initial impressions of the audit. A contractor should listen and take notes but not admit to any violations or deficiencies or commit to any remedial measures. Finally, a contractor should ask when it will hear from the investigator and what follow-up, if any, will be required.
What is the OFCCP Looking For? A contractor's best chance to "pass" a compliance review is to show the investigator from the beginning of the audit process that it actually made good faith efforts to comply with its affirmative action obligations. Manifested actions, such as internal and external outreach, will be noticed by the investigator and likely create a positive impression. An absence of such actions will negatively influence the investigator and will likely result in increased scrutiny.
Generally, the OFCCP emphasizes the following areas in an audit: the application process, actual utilization of females and minorities, comparable compensation, internal and external outreach, and other indications of good faith efforts to take affirmative action.
The OFCCP's definition of "applicant" is hotly debated, newly revised and much broader than most employers realize. Thus, many audits reveal errors in applicant tracking. The investigator will scrutinize how a contractor defines "applicant" and how it tracks an applicant's flow through the employment process. In this regard, the investigator will review when the contractor considers an unsolicited resume (either by snail mail, electronic mail or via the Internet) as an "applicant." Failure to satisfy the OFCCP's definition of "applicant," improper applicant tracking, or inconsistent application of the stated policy could lead to remedial action by the OFCCP.
Although quotas are not required, the investigator also will consider whether a contractor hires a sufficient rate of female or minority applicants or has substantial documentation that it has tried to hire such employees but has been unable to do so. Likewise, the investigator will look for statistically significant pay disparities among females and minorities versus other non-protected employees in comparable positions. Finding violations in either of these areas could result in monetary penalties (back pay, front pay or both) rather than just the implementation of new policies or procedures in the future.
What Happens After the Audits? After completing the review, the OFCCP investigator will send a letter to the contractor regarding the results. The best case scenario is a Letter of Compliance stating that no violations were discovered. Much more likely is a Conciliation Agreement addressing the areas of deficiency and requiring remedial action such as changes in policies, practices or even backpay and imposing certain reporting obligations. In cases of substantial non-compliance or refusal to cooperate with the audit process, the OFCCP may begin enforcement proceedings that could result in court actions and ultimately non-payment on existing contracts or the inability to be considered for future government contracts.
Do You Need Professional Help? Would you go through an audit by the Internal Revenue Service without the assistance of your accountant? Probably not. Likewise, if your company does not have substantial experience in dealing with the OFCCP and is not familiar with what is required to "pass" a compliance review, you should contact an expert experienced in OFCCP matters. Enlist assistance as soon as you receive notice of the review so that your advisor has an opportunity to assist the company in presenting the best possible information. If you wait until notice of an on-site audit, you limit your advisor's ability to affect the outcome of the review. Additionally, use of an attorney in the self-audit and/or preparation process may allow a contractor to take advantage of attorney-client privilege.
Last Bit of Advice? Be prepared. Don't wait to receive a letter from the OFCCP before considering your affirmative action obligations. Establish and maintain good policies and document all compliance actions.
The authors, D. Albert Brannen and Jennifer Sandberg are attorneys with Fisher & Phillips LLP, a national labor and employment law firm representing employers, including many construction companies. You may contact them at 404-231-1400 or their email addresses email@example.com and firstname.lastname@example.org .