Day 2 of the 2019 ILG National Conference in Milwaukee started with a favorite guest – EEOC Commissioner Victoria Lipnic.  Commissioner Lipnic last addressed the ILG National Conference in 2016, during which time, as she reminded attendees, she was likewise talking about pay data reporting, she had just created the Chief Data Officer role at EEOC and it was several months before the breakout of the #metoo movement.

With respect to the new EEO-1 Component 2 pay data reporting tool, or the “elephant in the room” as she called it, Commissioner Lipnic shared insights and history about the litigation, Court’s Order and how we got where we are today.

She expressed to conference-goers that

the goal is to have everyone comply by the end of September

to satisfy Judge Chutkan’s Order.  She additionally acknowledged that collection of the data is “not easy”; that having to go back to 2017 “is not in any way easy” but that is “what a federal judge has ordered.”  In Commissioner Lipnic’s opinion,

this is no way for public policy to be made.

From this, she offered a bit of advice of a lesson learned by the agency:

If you want your interests to be heard, you must intervene.

She went on to explain how the agency is going to “take a breath” and learn from what they get in the data – to undertake “an honest assessment”.  She desires a bipartisan and open process to learn about the utility and burden associated with the report, and encouraged participants to keep track of the burden associated with filing the required reports.  In her view,

balancing burden and utility is what good policy should be about.

Reflecting back how the agency dealt with issues in the past, she recounted “we took our time to think about it.”

During a subsequent conference session on the modernization of the EEOC, EEOC’s Chief Data Officer, Chris Haffer, answered a few questions about the Component 2 reporting, including whether there would be an “automatic extension” of the September 30th reporting period.  At this time, Dr. Haffer said there would be no automatic extension.  He also mentioned that “data clean up” would likely take until at least January 2020 after which the files would go to EEOC for analysis of data quality and utility.

Following her remarks on pay equity, Commissioner Lipnic turned to another of her favorite topics – age discrimination.  She pointed out that “millennials are just a few years away from being covered by the Age Discrimination Act.”  She also touched briefly on the fact of the 10 year anniversary of the ADA Amendments Act, which increased protections for individuals with disabilities.

As part of a generous Question and Answer session, Commissioner Lipnic answered a particularly simple, yet probing question:  As federal contractors, what do you want us to focus on?  Her response was equally as simple and thought-provoking.  She encouraged contractors to “lead the way in recruiting for populations you traditionally have not gone to before.”

Commissioner Lipnic concluded her remarks by reciting an inscription from the George Washington Masonic National Memorial:

 Let prejudices and local interest yield to reason. Let us look to our National character, and to things beyond the present period.

 

The 2019 ILG National Conference being held in Milwaukee, Wisconsin has officially begun.

OFCCP Director Craig Leen opened the conference with an energized keynote addressed that touched on the agency’s work on behalf of individuals with disabilities and veterans, as well as OFCCP’s continued action in furtherance of the four “bedrock” principles announced at last years’ ILG National conference.

Focused Reviews

Director Leen opened his remarks by suggesting if conference goers remember one thing about his speech they should remember

it is time in this country to treat individuals with disabilities the same.

From that opening sentiment Director Leen explained OFCCP’s continued commitment to individuals with disabilities through Focused Reviews is because

the numbers cry out for action.

The numbers to which he referred are the low hiring rates and wide pay gap for disabled individuals, as well as the relatively low average cost of accommodations.  Director Leen described the disabled community as a

tremendous untapped resource that can help the country succeed.

In addition to discussing the agency’s use of focused reviews to “make a significant positive impact” for individuals with disabilities, Director Leen also shared with conference attendees the agency’s developing plans for VEVRAA Focused Reviews.  Specifically, Director Leen shared that the agency is hoping to publish a listed of veteran specific focused reviews around Veteran’s Day, which occurs in early November.

Director Leen then transitioned to his “hypothesis” that

a lot of compensation issues [the agency] is finding are promotion issues in disguise.

As a result, he believes OFCCP should be looking a promotions, specifically the intersection of race and gender and disability status and other statuses.  In his words, the agency needs to look into promotions because

it is not about equality of outcome, but equality of opportunity.

Director Leen’s keynote address was followed in the afternoon by an informative breakout session in which OFCCP leadership provided additional insights into the Agency’s approach to Section 503 Focused Reviews.  The team, which was comprised of members of the national office, the Solicitor of Labor’s office and regional leadership, provided information about the agency’s expectations for focused reviews and spent a good deal of time answering questions from the audience.  An important take away is contractors scheduled for Section 503 Focused Reviews will receive an On-Site plan prior to their mandatory on-site review, as well as an “What to Expect” Guide, in addition to the guidance available on the Section 503 landing page.

Four Principles

Following his discussion of Focused Reviews, Director Leen went on to share the agency’s current progress on the four principles – Transparency, Efficiency, Certainty and Recognition.

He previewed that OFCCP would be imminently releasing a new Opinion Letter (on FCC contracts giving rise to OFCCP jurisdiction) as well as new FAQs regarding Functional Affirmative Action Plans (FAAPs).

With respect to Transparency, Director Leen reiterated his position that the field should be sharing reasons for an information request when the request for information is made.  He acknowledged however that

it takes a while to steer the boat.

He also shared that OFCCP is looking at a program that would allow non-violating, top-performing companies, to enter into an Early Resolution Program (ERP) agreement with the agency.

Director Leen also addressed the Agency’s “internalization” of the Analogic compensation decision.  He shared he believed OFCCP’s approach is consistent with the case’s holdings by looking at a company’s established pay programs, prioritizing cases that have both statistical and anecdotal evidence, and trying to identify the actual policy or practice causing the disparity.

Efficiency

Reiterating comments he’s made in the past, Director Leen discussed the rescission of the Active Case Enforcement Directive in favor of OFCCP’s current enforcement Directive which marries Active Case Management with Active Case Enforcement principles.  Specifically, Director Leen stated

The evidence doesn’t support the hypothesis that if you spend more time you find more discrimination.

Instead, OFCCP is trying to spend less time so they can “touch” more contractors.

Certainty

Moving down the list of principles, Director Leen acknowledge the Certainty principle ties in with the Transparency principle – noting the agency is trying to provide guidance so contractors have certainty about their obligations under the law noting examples such as FAQs, Opinion Letters, and Technical Assistance.  He also shared that the agency hopes to “very soon” launch its Online HelpDesk so everyone has access to answers to questions so “everyone is treated the same.”

Recognition

Touching on the final principal, Director Leen encouraged organizations to apply for the Excellence in Disability Inclusion Award, noting it is awarded on an establishment (not contractor) basis.  He also shared the Agency is working on a way to close audits “with distinction” to reward contractors who are not only in compliance, but who are excelling in their compliance.

Director Leen ended his remarks where he began – inclusion of individuals with disabilities.  He shared that he hoped contractors “take to heart” what the agency is saying about Section 503 compliance and looking at inclusion within their organizations.

 

As required, EEOC has filed its scheduled update with the Court regarding the progress of collection of the new EEO-1 Component 2 pay data report.

The report is brief, but notes EEOC is still on schedule to allow a data file upload function and validation process as an additional method of reporting no later than August 15, 2019.

The Agency also reports is it scheduled to send out “reminder” notices and e-mails to filers with login information a various times throughout August.

Finally, EEOC reports it is still “finalizing its analysis of the response rates for EEO-1 data submitted over the
last four years to be used to assess whether the EEOC is ‘on track’ to ‘complete’ the Component
2 data collection by September 30, 2019.

EEOC reports it “cannot begin to project what percentage of employers will submit Component 2 data
by September 30, 2019” and will not be able to do so until at least a significant percentage of employers have completed the report.  EEOC did confirm some employers have started submitting the Component 2 reports.

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 contractor 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 contractor 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.

  1. Validation of Employee Selection Procedures

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.

  1. Practical Significance in EEO Analysis

The Agency’s FAQs on practical significance is an important regulator to its statistical approach.  Specifically, these FAQs recognize that “severe 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.”

  1. Project-Based or Freelance Workers

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.)

We recommend staying up to date on these FAQs.  They were important enough to OFCCP to issue them, and they provide guidance the Agency will expect contractors to understand.

Functional affirmative action plans (FAAPs) are not new.  While the regulations require AAPs be prepared on an establishment-basis, OFCCP has permitted contractors to structure their AAPs by “function” or “business unit” – with Agency approval.

Implicitly, the Agency’s 2013 Directive on the subject recognized that business structures had evolved since the 1960s.  Establishment-centered chains of command were fading, and geographically diverse teams were rising.  Since then, this workforce evolution has only gained steam, including a substantive revision in 2016.

Dating back to town hall sessions in early 2018, the current OFCCP administration under Craig Leen has been doing some deep thinking on how to “best” incentivize contractors to adopt AAP structures, that may better reflect how recruiting is done in certain organizations, and empower them to better meet the goals of Executive Order 11246.  If contractors are not organized by establishment, why should their AAPs be so rigid?

In answer to that question, OFCCP has issued an updated FAAP Directive.  OFCCP summarized the highlights of the update as follows:

  • OFCCP will no longer consider compliance history when reviewing a request for a new FAAP agreement or termination.
  • The agreement term is extended to five years, up from three years.
  • There will be a minimum of 36 months between compliance evaluations for a single functional unit. This is 12 months longer than an establishment review.
  • Complete FAAP applications will be determined within 60 days. Historically, there was no deadline.
  • OFCCP no longer requires that FAAP contractors undergo at least one compliance evaluation during the term of their FAAP agreement.

Procedurally, these changes reduce the burden of a FAAP Agreement by extending its term and committing to act on all applications within 60 days.  And, substantively, these changes may seem advantageous —audits are no longer required, and should they occur each plan would be immune from a second audit for a year longer than an employer who prepares establishment plans.

There are a multitude of issues to considering before changing to a FAAP program.  If you are assessing whether a FAAP is right for your organization, please reach out—we’re happy discuss.

In an effort to provide additional guidance to employers navigating the new Component 2 pay data filing requirements, the Equal Employment Opportunity Commission (EEOC) and NORC have just updated its frequently asked questions (FAQs) with respect to how employers experiencing mergers, acquisitions, and spinoffs during 2017 and 2018 should be filing their 2017 and 2018 Component 2 reports.  Additionally, the EEOC has included new information on filing obligations for Professional Employer Obligations (PEOs).   in addition to the website materials, we understand messages to the NORC HelpDesk are being returned promptly.

The new FAQs provide the following guidance:

Mergers & Acquisitions

Regarding mergers and acquisitions, the general expectation is – whether the event occurred before or after the employer’s selected 2017 workforce snapshot – the acquiring/new employer submit 2017 Component 2 data for the acquired subsidiary or the newly formed company.  In some instances, the company experiencing a merger or acquisition will not have access to the former company’s data.  If that is the case, the company should note this in the comments box under the certification section of the Component 2 online filing system.

Spinoffs

Where a company spins off from another in 2018, the spinoff company is not responsible for filing 2017 Component 2 data for its employees, as it was still affiliated with the former parent company at that time.  Instead, the former parent company would be responsible for filing 2017 Component 2 data for those employees, and the newly formed Company would be responsible for its 2018 Component 2 data.  Alternatively, parent companies selling a portion of their business in 2018 are not required to file 2017 and 2018 Component 2 data for those employees – that becomes the purchasing company’s obligation.  Again, should data access issues arise, companies are advised to note this in the online filing system.

PEOs

The EEOC has advised that a PEO is not responsible for filing Component 2 data of entities that are former clients at the time of filing.  Further, when a PEO and a client company’s contracting agreement does not include 100% of the covered client company’s employees, the covered client company – not the PEO – is responsible for filing Component 2 data.

 

We will continue to monitor and provide Component 2 updates as they become available.

In just its second Opinion Letter, OFCCP has [somewhat] tackled the issue of Pay Analysis Groups (PAGs).  Issued two months after the inaugural Opinion Letter which addressed the issue of Pell Grants, Director Craig Leen’s second letter touches upon the more controversial topic of compensation.

In the July 22, 2019 letter, Director Leen answers the question of whether contractors can work with the Agency to establish acceptable pay analysis groups in advance of an audit.  While Leen does say contractors can proactively submit their pay groups to the Agency, he acknowledges OFCCP is

unable to conclusively agree that it will rely upon specific, predetermined PAGs in all future compliance evaluations[.]

Essentially, Director Leen says OFCCP can work with contractors to evaluate and review the pay groupings and perhaps give feedback, but for purposes of an audit, it

must conduct its analyses based on the contractor’s pay systems, functions, and workforce organization as they exist or existed during the period under review[.]

Because things can change, Director Leen states ” OFCCP will need to make a new determination as to whether the PAGs are appropriate” if there has been a material change to a contractor’s compensation system at the time of an audit.

Despite this, Director Leen reiterates that “submission of a PAG structure to OFCCP for review and feedback better serves OFCCP’s objective of eliminating pay discrimination through both enforcement and proactive, self-auditing compliance” and “furthers OFCCP’s ability to ‘work collaboratively with the contractor'” as is embodied in Directive 2018-05, which replaced the Agency’s previous compensation Directive.

Director Leen reminds contractors that if they wish to submit PAGs to the Agency for review and feedback,

the submission should include sufficient data for OFCCP to determine if the aggregation is similar to what would be available in a compliance review.

Without further detail, it is unclear exactly what data would need to be submitted.  The letter directs contractors to OFCCP’s Director of Enforcement for assistance.  Bob LaJeunesse, is currently listed as the Acting Director of Enforcement.

This is the third of our series of blog posts on the Office of Management and Budget’s (OMB) July 1 request for comments on OFCCP’s updated proposed scheduling letters.  For background, OFCCP first proposed changes to its existing compliance check, establishment review, and focused review scheduling letters in April, and received comments from the contractor community.

These newly proposed July scheduling letters each include changed requirements that, if approved, would impact what contractors must submit at the onset of every compliance review. We have recently blogged about these changes to OFCCP’s proposed compliance check and establishment review scheduling letters. This post explores the proposed changes to the required submissions in every focused review OFCCP plans to conduct.

In short, unlike its changes to its proposed establishment review scheduling letter, OFCCP’s proposed July focused review letter is largely unchanged.

To be fair, OFCCP has withdrawn some requests in its revised July focused review letters, which mirror changes to the revised July establishment review letter. These changes include:

  • Additional Months of Data. For contractors who receive a scheduling letter more than six months into their AAP plan year, the April proposed letters sought to require contractors submit additional personnel activity data and “44(k) data,” which tabulates information on job openings and disabled and veteran applicants and hires, for “every completed month” since the plan year began. The July letters dial this requirement back to require only this data “for at least the first six months.” Contractors may – of course – submit more data, or may provide it for each month, if they wish – but it would no longer be required.
  • Assessments of Personnel Processes, Physical and Mental Qualifications. Echoing the changes in the July establishment review letter, OFCCP has removed a requirement that a contractor provide the date of its more recent assessments and the date scheduled for its next one. Instead, only a “description of the review and any actions taken or changes made as a result of the assessment” would be required.
  • Promotion Pools. Recognizing the lack of regulatory obligation to create data-driven “promotion pools” and the additional burden that this requirement would create, OFCCP has withdrawn the requirement that contractors provide these specific pools for promotion decisions. But, in place of this requirement, OFCCP now seeks permission to require a contractor submit “the job title and job group that each employee was promoted into and the job title and job group from which each employee came” and the workforce representation of individuals with disabilities or protected veterans in the AAP job group from which the employee was promoted. (The current regulations do not require contractors to analyze veteran workforce representation at all, let alone by job group.)
  • Submission Procedures. As with the changes to its other July letters, OFCCP has withdrawn its requirement that contractors must provide audit submissions in electronic format—but still encourages electronic submission “to reduce the amount of time it takes to complete [OFCCP’s] evaluation.”

While these changes are encouraging, a number of the initially proposed changes from the April letters remain in place. The July proposed letters would still require:

  • Applicant and Employee Level Employment Activity Data. As with the April letters, the July letters require contractors submit individual-level applicant, hiring, promotion, and termination data that include veteran and disability personnel activity data by job title and job group. This is far more detailed than the aggregated “job group or job title” personnel activity submission in the current establishment review scheduling letter. And, as we discussed in our blog on the April letter, if OMB approves this requirement, proactive disability and veteran adverse impact analyses may be essential in each audit submission.
  • Unique Identifier Across All Data. The July letters continue to require employers submit a single unique identifier in all employee data files to permit OFCCP to track an individual across all applicant and employee reports. Many contractors may have significant difficulty complying with this data reconciliation across systems.
  • Employee Level Compensation Data. The April letters’ requirement that contractors submit employee level compensation data remains unchanged. The July letters would force contractors to submit compensation for each employee, including base salary/wage rate, hours worked in a typical week, and other types of compensation, such as bonus, incentive, commission, merit increase, locality pay, and overtime—and may lead to the same unpredictable compensation analyses contractors have experienced in its establishment reviews. Because there is no obligation to identify each employee’s disability or veteran status, as the EEO-1 Report requires for race and gender, this missing veteran and disability data will invariably skew any compensation analyses.
  • Executive Order (EO) 11246 AAP. In a continued effort to install a company-wide AAP verification system without the burden of changing the regulations, the July letters continues to require that contractors submit the current EO 11246 (race and gender) AAP for the selected establishment at the beginning of a focused review.

OFCCP represents to OMB that all of the July letters’ proposed obligations will create a burden of roughly 10.5 hours for each focused review – including the time necessary to gather, prepare, review, and submit all required items at the beginning of the focused review process. This burden estimate is unchanged from OFCCP’s assessment of its April letters – despite the changed obligations.

We encourage contractors to review these proposed additional items that would be required in every focused review, evaluate the ability of their current systems to provide this information, and estimate the work-hours necessary to comply with these requirements. Contractors who wish to provide comments to OMB on the substance or anticipated burden of these requirements may do so until July 29th.

On schedule, EEOC has opened the portal for filing 2017 and 2018 EEO-1 Component 2 reports.

Here’s the catch, however:  According to updates on the Component 2 website, the reporting portal is “operational and available for viewing by the public,” however, as it previously advised, batch reporting will not be available until mid-August.

In addition, filers will need EEOC-provided login information before being able to access the portal.  EEOC’s most recent status update filed with the Court indicated the information was put in the mail in hardcopy to users on July 12, 2019 and should be e-mailed, today, July 15, 2019.

With the opening of the portal, NORC has also published a 44-page User’s Guide to help employers with the reporting process.   This is in addition to the sample reports and file specifications recently added to the site.

To contact EEOC and NORC regarding filing issues, including questions regarding log-in information,  you may call (877) 324-6214 or send an email to EEOCcompdata@norc.org for assistance.

This is the second blog post in our series discussing the Office of Management and Budget’s (OMB’s) request for further comments on OFCCP’s proposed scheduling letters and itemized listings, which were first published in April.

In our April post on the proposed changes to the then newly proposed establishment review scheduling letter and itemized listing, we identified several new requirements that, if imposed, would result in significant changes (and increased burden) to contractor audit submissions. The public was given the opportunity to provide comments on the proposed letter, and it appears as though OFCCP has listened to the contractor community’s concerns.  In a welcome development, OMB’s July proposed establishment review letter walks back many of the more onerous requirements its April letter proposed. In fact, the July proposed letter largely reverts back to the existing establishment review letter.

Below are several proposed changes that have been removed in the most recent version of the itemized listing:

  • Sub-minority Utilization and Availability: The July proposed letter strikes all requests for data on sub-minority utilization and availability, goal calculations, and placements by sub-minority group.
  • Analyses of Compensation Systems: The July proposed letter also removes the requirement to provide results of a contractor’s most recent compensation analysis. This change protects the attorney-client privilege and recognizes that contractors are not required to prepare the types of “pay analyses” that OFCCP has requested during compliance reviews over the past few years.
  • Promotion Pools: OFCCP has withdrawn its request for contractors to submit “pools” of internal employees who were considered for promotional opportunities. However, it has updated the proposed letter to require contractors provide the female and minority representation in the job group from which employees were promoted.  This is a considerably lighter lift for contractors, many of which already provide this information in their existing audit submissions.
  • Voluntary and Involuntary Terminations Data: OFCCP is no longer requesting that contractors provide data to identify voluntary versus involuntary terminations in the initial submission.
  • Additional Months of Data: The proposed changes in the April letter would require contractors that receive a scheduling letter more than six months into their AAP plan year to submit summary data for every completed month of the plan year. The Agency has removed this request from the July proposed letter – now only requiring data for the first six months of the new plan year.  As with the other items discussed above, this mirrors the requirement in the existing establishment review scheduling letter.

Yet, contractors should keep in mind that the July proposed letter continues to depart from the existing scheduling letter in a number of ways. The following are some of the more significant differences that remain:

  • Subcontractor Information: Perhaps the most meaningful addition to the current letter, both versions of the proposed scheduling letter require information relating to subcontractors. But the July proposed letter only requires contractors identify subcontracts in excess of $150,000 and clarifies that, for contractors with multiple establishments, OFCCP is seeking the most recent subcontracts at any of the contractor’s establishments — not just the establishment under audit.  Though modified, this request may still pose a burden for contractors.
  • Assessments of Personnel Processes, Physical and Mental Qualifications: While the requests for these assessments are present in both the April and July proposed letters, the July proposed letter does not require the contractor to provide dates of the assessments. Rather, it only requests (1) a description of the assessment and actions taken for the Assessment of Personnel Processes, and (2) a schedule of the assessment and actions taken for the Assessment of Physical and Mental Qualifications.  As many contractors tend to assess their processes and qualifications on an ongoing or rolling basis, this update to the letter seems more in line with common contractor practices.
  • EEO-1 Reporting: Since the April letter, the Component 2 of the EEO-1 report is back on. The July proposed letter makes clear that contractors must only submit Component 1 of their last three years’ EEO-1 reports.  In the current form, there would be no requirement to submit Component 2 of the EEO-1 report during an audit.
  • Documentation of Compliance with Audit and Reporting System Requirements: The proposed changes in April removed this requirement from the current letter, but it reappears in the most recent version.

Contractors who wish to provide comments to OMB may do until July 29th.

Stay tuned for our third and final blog in this series, which will analyze updates to the focused compliance review scheduling letters.