The Office of Federal Contract Compliance Programs (OFCCP) released three new directives late last week, which provide insight into its approach with respect to two key facets of contractor compliance under new Acting Director Craig Leen: compensation analysis and affirmative action programs (AAPs). “Directives” do not create or change laws, but provide guidance on the agency’s enforcement and compliance policies.

Federal contractors or subcontractors subject to affirmative action requirements under Executive Order 11246, Section 503 of the Rehabilitation Act, or the Vietnam Era Veterans’ Readjustment Assistance Act should pay attention to these developments.

Directive 2018-05: Analysis of Contractor Compensation Practices During a Compliance Evaluation

Directive 2018-05 outlines the OFCCP’s current policies for compensation review during compliance evaluations. According to the accompanying FAQs, the directive “reinforces OFCCP’s commitment to greater transparency, consistency, and efficiency in compliance evaluations.” The directive replaces previous Directive 307 in order to provide more fulsome guidance and describes the agency’s processes for requesting and reviewing data, pay analysis groups, methodology and modeling, and other matters pertinent to its review of contractor compensation data during compliance evaluations.

Of particular interest to contractors, the directive describes its use of both statistical and non-statistical information and states that the agency will be “less likely” to pursue matters where “statistical data are not corroborated by non-statistical evidence of discrimination” – unless the statistical evidence is exceptionally strong.

The directive is also intended to support contractor self-analyses. Regulations under Executive Order 11246 require contractors to perform in-depth analyses of their total employment processes, including an analysis of their “compensation systems” to determine whether there are gender, race, or ethnicity-based disparities. While the OFCCP does not dictate a particular method of analysis, as noted in the FAQs, the directive might be useful in helping contractors fulfill this requirement.

The directive will apply to compliance reviews scheduled on or after August 24, 2018, and to open compliance reviews where its procedures do not conflict with existing guidance or procedures.

Directive 2018-07: Affirmative Action Program Verification Initiative

Directive 2018-07 outlines the agency’s goal to implement a verification process ensuring that federal contractors are compliant with their AAP obligations. The initiative is intended to address the OFCCP’s concern that not all covered contractors are developing AAPs or updating them annually, and that such contractors have a “small likelihood of discovery,” since only a small portion of contractor establishments are scheduled for compliance evaluations.

As stated in the directive, the program could initially take the form of review of a yearly contractor certification of compliance with AAP requirements, followed by potential compliance checks, and eventually, annual submission of AAPs with appropriate information technology in place. The initiative would also seek to incorporate certification information as a criterion for scheduling compliance evaluations so entities that have not developed and maintained AAPs are more likely to be scheduled for evaluation.

Directive 2018-07 makes clear that the OFCCP is committed to implementing initiatives to ensure that all covered contractors prepare and update affirmative action programs and track down those that do not. For any covered contractors who are not compliant with these obligations, the time is now to develop an AAP and achieve compliance with all other affirmative action obligations.

Directive 2018-06: Contractor Recognition Program

Directive 2018-06 announces a “Contractor Recognition Program” intended to recognize contractors with “high quality and high-performing” compliance programs. Although limited on details, the directive notes the OFCCP’s objective to “seek more ways to expand its compliance reach” by highlighting “implementable best or model contractor practices,” developing a contractor peer mentoring program, and providing other opportunities for contractors to collaborate or provide feedback to the OFCCP on compliance assistance efforts.

A More Consistent and Transparent OFCCP?

These new directives follow other OFCCP publications this year that underscore the agency’s stated desire for efficiency, consistency, and greater transparency with the contracting community. For instance, Directive 2018-01 that was issued on February 27 requires consistent use by regional and district offices of “Predetermination Notices” during audits to provide contractors an opportunity to respond to preliminary findings of discrimination before receiving a notice of violation. Offices previously had discretion to issue a predetermination notice before issuing a notice of violation. On August 1, the agency issued guidance entitled “What Federal Contractors Can Expect” to outline expectations for interactions between contractors and the agency, both in audits and outside of the audit setting.

Other 2018 directives include Directive 2018-03, which incorporates legal developments regarding religious-exercising organizations and individuals; Directive 2018-04, which outlines an initiative for focused compliance reviews under the three regulatory schemes under the OFCCP’s jurisdiction; and Directive 2018-02, which extends the moratorium on enforcement of the affirmative obligations required of TRICARE subcontractors issued in 2014.

While increased agency consistency and transparency is welcome news, the full impact of these new directives on contractor compliance and evaluations remains to be seen. With a total of seven directives issued in 2018 alone, it is clear that the OFCCP is considering how to enhance contractor compliance with affirmative action requirements.

Please contact any member of our Labor and Employment Group with questions about the new directives or other affirmative action matters.