Interview transcript:
Terry Gerton Well, let’s start with the basics because not everybody knows what the Office of Federal Contract Compliance Programs is in the Department of Labor. But on July 2nd, they issued a new directive that said they were reinstituting their enforcement of disability and veterans’ protections. Can you kind of walk us through what happened and why they had to announce that they were doing that again?
Sheila Abron Yeah, absolutely. So the Office of Federal Contract Compliance Programs, or more commonly referred to as OFCCP, is a Department of Labor agency that was tasked with enforcing the federal anti-discrimination provisions related to federal contractors and subcontractors, so those companies doing business with the federal government. They were enforcing three main provisions, Executive Order 11246, Section 503 and VEVRA. All of those provided for different activities and mechanisms related to, kind of under a broad umbrella of a general term of affirmative action, as it relates to different populations, race and gender, veterans, individuals with disability. Earlier this year, in one of the early days of the Trump administration, or the second Trump administration, there was a revocation of Executive Order 11246, which was one of the major provisions related to enforcement and obligations for federal contractors. And so at that time, given that revocation of the 60-year-old provision, the OFCCP made some kind of, we can call them intermediate steps, if you will, to provide some basic guidance, if you will, to federal contractors and subcontractors related to what their enforcement was going to look like. One of those things was pausing their audits that they do for federal contractors and subcontractors, they were pausing that audit framework. And so this July 2nd, now we’ve got to bring it all the way to your question, this July 2nd directive kind of moved that pause and that holding in abeyance of certain aspects of audits that lifted that pause for the contracting community.
Terry Gerton OFCCP will again begin their audits of contractors related to VEVRA and 503 compliance, is that correct?
Sheila Abron Yes, that is what that appears to be, yes.
Terry Gerton And what happened to the audits that were supposed to be conducted while the pause was in place?
Sheila Abron So that’s a really, really great questions. So there was an initial notice to contractors who are currently under an audit or some provision of the audit mechanism because there’s a whole process that we won’t go through today. But if you want to nerd out with me later, we totally can do that.
Terry Gerton We might.
Terry Gerton But there’s a whole process and the original kind of communication was that we are holding that in abeyance. This now subsequent communication in July said that all of those contractors that were under audit or who were going to be identified as potentially being under audit because OFCCP used to issue pre-audit notifications called CSAL lists. They, OFCCP, said that those audits were no longer going to go forward and they were going close those audit at that point. So, when the agency starts doing audits, it will be on a new footing and a new set of contractors, it appears.
Terry Gerton You said we could get nerdy, so I’m going to ask you the question. For firms who maybe haven’t been through an audit before, what does it entail?
Sheila Abron An audit is a very, very intensive process designed to identify and really test a company’s equal employment opportunities and their compliance with those three provisions that I talked about, Executive Order 11246, Section 503 and VEVRA. The audit would start at the desk audit phase, which was a production of a voluminous amount of documentation related to employee compensation, race, gender, policies, procedures, accommodation requests, all of these things that contractors generally had about 30 days to put together. OFCCP would attempt to finish conducting their audit just on those submissions, it was called during the desk audit phase. However, if they were to identify issues that needed further follow-up, they might expand and do employee interviews, they would come on site. What was at stake was pretty high, especially as it related to Executive Order 11246 as we’re looking at race and gender. And I just want to note here that OFCCP typically was going to enforce on a neutral basis. I think there was a lot of communication and commentary about affirmative action only being for women and minorities and OFCCP only enforcing in that particular manner, and that’s not the case. They typically followed Title VII as well. So if there were issues with white individuals or males, they were also investigating those pieces too. And so what was at stake, regardless of what they found, oftentimes they focused in the hiring and compensation area, was recovery for individuals that were impacted or groups of individuals. And that would have some non-monetary pieces, like we might have a monitoring period for several years, but oftentimes there was significant financial recovery on behalf of American workers instituted by OFCCP that would have companies having to pay back pay or future pay almost on a class-wide basis. And so those audits really took a deep dive into employers’ practices to really test out their providing equal employment opportunities for individuals. And where they found that that was missing, OFCCP would do its enforcement mechanism and do that. And they had some pretty strong recoveries on behalf of workers throughout the years.
Terry Gerton I’m speaking with Sheila Abron. She’s a partner at Fisher Phillips and chair of the firm’s Affirmative Action and Federal Contract Compliance Practice Group. So let’s go back now. The pause is over. What should contractors be expecting in the coming months from OFCCP related to 503 and VEVRA because the EO is no longer in force?
Sheila Abron Yeah, absolutely. So one of the things that left a lot of questions was because of the interplay between 11246, 503 and VEVRA, there were a lot unanswered questions on what compliance looks like and what contractors would need to do. So OFCCP has prepared some proposed regulatory changes that are currently in the notice and comment period. So in the coming months, we would hope to have final rules after the proposed rule gets out, people submit comments, the agency reviews them and then sends out a final rule. So we would expect to see a final rule that provides a bit more clarity, if you will, on continued compliance. The other wild card that’s out there, though, is the Department of Labor has also submitted a potential budget request that would have OFCCP kind of sunsetted and those Section 503 and VEVRA opportunities going to other agencies within the federal government. So that is a bit of a wild card that’s out there as well.
Terry Gerton In this kind of uncertain time, then, what’s your best advice for contractors to stay compliant and audit-ready while they wait for the rules and the clarification on organizational alignment?
Sheila Abron Absolutely. So one of the things that is helpful to know is making sure that they are working with their compliance team or their external legal counsel or legal counsel to understand what the framework of compliance has typically looked like. Actually, during the first Trump administration there was a heavy focus from OFCCP on Section 503 and VEVRA audits, and so there was a really strong framework for those audits to be done already, and so talking with someone and getting counsel from someone who has experience and advice in what those audits look like is going to be really, really helpful. The other thing is understanding in particular about Section 503 that it very closely mimics the Americans with Disabilities Act, so ensuring that you have compliance and record keeping that looks very similar to that is going to be really helpful. And then the other thing which we have seen, not just in OFCCP, but everything we’ve seen coming from this administration, is keeping abreast of the changing topics. Because one thing that is for certain is that nothing is for certain anymore. We want to make sure that we are staying abreast of the different changes and topics, especially in this very nuanced area. And the last thing that I’ll mention in that is making sure that contractors are aware of any contract modifications or contract obligations that are coming in the door. One thing that you would typically see in this space — and as a practitioner, I’ve been doing this a while — is that the people who are signing the contracts are not the same time as HR, who are doing the enforcement mechanisms on this. And these changes, especially with the rapid nature of them, are really calling upon companies to have a bit more synergy and communication internally with that. And so ensuring that if you’re getting a contract modification from the government, that everyone is on the same page about what that means from a compliance standpoint, so that we are not signing things and then not adhering to what those obligations are. And unfortunately, at this time, the government doesn’t have a uniform contract provision related to the executive orders and the changes. And so the things that we’re seeing out of different agencies are varying greatly, and so really making sure we’re clear on what that looks like, because the stakes are a little bit higher now with the False Claims Act potential liability that comes in here.
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