Littler Mendelson Warns Contractors and Offers Insight to Prepare for Audits
San Francisco, CA (January 10, 2007) -- The Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) recently reported its fiscal year 2006 results with a record-breaking $51.5 million in financial recoveries from government contractors. The contractors' employment practices were alleged to have subjected more than 15,000 American workers to unlawful employment discrimination, a 14 percent increase over recoveries in financial year 2005. The agency also conducted 3,975 compliance evaluations, up 45 percent from the previous period.
The increased number of compliance evaluations will likely generate substantially greater financial recoveries in financial year 2007 and beyond, since the OFCCP estimates that it takes approximately two years to bring evaluation cases to resolution. Also, the fiscal year success of the OFCCP's enforcement activities will likely fuel an increase in its compliance evaluation efforts in 2007.
Attorneys with Littler Mendelson, the nation's largest employment and labor law firm, warn contractors that readiness for an audit cannot be overstated. The agency is becoming more effective and efficient with the use of automated statistical tools that rank and prioritize organizations for further review based on what the OFCCP calls "indicators of potential discrimination."
Compared with years past, the OFCCP more quickly and accurately screens contractor establishments for indicators of potential discrimination with its Active Case Management (ACM) system. Implemented in each of OFCCP's regions in fiscal year 2005, ACM has enabled the agency to open more reviews and to scrutinize more transaction and compensation data than it ever has before.
Alissa Horvitz, a shareholder with Littler's Washington, D.C. office who has extensive experience in dealing with the OFCCP, remarks, "This year under its Contracts First initiative, the OFCCP is targeting employers who have government contracts over $50,000, but who have not previously indicated on their annual EEO-1 forms that they are government contractors. The OFCCP also uses its Federal Contractor Selection System to evaluate race and gender information from contractor EEO-1 submissions to develop a priority list of companies to be selected for an audit."
Once selected for an audit, contractors have 30 days to submit their affirmative action plans, including the transaction data and compensation information requested in the standard itemized listing that accompanies the OFCCP's scheduling letter. "Thirty days is simply not enough time for an organization to develop a compliant affirmative action plan from scratch, and some OFCCP offices are extremely stingy about granting extensions. The time to get a plan done right is at the beginning of the contractor's plan year, not once the audit notice arrives," Horvitz advises.
In June 2006, OFCCP published interpretive standards for evaluating compensation practices, providing contractors with definitive guidance as to how OFCCP intends to examine compensation differences in its audit process. The standards provide the agency with a stronger basis for pursuing investigations of possible systemic compensation discrimination because of their transparency and because of their consistency with court rulings on pay discrimination law. The OFCCP is also making a more conscious effort to involve its own lawyers from the Solicitors' Office early in its investigations.
Adds Horvitz, "Contractors can reduce their vulnerability to exhaustive OFCCP follow-up information requests by (1) preparing an annual Affirmative Action Plan using internally reliable, consistent and accurate employment information, (2) analyzing applicant and hiring data for statistically significant under-selection rates of women and minorities in hiring, and (3) maintaining complete records of each step in the employer’s selection process that explains any data that could be perceived as discriminatory."
About the OFCCP
The OFCCP is the Employment Standards Administration agency that enforces laws prohibiting federal contractors and subcontractors from discriminating in employment based on race, gender, color, religion, national origin, disability or covered veteran status.
About Littler Mendelson
With more than 530 attorneys and 38 offices in major metropolitan areas nationwide, Littler Mendelson is the largest law firm in the United States devoted exclusively to representing management in employment, employee benefits and labor law matters. The firm's client base ranges from Fortune 500 companies to small-business owners. Established in 1942, the firm has litigated, mediated and negotiated some of the most influential cases and labor contracts in the nation's history. For more information, visit www.littler.com.