Trump & the Supply Chain
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Federal Contractors Face Closer Scrutiny

OFCCP pursues formal reviews and demands greater documentation of anti-discrimination measures.

If you are a federal contractor, get ready for a new government crackdown on contractors who are not meeting their obligations under anti-discrimination laws.

The Office of Federal Contract Compliance Programs (OFCCP) inspections of federal contractors and subcontractors after August 24 will include more intensive scrutiny to look for lack of Affirmative Action Plan (AAP) documentation, which employers now are required to update annually.

Last February the office announced its intention to conduct affirmative action Compliance Audits of 1,000 federal contractor employers. In spite of the Trump administration’s emphasis on removing government regulations, OFCCP says it remains committed to vigorous enforcement of anti-discrimination laws, which is what led to several recent compliance announcements, including the one requiring greater attention to AAP documentation.

“The directive appears to be the result of OFCCP's frustration with the fact that government contractors are essentially on the honor system when it comes to AAPs—those contractors are not required to file their AAPs with the government,” explain attorneys Mark Neuberger and Angelica Boutwell of the law firm of Foley & Lardner.

As a result, OFCCP has had to rely on government contractors' voluntary, and unsupervised, compliance unless and until a contractor is specifically targeted for a compliance audit. Given OFCCP's budgetary and staffing limitations, only a relatively small number of the total general contractor population is ever subjected to a formal compliance review.

The U.S. Government Accountability Office estimates that up to 85% of government contractors do not maintain current AAPs. Neuberger and Boutwell observe that OFCCP appears to suspect that many contractors have chosen to engage in "back-end compliance" by waiting to receive notice of a formal OFCCP compliance audit, and only then preparing their AAPs.

It is OFCCP's intention to establish a program for annual verification of compliance by all government contractors. Among other things, that annual verification process would require all government contractors to sign and file an annual certification. Signing and submitting a false certification to the federal government is a crime punishable by incarceration, the attorneys warn.

OFCCP is looking at other ways to ensure upfront rather than back-end compliance from government contractors, including establishing a requirement that each contractor file its updated AAP with the agency each year.

“The key takeaway for employers is that now is the time for HR managers to learn or confirm where their company's products are going so they can determine if their company is a covered contractor or ‘first-tier subcontractor,’" Neuberger and Boutwell suggest. “If it is, now is the time to get your company's metaphorical house in order, and start preparing and maintaining required AAPs.”

More Focused Reviews Ahead

OFCCP also said it plans to implement Focused Reviews of federal contractors’ compliance with equal employment opportunity laws. In addition, it announced initiatives directed at combatting discrimination against employees on the basis of religion or being a military veteran.

Different from Compliance Audits, focused compliance reviews have been available to the OFCCP since the 1997, this type of review was rarely, if ever, used in the past. In a Focused Review, a compliance officer will come on-site with the sole task of examining compliance with every portion of the regulations pertaining to just one of the laws.

For example, if a contractor is selected for a review focused on particular issue—like prohibitions against disabled discrimination—the OFCCP would likely interview managers responsible for compliance as well as employees affected by those policies, explain attorneys Farrah N.W. Rifelj and Maryelena Zaccardelli of the law firm of Michael Best & Friedrich.

This review likely will include examining documentation showing compliance and interviewing managers and employees responsible for equal employment opportunity compliance, such as affirmative action officer, the Americans With Disabilities Act coordinator, perhaps the Family and Medical Leave Act administrator to check leave issues.

Employees will be interviewed as well, including some protected by the relevant law, to check for policy awareness, training and compliance. In such a situation, OFCCP would also could be expected to evaluate hiring data and the contractor’s handling of accommodation requests to ensure that employees and applicants with disabilities are not being discriminated against.

While the specifics of OFCCP’s Focused Review plan are still being worked out, the directive indicates that agency would come onsite and conduct a comprehensive review of a contractor’s compliance with the specific area specified for that review.

In another directive, OFCCP also warned contractors to expect it will pay particular attention to equal compensation issues in some reviews and audits. The office points out that compensation disparities can be created through inequities in monetary compensation, inequitable training or advancement opportunities, and assignment/placement differences.

If a contractor cannot rebut OFCCP’s statistical and anecdotal findings of pay discrimination, the agency has a menu of remedies available to it, explains attorney Leigh M. Nason of Ogletree Deakins. These include seeking back pay and benefits, interest, salary adjustments and other monetary relief. Other remedies can include modifying policies and procedures or providing training opportunities, work assignments, promotions and job placements.

Should conciliation fail, and in cases where OFCCP finds strong evidence of discrimination, the agency can pursue legal action and may seek sanctions to include cancellation of current federal contracts and debarment from entering future contracts, Nason adds.

The government’s FY 2019 starts on October 1, 2018, which means companies selected for audit in the next round of scheduling may find themselves facing a Focused Review, attorneys Lance Gibbons and David J. Goldstein of the law firm of Littler Mendelson believe.

“In the meantime, we recommend that contractors familiarize themselves with OFCCP’s expectations relating to affirmative action for individuals with disabilities and protected veterans, particularly the requirements relating to outreach and the documentation of affirmative action efforts,” they suggest.

Because OFCCP audits focus on the employer’s past efforts, improvements required to be made now in order to be prepared for a Focused Review in 2019 and beyond, Gibbons and Goldstein stress. The week before the directive was issued, OFCCP Acting Director Craig Leen said in a speech at the Industry Liaison Group National Conference that he expects the agency will pursue about 200 of these Focused Reviews each year.

Make Sure You Get Legal

Contractors need to pay extra attention to directive pertaining to the regulations that implement the revised Vietnam Era Veterans’ Readjustment Assistance Act. Not only are federal contractors and subcontractors banned from discriminating against veterans in employment, the employers also must take – and show that they have taken—affirmative action to recruit, hire, promote and retain these veterans.

Contractors must establish annual hiring benchmarks for protected veterans. A protected veteran means any veteran who served on active duty in the U.S. military in conflicts for which a campaign badge has been authorized by the Department of Defense.

Contractors also are required each year to document and update quantitative comparisons for the number of veterans who apply for jobs and the number they hire. Contractors must allow OFCCP to review these documents as part of a compliance check or Focused Review.

When it comes to the new emphasis on r veteran protections, Rifelj and Zaccardelli pulled no punches in their warning to potential targets. “Contractors without robust outreach to individuals with disabilities and protected veterans, who do not track reasonable accommodation requests and decisions, and who have not rolled out training and other internal programs to make their commitment to equal employment opportunity for protected veterans and individuals with disabilities well known throughout the workforce, would be well advised to prioritize compliance.”

However, the lawyers say the new enforcement directive clarifying the agency’s position on religious non-discrimination most likely won’t impact on the vast majority of federal contractors because it deals with such narrow grounds.

The directive’s intention is to reinforce the free exercise of religious belief in the wake of Supreme Court decisions limiting the enforcement of Gay rights laws against churches and businesses, such as the recent decision upholding the right of a bakery owner to refuse to make a wedding cake for a Gay wedding.

The new directive also serves to align the agency’s enforcement actions with recent executive orders issued by the White House protecting religious freedom and the ability of faith-based and community organizations to compete fairly for government contracts and grants, OFCCP says. Critics from Gay organizations say the executive order goes beyond what the limits that were decided on by the Supreme Court.

DOL said that the executive orders issued by President Trump make clear “the Administration’s commitment to robust protections for religious freedom, as well as ensuring a level playing field for faith-based organizations to compete for federal grants, contracts, programs and other funding opportunities.”

In addition, the directive instructs OFCCP staff to take these policies into consideration when providing compliance assistance, processing complaints and reviewing compliance.

“It may also impact complaint investigations against certain employers which allege discrimination on the basis of religion or sexual orientation and gender identity,” note Seyfarth Shaw law firm attorneys Annette Tyman, Lawrence Lorber and Michael Childers.

In spite of all this, the newest directive does not change any of the OFCCP regulations that already prohibited discrimination based on sexual orientation and gender identity.

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