OFCCP Proposes Clarifying Evidence Standards, Post-Audit Procedures in Regulations
The Office of Federal Contract Compliance Programs (“OFCCP”) is seeking to codify its current procedures for analyzing statistical evidence of discrimination and communicating with contractors after finding potential violations of the laws it enforces. The proposed regulations provide greater clarity to the contractor community about OFCCP’s process both during and after audits.
What do the proposed regulations say?
Under the proposed regulations, OFCCP defines two new terms in 41 C.F.R. § 60-1.3: statistical evidence, and nonstatistical evidence. Statistical evidence means “hypothesis testing, controlling for the major, measurable parameters and variables used by employers.” The proposed regulations list several factors as examples of what OFCCP believes are “variables used by employers,” including test scores, geographic variables, years of experience, years of service, performance evaluations, and quality of performance. Nonstatistical evidence is essentially any nonstatistical indicia of discrimination, such as biased statements, cohort analyses, and “testimony about the extent of discretion or subjectivity involved in making employment decisions.”
OFCCP’s proposed regulations require different levels of evidence for OFCCP to pursue discrimination claims, depending on whether nonstatistical evidence of discrimination exists. If a finding of discrimination is based solely on statistical evidence, OFCCP would require that the statistical evidence be significant at a 99 percent confidence level (roughly equivalent to at least three standard deviations). If the audit finds nonstatistical evidence of discrimination in addition to statistical evidence, OFCCP would only require a 95 percent confidence level (approximately two standard deviations) to move forward.
The changes proposed to 41 C.F.R. § 60-1.33 confirm that if OFCCP makes preliminary findings of discrimination in an audit, it will follow a specific process. First, OFCCP will issue a predetermination notice (“PDN”). The contractor would have 15 days to respond to the PDN, with potential extensions of time “for good cause.” Second, and only if discrimination allegations are not resolved at the PDN stage (or the contractor does not respond within the required timeframe), OFCCP will issue a Notice of Violation (“NOV”). After these two steps, if OFCCP believes there is a “material violation of the equal opportunity clause,” OFCCP can pursue a Conciliation Agreement. This process may be expedited with the contractor’s agreement, and may be abbreviated if the violations at issue are technical, rather than indicia of discrimination.
What would these changes mean?
OFCCP has touted its commitment to increased transparency during the Trump Administration, and the regulations do provide greater clarity both on OFCCP’s process following an audit and OFCCP’s own standards for pursuing claims.
OFCCP’s confirmation of the threshold for pursuing cases based on statistical evidence—if actually followed—should be welcomed by the contractor community. The proposed regulations not only set specific standards for the level of statistical evidence required, but they confirm by way of definition that statistical evidence requires “controlling for the major, measurable parameters and variables used by employers.” There will still be disputes about whether a factor is “major” or “measurable,” or actually “used” by an employer, but again, if followed, this codified process would be an improvement on the seemingly random or inexplicable statistical analyses some contractors have faced in audits and litigation against OFCCP. The statistical thresholds of two to three standard deviations for pursuing discrimination cases are not new (and are in fact well defined in case law), but would now be formalized in the regulations.
Contractors should also appreciate the proposed regulations’ commitment to a post-audit process. The current text of 41 C.F.R. § 60-1.33 only concerns Conciliation Agreements, and use of PDNs had historically been discretionary to OFCCP. The changes—at least theoretically—give contractors more of a guarantee of notice and opportunity to dispute OFCCP’s findings, better explain their position, and potentially resolve issues.
Contractors can submit comments on the proposed regulations until January 29, 2020: https://www.federalregister.gov/documents/2019/12/30/2019-27258/nondiscrimination-obligations-of-federal-contractors-and-subcontractors-procedures-to-resolve.