New Regulations Increase Risk Of OFCCP Systemic Discrimination Allegations

• Published date: 11 August 2023
• Subject Matter: Employment and HR, Government, Public Sector, Compliance, Discrimination, Disability & Sexual Harassment, Employee Rights/ Labour Relations, Government Contracts, Procurement & PPP
• Law Firm: McGuireWoods LLP
• Author: William E. Doyle Jr., Robert Holland, Sarah K. Wake, Brian Barger, Edwin Childs, Elena Marcuss and Paul Navarro

On Aug. 4, 2023, the Office of Federal Contract Compliance Programs (OFCCP) promulgated a final rule that eliminated self-imposed regulatory standards for making allegations of systemic discrimination against federal contractors and subcontractors. The final rule also eliminated minimum disclosure and other transparency requirements that helped ensure contractors were provided adequate information about the legal and factual bases for allegations of systemic discrimination during audits.

Note: OFCCP compliance reviews focus on potential systemic discrimination, and OFCCP rarely alleges individual discrimination as a result of a compliance review. The requirements discussed here do not apply to OFCCP complaint investigations.

Background

The new regulations do not alter OFCCP compliance obligations but will increase the likelihood of agency allegations of systemic discrimination, which typically involve claims of hiring and compensation discrimination. To manage the increased risk, contractors should conduct privileged risk assessments of hiring and compensation data in affirmative action programs (AAPs) with larger employee headcounts. OFCCP's systemic discrimination allegations rely heavily on statistical analyses and the privileged risk assessment should be informed by a comprehensive understanding of both OFCCP statistical practices and legal standards for statistical evidence of discrimination, which often do not coincide. Further, the immediate impact of the new regulations will primarily fall on contractors with pending OFCCP audits where the agency has found indications of potential systemic discrimination but has not yet issued a formal notice of systemic discrimination allegations.

While the new regulations do not alter the substantive legal standards governing adjudication of systemic discrimination allegations raised by OFCCP, the revisions are expressly designed to make it easier for the agency to raise such allegations and to seek settlements without fully disclosing the legal and factual bases for the allegations. These regulatory revisions will also make the process of responding to and resolving allegations of systemic discrimination more time consuming and frustrating for employers. Despite the regulatory revisions, contractors should continue to insist on a fulsome understanding of the bases for OFCCP's systemic discrimination allegations and prepare compelling submissions to refute agency assertions and demands.

Contractors have long expressed concerns that OFCCP allegations of systemic discrimination were often inconsistent with legal and statistical standards and unsupported by the facts. See U.S. Chamber of Commerce, OFCCP: Right Mission, Wrong Tactics'Recommendations for Reform (2017). For example, OFCCP pursued settlements aggressively but refused to provide information the employer requested about the core basis for the allegations. The 2020 regulations helped remedy those historical problems by imposing binding requirements on OFCCP field personnel that contractors could enforce through legal action. See United States v. Nixon, 418 U.S. 683, 695-96 (1974) (regulations binding on agency personnel). McGuireWoods submitted comments that helped improve the 2020 final rule and another set of comments against the 2022 proposed rescission of those minimum standards and transparency requirements.

In rescinding the 2020 OFCCP standards...