Department of Labor Announces Proposed Rules to Raise the Minimum Wage for Federal Contract Workers; Federal Contractors Should Consider Making Their Voice Heard During the Notice and Comment Period

In response to President Obama's Executive Order earlier this year, the Department of Labor has issued a Notice of Proposed Rulemaking (NPRM) to establish standards and procedures for raising the minimum wage paid to employees of federal construction and service contractors to $10.10 per hour beginning January 1, 2015 and then increased on a yearly basis beginning January 1, 2016. Federal contractors have until July 17, 2014 to comment on the proposed regulations that could have a large impact on contractors' operations. UPDATE (7/9/14): The Department of Labor has extended the period for filing written comments until July 28, 2014.

The proposed rules clarify that the terms "contracts" and "contract-like instruments" as used in the Executive Order apply to "all contracts for construction covered by the Davis-Bacon Act; contracts for services covered by the Service Contract Act; concessions contracts, such as contracts to furnish food, lodging, automobile fuel, souvenirs, newspaper stands, and/or recreational equipment on Federal property; and contracts to provide services, such as child care or dry cleaning, in Federal buildings for Federal employees or the general public." The Order applies to new contracts and replacements for expiring contracts that result from solicitations on or after January 1, 2015.

The Order is incredibly narrow and noticeably excludes contracts for goods (the manufacturing or furnishing of materials, supplies, articles, or equipment to the federal government) from the new minimum wage requirements. The proposed rules also make it clear that the minimum wage increase does not apply to grants. Furthermore, the rules clarify that the new minimum wage need not be paid for ALL hours worked—just all hours spent performing work on covered contracts.

While the Administration maintains that increasing the minimum wage will increase employee morale (and it certainly will increase the morale of those receiving a wage increase), we are concerned about the following scenario. If an employee making $8.00 an hour is suddenly making $10.10 an hour, will an employee who was previously making $10.50 an hour and received no raise in response to the Executive Order and its implementing regulations feel slighted? Contractors should be aware of these potential unforeseen issues and consider examining their entire wage scale in preparation to comply with these new rules. Furthermore, as many federal contractors pay their employees well in excess of $10.10 per hour, these new rules could prove to be a non-factor in their operations.

We strongly encourage all contractors to read the proposed rules, determine if the rules will apply to them, and participate in the public comment process by submitting a comment by July 28!

New Regulations Governing Affirmative Action Requirements for Individuals with Disabilities and Protected Veterans Go Into Effect TODAY!

Beginning today, March 24, 2014, federal contractors and subcontractors have a number of new responsibilities. Contractors already have the existing obligation to collect demographic data regarding race and gender and take affirmative action to recruit, hire, and retain qualified minorities, women, individuals with disabilities, and protected veterans. Now contractors must take additional steps to recruit and hire individuals with disabilities and protected veterans, including the collection of data related to the status of applicants and employees as protected veterans and individuals with disabilities.

Specifically, federal contractors and subcontractors are required to:
• Invite applicants and employees to self-identify as individuals with disabilities or protected veterans;
• Track and analyze data related to applicants and employees who are individuals with disabilities and/or protected veterans;
• Notify subcontractors and vendors (and labor unions, if applicable) of their Affirmative Action requirements;
• Conduct written effectiveness evaluations to determine whether efforts to reach out to individuals with disabilities and protected veterans have been successful;
• Establish a 7% utilization goal for individuals with disabilities to measure the efficacy of affirmative action steps;
• Establish a hiring benchmark for protected veterans or adopt the 7.2% national benchmark to measure the efficacy of affirmative action steps; and
• much more!

Additionally, for the first time ever, construction contractors will be required to have written affirmative action plans for individuals with disabilities and protected veterans. While some in the construction industry were hopeful that the new regulations impacting individuals with disabilities would not apply to them, on Friday, the United States District Court for the District of Columbia rejected the Associated Builders and Contractors, Inc. challenge to the validity of the regulations. The Court concluded that the new rules are valid and the Office of Federal Contract Compliance Programs (OFCCP) has broad authority to interpret what it means to "take affirmative action."

Between these new rules and President Obama's Executive Order to raise the minimum wage for employees of federal contractors, federal contractors are facing an onslaught of new regulatory requirements.

Stay tuned to the blog for more updates on issues that impact federal contractors, subcontractors, and all employers. Please feel free to contact me, Schaun Henry or any other McNees Labor & Employment attorney if you have any questions about how these new regulations may impact your business.


This post was contributed by Tony D. Dick, Esq., an attorney in McNees Wallace & Nurick LLC's Labor and Employment Practice Group in Columbus, Ohio.

As expected, new U.S. Department of Labor Secretary Thomas Perez has wasted little time implementing a number of agenda items in the few short weeks since his Senate confirmation. Most recently, Secretary Perez announced two new rules that amend longstanding regulations under the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) and Section 503 of the Rehabilitation Act, which deal with federal contractors’ and subcontractor’s affirmative action and nondiscrimination obligations toward protected veterans and individuals with disabilities. Among other things, these new rules establish specific hiring metrics, data collection practices, and record keeping requirements that federal contractors must implement for veterans and disabled individuals seeking employment.

Below are some highlights of the final rules:

  • Utilization Goal for Individuals with Disabilities – The final rule under the Rehabilitation Act establishes, with some exceptions, a 7% hiring goal for qualified individuals with disabilities. While the goal is aspirational, contractors will be required to conduct an annual utilization analysis of individuals with disabilities within the organization, assess problem areas, and establish specific programs to address any identified problems.
  • Hiring Benchmarks for Protected Veterans – Under the final rule amending VEVRAA, federal contractors must establish annual hiring benchmarks for protected veterans utilizing one of two methods. Contractors can either choose to set a benchmark that mirrors the national percentage of veterans in the civilian labor force or they may establish their own benchmarks using certain data from the Bureau of Labor Statistics and Veterans’ Employment and Training Service/Employment and Training Administration.
  • Job Listings Requirements for Protected Veterans – The final rule under VEVRAA also clarifies that when listing job openings, contractors must provide the information in a manner and format permitted by the appropriate state or local job services, so that it can be easily disseminated to veterans seeking jobs.
  • Data Collection – Under both rules, contractors must now document and annually update several quantitative comparisons concerning the number of veterans and individuals with disabilities who apply for jobs and the number of veterans and individuals with disabilities who are actually hired. Such data must be maintained for three years.
  • Invitation to Self-Identify – Both rules also require contractors to invite applicants to self-identify as a veteran and/or an individual with a disability at both the pre-offer and post-offer phases of the application process.
  • Records Access – The new rules also clarify that contractors must permit officials from the Office of Federal Contract Compliance Programs to review documents to establish compliance with the rules.

The regulations are expected to be published in the Federal Register early next month and will go into effect 180 days later. Contractors with affirmative action plans already in place on the effective date of the new rules may keep those plans until the end of their plan year. Thus, federal contractors and subcontractors that submit affirmative action plans at the beginning of each calendar year will not be required to submit affirmative action plan documents based on these new rules until the beginning of 2015. However, contractors must begin following the data collection, record keeping, and other requirements of the new rules immediately after the rules take effect. Accordingly, if you are a federal contractor or subcontractor, now is the time to begin to revising your policies, procedures and relevant forms to conform with the Department of Labor’s new rules so that you are not caught flat-footed when the rules go into effect.

OFCCP Mid-Atlantic Region Issues Scheduling Letters

This post was contributed by Rick L. Etter, Esq. of McNees Wallace & Nurick LLC's Labor and Employment Group.

The Office of Federal Contract Compliance Programs (OFCCP) recently issued scheduling letters from its offices throughout the Mid-Atlantic Region. The OFCCP sends a scheduling letter to notify a government contractor or subcontractor that a particular establishment has been selected for a compliance evaluation. In response to the scheduling letter, the contractor or subcontractor must submit its written Affirmative Action Program (AAP) along with supporting information, including detailed data on compensation, hiring, promotion, and termination decisions. A sample scheduling letter can be viewed here (pdf).

Make no mistake, an OFCCP scheduling letter should be treated in the same manner as a class action lawsuit because that is exactly what it is. A quick review of the OFCCP's recent press releases highlights the agency's focus on pursuing high-dollar awards from entry-level failure to hire cases.  The OFCCP uses the information obtained from the scheduling letter to identify personnel decisions that cannot be supported by documentation and then relies on statistics to establish systemic discrimination. For this reason, you should perform your own statistical analyses prior to submitting your response to the OFCCP. More importantly, we strongly recommend that such statistical analyses be coordinated by counsel and protected by the attorney-client privilege. While there are a number of vendors and consultants who offer compliance review support as part of their AAP services, their work is not protected by the attorney-client privilege and is therefore discoverable by plaintiff's attorneys and may be available to the public under the Freedom of Information Act (FOIA).

McNees Wallace & Nurick can guide you through the OFCCP's compliance evaluation. If you receive a scheduling letter, you should immediately contact Rick Etter or Schaun Henry because you have only 30 days to submit your response. 

Recent OFCCP Settlement Makes Case For Affirmative Action Self-Audits

This post was contributed by Rick L. Etter, Esq., an Associate in McNees Wallace & Nurick LLC's Labor and Employment Group.

Recently, Alcoa Mill Products Inc. agreed to pay over $500,000 in back wages to 39 female and minority applicants who were rejected for jobs at the company's plant in Lancaster, PA. The payment was part of a settlement that resolved a finding by the Office of Contract Compliance Programs (OFCCP) that Alcoa Mill Products discriminated against Hispanic, African-American and female applicants for material handler positions. During a scheduled compliance review, the OFCCP determined that the company's hiring process for material handlers had a disparate impact on minority and female applicants. In addition to paying back wages, Alcoa Mill Products agreed to extend job offers to nine of the class members, to spend at least $20,000 on training, and to revise its selection process for material handlers.

This case is a cautionary tale for government contractors. The outcome in this case could have been avoided if the company would have conducted an affirmative action self-audit. A self-audit would have revealed the problems in the selection process before they were uncovered by the OFCCP.

If you are a government contractor, now is the time to consider an affirmative action self-audit. An affirmative action self-audit would enable you to uncover and remedy mistakes that contractors commonly make, including critical mistakes concerning the hiring process, applicant tracking, adverse impact analyses, compensation analyses, and record retention. Of course, a self-audit is effective only if it is conducted before the contractor receives the OFCCP's notice of compliance review. This is because once that notice is received a contractor has only 30 days to submit its affirmative action program and supporting documents. To get the most out of the process, contractors are best served by conducting a self-audit well in advance of notice of an OFCCP audit.

McNees Wallace & Nurick's Labor and Employment Group can assist you with performing a self audit and with preparing for an OFCCP compliance review.  You can contact McNees by clicking here.


This post was contributed by Schaun D. Henry, Esq., a Member in McNees Wallace & Nurick LLC's Labor and Employment Practice Group.

In this difficult economy, funding sources can be scarce. The financial climate makes government contracts appear quite lucrative. Every industry should seriously consider the ramifications of their actions on other areas of the business when entering into government contracts. We frequently see situations where the sales force of an organization enters into a contract without coordination with the sections of the business responsible for compliance with the multiple reporting procedures, that often go along with government contracts. In fact, there have been a number of occasions where a company's contracting agents had no idea that the work being secured for the company would result in significant reporting requirements. Two relatively new developments should give companies pause when considering government contracting.

Executive Order 11246 requires that all government contractors undertake affirmative action in the hiring of traditionally disenfranchised groups where the contractor or subcontractor has a government contract of $10,000 or more. Contractors who have contracts of $50,000 or more must prepare, maintain and comply with a written affirmative action program. Compliance with affirmative action plans is onerous enough, but the bigger issue is that these plans may be classified as admissible evidence to prove reverse discrimination. See Stimeling v. Board of Education Peoria Public School Dist To be sure this issue has been visited in the past by appellate courts, with recent case law successes in the reverse discrimination field. See Christianson v. Equitable Life Assurance Society, 767 F.2d 340, (7th Cir. 1985).  At least one court has recently found that a former employee of the Peoria School District in Illinois could use the existence of the District's affirmative action plan as evidence of discriminatory intent, so long as other evidence of intent was also present. This case is evidence of the fact that Office of Federal Contract Compliance Programs' ("OFCCP") mandates for affirmative action plans can create hidden dangers to a company. These factors should be considered prior to entering into any government contract.

The second fairly new issue of concern is the fact that government contractors are now required to disclose the compensation earned by certain company executives. This information will be made publicly available once it has been reported to the government. An amendment to the federal acquisition regulation which became effective March 1, 2011, requires all contractors and first-tier subcontractors to report the executive compensation (in all forms) of their top five most highly compensated executives for the contractor's previous fiscal year (the amendment has been in place since July 2010, and has been implement in phases).  The reports will be applicable to all contracts where the prime contract is for $25,000 or more. Contractors and first-tier subcontractors must report the information by the end of the month following the month of the award of the contract and annually thereafter. Many companies will be less than thrilled about such information becoming public.

The wise move is to think long and hard about entering into any government contract. Once the decision is made, companies would do well to recognize the risks of such contracts and take steps to limit those risks. Here are some dos and don'ts when considering entering into government contracts:

• Advise your sales force of the potential attendant requirements of any government contract.

• Require sales executives to get approval of a management official before proceeding with any government contract.

• Carefully examine all requirements of the contract before signing.

• Assign reporting requirements to a specific entity within the company.

• Know the end date for the contract. You are not required to continue any contract-related reporting or other record keeping after the completion of the contract. Doing so may subject the company to discrimination claims and unnecessary scrutiny.

Should you require additional information about any of the information discussed above, please feel free to contact Schaun Henry at (717) 237-5346.

OFCCP Jurisdiction Extended to More Hospitals and Health Care Providers

Today, Rick L. Etter, Esq. and Schaun D. Henry, Esq. of McNees Wallace & Nurick LLC's Labor and Employment Group issued an Employer Alert entitled "OFCCP Jurisdiction Extended to More Hospitals and Health Care Providers."

The Employer Alert discusses the jurisdiction of the Office of Federal Contract Compliance Programs (OFCCP), which was recently extended to cover hospitals and other health care providers that provide services to participants of the Department of Defense’s (DOD) TRICARE program.

TRICARE is the federal government's health care program for active duty service members, National Guard and Reserve members, retirees, and their families. TRICARE provides health care services through networks of civilian health care professionals, institutions, pharmacies and suppliers.

To read the Employer Alert click here.

Supreme Court Rejects choice of Lawsuits Defense

A governmental employer cannot throw out a employment promotion test because it thinks that the test results have a disparate impact against a minority group unless there is a "strong basis in evidence" to believe it will be liable for discrimination unless it rejects the test results. Fear of litigation alone cannot justify an employer’s decision that is based on race even if the employer will be sued regardless of which group it favors.

In Ricci v. DeStefano, the City of New Haven, Connecticut used a validated test to select firefighters for promotion. However, the results the promotion examination to fill vacant lieutenant and captain positions showed that white candidates had scored higher than other minority candidates. Strong public opposition to use of the test followed. Confronted with arguments both for and against certifying the test results—and threats of a lawsuit either way—the City threw out the results based on the statistical racial disparity.

White and Hispanic firefighters who scored well on the exams but were denied a chance at promotions by the City’s refusal to certify the test results, sued the City, alleging that discarding the test results discriminated against them based on their race in violation of Title VII. The City responded that had it certified the test results, it could have faced Title VII liability for adopting a practice having a disparate impact on minority firefighters.

The District Court granted summary judgment for the City, and the Second Circuit affirmed. The Supreme Court reversed holding that City discriminated against the White and Hispanic firefighters who passed the test because there was not a strong basis in evidence to throw out the test scores in response to their disparate impact. The City conducted hearings on the test results and determined that there was a statistical adverse impact on minority employees. This showed that there was at least a prima facie case of disparate impact. However, this fear of litigation alone cannot justify the City’s reliance on race to the detriment of individuals who passed the examinations and qualified for promotions. To reject the test, the City needed to go further and show that the exams at issue were not job related and consistent with business necessity, or if there existed an equally valid, less discriminatory alternative that served the City’s needs. Based on the record the parties developed through discovery, there was no substantial basis in evidence that the test was deficient in either respect.

Under Title VII, before an employer can engage in intentional discrimination for the asserted purpose of avoiding or remedying an unintentional, disparate impact, the employer must have a strong basis in evidence to believe it will be subject to disparate-impact liability if it fails to take the race-conscious, discriminatory action. The Court’s analysis held that the City’s actions would violate Title VII’s disparate-treatment prohibition absent some valid defense. All the evidence demonstrates that the City rejected the test results because the higher scoring candidates were white. Without some other justification, this express, race-based decision-making is prohibited. The question, therefore, is whether the purpose to avoid disparate-impact liability excuses what otherwise would be prohibited disparate-treatment discrimination.

The Court held that certain government actions to remedy past racial discrimination—actions that are themselves based on race—are constitutional only where there is a “strong basis in evidence” that the remedial actions were necessary. The same interests are at work in the interplay between Title VII’s disparate-treatment and disparate-impact provisions. However, the Court gave little other guidance on how employers may use tests in the hiring and promotion processes.

E-Verify Federal Contractor Rule Delayed until June 30, 2009

The applicability date of the final rule requiring federal contractors and subcontractors to begin using U.S. Citizenship and Immigration Services’ (USCIS) E-Verify system has been pushed back by six weeks to June 30, 2009, with hint that it may be abandoned or revised. The USCIS website contains the following notice:

The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (collectively known as the Federal Acquisitions Regulatory Councils) will publish an amendment in the Federal Register tomorrow postponing the applicability of the final rule until June 30, 2009. The rule requiring federal contractors and subcontractors to agree to electronically verify the employment eligibility of their employees was first published on Nov. 14, 2008, and went into effect on Jan 19, 2009.

The extension provides the Administration an adequate opportunity to review the entire rule prior to its applicability to federal contractors and subcontractors.

My previous posts on the E-Verify rule are here:

E-Verify Final Regulations Issued Requiring Government Contractors and Subcontractors to Verify Employment for New and Existing Employees who Perform Contract Work

Mandatory use of E-Verify for Government Contractors delayed again to May 21, 2009

Good News: SHRM reports delay in E-Verify Regulations' Effective Date until February 20, 2009

OFCCP's Accessible On-Line Application Requirement

Employers that rely on a web-based application and recruiting processes should examine their websites for compliance with the ADA’s employment provisions which require accessibility and accommodation in the hiring process.   A recent OFCCP Directive sets forth the agency's policy on review of employer websites where applications are solicited:

Effective immediately, all compliance evaluations shall include a review of the contractor's online application systems to ensure that the contractor is providing equal opportunity to qualified individuals with disabilities and disabled veterans. The review should include whether the contractor is providing reasonable accommodation, when requested, unless such accommodation would cause an undue hardship. In this directive, the term "online system" shall include, but not be limited to, all electronic or web-based systems that the contractor uses in all of its personnel activities.

Website accessibility is a growing issue as we discussed in a prior post highlighting a lawsuit under the ADA against Target Corporation's commerce site: Business Websites Face Americans with Disabilities Act Accommodations Claims. Given the OFCCP's initiatives on systemic discrimination, this area is ripe for compliance activity.

The OFCCP has recommended the following action steps in a recent webinar:

  • Prominently display a notice outlining your reasonable accommodation process, & provide timely & effective accommodation.
  • If kiosks are used, ensure that they are physically accessible.
  • Allow people who cannot use the online system because of a disability to apply in an alternate way.
  • Consider designing online systems using universal design techniques & interoperable technology to:
    • Reach out to and receive applications from qualified applicants with disabilities, and
    • Minimize the need for individual reasonable accommodations.

Resources for evaluating accessibility of system including the interoperability with assistive technologies can be found at Accessible Systems Racing League. The OFCCP's Power Point Training Program entitled Accessible Online Applications Systems and Tools for Achieving Them is also a good resource.

Good News: SHRM reports delay in E-Verify Regulations' Effective Date until February 20, 2009

SHRM is reporting the delay of E-verify regulations until February 20, 2009. There is no such report on the Homeland Security or Dept of Justice websites. Stay tuned.  A previous post discusses the regulations: E-Verify Final Regulations Issued Requiring Government Contractors and Subcontractors to Verify Employment for New and Existing Employees who Perform Contract Work

UPDATE: Mandatory use of E-Verify for Government Contractors delayed again to May 21, 2009


E-Verify Final Regulations Issued Requiring Government Contractors and Subcontractors to Verify Employment for New and Existing Employees who Perform Contract Work

Federal government contractors and subcontractors will be required to begin using the U.S. Citizenship and Immigration Services’ E-Verify system starting Jan. 15, 2009 (now 5/21/09), to verify their employees’ eligibility to legally work in the United States.  The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council amended the Federal Acquisition Regulation (FAR) to reflect this change.  E-Verify must be used to verify all new employees and all employees who work on the covered government contract unless the employees were previously verified or commenced work for the employer before the June 6, 1986 the effective date of the Immigration Reform and Control Act.  Contract Officers will insert clauses in new contracts and solicitations.  In addition, certain existing government contracts may be amended to include the requirements.

E-verify provisions on covered contracts apply to all government contractors and subcontractors with limited exceptions detailed in the final regulations. Each covered contractor and subcontractor must: 

  • Enroll in the E-Verify Program within 30 days of the award of a contract, if not already enrolled.
  • Those employers already enrolled in E-Verify for 90 days as of the effective date of the new regulations must verify all new employees with 3 days of hire.
  • Those employers not enrolled in E-Verify must begin to verify all new employees within 90 calendar days of E-Verify enrollment whether or not such employee performs work on the government contract or subcontract within 3 days of the date of hire.
  • Verify each existing employee assigned to the contract within the later of 90 calendar days of E-Verify enrollment or 30 calendar days after the employee's assignment to the contract
  • Employees previously verified through E-Verify are exempt.
  • Elect to verify all employees hired after June 6, 1986 whether or not assigned to the contract.
  • The phrase “employee assigned to the contract” refers to individuals who were hired after June 6, 1986 who are “directly performing work under the contract,” and to exclude employees who normally perform support work, or who do not perform any substantial duties applicable to an individual contract.
  • Subcontracts must include a clause requiring compliance by the subcontractor.
  • A new Memorandum of Understanding (MOU) will be published shortly.

The Final Regulations are summarized by the Office of Acquisition Policy and appear on the DHS website with a Small Entity Compliance Guide.

Final Regulations in .pdf: FAR Employment Eligibility Verification

DHS Website: Frequently Asked Questions: Federal Contractors and E-Verify


UPDATE:  Mandatory use of E-Verify for Government Contractors delayed again to May 21, 2009

Employer's Guide to the Election

The election rhetoric has been relatively quiet on employment-related topics, except for the brief mention in the last debate. Candidate Obama has a clear agenda employment legislation based on his co-sponsorship of various bills and other media comments. Candidate McCain’s position is less clear. Detailed below is a summary of the key legislative initiatives considered by Congress in 2008, all of which have passed the House of Representatives except the RESPECT Act.

Employee Free Choice Act (H.R. 800 and S. 1041)

Summary:  The EFCA amends the NLRA to change the procedures for union certification and first contract negotiation. The primary components of the act are as follows:

  • Allows NLRB certification of a relevant bargaining unit upon authorization card showing from 50% plus one of employees bypassing secret ballot election.
  • Mandates initial collective bargaining contract be negotiated within 120 days or first contract is produced by an arbitrator covering employees for 2 years.
  • Provides new fines for employer unfair labor practices.

Impact:   EFCA is a monumental change to the NLRA. Much has been made of the abrogation of the secret ballot election, but equally dramatic are the limitations placed on collective bargaining and contract determination by an arbitrator if no agreement is reached in 120 days of negotiations.   If enacted, EFCA will result in unprecedented organizing activity with employers losing their ability to demand an election and engage in hard bargaining over a first contract.

Candidate Positions:  H.R. 800 passed the House but did not receive enough votes for consideration by the Senate. Candidate Obama is a co-sponsor of the Senate Bill and supports its passage. Candidate McCain opposes the Senate Bill.

Prior Posts:  NOW is the Time for Employers to Gear up for the Employee Free Choice Act (Unions Are)


Employment Non-Discrimination Act (H.R. 3685/ no Senate Bill)

Summary:  ENDA adds sexual orientation to the protected classes under Title VII for all employers except religious organizations. It allows reasonable access to adequate facilities that are not inconsistent with the employee’s identified gender, but does not require domestic partner benefits or protect “gender identity”.

Impact:  ENDA adds a protected class to employment discrimination protections allowing compensatory and punitive damage claims against employers.     

Candidate Positions:  H.R. 3685 passed the House but did not receive enough votes for consideration by the Senate.  No legislative position by either candidate.   Candidate Obama’s website expresses support for the legislation.


Ledbetter Fair Pay Act (H.R. 2831/ S. 1843)

Summary:  FPA overturns the Supreme Court’s decision in Ledbetter v. Goodyear Tire and Rubber Co. effectively eliminating the 180 or 300-day statute of limitations for filing a wage-related discrimination claim. The bill allows family members and others affected by discrimination to file claims and reinstitutes the Paycheck Rule for determining when a claim accrues. It also allows claims based on paychecks and annuity payments which would allow retirees to bring claims.

Impact:  FPA virtually eliminates the statute of limitations for wage-related claims.

Candidate Positions:  H.R. 2831 passed the House but did not receive enough votes for consideration by the Senate.  Candidate Obama is a cosponsor of the Bill. Candidate McCain has expressed no opinion on the Bill.


Paycheck Fairness Act (H.R. 1338/ S. 766)

Summary:  PFA changes the burden of proof in gender based pay claims requiring the employer to affirmatively demonstrate that any pay differential is not based on sex. Employers who cannot meet this burden face unlimited compensatory and punitive damages. The EEOC would be required to collect employer payroll information based on sex, race, and national origin thereby targeting its enforcement activities. The Bill also changed rules on class actions automatically including employees in such claims unless they specifically opt out.

Impact:  PFA subjects employers to wage related class actions with unlimited damages and makes it easier for employees to prove such claims.

Candidate Positions:  H.R. 1338 passed the House but did not receive enough votes for consideration by the Senate.  Candidate Obama is a cosponsor of the Bill. Candidate McCain has not taken any position on the Bill.


RESPECT ACT (H.R. 1644/ S. 969)

Summary:  The so-called Re-Empowerment of Skilled and Professional Employees and Construction Tradesworkers (RESPECT) Act would change the NLRA definition of “supervisor” to exclude “working supervisors” who do not spend a majority of their worktime in strictly managerial duties excluding the tradition duties of assigning work and directing the activities of others.

Impact:  Respect would allow many working or front line supervisors to join a union dividing their loyalties to the company, as they would be permitted to assist in the unionization of the company.

Candidate Positions:  Candidate Obama is a cosponsor of the bill and Candidate McCain has taken no position on the Bill.

Prior Posts: Bosses do not Deserve RESPECT


If there is a Democratically-controlled House, Senate, and President, it is likely that some or all of the above legislation will be enacted in 2009. Others have commented on the HR landscape following the election:

What The Future of HR Looks Like in 2009

Small business owner’s guide to the election

Benchmarking against the Federal Government's EEO Performance

The EEOC released its Annual Report on the Federal Workforce for Fiscal Year 2007 (period October 2006 to September 2007).  For those employers who may be benchmarking against the federal government, it seems to me that the government performs at a level that the EEOC would never accept from other employers. Here is a sampling of report’s findings:

·         The federal government employs almost 2.6 million workers of which 56.8% are men and 43.2% are women.

·         The federal workforce’s demographic composition is 7.8% Hispanic or Latino; 65.8% White; 18.4% Black or African American; 6% Asian; 0.2% Native Hawaiian/other Pacific Islander, 1.7% American Indian/Alaskan Native; and 0.2% reported 2 or more races.

·         Hispanic or Latinos, Whites, women and persons of Two or More Races remained below their overall availability in the national civilian labor force, as reported in the 2000 census (CLF).  Black or African Americans, Asians, Native Hawaiian/Other Pacific Islanders, American Indian/Alaska Natives and men remained above their overall availability in the CLF.

·         Federal employees and applicants filed 16,363 complaints alleging discrimination.

·         Unlawful discrimination was found in 2.8% of the 7,673 cases that were closed on the merits.

·         85% of federal agencies provided their EEO staff with required training.

·         58% of federal agencies have an Anti-Harassment Policy.

The good news is that the government is evaluating its EEO performance and publishing the results.

Use of Subjective Hiring Criteria May Require Procedural "Safeguards"

Most hiring decisions are predicated in some part on subjective criteria. Let’s take for example, “Attitude and communication skills” which are on the top the hiring criteria for Phil Gerbyshak at Slacker Manager’s based on his post 5 Must Have Skills. Undoubtedly these traits were assessed by one or more members of the Phil’s hiring team based on how the candidates presented themselves at the interview. This hiring approach is universally practiced by companies across the country and loathed by government enforcement agencies.

The EEOC and OFCCP have initiatives targeting an employer’s selection process. The EEOC announced its focus on employment testing and screening resulting in a fact sheet Employment Tests and Selection Procedures. Likewise, OFCCP has a program targeting Systemic Discrimination, which examines criteria used in the hiring process. Subjective criteria are scrutinized because of the fear that they will be manipulated for a discriminatory purpose.

Courts examining subjective hiring criteria have not outright prohibited their use, but have cautioned against their advancement because they are “easily fabricated”. Recently in Wingate v. Gage County School District, the Eighth Circuit Court of Appeals ruled that an employer’s use of subjective criteria did not create an inference of age discrimination when objective criteria were also utilized to make the employment decision.

The legal analyses of subjective hiring criteria revolve around theories of disparate treatment or disparate impact. The measure of compliance has its origin in the Uniform Guidelines on Employee Selection Procedures, which define interview questions as means of selection criteria and set forth the parameters for compliance.

The legal compliance for disparate treatment focuses on the following:

  • Whether the subjective criteria are job related
  • How they are measured
  • Whether the criteria are uniformly applied

According to Section 30 the OFCCP Compliance Manual, employers that utilize subjective hiring criteria will be evaluated for disparate treatment based, in part, upon their use of “safeguards” in the hiring process:

Safeguards consist of efforts made by the contractor to limit the possibility of differential application of the selection criteria/processes. In other words, treating members of a minority group or women differently than others in the application/evaluation of the criteria/processes. An example of a uniformly applied subjective process with safeguards could be an interview where all persons who pass the required test are interviewed regardless of minority or sex status; all interviewers are professionally trained in interviewing; all persons interviewed are asked the same questions; responses are documented; and answers are all evaluated in the same manner.

The legal compliance hurdles for disparate impact have a slightly different focus. The EEOC describes this process as follows:

  • If the selection procedure has a disparate impact based on race, color, religion, sex, or national origin, can the employer show that the selection procedure is job-related and consistent with business necessity? An employer can meet this standard by showing that it is necessary to the safe and efficient performance of the job. The challenged policy or practice should therefore be associated with the skills needed to perform the job successfully. In contrast to a general measurement of applicants’ or employees’ skills, the challenged policy or practice must evaluate an individual’s skills as related to the particular job in question.
  • f the employer shows that the selection procedure is job-related and consistent with business necessity, can the person challenging the selection procedure demonstrate that there is a less discriminatory alternative available? For example, is another test available that would be equally effective in predicting job performance but would not disproportionately exclude the protected group?

Employers who want to assess attitude and communication skills should consider the following additions to their hiring procedures:

  • Make attitude and communication skills an express criteria in job descriptions and summaries of minimum job requirements
  • Describe its job relatedness and business justification
  • Assess whether the criteria is creating an adverse impact
  • Implement “safeguards” in the hiring process describe in OFCCP Guidance

OFCCP Audits Focus on Systemic Discrimination

The OFCCP reports a record $51.7 million recovered for 22,251 workers. Of the recovery, 98% was collected for cases of systemic discrimination in the application process because of unlawful employment policy or practice according to a published account. Much of the monetary recovery came from the 14 cases of systemic discrimination referred to litigation with the DOL’s lawyers.

Government contractors are selected for audit in several ways including the use of a mathematical model that predicts the likelihood of a finding of systemic discrimination. The model analyzes data from five years of OFCCP compliance evaluations to formally identify and characterize relationships between reported EEO-1 workforce profiles and findings of discrimination. The OFCCP publishes compliance lists for one year audit cycles beginning in October of each year.

We have been involved in many of these style OFCCP audits and the approach is the same. The audit is triggered by an anomaly in a business' EO Survey which shows a statistical disparity in either hires or terminations. For example, the percentage of minority applicants differs by more than 80% from the percentage of minorities hired (the four-fifths rule). The investigation into the disparity in the hiring process follows the road map set out in the OFCCP's Compliance Manual as follows:

  • Summarizing the hiring process by obtaining an employer's summary
  • Establishing the minimum objective criteria for the position.
  • Evaluating the Pass/Fail Points for disparate impact (i.e., when does an applicant move to the next step of the process).
  • Evaluating both the objective and subjective criteria for uniform application to all applicants and for business relatedness.
  • Evaluating specific safeguards as to the application of selection criteria including how well each is documented for each applicant.
  • Measuring statistical disparity by Impact Ratio Analysis (IRA) of each step and criteria.

There are many problems with the OFCCP's investigatory process, a few of which are described as follows:

1.    The OFCCP loathes subjective hiring criteria. I had a client who required that its customer service candidates be "personable and friendly". The OFCCP started out with the position that this was not a "job-related" criteria. When that didn't fly with its own legal department, the OFCCP interviewed every hiring manager and asked them to define how it applied the "personable and friendly criteria". When the hiring manager responses weren't exactly the same, the OFCCP found adverse impact because the hiring procedures weren't uniformly applied to all applicants.

2.    The OFCCP's standard for adequate record keeping of each hiring decision is extremely high and it finds that inadequate records are a form of systemic discrimination.

3.    Finding adverse impact based on the four-fifths rule is a joke in terms of its lack of statistical significance. The rule has its origin in the EEOC's Uniform Guidelines on Employee Selection Procedures. However, knowing that the OFCCP uses this flawed measure makes it all the more important to use this measuring stick when self-assessing your employment practices.

Once the OFCCP makes a finding of a prima facie case of pattern and practice discrimination, it will presume that all members of the class are victims of discrimination and assess liability against the contractor.   The employer can only argue about who is eligible for an award and how much. This is where an employer must decide to dig in its heals and litigate or settle.

A settlement with the OFCCP for systemic discrimination in the hiring process will include back pay plus interest and job offers to the affected class, internal mandated and OFCCP approved training, follow up reporting to the OFCCP and publicity in the form of an OFCCP Press Release.

E-Verify Coverage and Criticisms: Government Contractor Compliance Quandary

The Amendment to Executive Order 12989 has government contractors and subcontractors scrambling to evaluate their legal obligations. Details remain sketchy, but the following information may help prepare a compliance strategy:

What is the Effective Date for Using E-Verify?

Employers have no immediate requirement to start using E-Verify. According to a SHRM news report, the deadline for federal contractors to sign up for E-Verify “still needs to be determined” and will be made public through the standard government regulation process, U.S. Citizen and Immigration Services (USCIS) Acting Director Jonathan Scharfen said, following his testimony June 10, 2008, on E-Verify before the House Immigration, Citizenship, Refugees, Border Security and International Law Committee. Once a deadline has been determined, E-Verify will be able to handle the roughly 200,000 contractors who will have to sign up or risk losing their federal contracts, he said.

Which Employers will be Covered?

The Amendment to E.O. 12989 requires E-Verify use for (i) all persons hired during the contract term by the contractor to perform employment duties within the United States; and (ii) all persons assigned by the contractor to perform work within the United States on the Federal contract.The original E.O. 12989 set forth the parameters of the order by referencing the debarment provisions of the Federal Acquisition Regulations. Based on the combination of references it appears that the new E-Verify system will be applicable to the employees of all first tier contractors (and their affiliates) and the employees of sub-contractors working on the government contract. It is unclear whether E-Verify applies to existing contracts and/or existing employees.

Are there Alternatives to E-Verify?

An alternate program called New Employee Verification Act (NEVA) (H.R. 5515), has been introduced by Rep. Sam Johnson, R-Texas. NEVA would transform the current paper-based employment verification process by requiring employers to participate in one of two electronic employment verification systems. Employers would enroll through their state’s existing “new hire” reporting program which was originally designed to enhance child support enforcement. The new hire-reporting program is an electronic portal already used by 90 percent of U.S. employers. Commentators have noted “serious flaws” in this program too.

Have the Accuracy Issues with E-Verify been Resolved?

The DHS report “Debunking the E-Verify Error Rate” touting the accuracy of the E-verify System is based on 1000 queries conducted by an independent reviewer noted automatic confirmation of 942 (94.2%) of the sample queries. Five (.5%) of applicants were able to resolve the mismatch by correcting information with the Social Security Administration. The balance of 52 (5.2%) applicants could not be hired because of unconfirmed information. There is no analysis as to whether the rejected applicants where illegal workers or erroneous rejections.

GAO Report issued on June 10, 2008 entitled “E-Verification: Challenges Exist in the Implementing the Mandatory Electronic Employment Verification System” evaluates the accuracy of E-Verify as follows:

According to USCIS, under the current voluntary program the majority of E-Verify queries entered by employers--about 92 percent--confirm within seconds that the employee is authorized to work. About 7 percent of the queries cannot be immediately confirmed as work authorized by SSA, and about 1 percent cannot be immediately confirmed as work authorized by USCIS because the employee information queried through the program does not match information in SSA or DHS databases. With regard to SSA tentative nonconfirmations, USCIS and SSA officials told us that the majority of erroneous tentative nonconfirmations occur because employees' citizenship or other information, such as name changes, is not up to date in the SSA database, generally because individuals have not contacted SSA to update their information when changes occurred.

Should a Contractor get a “Head Start” by signing up for E-Verify in Advance of the Effective Date?

A wait and see approach may still be the best play as the uncertainties of the effective date and coverage are resolved by regulations. In any event, employers should carefully considered a compliance strategy based on yet unresolved contingencies:

  • Scope of Operations covered by E-Verify
  • Whether Verification applies to existing employees or just new hires
  • Effect on Hiring and Retention of Workforce
  • Centralization of Hiring Process
  • Communication with No-Match Employees and/or Applicants
  • Assistance to Employees in correcting No-Match
  • Appreciating the Scope of the No-Match Safeharbor and IRCA's Anti-discrimination protections

White House Mandates use of E-Verify by All Government Contractors

On June 6, 2008, President Bush amended Executive Order 12989 to require that all federal contractors verify the legal status of their employees by using the government’s electronic employment verification system or face sanctions including debarment from future contracts:

Executive departments and agencies that enter into contracts shall require, as a condition of each contract, that the contractor agree to use an electronic employment eligibility verification system designated by the Secretary of Homeland Security to verify the employment eligibility of: (i) all persons hired during the contract term by the contractor to perform employment duties within the United States; and (ii) all persons assigned by the contractor to perform work within the United States on the Federal contract.

DHS has designated E-Verify as the employment eligibility verification system for all federal contractors and touted its effectiveness:

More than 69,000 employers currently rely on E-Verify to determine that their new hires are authorized to work in the United States. Employers have run more than 4 million employment verification queries so far in fiscal year 2008. Of those queries, 99.5 percent of qualified employees are cleared automatically by E-Verify.

Commentators have questioned the accuracy and capacity of the E-Verify system. Michael Aitken, SHRM Government Affairs Director has said, “ mandating participation in a system that doesn’t really work won’t give employers the tools they need to ensure a legal workforce.” DHS has responded publicly in its release “Debunking the E-Verify Capacity Problem.” I have suggested taking a Wait and See Approach to E-Verify. However, the wait is over for government contractors who will soon see how the system fairs. Bush’s Order has no clear effective date, but appears to be prospectively applicable to new or renewed government contracts.

Sex may Sell, but Gender-based Employment Decisions are Unlawful Discrimination

The EEOC announced a $1 million settlement for sex discrimination against men arising from a restaurant’s preference for hiring and promoting only women into bartending positions. The lawsuit highlights the tension between a business’s marketing efforts and legal compliance. What marketers may pander to in the name of “customer preference,” employment laws prohibit as discrimination.

Businesses spend millions of dollars to find out what motivates customers to buy by evaluating their preferences. Demographics play an important role in tying the right product to the right market. Also critical is having the “right” salesperson to make the pitch.

A business’s natural, but unlawful reaction may be to make staffing decisions based upon appealing to a target demographic group.  The “customer preferences” for the right salesperson cannot create employer hiring or promotion criteria for someone of a particular gender, religion, age, etc. Courts have universally rejected this form of customer preference, except in the narrow case where it is a Bona Fide Occupational Qualification (BFOQ). A BFOQ may exist where it is necessary for the purpose of authenticity or genuineness, such as, a model for gender specific clothing. 

In its lawsuit, the EEOC said that Razzoo's, a Cajun food restaurant chain, refused to hire or promote men to the position of bartender. The EEOC had evidence that the restaurant's management set up and communicated to managers by e-mail, a plan for an 80-20 ratio of women to men behind the bar. Male applicants and servers were told that management wanted mostly “girls” behind the bar. Men who worked as servers at the restaurant were generally denied promotion to bartender because of their gender. The few men who were promoted to bartender were not allowed to work lucrative “girls-only” bar­tend­ing events.

The EEOC’s settlement with Razzoo shows a developing trend in the agency of making an employer improve its approach to human resources. In addition to paying $775,000 to be divided among a class of male applicants, male servers, and male bartenders who were discriminated against, Razzoo's was also required to retain the services of a human resources consultant or to develop an in-house human resources department spending no less than $225,000 for these human resources services.   Razzoo's agreed to injunctive relief requiring training on equal employment opportunity for all its employees, the posting of an anti-discrimination notice, and EEOC monitoring of employee complaints of discrimination.

Suzanne M. Anderson, EEOC supervisory trial attorney and lead counsel on the lawsuit, summed up the EEOC’s position by saying that, "Some may think that sex sells drinks, but gender ratios are illegal… Razzoo's decision to hire and promote by gender is a clear violation of federal law. A hiring ratio is illegal whether it is 80-20 whites to blacks or 80-20 women to men."   It will be interesting to see how far the law will go in policing an employer’s efforts to appease a customer preference. For example, would an OBGYN practice be subject to an EEOC lawsuit if it specifically hired a female doctor based on the preference of its patients?