Pennsylvania Labor and Employment Blog : Pennsylvania Labor and Employment Lawyer & Attorney : McNees Wallace & Nurick Law Firm : Human Resources, Workplace and Business Law : Harrisburg, Lancaster, Allentown, Lehigh

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. 

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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.

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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.
 

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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.
 

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Target Corp. has agreed to pay $6 million in damages to plaintiffs in California unable to use its online site as part of a class action settlement with the National Federation of the Blind. The issue centers on the Americans with Disabilities Act’s requirements that retailers and other public places to make accommodations for people with disabilities. Target had argued that the ADA covered only physical spaces. The California court held that the ADA covers an online retailer’s website. Websites can be made more accessible through screen-reading software that converts text into speech for visually impaired access. The court certified the case as a class action before it settled.

The case has important implications for retailers who may now face class action lawsuits. Employers that rely on a web-based application and recruiting processes should also 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.

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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.

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