Labor Department Secures OMB Approval of Changes to OFCCP Scheduling Letter

Stay informed and ready to meet both everyday challenges and long-term planning and policy-making goals, with focused news, practical information, and strategic insights on all HR-related developments.

 

By Kevin McGowan

Sept. 29 — The White House Office of Management and Budget has approved changes to the Labor Department's record-keeping requirements for federal contractors, including a new scheduling letter and itemized listing used in agency compliance reviews, the Office of Federal Contract Compliance Programs said Sept. 29.

In a notice published in the Federal Register Sept. 30 (79 Fed. Reg. 58,807), the OFCCP said the OMB gave final approval to changes the Labor Department originally had proposed and received public comment on during 2011.

“The limited number of substantive changes that OFCCP incorporated in the OMB-approved renewal reduce the cost and burden imposed on contractors; maintain contractor flexibility when submitting employment activity data; support effective and efficient agency enforcement in the area of pay discrimination; and incorporate changes required by OFCCP's recent regulatory activity,” the OFCCP said.

The new scheduling letter incorporates changes made by new Vietnam Era Veterans' Readjustment Assistance Act regulations, which took effect in March, and modified federal contractors' affirmative action obligations toward categories of protected veterans.

The itemized listing used in conjunction with the scheduling letter, which identifies the documents and information contractors must provide during the desk audit phase of an OFCCP compliance review, also is modified, the agency said.

Agency's Proposal Was Modified

The OFCCP's 2011 proposal was changed in some respects after consideration of stakeholder comments, the agency said.

“This OMB-approved renewal reflects these comments, where OFCCP substantially reverts to the 2008 itemized listing, including continuing to allow contractors to submit employment activity data either by job group or by job title,” the OFCCP said.

“Maintaining the option of reporting employment activity either by job group or job title eliminates the burden that some commenters associated with collecting, analyzing and reporting data in two different ways as OFCCP proposed in 2011,” the agency said.

Contractors will continue to report employment activity data by sex, but now will submit to the OFCCP race and ethnicity data using five specified categories instead of two broad categories designated as “minority” and “nonminority,” the OFCCP said.

Compensation Data Changes

The OFCCP in the itemized listing changes the compensation data requirements, the agency said.

Contractors no longer will submit “annualized aggregate compensation data” but instead must submit “individualized employee compensation data” as of the date of their affirmative action plan's workforce analysis, the OFCCP said.

The compensation data should include the individual's job title, job group and EEO-1 category, the agency said.

This change from the OFCCP's 2011 proposal “is expected to reduce the cost and burden that some commenters associated with collecting, tabulating and analyzing data to submit in aggregate form,” the agency said.

As proposed in 2011, the OFCCP has “refined its definition” of compensation to include consideration of hours worked, incentive pay, merit increases, locality pay and overtime, the agency said.

Under the OMB-approved renewal, the OFCCP requires contractors to submit the required data electronically, but only if the contractor maintains the data “in an electronic format that is useable and readable,” the agency said.

“This provides contractors with more flexibility when compared to what OFCCP proposed in 2011, and the provision may contribute to faster and more efficient compliance evaluations,” the OFCCP said.

The OMB-approved itemized listing reflects the recent regulatory changes under VEVRAA and Section 503 of the Rehabilitation Act, the OFCCP said. Those final rules changed contractors' data collection, recordkeeping and reporting requirements under VEVRAA and Section 503, the agency said.

The new itemized listing also reflects the OFCCP's February 2013 rescission of its prior voluntary guidelines and compensation standards, the agency said.

Pay Data Remains Prime Concern

The compensation information piece is “a big deal” for contractors regarding both data security and potential compliance burdens, said David Cohen, president of DCI Consulting Group Inc. in Washington, which advises federal contractors.

It's “huge and ground-breaking” that the OFCCP's new scheduling letter and itemized listing provide agency access to contractors' individualized pay data, which the OFCCP has been trying to get at the desk audit stage since the late 1990s, Cohen told Bloomberg BNA Sept. 29.

The OFCCP's argument was that summary pay data are “meaningless,” so it needed access to individualized compensation information, Cohen said. But the OFCCP simultaneously is seeking such aggregate compensation data in its recently proposed equal pay report, he noted.

Cohen questioned the equal pay report's purpose if the OFCCP deems summary pay data useless during a desk audit. “I find that part of it is fascinating,” he said. The agency simultaneously was lobbying to get rid of aggregate pay data during the desk audit but proposing to make contractors submit equal pay reports, which are based on aggregate pay data, he said.

It wouldn't be so bad if the OFCCP just required contractors to submit individual data on base pay, Cohen said. But the OFCCP's expanded definition of compensation to include hours worked, incentive pay, merit increases, locality pay and overtime shows the agency doesn't understand how employers' information systems work, Cohen said.

The OFCCP thinks an employment “snapshot” like those used in a contractor's EEO-1 report or affirmative action plan also is available on compensation, Cohen said. But compensation items other than base pay aren't found in a contractor's human resources information system but rather are located in entirely separate payroll systems, he said. Contractors will struggle to meet the OFCCP's compensation information demands when disparate data are spread across different systems, Cohen said.

The OFCCP's compensation data reporting requirements are contractors' prime area of concern, agreed lawyer David Fortney of Fortney & Scott LLC in Washington, who represents federal contractors.

The “interplay between the scheduling letter and the equal pay report” is a potential problem because the OFCCP notice doesn't address “clear disconnects” between the employee groupings used in contractors' affirmative action plans and those called for in the equal pay reports, Fortney said.

“Someone will have to do a lot of work” to reconcile the agency's differing definitions of employee used for contractors' affirmation action plans and the proposed equal pay reports, and it probably will be the contractor, Fortney told Bloomberg BNA Sept. 29.

In a “best practices” world, the OFCCP would have harmonized the different reports required of contractors, but the agency has rolled out its new reporting proposals in a “herky-jerky fashion” with little apparent concern for their inconsistencies, Fortney said.

New Veterans, Section 503 Requirements

Cohen questioned the OFCCP's announcement of scheduling letter changes related to the new VEVRAA and Section 503 regulations. When those regulations took effect, the OFCCP on its website indicated contractors shouldn't expect corresponding changes in the scheduling letter, Cohen said.

But the OFCCP in its latest notice said it had “no discretion” but to change the itemized listing to account for the “regulatory changes” to VEVRAA and Section 503 rules.

Cohen suggested the OFCCP can't make those changes regarding what contractors must provide regarding Section 503 and VEVRAA compliance at the desk audit stage without notice-and-comment rulemaking.

Contractors still are a bit in the dark since the OFCCP published only the notice of OMB approval and not the scheduling letter or itemized listing itself, Fortney said.

Even though the OFCCP website said no scheduling letter changes were necessary after the VEVRAA and Section 503 regulations were revised, Fortney said changes were “clearly necessary” given the “stepped-up reporting” required of contractors under the new rules.

Favorable News for Contractors

On the plus side for contractors, Cohen welcomed OMB's apparent rejection of the OFCCP's original proposal that contractors must submit employment activity data both by job group and job title.

By allowing contractors to continue to report by job title or by job group, the OMB removes a potential “big burden” on contractors, Cohen said.

It also makes sense the OFCCP has abandoned the “minority” and “nonminority” classifications in favor of five specific racial and/or ethnic designations, Cohen said.

But some potential ambiguity exists, since the Equal Employment Opportunity Commission's changes to the EEO-1 form include seven racial and/or ethnic designations, Cohen said. When the OFCCP instructional manual and new scheduling letter are available, it may well be the agency says a contractor's use of the seven categories rather than five is acceptable, Cohen said.

It was “favorable news” that contractors retain the option to report employment activity either by job title or job group, Fortney said. Contractors also apparently won't have to report all information electronically if they don't maintain the relevant information in a usable electronic format, Fortney said.

To contact the reporter on this story: Kevin McGowan in Washington at kmcgowan@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

Text of the OFCCP notice is available at http://op.bna.com/dlrcases.nsf/r?Open=kmgn-9pelte.