Right Tools Bolster Construction Contractors in OFCCP Audits

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By Jay-Anne B. Casuga

Oct. 6 — Federal construction contractors may have gotten lucky when the Labor Department withdrew a proposed rule revising affirmative action requirements, but moving forward they still have to prepare for deeper audits by the agency's Office of Federal Contract Compliance Programs.

“Construction contractors are in for a frustrating ride,” John Fox, an attorney with Fox, Wang & Morgan in San Jose, Calif., and a former OFCCP policy official, told Bloomberg BNA. “But you will get through it eventually.”

Construction Contractor Conciliation and Financial Agreements

The OFCCP, which enforces federal contracting equal employment opportunity and nondiscrimination laws, conducts only a few hundred construction contractor compliance reviews every year versus several thousand supply and service contractor audits.

Expanded Mega Project Program

To make the most of its enforcement efforts among construction contractors, the agency last month formalized and expanded its “mega construction project,” or MCP, program. MCPs are defined as projects with contract values worth more than $25 million that will last more than a year.

The OFCCP expanded the MCP program in lieu of issuing a proposed rule to update its rules pertaining to construction contractors and subcontractors. That proposal, which was introduced in 2009, was announced as on hold last month. But practitioners speculated as early as February, based on budget documents, that the proposed rule wouldn't be issued before the end of the Obama administration.

Given the renewed focus on construction, practitioners and a contractor representative offered advice for firms should they come under OFCCP review.

“The bottom line is that doing federal construction work can be great work, but it comes with a lot of compliance and record-keeping obligations,” attorney Alissa A. Horvitz of Roffman Horvitz in McLean, Virginia, told Bloomberg BNA.

Horvitz has practiced OFCCP law for 20 years and previously was co-chairman of Littler Mendelson’s OFCCP practice group. “You need to know what those are, and how much it’s going to cost to comply, before agreeing to do it,” she said.

Shift Under Obama Administration

The OFCCP has shifted from a compliance-centered approach to a more enforcement-centered strategy in construction company audits, Horvitz said.

The agency’s construction contractor rules, which are more than 40 years old, include goals for what percentage of work on a project should be done by women and minorities. For example, the rules set forth a 6.9 percent goal for women.

Under President George W. Bush, the OFCCP focused more on ensuring that construction contractors and subcontractors documented their outreach efforts for minorities and women to show they were diligently trying to meet those goals, Horvitz said.

By contrast, the OFCCP under President Barack Obama has focused more on applying an “enforcement methodology” that it developed for supply and service contractors, she said.

When the OFCCP audits a supply and service contractor, it requests hiring data for a set period of time and analyzes the information for statistical disparities based on race or sex that might be indicative of discrimination. If the contractor doesn’t have records explaining why it made its hiring decisions, the OFCCP can presume that the missing records would have been unfavorable to the contractor.

The OFCCP is now taking a similar approach for construction contractors and subcontractors and asserting hiring bias allegations whenever a company can't track “precisely” why it didn't hire people, Horvitz said.

Subcontractors Vulnerable, but Bias Findings Small

The OFCCP’s shift leaves subcontractors particularly vulnerable, Horvitz said, explaining that they tend to have a “loose” hiring process in which decisions are made verbally and not documented.

This can become a problem when the OFCCP conducts an evaluation, reviews applications and determines that hired workers don’t come across as the most qualified, she said.

“The employer appears to have made its hiring decisions loosely, inconsistently or arbitrarily,” she said.

Fox said he doesn’t believe the agency finds much discrimination in its construction audits.

Indeed, a Bloomberg BNA analysis of the DOL’s enforcement database as of September 2016 revealed that the OFCCP found discrimination in 66 of approximately 2,179 closed construction contractor audits, roughly 3 percent, since fiscal year 2011.

“Most of the audits are not problematic,” Fox said.

But that doesn’t mean contractors can afford to be lax about preparing for OFCCP audits.

Collect, Maintain Records

The attorneys acknowledged the challenges faced by construction contractors to collect and maintain hiring records, given the transient nature of the work. However, they advised contractors and subcontractors to make the effort.

Failure to keep records is one of the most cited violations in OFCCP construction contractor settlements, also known as conciliation agreements, according to Bloomberg BNA's analysis of DOL enforcement data. In approximately 1,044 conciliation agreements since fiscal 2011, the OFCCP alleged about 438 recordkeeping violations.

If a contractor determines an applicant isn’t qualified for a job, Horvitz suggested that it keep records of how it decided, such as taking note of the questions it asked the applicant and the answers it received.

These types of records would also be helpful in situations in which a minority or female applicant isn’t deemed qualified for one position, but is considered for a lower-paying job he or she is qualified for, Horvitz said.

Without such records, the OFCCP could allege that the contractor is unlawfully steering those workers into lower-paying jobs, Horvitz said.

She added that contractors that rescind job offers based on an applicant’s criminal convictions also have to explain to the OFCCP how the conviction is job-related.

Fox said records are also essential outside the hiring context to explain, for example, who is awarded overtime hours or why certain employes are retained while others are laid off.

Dedicated Staff Needed

Generally, contractors can’t just hit a button and have a computer produce these records, Fox said. Many of them are manually generated.

“Someone has to spend dozens and dozens of hours to retrieve this stuff,” he said.

Horvitz shared similar thoughts. “If you are going to do federal construction subcontract work, be prepared that you are going to need a full-time administrative person to engage in all of the compliance obligations and keep track of all these records,” she said.

16 Compliance Steps

Fox added that construction contractors must keep up with their paperwork on the 16 affirmative action and equal employment opportunity steps required under the OFCCP's construction contractor rules.

Among other things, construction contractors must maintain a harassment-free work environment, disseminate EEO policies internally and externally, and review supervisor adherence to EEO policies.

Horvitz stressed the importance of construction contractors taking anti-harassment obligations seriously.

“It’s 2016,” she said. “The notion that a job site is ‘rough’ and that it’s okay to curse and yell is unacceptable. Period. End of discussion. Shut it down or you will find that OFCCP has decided to expand what would otherwise be a routine audit and morph it into the need to interview every employee on every project to see how widespread and pervasive is the tolerance for bad behavior.”

In the past year or so, the OFCCP has filed administrative complaints against two construction subcontractors, Potomac Abatement Inc. and WMS Solutions LLC, that included harassment allegations.

Under the remaining 16 steps, contractors must make efforts to solicit offers for subcontracts from minority-and female-owned businesses, maintain applicant flow data, and ensure that job tests and other selection procedures are job-related and consistent with business necessity.

The steps also call on contractors to provide on-the-job training opportunities; annually evaluate all minority and female employees for promotional opportunities; ensure that seniority practices don’t have a discriminatory effect; and ensure that company activities and facilities, with the exception of restrooms and changing areas, are nonsegregated.

Construction contractors also have record-keeping obligations pertaining to hiring, recruitment and outreach concerning individuals with disabilities and protected veterans.

Continued Outreach, Recruitment Efforts

Finally, the steps encourage contractors to engage in internal and external recruitment with various minority and female organizations.

Contractors should consider working with the OFCCP to improve the pipeline for minority and female workers, Tamika Carter, senior director of construction human resources at the Associated General Contractors of America, told Bloomberg BNA. The AGC is a trade association in Arlington, Virginia, that represents more than 26,000 construction firms.

Companies could conduct outreach in high schools to drum up interest in the construction trades, or partner with community organizations that provide recruitment resources for disadvantaged groups, she suggested.

Carter also recommended that construction contractors make the effort to get to know their regional OFCCP representatives.

“They are very open to sharing information and resources,” she said.

To contact the reporter on this story: Jay-Anne B. Casuga in Washington at jcasuga@bna.com

To contact the editor responsible for this story: Peggy Aulino at maulino@bna.com

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