Contractor Watchdog Can’t Redo Bias Audit, Violated Constitution

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By Porter Wells

The Labor Department’s federal contractor watchdog violated the U.S. Constitution when it altered the selection process for scheduling anti-discrimination audits of a construction subcontractor, a federal district court ruled.

The Office of Federal Contract Compliance Programs’ selection of Baker DC for compliance review was “not sufficiently neutral to comply with Fourth Amendment requirements” because the audit schedule established by an otherwise-neutral selection was changed, Judge Susan Dlott of the U.S. District Court for the Southern District of Ohio said April 6.

The Fourth Amendment protects against unreasonable searches and seizures by the government and is implicated when government officials demand documents or physically step onto a business site, Dlott said.

The ruling could have a major effect on the way the subagency administers its audits on “mega construction projects"—construction projects with a value of at least $25 million and that last more than one year. MCPs create hierarchies of contractors and subcontractors that the OFCCP evaluates during the project.

“They’ll have to change their whole practice on construction facility evaluations now,” John Fox of Fox, Wang & Morgan in Los Gatos, Calif., told Bloomberg Law. Fox is one of Baker DC’s attorneys and a former OFCCP official.

The OFCCP annually audits 1 percent to 2 percent of about 200,000 federal contractor facilities. It uses data analysis to determine if a contractor-employer has run afoul of the three federal equal employment opportunity laws it enforces: Executive Order 11,246, Section 503 of the Rehabilitation Act, and Section 4212 of the Vietnam Era Veterans’ Readjustment Assistance Act.

The OFCCP didn’t immediately respond to Bloomberg Law’s request for comment.

‘Credible Complaints’

Baker DC was a federal subcontractor for Grunley Construction, which had secured a $139 million federal contract to renovate a building on the St. Elizabeths West Campus in Washington.

Grunley, as the prime federal contractor, chose to participate in the OFCCP’s MCP plan. In MCP plans, the prime contractor is reviewed for compliance with federal anti-discrimination laws enforced by the OFCCP. The subcontractors become eligible for review after three months of subcontracting work.

The agency only had the resources to audit four of the 13 subcontractors on the St. Elizabeths Campus MCP. Nine subcontractors reached their three-months checkpoint ahead of Baker DC.

However, the office scheduled Baker DC for an audit ahead of those subcontractors because the OFCCP had received “credible complaints” that Baker DC discriminated against its black workers.

The OFCCP admitted in depositions that it hadn’t made written records of the decision to schedule Baker DC for audit and hadn’t followed up on the complaints of discrimination before scheduling the audit.

Dlott sided with Baker DC after hearing testimony that enforcement officers had discretion to shift contractors to earlier inspection dates, “thereby effectively selecting the contractor for review,” she wrote.

The agency “has a laudable goal and a facially neutral administrative plan” to evaluate MCP facilities, Dlott wrote. However, because there weren’t enough resources to eventually evaluate all 13 of Grunley’s subcontractors, and because department interference essentially went around the neutral administrative plan, the court blocked the proposed audit of the Baker DC facility.

‘Troubling’ Decision

That the OFCCP would move up the audit of a particular subcontractor without making a written record of the decision and without first checking into the oral complaints received is “troubling,” Alissa Horvitz of Roffman Horvitz in McLean, Va., told Bloomberg Law April 9 in an email. The rescheduling of Baker DC’s audit isn’t unique, she said. Horvitz is not involved with the lawsuit.

OFCCP Director Ondray Harris should make it clear to all of his offices that “it is unlawful for anyone to deviate from the neutral selection process based on unfounded and uninvestigated allegations,” Horvitz said.

Dlott’s decision applies only to MCP projects, not to the supply and service contracts the OFCCP also investigates.

The opinion is “fairly thin on reasoning,” said Adam Pulver, an attorney with Public Citizen Litigation Group in Washington. The opinion’s “cursory discussion” overlooks the multiple complaints of discrimination made to the OFCCP, he said. Pulver is not involved with the lawsuit.

“Contractors often complain that the OFCCP goes on ‘fishing expeditions’ looking for discrimination, but this was a case where there were actual complaints of discrimination,” Pulver told Bloomberg Law.

Fox insisted that the law in this instance is simple.

“It doesn’t matter if the complaints are credible,” he said. “Rescheduling audits out of order and altering a neutral selection process renders the administrative plan non-neutral. This is chestnut constitutional law.”

Porter, Wright, Morris & Arthur in Cincinnati and Fox, Wang & Morgan represented Baker DC.

U.S. Attorney Margaret Castro in Cincinnati represented Labor Department Secretary Alexander Acosta and the Office of Federal Contract Compliance Programs.

The case is Baker DC, LLC v. Acosta, 2018 BL 122252, S.D. Ohio, No. 1:17cv-530, opinion issued 4/6/18.

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