Lower DOL Budget May Signal Changes for Contractor Enforcement

From labor disputes cases to labor and employment publications, for your research, you’ll find solutions on Bloomberg Law®. Protect your clients by developing strategies based on Litigation...

By Jay-Anne B. Casuga

A Labor Department subagency that monitors government contractor compliance with affirmative action and nondiscrimination requirements could pull back on deep dives into contractor data during audits. That’s one potential outcome under President Donald Trump’s fiscal year 2018 budget proposal.

Trump released a proposed “ skinny budget” March 16 that calls for a 21 percent funding reduction for the DOL as a whole, which likely means the DOL’s Office of Federal Contract Compliance Programs will also receive budget cuts.

“The question is not whether, but simply how much,” John Fox, a management attorney with Fox, Wang & Morgan in San Jose, Calif., and a former OFCCP policy official, told Bloomberg BNA.

The agency is currently funded at $105.5 million per year under a continuing resolution that’s keeping the government operating through April at the same budget levels in place from fiscal year 2016. Congress didn’t act on President Barack Obama’s FY 2017 budget requests.

The OFCCP’s annual budget hovered between $105 million and $106.5 million during the Obama administration.

It’s difficult to project the impact on the OFCCP and other areas given that the proposed skinny budget is silent on how a 21 percent reduction would affect all of the DOL’s subagencies, Shirley Wilcher, a former OFCCP director under the Clinton administration, told Bloomberg BNA.

“It is possible that there will be a reduction in the size of the staff or that when staff leave, they will not be replaced,” said Wilcher, who spoke in her capacity as a former OFCCP official and not her current role as executive director of the American Association for Access, Equity and Diversity in Washington. “That will of course reduce the ability of the agency to enforce the civil rights laws within its jurisdiction.”

Return to Audit Strategy Under Bush, Clinton?

A reduced budget would mean the OFCCP would have to find a way to do more with less, David Cohen, president of DCI Consulting Inc. in Washington, told Bloomberg BNA. Cohen is also a co-chair of the OFCCP Policy Institute.

This might take the form of OFCCP going back to some form of tiered audit approach that the agency took under the George W. Bush administration, Cohen said.

Known as “active case management” during the Bush era, the agency would close a compliance review if an abbreviated desk audit of a contractor’s affirmative action plan and employment data revealed no indicators of discrimination.

The OFCCP under President Barack Obama, however, conducted more comprehensive compliance reviews using an approach known as “ active case enforcement.”

Fox said it was the OFCCP under the Clinton administration that innovated the notion of the “tiered” review process, which applied “filters” to data that contractors submitted to the OFCCP.

“Based on the data, OFCCP then began for the first time to decide when not to go on-site and when to stop pursuing investigative leads instead of looking at every issue in detail,” he said. “Back pay collections almost doubled. The George Bush Administration which followed tinkered with the filters begun in the Clinton Administration. Back pay collections almost tripled, even with reduced headcounts.”

By contrast, the Obama administration installed a “deep dredge, slow churn” model of audits that resulted in lower back pay collections for the agency, Fox said.

“Does OFCCP’s deep dredge, slow churn audit style have any chance to survive going forward? No. Zero chance,” he said. But it will continue to be the agency’s audit style until the Trump administration selects a new OFCCP director who can “change this current unproductive audit strategy.”

Wilcher agreed that during her tenure, the OFCCP changed its regulations to allow for a tiered review process “to achieve efficiency in the deployment of compliance officers.”

“It may be time to employ such creativity again if the agency is to reach even 2 percent of the federal contractor community in its reviews,” she said.

According to some estimates, there are about 200,000 contractor facilities that could be selected for audit in any given year.

Deep Cut Would Be ‘Felt Keenly.’

Fox said he doesn’t believe the proposed 21 percent cut for the DOL will be distributed evenly among its subagencies.

But if the OFCCP does receive such a decrease, it would return the agency’s funding closer to levels seen in the later years of President George W. Bush’s administration. The OFCCP received between $81.3 milion and $82.1 million during the last four fiscal years of Bush’s presidency.

That type of reduction now could potentially lead to closure of district offices around the nation, Cohen said.

The agency currently has about 50 district and field offices, and six regional audits.

The cuts could also lead to a wide-scale reduction in force, which could make the agency too small to operate efficiently, Fox said. The agency currently has about 615 full-time equivalent employees, according to fiscal year 2017 budget documents.

“Let’s assume it’s not Armageddon of a 21 percent or more cut,” Fox said. “Let’s say it’s 10 percent, which would translate roughly to $10 million. That’s probably still going to require a RIF and office closures.”

Not Necessarily Good News for Contractors

Will a reduced budget be good news for federal contractors? Maybe, maybe not.

Although the number of annual contractor compliance reviews could go down, depending on the audit approach the agency takes, a reduced OFCCP workforce could have dramatic impacts on the quality, speed and efficiency of audits, Fox said.

It also could affect the number of agency employees available to draft training materials for OFCCP investigators, compliance guidance for contractors or new regulations.

From a policy perspective, the OFCCP’s focus “will probably be on discrimination, and hopefully, systemic discrimination,” Wilcher said.

It’s unclear if compensation and equal pay will continue to be priorities, as it was under the Obama administration, she said.

“There will also be an emphasis on compliance assistance versus enforcement,” Wilcher said. “In fact, I expect the agency will be far more solicitous of employers than the previous administration.”

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

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com; Christopher Opfer at copfer@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.