Outlook 2018: Lengthy Audits Expected From Contractor Watchdog

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By Jay-Anne B. Casuga

Federal contractors in 2018 can expect a continuation of lengthy, deep-dive audits, an ongoing focus on pay equity, and more compliance assistance from a shrinking Labor Department agency tasked with monitoring workplace affirmative action and nondiscrimination compliance.

Changes to enforcement priorities, policies, or rulemaking at the Office of Federal Contract Compliance Programs may be in store now that Ondray T. Harris has begun serving as the agency’s new political director. But any shifts likely won’t occur right away, contractor stakeholders told Bloomberg Law. They include former agency officials, DOL attorneys, management lawyers, and business consultants.

“Most of the policies for the agency will flow from a new director,” said Shirley Wilcher, a former DOL deputy assistant secretary and former OFCCP director under the Clinton administration. Wilcher is now the executive director of the American Association for Access, Equity and Diversity in Washington.

Harris’ plans for the OFCCP remain to be seen. In response to requests for an interview with Harris and questions on the agency’s plans for the next year, DOL spokesmen referred Bloomberg Law to written testimony submitted by Labor Secretary Alexander Acosta to House lawmakers in November.

Acosta wrote that the OFCCP would work to improve communication, provide consistent training for contractors and agency staff, and build “trust and transparency.”

Priorities Include Pay Equity, Skilled Centers

Despite the absence of more detailed responses from the agency, non-political career officials, such as former Acting Director Thomas Dowd, have given hints over the past year on some of the OFCCP’s priorities moving forward. They include providing more compliance assistance for supply and service, and construction contractors. The agency held listening sessions on the topic in September.

“Acting Director Dowd already has spoken at length of the agency’s need to do more in this area,” said Matthew Camardella, a management attorney with Jackson Lewis in Melville, N.Y., and co-leader of the firm’s Affirmative Action & OFCCP Defense Group. “So, contractors can expect increased compliance assistance opportunities.”

The office also has stated it will move forward with plans to establish “skilled regional centers” in San Francisco and New York that would handle complex audits of contractors in specific industries, such as financial services or information technology.

Additionally, it has said it will continue to focus on uncovering systemic pay discrimination, which was an enforcement priority under the Obama administration. Agency administrative actions involving pay data access disputes or compensation bias allegations against contractors like Google, JPMorgan Chase & Co., and Oracle America continue into 2018.

An annual affirmative action program certification is another potential development in 2018 that contractors “should watch carefully,” said Lynn Clements, a former acting and deputy director of OFCCP’s Division of Policy, Planning and Program Development during the George W. Bush administration.

“Agency officials have said that they would use this information to try and better target non-compliant contractors,” said Clements, now director of regulatory affairs for Berkshire Associates Inc. in Columbia, Md.

No Regulatory Action Planned So Far

The OFCCP was absent from the Trump administration’s fall 2017 regulatory agenda, which means that the agency’s Obama-era regulations remain intact.

They include controversial data collection and analysis rules related to the outreach, recruitment, and hiring of disabled individuals and military veterans. The office also finalized rules providing workplace bias protections based on sexual orientation and gender identity, prohibiting pay secrecy policies, and updating sex discrimination guidelines.

While employee advocates praised the OFCCP’s regulatory approach under the Obama administration as necessary to combat discrimination, some employer-side representatives countered that the agency’s regulations are overly burdensome to contractors.

Budget Cuts May Affect Audit Length

The office faces a potential budget cut in the coming year, and the Senate has already directed the OFCCP to submit a plan to “consolidate and right-size the agency.” It already has shrunk its staff by more than 200 employees nationwide over the last six years, and currently has fewer than 550 employees nationwide following two rounds of buyouts and early outs in late 2017.

“Whether the shrinking budget means fewer compliance officers, closure of some district offices, reduced on-sites and/or fewer new audits, enforcement will continue and OFCCP will likely focus on deeper audits of contractors,” said Tammy Daub, a former senior attorney with the DOL’s Office of the Solicitor. Daub is now of counsel in the Employment Law Department of Paul Hastings in Washington.

The reduced staff could also mean even longer audits for the contractors that have been selected for review. The agency traditionally audits about 1 percent to 2 percent of about 200,000 federal contractor locations annually, but that number has steadily decreased over the last few years. One reason underlying that trend was the Obama administration’s shift from a tiered audit approach to more thorough reviews.

“There just aren’t enough people to fully satisfy the need for audit completions,” said Candee Chambers, executive director of the DirectEmployers Association in Indianapolis. “Therefore, audits will continue to drag on for years on end until they can figure out a new approach with reduced staffing.” Bloomberg Law is an affiliate of Bloomberg L.P., which is a member of the association.

More Transparency, Consistency, Collaboration in Store?

Still, contractors may see more transparency, consistency, and collaboration from the OFCCP moving forward. That could mean more communication from the agency about its expectations, as well as explanations behind its data and information requests during audits and how it reaches its conclusions that a contractor violated the law.

In addition to Secretary Acosta’s November testimony, former acting director Dowd has also signaled that the OFCCP would be more collaborative, attorneys said. That message has also been voiced by Labor Solicitor nominee Kate O’Scannlain.

Alissa Horvitz, a management attorney with Roffman Horvitz in McLean, Va., referenced O’Scannlain’s Senate hearing testimony during which the nominee said: “The rules of the road should be clear and compliance guidance ample and easily accessible. Our laws should not be a game of ‘gotcha.’”

Horvitz, who previously served as co-chair of Littler Mendelson’s OFCCP practice group, said those statements lead her to believe that “there will be more opportunities for the regulated community to engage with OFCCP.”

Fate of the EEOC Merger Proposal

House and Senate appropriators last year rejected a controversial Trump administration proposal to merge the OFCCP with the Equal Employment Opportunity Commission. But could it come back again in the future?

There’s “no question in my mind” that the merger proposal will be revived again, said John Fox, a former OFCCP policy official during the Reagan administration. Fox is currently a management attorney with Fox, Wang & Morgan in San Jose, Calif.

With the Senate’s instruction to reorganize the agency, and the OFCCP continuing to shrink, at some point the agency may become too small to operate effectively and merger with the EEOC again becomes a possibility, Fox said.

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

To contact the editor responsible for this story: Terence Hyland at thyland@bloomberglaw.com

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