On December 30, 2019, the Office of Federal Contract Compliance (OFCCP) issued a Notice of Proposed Rulemaking that aims to clarify the process for its two formal notices – the Predetermination Notice (PDN) and Notice of Violation (NOV). In addition, the new regulations will allow contractors in violation to enter into a conciliation agreement prior to a PDN or NOV being issued. The new procedure will be called the Expedited Conciliation Option (ECO).
Why an Expedited Conciliation Option?
Contractors who have been through an OFCCP compliance audit know that it can be a long a tedious process. This new ECO allows a contractor who has been preliminary found to have either a discrimination violation(s) or material violation(s) to bypass the PDN and NOV process and resolve the matter sooner than later. It’s akin to the decision to tearing off a band-aid and getting it over with when the findings are not worth disputing. Federal contractors with multi-establishments have had the unwritten option for early resolution in the past, but this rule would codify the procedure for all.
What Evidence the OFCCP Must Find to Support a Violation is Clarified
Further – and much needed – the proposed rule clarifies exactly what the OFCCP must find before issuing a PDN or NOV. Historically, the OFCCP has been tight-lipped with respect to how it came up with the decision that there is a statistically significant disparity caused by an employment action. Gone will be the days where the OFCCP can refuse to provide its methodology and share its calculations. Specifically, the OFCCP has proposed the following definitions:
“Nonstatistical evidence may include testimony about biased statements, remarks, attitudes, or acts based upon membership in a protected class; differential treatment through review of comparators, cohorts, or summary data reflecting differential selections, compensation and/or qualifications; testimony about individuals denied or given misleading or contradictory information about employment or compensation practices; testimony about the extent of discretion or subjectivity involved in making employment decision; or other anecdotal or supporting evidence.”
“Statistical evidence means hypothesis testing, controlling for the major, measurable parameters and variables used by employers (including, as appropriate, other demographic variables, test scores, geographic variables, performance evaluations, years of experience, quality of experience, years of service, quality and reputation of previous employers, years of education, years of training, quality and reputation of credentialing institutions, etc.), related to the probability of outcomes occurring by change and/or analyses reflecting statements concluding that a difference in employment selection rates or compensation decisions is statistically significant by reference to any one of these statements:
(1) The disparity is two or more times larger than its standard error (i.e. a standard deviation of two or more);
(2) The Z statistic has a value greater than two; or
(3) The probability value is less than 0.05″
For those contractors who have already been involved in an OFCCP compliance audit, you can appreciate the above. For those that have not yet been audited, this information will be useful both now and later. For example, when you are making compensation decisions, you can see from the above what the OFCCP will look at. Be sure that there is no nonstatistical or statistical evidence that would support a violation of your affirmative action obligation as a federal contractor. Finally, OFCCP has updated its Federal Contract Compliance Manual, which you can view here.