OFCCP and the Rule of Law
OFCCP and the Rule of Law
Implementing affirmative action programs and complying with OFCCP requirements are intensely practical matters for those charged with these responsibilities. It may seem that abstract questions about the Rule of Law are far afield from such practical concerns.

However, the most important requirement that OFCCP enforces relates to an abstract law: “The contractor will not discriminate against any employee or applicant for employment because of race, color, religion, sex, sexual orientation, gender identity, or national origin.” E.O. 11246, § 202(1). This seemingly simple requirement masks considerable complexity and practical implementation challenges. The recent wave of sexual harassment allegations in the entertainment industry aptly illustrates the practical challenges. It has been three decades since the Supreme Court recognized sexual harassment as a form of unlawful discrimination and two decades since the Court provided robust incentives for employers to take effective steps to prevent and promptly correct workplace harassment. Yet these high-profile cases raise the question whether employees feel comfortable using available complaint mechanisms and should serve as an opportunity for employers to candidly evaluate their sexual harassment training, reporting, and complaint investigation procedures to ensure that they are effective in practice.

In addition to presenting practical challenges, the simple promise, “will not discriminate” has also led to the most significant recent regulatory and enforcement controversies between OFCCP and the regulated community. Many of the recent controversies between OFCCP and the regulated community are well-documented in a recent report of the US Chamber of Commerce: Office of Federal Contract Compliance Programs: Right Mission, Wrong Tactics, Recommendations for Reform (Fall 2017). Several of the US Chamber of Commerce’s concerns relate to OFCCP audits and enforcement actions focusing on systemic hiring and pay discrimination.

The Chamber’s concerns regarding OFCCP’s hiring discrimination audits have also been shared by Congressional appropriators. Thus, the Senate Committee formally questioned OFCCP audit and enforcement practices:

The Committee is concerned that OFCCP [Office of Federal Contract Compliance Programs] has lost its focus on identifying and addressing real employment discrimination and is imposing excessive compliance burdens on contractors. More specifically, OFCCP appears to prioritize specific quota results rather than equal consideration and opportunity because of its reliance on statistical analysis in evaluating contractor hiring practices. OFCCP should focus on actual discriminatory treatment instead of presumed discrimination based solely on benchmarks that may not be uniformly applicable. Strict and exclusive use of statistical significance tests effectively requires contractors to use a quota hiring system in violation of the Civil Rights Act to avoid adverse impact claims by OFCCP.
The House Committee raised similar concerns:

The Committee is concerned that OFCCP has lost its focus on identifying and addressing real discrimination in employment and has become hyper-focused on fulfilling quotas instead of equal opportunity by relying on statistics alone in evaluating contractors. The Committee believes OFCCP should take steps to use common sense in the use of government resources to focus on finding actual discriminatory treatment instead of presumed discrimination based solely on what OFCCP assumes through statistics. Further, the Committee believes that OFCCP should end its reliance on threatening sanctions, including debarment and the costs associated with an extremely drawn-out administrative litigation process, to induce contractors to waive their legal rights and to enter into conciliation agreements that are not justified by the evidence.
The US Chamber also raised concerns about OFCCP’s regulatory and enforcement approaches related to systemic compensation discrimination. In 2013, OFCCP rescinded the Agency’s 2006 Compensation Standards, Interpreting Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination, 71 Fed. Reg. 35124-141 (June 16, 2006). OFCCP replaced the 2006 Standards with Directive 307, which was adopted without affording contractors an opportunity to comment through notice and comment procedures.

Since 2013, OFCCP compensation audits have proven to be challenging for federal contractors, which have raised concerns about several aspects of the OFCCP audit practices under Directive 307:

  • Expansive investigations into compensation in nearly every audit with an AAP headcount over 300.

  • Investigations are quite burdensome and involve large numbers of requests for data, information, records, policies, and interviews of managers, employees, and personnel in compensation and HR.

  • Investigations last multiple years, but there are often long periods of apparent inactivity.

  • Investigations are not focused or transparent: very little information is shared with the employer about OFCCP’s concerns and the agency does not articulate any focus on particular areas, but generally conducts a far-ranging inquiry extending into obscure forms of compensation and compensation practices.

  • Allegations of pay discrimination generally arrive without any forewarning and typically do not specify even the basic legal theory (disparate treatment or disparate impact) of the claim.
In addition to the above process defects, OFCCP has relied on highly controversial approaches to allege systemic pay discrimination in recent audits:

  • Excessive aggregation: regressions by broad categories such as job functions or families, and sometimes even including the entire AAP workforce in one regression.

  • Expansive job similarity: refusal to control for job code in the regression and arguments that AAP job group or grade or level controls are sufficient to model comparisons of similarly situated employees.

  • Tainted factor arguments: refusal to control for performance and other factors assigned by the employer based on unsupported concerns that the factors may be “tainted” by discrimination.

  • Statistical oddities: departure from generally accepted statistical practices such as refusal to control for age as a proxy for prior work experience, refusal to control for square terms for “time-in” factors, and controlling for highest level of education using continuous, instead of dummy, variables.

  • Failure to offer any anecdotal evidence of pay discrimination.
While these controversies have accrued under a different Administration, they continue today as the incoming Administration builds its team and considers the regulatory and enforcement approaches to be implemented on its watch. Questions of law are central to this review process. Secretary Acosta has rightly emphasized the rule of law and his overriding intent that the Department under his stewardship will respect the law:

The rule of law is America’s other great contribution to the modern world. Engraved above the doors of the Supreme Court are the words “Equal Justice Under Law.” Those four words announce that no one is above the law, that everyone is entitled to its protections, and that Washington must, first and foremost, follow its own rules. The law sets limits on their power and establishes procedures they must follow when they regulate—or deregulate.

- R. Alexander Acosta, Commentary, Wall Street Journal, May 22, 2017.

We may do well to view OFCCP’s recent regulatory and enforcement positions through the lenses of the fundamental and perennial question, “What is Law?” This question has been subject to immense debate, even as to whether the question itself is well-formed or intelligible. One of the now classic debates, known as “the Hart-Fuller debate” after the names of two of its key protagonists, relates to the role of morality in law.

In The Morality of Law, the late Professor Lon Fuller of the Harvard Law School argued that there is an “inner morality of law” and illustrated his position by considering the reign of a monarch “Rex” who “came to the throne with the zeal of a reformer.” Fuller outlined eight ways in which Rex might fail to make law:

(1) The first and most obvious lies in a failure to achieve rules at all, so that every issue must be decided on an ad hoc basis;
(2) a failure to publicize, or at least to make available to the affected party, the rules she is expected to observe;
(3) the abuse of retroactive legislation, which not only cannot itself guide action, but undercuts the integrity of the rules prospective in effect, since it puts them under the threat of retrospective change;
(4) a failure to make rules understandable;
(5) the enactment of contradictory rules; or
(6) rules that require conduct beyond the powers of the affected party;
(7) introducing such frequent changes in the rules that the subject cannot orient her action by them; and
(8) a failure of congruence between the rules as announced and their actual administration.

- Lon L. Fuller, The Morality of Law, at 39 (2d Ed. 1964).

We plan to consider these questions in future issues.