Compliance with OFCCP in a New Era: Audit Trends, Policy Updates, and Jurisdiction Regulations

1. Affirmative Action Compliance inA New OFCCP Era Allen Hudson, SHRM-CP, PHR Chief Operating Officer - HudsonMann

2. Session Agenda OFCCP Audit Stats & Trends Policy Updates Your Questions OFCCP Jurisdiction & Regulations

3. OFCCP Jurisdiction & Regulations Part 1

4. Office of Federal Contract Compliance Programs (OFCCP): Enforces and monitors Affirmative Action Programs of Federal Contractors.

5. Executive Order 11246 • Applies to Federal contractors and subcontractors • Prohibits discrimination based on: Race, Color, Religion, Sex, and National Origin • Enforced by OFCCP

6. Rehabilitation Act of 1973 • Applies only to the Federal government and Federal contractors with contracts of $10,000 or more per year • Prohibits discrimination based on physical or mental disabilities • Requires the employer to make reasonable accommodation for a disability unless it can prove that would cause undue hardship to the company

7. Vietnam Era Veterans’ Readjustment Assistance Act of 1974 • Applies to Federal contractors and subcontractors • Must provide equal opportunity and affirmative action for protected veterans

8. Magic Numbers For Federal Contractors

9. $10,000 in Federal contracts or subcontracts non-discriminationrequirements apply

10. 50employees & $50,000 in Federal contracts or subcontracts written AAPsare required

11. locations with 50+ employees need a separate AAP

12. ThreeAffirmative Action Plans are created: Women and Minorities Veterans Individuals with Disabilities

13. Types of Contractors • Supply and service • Financial institutions • Construction contractors

15. “Therefore, financial institutions with federal share and deposit insurance are considered to be federal contractors.” www.dol.gov/ofccp

16. Audit Trends and Focus Areas Part 2

17. OFCCP By the Numbers Source: www.dol.gov/ofccp/BTN/index.html

18. Source: OFCCP Enforcement Database

19. 812 Compliance Reviews Fiscal Year 2018 79% 14% 120 644 0% 5.9% Conciliation Agreements Notice of Compliance Source: OFCCP Enforcement Database 0 48 Consent Decree Financial Agreements

20. FY 2018 monetary relief $16.4M

21. Recent Financial Settlements • $600K hiring settlement across four locations; back pay to: • 565 female applicants • 755 African American applicants • $200K pay settlement to 37 women • $5M in back pay to 305 females and 15 African American executives • $2.9M in back pay to women and African Americans

22. Source: OFCCP Enforcement Database

23. OFCCP Violations by Type (FY 2010-2018) Source: OFCCP Enforcement Database

24. Audits added to scheduling list 3500 March 2019

25. Scheduling Methodology • 3500 CSALs • 2,345 Establishment Reviews • 500 Section 503 Focused Reviews • 500 Compliance Checks • 83 CMCEs • 72 FAAP Reviews • Focus on Industries with Highest Discrimination Rates • Agriculture • Manufacturing • Wholesale Trade

26. Scheduling Methodology continued • Priority for larger establishments • No more than 15 from same parent company • up from 10 in 2018 methodology • No more than 2 FAAPs from same company • Did not include establishments reviewed in last 2 years • “Release – 1” language again

27. Enforcement Changes • Extension requests – need to proffer AAP • What is basic AAP? • 45-day desk audits • Memorandum Of Understanding with NILG • What Federal Contractors Can Expect document

28. Focused Reviews • On-site, comprehensive review on one authority • Interviews with employees and managers • Hiring and compensation data • Accommodations requests • Replacing quality control audits • Director Leen has passion for disability inclusion • Effective for audits scheduled in FY 2019

29. Compliance Checks • Different Scheduling Letter • Abbreviated Itemized Listing: • AAP results for preceding year • Examples of job advertisements including mandatory job listing • Examples of accommodations for individuals with disabilities Option to provide documents onsite or offsite

30. Audit Trends and Focus Areas • Adverse Impact in Hiring • Compensation and Pay Equity • Job Steering • Outreach • Recordkeeping

31. of discrimination findings are from hiring discrimination 70% FY 2018

32. Case Study – Beverage Distributor • Consent decree for $175,000 • Alleged hiring discrimination against black applicants • Violations included: • - failing to keep complete & accurate records • - failing to evaluate selection procedures

33. Avoiding Hiring Discrimination • Solid job descriptions • Consistent hiring process • Use disposition codes • Annual adverse impact analysis • Validate all assessments and tests

34. of discrimination findings are from compensation issues 30% FY 2018

35. Compensation Trends • Compensation Interviews: • 20 minutes – 3 hours long • Detailed, repetitive questions on pay policies and procedures Pay Analysis Groups

36. Compensation Interview Questions • Does your company have written guidelines on compensation administration? • Who determines the starting salary for a new employee? • Are there annual performance increases? • How do you ensure fair pay? • Do you provide training on compensation administration?

37. Complaint Investigations • New electronic filing form and system • $50K settlement from disability complaint • $19,600 average monetary relief (FY 2007-FY 2016) • 79 Investigations FY 2017 Q1-Q3 (4 with monetary relief)

39. job steering settlement amount $1.8M FY 2015

40. Job Steering Case Study • 444 women steered into “light-duty” jobs with lower wages • Adverse impact in hiring on males, African-Americans and Caucasians • Settlement from reviews at nine separate facilities

41. Avoiding Steering Issues • Require applicants to apply for specific positions • Document applicant choice • Defined application process

42. Outreach & Documentation Violations • Ensure mandatory job listings are occurring • Document specific outreach towards women, minorities, veterans and individuals with disabilities • Maintain 3 years’ of employment and recruitment data

43. How Do You Minimize Potential Liability? • Follow a formal application process • Utilize disposition codes • Avoid “informal” expressions of interest • Set up an active consideration period • Don’t accept applications for “any opening” • Posting temp to hire opportunities • Review employee referral selection process • Set and utilize minimum qualifications – track outcomes • Review testing validation

44. Regulatory Updates Part 3

45. Recent Directives https://dol.gov/ofccp/regs/compliance/directives/dirindex.htm

46. Contractor Recognition Program • Drive toward 100% compliance • Under development: • Recognition for implementable best or model practices • Contractor mentoring program • Collaboration initiatives • For “innovative thought leaders among their peers for achieving diverse and inclusive workplaces.” • Some discussion of moratorium on all audits for winners

47. Transparency in OFCCP Compliance Activities • Operational consistency and efficiency • 45-day scheduling delay after CSAL issuance • 15 days after scheduling letter, make contact & offer technical assistance • 30 day extension available • Requested before due date • Proffer of AAP • Immediate Show Cause for untimely submissions • Need not result in conciliation agreement (as in past) • 45-day desk audit for majority of cases • Request for information not on itemized listing should only come after desk audit has been completed & conclusion recorded in OFCCP’s systems • Greater transparency in on-site and other data requests

48. On the Horizon • New Functional AAP Program Updates • Construction Contractors: • Compliance Check Scheduling Letters • Revised Technical Assistance Guide • Higher Education Technical Assistance Guide

49. Your questions Part 4

50. Thank you! Allen Hudson ahudson@hudsonmann.com 843-884-5557