Are You Prepared for OFCCP's "New & Improved" Audits?
As you have undoubtedly heard, the Office of Federal Contract Compliance Programs (OFCCP) released the revised versions of its Scheduling Letter and Itemized Listing on October 1, 2014. These documents advise federal “supply and service” contractors that the OFCCP has initiated a compliance review and set out the information required to be submitted to the agency. These new documents were effective immediately, and any contractor who is lucky enough to be selected for a compliance review will now receive the new Scheduling Letter & Itemized Listing.

Let’s discuss what has changed, what hasn’t changed, and some strategies contractors may consider when submitting their information.

Scheduling Letter

The Scheduling Letter itself is a rather boring document. Yes, it alerts the contractor that it is being audited – which is sure to get your heart racing – but, other than asking for current Affirmative Action Plans, it’s pretty short on substance. The Itemized Listing is really where it’s all at! (We’ll get to that in a moment).

Most of the changes to the Scheduling Letter were non-substantive or stylistic. The OFCCP did eliminate reference to 41 C.F.R. Part 250, which was the portion of the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) regulations that was rescinded as outdated.

Otherwise, the OFCCP made only two changes that I consider somewhat significant. First, the agency added a warning that failure to preserve records through the final disposition of the compliance review “constitutes non-compliance.” This does not represent a change in OFCCP policy, but this is the first time the agency has expressly warned contractors that it considers the requirement to preserve records as continuing indefinitely, as opposed to just including the time period covered by the AAP. This issue was in contention in the long-running case of OFCCP v. Bank of America, and the Administrative Law Judge sided with the OFCCP, stating that the contractor had a “complete lack of justification” for failing to retain all documents from the start of the compliance review through the final disposition. 1997-OFC-16, p. 61 (ALJ Recommended Decision & Order, 2010).

Whenever a company is put on notice of a claim or potential claim, the obligation to preserve all relevant records commences. Therefore, contractors should treat receipt of the Scheduling Letter the same as notice of any other legal action requiring issuance of a Litigation Hold memorandum. Contractors would be wise to ensure all records required to be retained by Executive Order 11246, Section 503 of the Rehabilitation Act, and Section 4212 of VEVRAA are preserved until the OFCCP closes the compliance review. This typically requires notification to multiple individuals, such as HR, IT, and management/supervisory personnel, of the need to retain specific types of records and documents.

Second, the OFCCP changed the language advising contractors that the information submitted would be treated “as sensitive and confidential to the maximum extent permitted under the Freedom of Information Act (FOIA)” to “assuring” contractors that any disclosures made will be “consistent with the provisions of” the FOIA. This may just be a semantic change with no alteration in OFCCP policy; however, the softening of the language may signal a shift in the deference the agency accords contractor information. To my knowledge, the OFCCP has not specifically addressed the purpose or rationale behind this change.

Itemized Listing

Now to the fun part! The OFCCP made significant changes to the Itemized Listing – the outline of all information that contractors must submit to the OFCCP within thirty days of receipt. The section regarding Executive Order 11246 was not modified. Contractors must still provide an organizational profile, job group analysis, availability determination, comparison of incumbents to availability, and placement goals for females and minorities. Information regarding progress toward prior year goals must also be provided.

Section 503 & VEVRAA

New sections requiring submission of information related to compliance with the new regulations implementing Section 503 and VEVRAA were added. Specifically, contractors are now required to provide:
  • Results of the evaluation of the effectiveness of outreach and recruitment efforts that were intended to identify and recruit qualified individuals with a disability and protected veterans;
  • Documentation of all actions taken to comply with the audit and reporting system requirements;
  • Documentation of the figures required in the data collection analyses for the preceding AAP year, and if you are more than six months into your current AAP year, documentation of these figures for at least the first six months of your current AAP year;
  • The utilization analysis for individuals with a disability, and if you are more than six months into your AAP year, current year progress towards this goal;
  • Documentation of the hiring benchmark adopted for protected veterans, and if you are more than six months into your current AAP year, current year progress toward the benchmark; and
  • The most recent assessments of personnel processes and physical and mental qualifications, including the dates the assessments were performed, any actions taken or changes made as a result of the assessments, and the dates of the next scheduled assessments. (These items are actually included in the Support Data section of the new Itemized Listing, but they relate specifically to Section 503 & VEVRAA compliance, so I have included them here).
Contractors should review the regulations relating to each of these requirements to ensure that their submissions document full compliance. For example, when it comes to outreach and recruitment, contractors must conduct an annual self-assessment. 41 C.F.R. §§ 300.44(f)(3) and 741.44(f)(3). This self-assessment must include consideration of the data collection analysis “metrics” for the current year and the two most recent previous years (to the extent required by the current regulations). Any other criteria considered must be reasonable and documented. Additionally, if the contractor determines that its outreach and recruitment efforts were not satisfactory, it must identify and implement alternative efforts. All of these items should be included in the contractor’s submission to the OFCCP to demonstrate that it has complied with the new regulatory requirements.

In performing this self-assessment, contractors should determine what factors are to be considered in concluding whether its outreach and recruitment efforts were effective. Some potential factors may include:
  • The response rate from each recruitment source;
  • Whether the recruitment sources referred qualified candidates;
  • The percentage of candidates who identified a targeted referral source;
  • The percentage of candidates who self-identified as an individual with a disability or protected veteran;
  • The relative opportunities for hire;
  • The percentage of hires who self-identified as an individual with a disability or protected veteran; and
  • Whether the goals for individuals with a disability and protected veterans were satisfied.
After considering the relevant and appropriate factors, the contractor should document the evaluation and its conclusion as to the effectiveness of its efforts and any necessary corrective action to improve its efforts going forward.

Contractors should also be documenting their audit and reporting systems, showing that they are: (1) measuring the effectiveness of their AAPs; (2) indicating any need for remedial action (NOT!);* (3) determining the degree to which objectives have been attained; (4) determining whether known individuals with a disability and protected veterans have had the opportunity to participate in all company-sponsored events; and (5) measuring compliance with the AAPs’ specific obligations. 41 C.F.R. §§ 300.44(h) and 741.44(h).
  • *I submit that it would never be necessary to “admit” that an AAP is deficient and that remedial action is necessary. That could be interpreted as an admission that discrimination occurred or may have occurred. The more appropriate action is to acknowledge if goals were not met and/or whether recruitment efforts should be more robust. However, these shortcomings are not the equivalent of a deficient AAP; rather, these conclusions demonstrate that the AAP is in fact effective and serving the very purpose it is designed to do – determine when additional affirmative action efforts may be needed.
I would also point out that, for the data collection analyses, the OFCCP only requests the “computations and comparisons” (what a misnomer!) for the immediately preceding year and, if you are more than six months into your current AAP year, for at least the first six months of your current AAP year. (No computations or comparisons are required in the data collection analyses; contractors are simply required to note totals of specific categories, such as total protected veterans hired). Although the regulations require that contractors maintain and evaluate three years worth of data in the data collection analyses, the OFCCP has not requested that much in the Itemized Listing. Thus, I recommend that contractors only provide as much data as has been requested (though, this information may be provided with the self-assessment of your recruitment efforts, regardless).

In addition, the most recent assessments of personnel processes and the physical and mental qualifications for jobs must be provided. Section 503 and VEVRAA require contractors’ personnel processes to:
  • Provide for careful, thorough, and systematic consideration of job qualifications of applicants and employees who are known individuals with a disability or protected veterans for job vacancies filled either by hiring or promotion, and for all training opportunities offered or available;
  • Rely on only that portion of military records that are relevant to requirements of the opportunity;
  • Not stereotype individuals with a disability or protected veterans in a manner that limits access to jobs;
  • Ensure individuals with a disability have equal access to personnel processes, including those implemented through information and communication technology; and
  • Provide reasonable accommodations to ensure applicants and employees with a disability receive equal opportunity in the operation of personnel processes.
Contractors must periodically review their personnel processes and make any necessary changes to ensure all obligations are met. Significantly, the regulations also require that contractors design their procedures to facilitate a review of this implementation requirement by both the contractor and the government. 41 C.F.R. §§ 300.44(b) and 741.44(b). The regulations also require that contractors provide in their AAPs and adhere to a schedule for review of all physical and mental job qualification standards to ensure that, to the extent they tend to screen out qualified individuals with a disability or disabled veterans, they are job-related and consistent with business necessary. 41 C.F.R. §§ 300.44(c) and 741.44(c).

Significantly, the Itemized Listing does not address how those contractors with AAPs prepared prior to the effective date of the new Section 503 and VEVRAA regulations (March 24, 2014) should respond. Those contractors will, appropriately, not have many of these items in their current AAPs. If the OFCCP issues another round of Scheduling Letters prior to March 24, 2015, this is an issue many contractors will likely face. Hopefully, the OFCCP will provide informal guidance for those affected contractors.

Compensation Information

The OFCCP also expanded the information requested in the Support Data section of the Itemized Listing. The biggest change is to the compensation data to be produced. As expected, the OFCCP is now requiring contractors to submit employee-level compensation data; the aggregation of compensation information is no longer an option. The individualized data must be provided for all employees included in the AAP and must include sex, race, ethnicity, hire date, job title, job group, and EEO-1 category. Compensation information to be provided includes base salary or wage rate and hours worked in a typical workweek. “Other compensation or adjustments to salary such as bonuses, incentives, commissions, merit increases, locality pay or overtime should be identified separately for each employee.” Of course, the OFCCP encourages contractors to provide any other information that may determine employee compensation, such as education, past experience, location, performance scores, department, and salary grade. The OFCCP further requests that documents and policies relating to compensation practices be provided. Electronic submission of the compensation data is required, if it is maintained by the contractor in an electronic format that is useable and readable.

Some issues for contractors to consider and/or actions to take when preparing this compensation report include:
  • How to calculate hours worked in a typical workweek for those “non-typical” employees;
  • How to provide historical information for what is actually a request for “snapshot” data;
  • Analyzing the data internally (under the attorney-client privilege) prior to submission;
  • Analyzing the data (under the attorney-client privilege) by racial group (as opposed to just minority v. non-minority);
  • Comparing similarly situated employees;
  • Looking for under- and over-representation issues that may signal potential “steering” problems;
  • How disparities can be explained;
  • Whether and how to correct unexplained disparities; and
  • Whether and how to change existing practices that may be causing unexplained disparities.

Employment Activity Data

Contractors will still be allowed to provide employment activity data, i.e., applicants, hires, promotions and terminations, by either job group or job title. However, now employment activity data will have to be provided by individual racial group instead of by non-minority or minority, as has been allowed in the past. In addition, contractors must include their “unknown” applicants in the data provided.

Because adverse impact in the hiring process continues to be the OFCCP’s main violation that results in monetary liability, contractors should analyze their employment activity prior to submission. As with compensation information, the racial groups should be broken out and compared to the group with the highest selection rate. Contractors should ensure that the data being analyzed is correct and appropriate, i.e., only candidates that meet the definition of an “internet applicant” are included. Finally, if statistically significant adverse impact is found, due consideration should be given to engaging counsel and/or an expert prior to submitting the data to the OFCCP.

More than Six Months into Current AAP Year

If a contractor is more than six months into the current AAP year when the Scheduling Letter is received, then it must produce current year information regarding: (1) data collection analyses; (2) utilization analysis for individuals with a disability; (3) hiring benchmark for protected veterans; (4) progress toward current year goals for females and minorities; and (5) current year employment activity.

The prior Itemized Listing stated that if a contractor was more than six months into its current AAP year, the data for the current year should be provided. In contrast, the new Itemized Listing states that, in these circumstances, the contractor must provide the information “for at least the first six months of the current AAP year.” (Emphasis added). “At least” does not mean “only;” it means “at a minimum.” Therefore, the OFCCP may continue to request that contractors provide data from the AAP date through the date of the Scheduling Letter, which could be anywhere between six months and 364 days. The language of the new Itemized Listing may provide the OFCCP with more leverage to insist that the contractor not limit its current year data submissions to only six months. In general, contractors usually benefit from providing less information, rather than more, so this may continue to be an area of contention between the OFCCP and contractors.

Other Policies & Documents

In addition to providing any collective bargaining agreements, contractors will now have to submit “any other documents you prepared, such as policy statements, employee notices or handbooks, etc. that implement, explain, or elaborate on the provisions of the collective bargaining agreement.” This seems exceptionally broad, as many companies have policies that potentially “elaborate on” issues addressed in a collective bargaining agreement. Contractors must also provide policies related to reasonable accommodations, as well as documentation of any accommodation requests received and their resolution.

Further, contractors must still submit the three most recent EEO-1 Reports for the location being audited. Submission of the VETS-100A (soon to be VETS-4212) Report is not mandatory.


As contractors develop and fine-tune their processes and procedures for complying with OFCCP’s new regulations, they should keep the new Itemized Listing in mind. Strategic planning for compliance can help avoid unnecessary duplication of efforts, as well as the potential to overlook essential obligations. In addition, as always, contractors are advised to approach their submissions to the agency with a keen eye and thorough evaluation and analysis.

Good luck! But be well-prepared, so you won’t need the luck.