Compliance Reviews. A Presentation. HR Analytical Services
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1 The New World of OFCCP Compliance Reviews A Presentation by Bill Osterndorf, President HR Analytical Services
2 A Presentation by: Bill Osterndorf, President HR Analytical Services Disclaimer this presentation is not to be interpreted as legal advice. This document provides information of a general nature. None of the information contained herein is intended as legal advice or opinion relative to specific matters, facts, situations, or issues. Additional facts or information or future developments may affect the subjects addressed in this document. You should consult a lawyer about your particular circumstances regarding any of this information because it may not be applicable to your situation. All original materials in this presentation copyright HR Analytical Services, 2013 For reproduction rights, please contact HR Analytical Services Slide 2
3 Presenter Bio HR Analytical Services HR Analytical Services provides a complete range of affirmative action services to companies throughout the nation. The firm helps companies comply with laws enforced by the U.S. Department of Labor s Office of Federal Contract Compliance Programs (OFCCP) and other regulatory agencies. HR Analytical Services closely tracks trends and new developments at OFCCP and provides innovative and practical solutions for clients before and during regulatory reviews. Bill Osterndorf President, HR Analytical Services A leader in helping companies that must deal with the many complexities in the federal affirmative action realm, Bill Osterndorf has been involved in the affirmative action/equal opportunity field for 30 years. He has extensive knowledge of the affirmative action laws and how these laws are being implemented and followed. As part of his work on affirmative action issues, Bill has acquired a specialization in dealing with computer applications and HR information systems. He was the chief architect for the Society for Human Resource Management s position statement on applicants and co-author of SHRM responses on a variety of OFCCP proposals. Bill is a former president of the southeastern Wisconsin SHRM chapter and current chairman of the Milwaukee Industry Liaison Group. Slide 3
4 Background on Affirmative Action in Employment
5 Is Affirmative Action Dead? It may be in educational admissions Supreme Court s decision in Fisher v. University of Texas provides no clear guidance Court basically ignored requirement for a compelling state interest and focused on whether remedy was narrowly tailored It may be in other realms such as set-asides in contracting Earlier Supreme Court cases (e.g. Adarand Construction Inc. v. Pena) limit setasides State and local governments may be withdrawing from set-asides It seems alive in employment, but OFCCP is very active in enforcing the federal regulations regarding affirmative action in employment Question: is OFCCP actually focused on affirmative action? Slide 5
6 Two Tracks During an OFCCP Review Affirmative Action Track Focuses on outreach efforts OFCCP evaluates specific efforts made to find members of protected groups Equal Opportunity Track Focuses on discrimination OFCCP evaluates selection procedures and data to determine whether there are disparities between groups Slide 6
7 Pre-2009: OFCCP Focused on Finding Discriminationi i OFCCP looked for a class of employees or applicants Most discrimination cases involved entry-level hiring When looking for discrimination, OFCCP used statistics to find disparitiesiti OFCCP wanted to find statistically significant disparities Examined applicant-hire ratios using a two standard deviation test OFCCP had some interest in how employees were paid Reflected in 2006 compensation guidelines Guidelines focused on systemic discrimination in compensation OFCCP had little interest in traditional affirmative action issues Slide 7
8 What s Happening in Today s OFCCP The return of affirmative action OFCCP reviews outreach during all compliance reviews OFCCP continues to investigate discrimination cases OFCCP will now investigate cases involving small groups of applicants or employees (even one or two people) as well as cases involving large groups OFCCP will look for discrimination based on race or gender Whites and males may now be the subject of a discrimination investigation OFCCP will examine racial subgroups (e.g. discrimination involving only Hispanics or only Asians) Note: recent ALJ decision (OFCCP v VF Jeanswear) limits comparisons of one racial sub-group against all other groups (i.e. can t compare Asians vs. non-asians) Current focus areas Issues concerning veterans and persons with disabilities Compensation Slide 8
9 OFCCP Initiatives Since 2009 Veterans Regulations Proposed April 2011, finalized August 2013 Disability Regulations Proposed December 2011, finalized August 2013 Compensation ANPRM August 2011, Directive 307 published February 2013 Criminal Records Directive 306 published January 2013 Federal Contract Compliance Manual Announced July 2011, released August 2013 Slide 9
10 OFCCP s Focus on Veterans and Persons with Disabilities
11 Then and Now Traditionally, OFCCP had shown little interest in issues concerning veterans and persons with disabilities Regulations hadn t changed for many years Compliance officers requested little if any information on these classes Starting in 2009, OFCCP made a fundamental shift Without warning, issues concerning veterans and persons with disabilities became a major focus of all compliance reviews Why focus on veterans and persons with disabilities? Large number of veterans returning from military conflicts Move individuals from federal programs into private sector employment Veterans are a highly active political group Slide 11
12 Basic Vets/Disabled Requirements State employment service (SES) listings OFCCP routinely asks for specific documentation of listings Companies with multiple sites having difficulties with SES listings Review of mental and physical job requirements Review of policies Family and medical leave Veterans leave Survey of employees for veteran and disability status Under regulations in effect as of, NO requirement to survey applicants for veteran or disability status Slide 12
13 Accommodation for Persons with Disabilities OFCCP routinely asks for records regarding requests for accommodation Request may be made by known person with a disability or known disabled veteran Where request is denied, OFCCP expects written rationale Who is a person with a disability? ADA amendments significantly expanded the definition of who might be considered a person with a disability Problem: persons with disabilities frequently do not self-identify What is an accommodation? Companies routinely accommodate conditions that would be considered a disability Problem: how to record these actions when employee has not self-identified Slide 13
14 The New Veterans and Disability Regulations Notices of proposed rulemaking published in 2011 Included extensive and extremely burdensome revisions to regulations Final version of revised regulations made available by OFCCP in August 2013 Received by Office of Management and Budget (OMB) July 30 and 31; released by OMB August 31 Awaiting publication in Federal Register Revised regulations must be published before they go into effect Federal contractors and subcontractors given 180 days to implement revised regulations after publication in Federal Register Certain provisions delayed further based on AAP date OFCCP must publish changes to scheduling letter Slide 14
15 Major Changes in Revised Regulations Requirement to collect and retain three years of data Number of applicants who are protected veterans or persons s with disabilities Total number of job openings and total number of jobs filled Total number of applicants for all jobs Total number of protected veterans and persons with disabilities hired Total number of applicants hired Benchmarks for hiring 7% benchmark for persons with disabilities for all AAP job groups 8% company-wide benchmark for protected veterans Company can create their own veteran benchmarks using certain defined factors Other provisions Assessment of effectiveness of outreach efforts, methodology for posting with SES, new EEO clause for use in contracts Removal of veterans regulations at Slide 15
16 Surveying for Veteran and Disability Statust Current regulations require survey of employees No requirement e e to survey applicants, in part because of concern ce about ADA prohibition on surveying applicants for disability Revised regulations require survey at post-offer, pre-hire stage OFCCP has letter from EEOC stating that federal contractors and subcontractors may survey applicants for disability status Change in EEOC policy; appears to apply to current and revised regulations OFCCP will provide specific applicant survey forms Revised veterans regulations require applicant survey for protected veteran status Status as falling under any one of four classes covered by regulations at Question: why not survey for each status? Slide 16
17 OFCCP s Focus on Compensation
18 Then and Now OFCCP has had interest in compensation since the mid-1990 s Equal opportunity survey from early 2000 s had compensation component 2006: OFCCP publishes compensation guidelines Informed federal contractors of agency s intentions to examine contractor compensation data for systemic discrimination Provided self-audit process Used multiple regression on similarly situated employee groups (SSEGS) for examining compensation disparities 2009: OFCCP begins extensive focus on compensation OFCCP quotes studies showing significant issues involving women and minorities OFCCP begins looking at cohort (one-to-one) analyses again February 2013: OFCCP withdraws 2006 guidance and issues Directive 307 Slide 18
19 Directive 307 Gives OFCCP extensive flexibility in analyzing compensation OFCCP can analyze large groups, small groups, or compare individual employees OFCCP can use multiple regression and other statistical tools, basic comparisons, or any other form of analysis OFCCP can review any payments made to an employee Base pay, overtime, commissions, bonuses, stock options, etc. OFCCP may analyze factors that may affect compensation Assignment to particular jobs, sales regions, etc. Training provided to certain classes of employees Shift assignments OFCCP may conduct analyses using Pay Analysis Groups Pay analysis group grouping of employees who are comparable for purposes of the contractor's pay practices Does not seem to require employees to be similarly situated Slide 19
20 OFCCP Inquiries Regarding Compensation OFCCP may request extensive compensation-related data from contractors Examples of data requested: Gender; race/ethnicity; time with company; time in current position; date of birth; annual base salary; full-time or part-time status; exempt or non-exempt status; job title; job group; salary grade/salary level/salary band classification; location; commissions, overtime, tips, bonuses, shift differential, and all forms of compensation OFCCP may ask for phone conference with compensation manager OFCCP asks questions about compensation programs and implementation Examples of questions: Who determines the rate of pay that an employee receives at time of hire? Does an applicant have the flexibility to negotiate? How are salary increases determined? d Are there any exceptions? Are salary increases monitored? How are promotions handled within your compensation systems? Do you reimburse for specific types of education or training? Are salaried or management employees entitled to incentives/bonuses? Slide 20
21 OFCCP Has Shown Few Results for Its Efforts OFCCP has spent approximately $120 million in investigating compensation discrimination since 2010 Agency has taken in less than $1 million in settlements for alleged victims of discrimination Generally, small number of employees at issue One systemic discrimination settlement since 2010 AstraZeneca paid $250, in June 2011 Contractors have been reluctant to provide comprehensive data Generally, contractors provide information on base salary only Why does OFCCP keep trying? Major political initiative of the Obama administration Slide 21
22 Problems for Federal Contractors t from Comp Inquiries i Contractors lack effective data Contractors do not have data on salaries at previous companies and previous experience that may help to explain starting salaries Contractors fail to keep market data that was used to determine salaries HR systems cannot produce data on all compensation components Contractors fail to follow internal procedures Compensation increases awarded for reasons other than merit or promotion Discrepancies occur between hiring managers in determinations on initial pay and increases Red-circling and other practices used Contractors do not monitor activities that may affect pay Training, rotational assignments, shift premiums, sales territory assignments, other employment practices affecting pay Slide 22
23 OFCCP s Approach During Compliance Reviews
24 Compliance Reviews Under the New OFCCP Much more complicated than reviews were five years ago Multiple focus areas for OFCCP including areas that were of no interest until 2009 such as veterans issues and outreach OFCCP is requesting extensive additional data and other information OFCCP is approaching reviews in an aggressive manner OFCCP Head Patricia Shiu: Affirmative action can no longer be measured by good faith efforts Federal contracts are a privilege, not a right OFCCP believes discrimination in the workplace is a very real problem for the economy OFCCP assumes that contractors know and have been following all regulations OFCCP expects a quick response to questions and requests Slide 24
25 The Politics of Compliance Reviews Politics influences the focus on veterans and persons with disabilities Politics influences the focus on compensation Politics influences the approach to business General assumption of problematic conduct by business Extensive regulatory reviews throughout the Department of Labor OFCCP desires to show results The percentage of reviews ending in conciliation agreements is up dramatically OFCCP wants to show that it is modernizing its approach to reviews Changes to regulations, requirement to submit data electronically, proposed new IT system HOWEVER: expenditures are up; the number of compliance reviews is down; the results of new initiatives are limited Slide 25
26 Timelines and Standardized di d Requests With initial submission of AAP, 30 days means 30 days OFCCP checking with contractors before AAP is submitted OFCCP frequently sends lengthy data requests with short deadlines for response Three to five business days not uncommon Requests for additional time not necessarily granted OFCCP is using standardized requests For information regarding veterans and persons with disabilities For information regarding compensation OFCCP is requesting information on subjects not within its mandate Maternity leave policies, data on veterans and persons with disabilities in the workforce, data on disability-related l t d leaves, etc. Slide 26
27 OFCCP is Examining i Promotion and Retention ti Issues OFCCP uses a standard deviation test to determine problems The agency may request information for isolated cases, but typically asks for data when there are two standard deviations worth of adverse impact Question: Is this the right test? What about three standard deviations? Fisher s Exact? Promotion issues Agency may request posting records, selection criteria, interview notes, etc. Federal contractors need to define what actions are promotions Retention Issues OFCCP primarily interested in situations where employees leave involuntarily However, agency may request information on all persons leaving Agency may request personnel files, documentation of problems, etc. Compliance officer may contact individuals who have left the company Slide 27
28 OFCCP is Unpredictable During the Bush administration, reviews would typically close absent a statistical significant disparity During the Obama administration, OFCCP may focus on many issues during a review Outreach, documentation, accommodation, SES postings, compensation, progress towards meeting placement goals, hiring, promotion, retention, record-keeping, manager training, etc. Despite public announcements, OFCCP does NOT always request compensation data Absence of discernible disparities in initial submission may help There appears to be less interest in pay for hourly production employees Slide 28
29 OFCCP and Hiring
30 OFCCP and Hiringi The review of applicant data is a key component of OFCCP compliance reviews Companies must submit numeric information on applicants and hires at the start of a review OFCCP looks for statistical disparities OFCCP starts with statistics, may move to other materials Other materials requested where there is evidence of discrimination, esp. where data has statistical significance Other materials may include resumes, job postings, job descriptions, interview notes, etc. OFCCP expects companies will hire the best qualified candidate Companies undergoing review may be asked to prove they hired the best qualified candidates Slide 30
31 Why Does OFCCP Care About Applicant Data? That s where the money is OFCCP reaches settlements every year with federal contractors involving millions of dollars in back pay for hiring discrimination OFCCP announces settlements with contractors on its website on a regular basis Financial settlements demonstrate OFCCP s value OFCCP uses information on financial settlements to support budget requests Recent major financial settlements involving hiring Baldor Electric (June 2012): Paid $2 million; involved hiring of minorities and females FedEx (March 2012): Paid $3 million; involved hiring at multiple locations Green Bay Dressed Beef (February 2011): Paid $1.65 million; involved hiring of Hispanics Slide 31
32 OFCCP s Internet Applicant Rule Limits investigations to applicants who might actually be hired OFCCP wants to avoid review of information on persons who could not be part of a systemic discrimination claim OFCCP wants companies to develop procedures that give proper consideration to qualified candidates When rule applies, only Internet applicants can be subjects of hiring discrimination claim In theory, Internet applicants are the only viable candidates Name is a misnomer Internet Applicant = person who could be hired into open position Slide 32
33 The Four-Part Test Four-part test to be an Internet applicant 1. Applicant must submit an expression of interest 2. Applicant must be considered for a particular position 3. Applicant must meet basic qualifications 4. Applicant must not withdraw from consideration Test not focused on how people apply Someone who applies via the Internet may not be an Internet applicant Someone who does not apply via the Internet may be an Internet applicant Four-part test is applied to each open position o Slide 33
34 Job Seekers Who May Not Be Internet t Applicants Job seekers not considered for a particular position Job seekers must follow company protocols in order to be considered Examples of limitations Job seekers who do not provide or complete required materials Job seekers who apply late Job seekers who do not apply for a specific opening Job seekers living outside of a defined geographic area Company can use data management techniques to limit job seekers Job seekers who do not meet basic qualifications Basic qualifications must be objective, non-comparative, and job-related Job seekers who withdraw Active withdrawal through expressed lack of interest Passive withdrawal through failure to respond Withdrawal by job seeker having a requirement the company cannot meet Slide 34
35 Common Problems with Selection Process Considering persons who do not meet basic qualifications Failing to properly define basic qualifications Good communications skills is not a basic qualification Bachelor s degree or equivalent is not a basic qualification Inconsistencies in considering candidates Example: considering late applicants for certain positions For OFCCP, the exception will define the consideration process Considering candidates for openings where they didn t apply Example: job seeker applies for assembler position, is hired for welder position without applying for welder OFCCP may consider all candidates for original opening as candidates for new opening Slide 35
36 Provide OFCCP with Data on Internet Applicants Only At the start of a compliance review, OFCCP requests statistical data on applicants and hires No requirement to initially submit applicant logs or other materials Must provide summary data for the prior AAP year Must provide summary data for the current AAP year if more than six months into AAP year Why provide information on fewer applicants to OFCCP? A smaller number of applicants limits the chances for a statistical disparity Reports from applicant tracking systems (ATSs) should differentiate Internet applicants from other job seekers Statistical i summaries from ATS should parallel l what is required by OFCCP Proper dispositioning of candidates is critical Dispositions iti determine whether a job seeker is an Internet t applicant Slide 36
37 Common Problems with Dispositioningiti i Failing to fully disposition all candidates on a requisition Mass dispositioning candidates after a recruitment is closed Example: showing all candidates as not hired except candidate who is selected Using an inappropriate disposition Example: dispositioning candidates who are not minimally qualified as others better qualified Example: More suitable candidate selected rather than experience-obq education or no longer interested Failing to use dispositions that would properly remove candidates who are not Internet applicants from applicant data Remember: only Internet applicants are included in statistical analyses Slide 37
38 What to Do with Situations ti Where There is No Hire Situations where no one is selected Where there is no selection, there is no nexus between applicants and hire OFCCP can t use statistics to find discrimination in selection process Issue: why was there no selection? Option: remove all applicants from applicant data provided to OFCCP where no one is selected Situations where an internal candidate is selected While the Uniform Guidelines focus on selection, OFCCP in practice focuses on hires See regulatory materials associated with Internet applicant rule Option: remove all applicants from applicant data provided to OFCCP where an internal candidate is selected Slide 38
39 Preparing for a Compliance Review in the New World
40 Prepare an Effective Affirmative Action Plan The AAP is a company s first line of defense AAPs should include all required statistical and narrative reports The AAP should reflect your company and its unique circumstances Avoid boilerplate language or canned reports Update the AAP annually All statistical reports should be re-done Narratives should change to reflect new circumstances and new regulations Understand where statistics suggest there are issues Statistical reports on personnel activity are especially critical Slide 40
41 Make and Document Outreach Efforts Outreach efforts should target ALL protected groups Should be specific and differentiated regarding minorities, females, veterans, and persons with disabilities Document specific outreach efforts for individual id positions Generalized outreach is NOT SUFFICIENT Must be able to show particular efforts for specific openings Must have documentation of specific referral sources that are contacted Track results of outreach efforts Have data available on number of minorities, females, veterans, and persons with disabilities hired Use applicant tracking to evaluate where candidates came from Use different recruitment sources if current sources cannot provide minorities, females, veterans, and persons with disabilities Slide 41
42 Meet Requirements Regarding Veterans Make and document outreach efforts to find veterans List all covered openings with the state employment service Executive opening, openings filled internally, and openings of three days or less do not need to be listed NO exception for confidential searches, highly-skilled professional positions, and other specialized searches Situations where temporaries from agencies are converted typically do not need to be listed Issue: should temporary agencies be listing openings with the SES? Survey employees concerning veteran status Consider re-survey if current data is incomplete or inaccurate File the VETS-100A report Slide 42
43 Meet Requirements Regarding Persons with Disabilities Make and document outreach efforts Provide reasonable accommodation for applicants and employees Document accommodation efforts and decisions not to accommodate Review mental and physical requirements for all jobs Ensure that on-line application system is accessible Survey employees concerning disability status Consider re-survey if current data is incomplete or inaccurate Slide 43
44 Review Compensation Systems and Decisions i Know how decisions are made regarding initial pay and subsequent increases Document factors used in decision-making process Previous salary? Previous experience? Performance? Promotion? Limit the number of exceptions made to compensation policies Communicate compensation policies to hiring managers Establish rules regarding situations where managers request exceptions Review compensation of employees for disparities Should be completed under supervision of legal counsel Determine whether there are disparities involving race or gender for similarly situated employees Focus on job titles and pay grades Slide 44
45 Monitor the Selection Process Develop basic qualifications for all openings Have both basic and preferred qualifications Ensure that candidates who are hired meet basic qualifications Do not change qualifications in the midst of considering candidates Require candidates to express interest in specific positions Consider candidates only for those positions in which they expressed interest Ensure that there is effective tracking of applicants Properly survey Internet applicants for race and gender Compare applicants to hires Determine if there are disparities involving race and gender Slide 45
46 Use Effective Dispositionsiti Effective dispositions ask: When was the candidate no longer under consideration? Why did the candidate fall out of the selection process? Who made this decision? Examples of ineffective dispositions Reviewed, Not Chosen, Declined, New Applicant Examples of effective dispositions Prescreen: ineligible for re-hire (per HR) Phone screen: did not meet education requirement (per HR) Candidate compensation requirements too high (per hiring manager) Slide 46
47 Other Actions to Take Ensure that all required posters are up Ensure that all tests are properly validated Consider eliminating the use of tests Ensure that required clauses are included in purchase orders Include EEO taglines on all advertisements Limit the use of criminal background information Remove request for criminal background information from application forms Keep up on regulatory changes Slide 47
48 Websites The Office of Federal Contract Compliance Programs OFCCP Federal Contract Compliance Manual - OFCCP s revised regulations on veterans - OFCCP s revised regulations on persons with disabilities - OFCCP Compensation Directive - htm USASpending.gov (used to determine whether a company is a federal contractor) Slide 48
49 Contact t Information Bill Osterndorf HR Analytical Services Phone: ext wosterndorf@hranalytical.com l Website: Blog site: Slide 49
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