OFCCP Compliance: It’s a bit like being in the Land of Oz!
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Imagine repeating the phrase, “There’s no place to audit. There’s no place to audit,” and – poof! – a closure letter arrives. Wouldn’t that be nice? Unfortunately, life only works that way in the movies. None of us own a crystal ball, have ever met a cornfield scarecrow that talks or admit to knowing one, or own a dog named Toto. Well, maybe someone has a pet named Toto. But we don’t have the power to click our problems away. And we certainly can’t make an OFCCP audit go away by dumping a bucket of water on the letter. That would leave an unfortunate mess.

The twists and turns of a compliance review can feel a bit like taking a trip down that famous yellow brick road, complete with flying monkeys and a funnel cloud. But it doesn’t need to be all that difficult. A well prepared HR Department will find itself in good standing, if staff manage their OFCCP compliance program strategically.

Hand over your plan, my pretty!

Remember the sand steadily pouring through the hour glass? The witch laughs manically. Time is running out. Dorothy must turn over those precious ruby red slippers or suffer dire consequences. Now even a tough audit isn’t life or death, but deadlines are important. When a contractor receives an audit notice, they have 30 days to submit their AAP and other accompanying documents. Unless there are exceptional circumstances, the OFCCP will not grant an extension, and any delays in submitting the documentation will set the audit off on the wrong foot that no red shoes, however shiny, can fix.

Don’t be a Cowardly Lion, have courage!

At one point during the movie, the Wizard of Oz tells the Cowardly Lion that he is the victim of disorganized thinking. Don’t play that role. A proactive HR Department will always be audit ready when that scheduling letter arrives. Here are a few tips to consider:
  • ESDS postings – Did you know that failing ESDS compliance is the single most common audit violation cited by the OFCCP? Don’t wait until you receive a scheduling letter to demonstrate your compliance. Conduct quarterly, monthly or even bi-weekly audits to ensure that your openings are being posted with the state delivery system. Remember, contractors must provide job listings in the format and manner required by the ESDS (fax, mail, e-mail, and internet). Even if you use a third party vendor to manage the posting process, you are ultimately responsible for complying with the VEVRAA requirement. It’s such an easy requirement to manage. Don’t make the mistake of assuming you are compliant. Do your due diligence!

  • Mandatory job tagline requirements – Contractors are required to include the proper EEO tagline in all job advertisements and posting notices. The OFCCP will request evidence of your compliance with this requirement. As with the ESDS postings, conduct audits in advance.

  • Mandatory dissemination of AAP policy – Contractors must include the AAP policy in employee handbooks or otherwise make postings available to employees. The OFCCP will ask for evidence of this requirement during an audit. Make sure your EEO policy is up to date, references all the protected classes, including the most recent additions – protected veterans, sexual identity and sexual orientation, and has been signed by your CEO within the most current AAP period. Don’t forget to update your anti-harassment policies with the required protected classes as well.

  • Posting of notices and posters – Contractors are required to post notices and posters in conspicuous places notifying applicants and employees of their rights and of the contractor’s affirmative action obligations. The Final Rules now allow contractors to satisfy these posting obligations by posting notices electronically for employees who work remotely or from home. Conduct bi-annual site audits to ensure that you have met this requirement. During an audit, the OFCCP will review a contractor’s website and poster boards for evidence of the contractor’s compliance.

  • Contract and sub-contract flow-down language – Contractors must include the mandatory flow-down language in their contracts and purchase orders by reference. Remember the language must be bolded. The OFCCP may request to see copies of purchase orders and contracts during an audit.

  • Record retention requirements – The Final Rules impose a three year record-keeping requirement for certain AAP reports and documents. The two year period for documents under the Executive Order jurisdiction remain, but for the sake of simplicity establish a three-year retention period for all AAP related documents. Remember, don’t start your spring cleaning prematurely. A neatly organized cabinet isn’t worth a conciliation agreement.

  • Voluntary self-identification documents – It is likely the OFCCP will ask to review the self-identification documents at some point during the audit. Under the rules, contractors are required to solicit demographic information (race, ethnicity, gender, protected veteran status and disability status) from applicants and employees during the pre-offer and post-offer stages. The invitation to self-identify forms must be kept separate from the application, although they may be included in the application materials.

  • Self-identification of individuals with disabilities – Make sure you are using the mandated OMB form to invite applicants and employees to self-identify as individuals with disabilities. All contractors should have surveyed their existing workforce for disability status by now. If you haven’t, you had better make that a priority. You can bet the OFCCP will ask for evidence that contractors have met that requirement.
Somewhere over the compensation analysis

The compensation analysis has experienced perhaps the biggest shift in the audit landscape over the past few years. The current president has made pay equity a top priority during both of his terms, and has encouraged the OFCCP to pursue compensation discrimination claims vigorously. Knowing that, contractors should spend a good deal of time analyzing their pay policies and practices. It would be most unfortunate to discover and have to explain pay inequities during an audit. At least annually contractors must examine their compensation structure, review their pay practices, and conduct a pay equity analysis. Consider the following points:
  • Review and update job descriptions. Are the basic job qualifications relevant, objective and clearly stated? Do managers consistently follow these requirements? Are some applicants considered even if they don’t meet the minimum qualifications? If the answer is yes, you have a problem. Consider revising the job description. The OFCCP dislikes inconsistent practices, especially those that have a disparate impact on any particular group.

  • Develop and document your compensation philosophy. Discuss how you develop your compensation structure. Define compensation terms that impact how you pay your employees like incentives, bonuses, overtime pay, shift differentials, promotion, demotion etc.

  • Conduct a compensation analysis by job titles and departments. If you discover pay disparities, investigate why they exist. Coordinating this review through your internal or external counsel is important as it will allow you to establish attorney-client privilege work product. If compensation disparities can’t be explained by relative experience, education or time-in-job, develop a plan to resolve the pay issue. Fixing a pay issue outside of an audit is much more prudent than fixing it during an OFCCP audit when fines and back pay may become a factor.
Toto – We are not in the same audit anymore!

The revised VEVRAA and 503 Disability regulations remain the most significant changes impacting OFCCP compliance audits. Most contractors have not experienced an OFCCP audit since the Final Rules went into effect. But that doesn’t justify inaction. Be strategic, plan ahead, and start your efforts now! Undertake positive outreach and recruitment measures to attract qualified minorities, females, protected veterans and individuals with disabilities to your organization, particularly for plans where you have underutilization in your workforce. Don’t stop there. Make sure to document these efforts, and conduct a thorough analysis of these initiatives at the end of the plan year. It’s not the outreach of old. Merely documenting your efforts without analyzing the effectiveness will not pass muster during an audit. The OFCCP expects results. If an outreach agency isn’t producing candidates, then move on to another outreach initiative or forge another partnership.

Don’t treat the OFCCP as a good or bad witch!

While the OFCCP has made no secret that it views itself as an enforcement agency, that doesn’t mean we need to consider them the enemy. Establishing rapport with a compliance officer from the outset can set the audit on a positive course. Mention your affiliation with your local ILG, if you belong to one. Conversely, if you establish an antagonistic atmosphere, pushing back at every request, the auditor is likely to push back even harder. Unless you feel the OFCCP has pushed beyond its jurisdictional boundaries, you will find the audit moves much smoother when you exhibit professional and courteous behavior.

It really was no miracle. What happened was just this…

Don’t hold your breath and hope for a miracle. Miracles and magical fairies only appear in movies. Commit to engaging in proactive self-audits. Devise a checklist or use the standard OFCCP issued template. Conduct these audits on a consistent basis, so you aren’t caught off guard when a scheduling letter arrives. Should you receive an audit notice, don’t panic. If you have planned ahead, updated your policies, documents, and other applicable procedures, made the necessary form modifications, updated your HRIS to accommodate these changes, and conducted and analyzed your outreach, you will be fine.