Society of Corporate Compliance and Ethics€¦ · Society of Corporate Compliance and Ethics Federal Contractor Compliance| 2 Overview • What regulations are enforced by the Office

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Federal Contractor Compliance| 1

Federal Contractor Compliance:What You Need to Know

Murray Simpson, Ph.D. 9/13/11

Manager, Consulting Services

Society of Corporate Compliance and Ethics


Overview

• What regulations are enforced by the Office of Federal Contract Compliance Programs (OFCCP)?

• What changes are taking place with regard to these regulations?

• What items are increasingly subject to greater scrutiny by the OFCCP during compliance evaluations?

• What can federal contractors do today to prepare for the changes of tomorrow?

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What Regulations Are Enforced by the OFCCP?

• Executive Order 11246– Prohibits discrimination based on race, color, religion, sex or national origin

– Requires contractors to engage in affirmative action for women and minorities

– Requires contractors to maintain data on applicants, hires, promotions, transfers, and terminations by race and gender

• Section 503 of the Rehabilitation Act– Prohibits discrimination based on an individual’s physical or mental disability

– If federal contract exceeds $10,000, requires contractor to employ and advance in employment qualified individuals with disabilities

– Requires contractors to take affirmative action to ensure individuals with disabilities are included in all employment activities and to make reasonable accommodation of the physical and mental limitations

• Section 4212 of Vietnam Era Veterans’ Readjustment Assistance Act– Prohibits discrimination based on covered veterans status

– If federal contract prior to 12/01/2003 exceeds $25,000, (post 12/01/2003, $100,000) requires contractors to employ and advance in employment qualified covered veterans

– Requires contractors to take affirmative action to ensure covered veterans are included in all employment activities


Changing Regulatory Environment

• December 2010: OFCCP changes its enforcement protocol from Active Case Management to Active Case Enforcement

• January 2011: OFCCP initiates process to rescind the standards that have governed since 2006 how the agency conducts a compensation audit

• April 2011: OFCCP proposes changes to the regulations implementing Section 4212 of VEVRAA

• May 2011: OFCCP proposes changes to the itemized listing of documents and data that federal contractors must provide upon notification of an audit

• August 2011: OFCCP requests input on developing a new tool to collect compensation data from federal contractors

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Increased Scrutiny by OFCCP During Compliance Audits

• Active outreach for veterans

• Active outreach for disabled individuals

• Reasonable accommodations for disabled individuals

• Web accessibility


Changes in the OFCCP’s Enforcement

Protocol

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OFCCP Has Changed Its Enforcement Protocol

Active Case Management (ACM)

• Compliance review only

• Full desk audits only when there were indicators

• Focus: Systemic discrimination comprising at least 10 class member by gender or race

Active Case Enforcement (ACE)

• Compliance review, offsite review of records, compliance check, or focused review

• Full desk audits conducted in all compliance evaluations

• Focus: Individual as well as class cases of discrimination with no threshold on number of class members by gender or race


Rescission of Standards Governing How OFCCP Conducts

a Compensation Audit

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Rescission of Standards Governing a Compensation Audit

• The OFCCP adopted a three-tiered audit strategy as the means to implement these standards

• Tier 1 (“tipping test”) and Tier 2 (“mini-regression”) conducted as part of the desk audit

• Tier 3 (“comprehensive regression analysis”) conducted in association with an onsite review



• Tier 1 – Tipping Test

– Item 11 data aggregated by “pay division” (usually job group or job title)

– Under Active Case Management (2006-2010):

» Thresholds

� 5/10/3 thresholds

� 5/10/3/30 thresholds

» Typically between 40-60% of AAP establishments failed

» Remainder passed and compensation review closed at desk audit stage

– Under Active Case Enforcement (which requires completion of full desk audit – meaning Tier 1 and Tier 2 until rescission process is completed)

» Threshold: 2% or $2,000

» Nearly 100% of AAP establishments fail

» Automatically move forward to Tier 2 of the desk audit

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• Tier 2 – Mini Regression Analysis

– OFCCP requests employee-specific data with which to conduct a regression analysis

– Under Active Case Management (2006-2010):

» OFCCP typically requested employee-specific data on 12 factors:1. Employee ID number

2. Time with company or date of hire

3. Time in current position or date of last change in grade or title

4. Date of birth or, if possible, date of last degree earned

5. Current annualized base salary or base hourly wage

6. Part-time v. full-time status

7. Exempt v. non-exempt status

8. Job title

9. Grade level or salary band

10. Location (if different from facility under review)

11. Gender

12. Race



• Tier 2 – Mini Regression Analysis (continued)

– Transition from Active Case Management to Active Case Enforcement

» Additional factors began appearing in various combinations over the course of 2010:13. Division

14. Department

15. Work shift, if applicable

16. AAP job group

17. Similarly situated employee groups (SSEGS), if developed

18. Other paid allowances, if any, such as commission pay, overtime pay, bonus pay or shift differential

19. Any other factors not previously listed that impact compensation for your company

– Under Active Case Management

» Additional factors requested by OFCCP as recently as May-July, 2011: 20. Last two performance ratings for each employee

21. Education

22. Prior experience outside the company

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• Tier 2 - Blurring the Lines of Distinction with Tier 3

– The expansion in the requested number of factors (i.e., data fields containing employee-specific information) :

» Indicates a movement by the OFCCP to push the Tier 2 analysis toward the “comprehensive regression” stage previously reserved for the third tier of its audit strategy

» As a consequence, the Tier 3 analysis associated with an onsite review likely will focus on refining the Tier 2 analysis (with regard to any omitted influences on pay and to forming SSEGs) based on:

� OFCCP review of documented compensation policies

� OFCCP review of job descriptions

� OFCCP interviews of employees, supervisors, managers, and personnel in HR and compensation functions


Changes to Compensation Data Requested in Itemized Listing That Accompanies 30-Day Scheduling Letter

• Employee-specific data as opposed to aggregated data– As of February 1st of the most recent year for all employees in the workforce

covered by the AAP (including full-time, part-time, temporary, contract, and per diem or day labor) provide the following:1. Employee ID number

2. Gender

3. Race/Ethnicity

4. Hire date

5. Job title

6. Job group

7. EEO-1 category

8. Base salary

9. Wage rate

10. Hours worked

11. Other compensation or adjustments to salary (such as bonuses, incentives, commissions, merit increases, locality pay, and overtime)

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Changes to Compensation Data Requested in Itemized Listing That Accompanies 30-Day Scheduling Letter

• Employee-specific data as opposed to aggregated data– Federal contractor may provide data on additional factors used to determine

employee compensation, including but not limited to:12. Education

13. Past experience

14. Duty location

15. Performance ratings

16. Department or function

17. Salary grade, band, level or range

• Contractor should also submit documentation and policies related to its compensation practices, particularly those that explain the factors and reasoning used to determine compensation


Where is the OFCCP Heading With Regard to Analyzing a Federal Contractor’s Compensation Practices?

• OFCCP will seek to collect a comprehensive set of pay-related data fields covering all employees in the AAP

– In the short term, the OFCCP will use the nearly universal failure of the Tier 1 Tipping Test (with differences in average pay of at least 2% or $2,000 for one job title or job group resulting in failure) as the justification for requesting these data fields

– In the longer term, the OFCCP will abandon the Tier 1 Tipping Test because the revised Itemized Listing accompanying the 30-Day Scheduling Letter requests these data fields as part of the supporting documentation and data the federal contractor must provide in response to the letter

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Where is the OFCCP Heading With Regard to Analyzing a Federal Contractor’s Compensation Practices?

• Once the Tier 1 tipping test is abandoned, the OFCCP will conduct a single desk-audit analysis, which may be refined during an onsite review if such a review is warranted.

• During the desk audit, the OFCCP:

–Will continue to analyze employee pay using a regression model

–Will likely exercise greater latitude in how employees are grouped for comparison

–Will likely combine the statistical analysis of “large” comparison groups with a casual analysis of “small” comparison groups

» Currently conducting such casual analyses, presumably as part of the Active Case Enforcement protocol to identify potential discrimination against individuals


Proposed Changes to the Itemized Listing of the

30-Day Scheduling Letter

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Proposed Changes to Itemized Listing of Scheduling Letter

Item #8

• Copies of employment leave policies, including FMLA, pregnancy leave, accommoda-tions for religious observances

• Send in your employee handbook or manual if policies are discussed within

Item #9

• Copy of collective bargaining agreement(s), including policy statements, employee notices or handbooks that implement, explain, or elaborate on provisions of the collective bargaining agreement (s)

Item #10

• Job group representation at the start of the AAP year, including total incumbents, total minority incumbents, and total female incumbents

• Placement goals for minorities and women and actual number of placements during the year

• Placements defined as hires plus promotions


Proposed Changes to Itemized Listing of Scheduling Letter

Item #11

• Submit information on applicants and hires by job group and job title and by gender and racial sub-group

• Include information on unknowns

• Include actual pools for promotions & terminations

• Distinguish between voluntary and involuntary terminations

Item #12

• For each employee as of February 1st, provide gender, race, hire date, job title, job group, EEO-1 category, base salary, wage rate, hours worked, bonuses, incentives, commissions, merit increases, locality pay, and overtime pay

• May also include additional data used to determine pay: education, past experience, duty location, performance ratings, department or function, and salary level/band/range/grade

• Submit documentation and policies on compensation practices

Item #13

• Copies of VETS-100A for last 3 years

• Copies of accommodation polices and records of accommodations granted under Section 503 (disabled) and Section 4212 (veterans)

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Proposed Changes to the Regulations Implementing Section 4212 of VEVRAA


Current Regulations Implementing Section 4212 of VEVRAA

• Non-Discrimination– Contractors must not discriminate against protected veterans with regard to

employment activities (hiring, promotion, dismissal, compensation, etc.)

• Affirmative Action– Contractors must engage in active outreach for protected veterans

– Post jobs through local/state job service offices for all openings except those that last 3 or fewer days, are filled from within the company, or are executive/top management positions

• Reporting– Contractors must file an annual VETS-100 or VETS-100A that reports the

number of protected veterans in their work force by job category and hiring location as well as the number of new employees, including protected veterans, hired during the reporting period

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Proposed Changes to Section 4212 Regulations

• Job Posting with Local/State Service– Contractors must provide job postings to local/state agency in the manner

required by the agency

– Contractors must provide information regarding status as a federal contractor to hiring official and request priority referral of protected veterans

• Linkage Agreements & Recruitment Efforts– Contractors must enter into signed “linkage agreements” with appropriate

recruitment and training sources including, at a minimum, the following:

1. The local veterans’ employment representative at the state employment service;

2. At least one veterans’ service organization listed on the Employee Resources section of the National Resource Directory (https://www.nationalresourcedirectory.gov/);

3. At least one more organization from a list of other organizations



• Data Collection, Analysis and Recordkeeping– Contractors will be required to maintain quantitative measurements and

comparisons related to veterans each year, including the following:

1. The number of referrals from state employment services, the number of priority referrals of protected veterans, and the “referral ratio” of protected veteran referrals to total referrals

(Example: 50 referrals from the Texas Workforce Commission; 10 of those were protected veterans; referral ratio of protected veterans is 10 ÷ 50 = 0.20 or 20%)

2. The number of applicants for employment, the number of protected veteran applicants, and the “applicant ratio” of protected veterans applicants to total applicants

(Example: 100 applicants applied for jobs; of those, 10 were protected veterans; applicant ratio of protected veterans is 10 ÷ 100 = 0.10 or 10%)

3. The number of job openings, the number of jobs filled, the number of protected veterans hired, and the “hiring ratio” of protected veteran hires to total hires

(Example: 100 jobs filled; 5 filled by protected veterans: hiring ratio of protected veterans is 5 ÷ 100 = 0.05 or 5%)

4. The total number of job openings, the number of filled openings, and the “job fill” ratio of filled openings to total openings

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• Hiring Benchmarks– Contractors will be required to establish a hiring benchmark by referring to

various resources such as percentage of veterans in the civilian labor force;

– Will be similar to setting a placement goal for placing females or minorities in the upcoming year

• Other proposed changes– Specific action items with regard to annual review of personnel processes

» For example, written reasons for each decision to reject a veteran for employment, promotion, training, or request for accommodation

– Policy dissemination and training

» Documentation of employee meeting to discuss policy and contractor responsibilities

» Meet with management to explain policy and responsibilities for implementation

» Discuss policy and responsibilities in new hire orientation and management training

» Train all employees involved in personnel transactions on legal responsibilities



• Other proposed changes (continued)

– If deny accommodation due to undue hardship, the employer must give disabled veterans the option of providing the accommodation themselves or paying the portion of the expense that constitutes an undue hardship

– Invite applicants to self-identify veteran status at pre-offer stage

– Include the entire veterans EO Clause verbatim in subcontracts and purchase orders

– Send written notification of their AA policies and efforts to subcontractors and request appropriate action on their parts

– Change term from “covered veterans” to “protected veterans”

– Retain many records for 5 years

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• Other proposed changes (continued)

– No more classifications of Vietnam Era Veteran or Special Disabled Veteran

– Protected veterans would fall into one or more of the following classifications:

1. Disabled veterans

2. Other protected veterans

� Veterans who served on active duty in the U.S. military during a war or in a campaign or expedition for which a campaign badge was awarded

3. Armed Forces service medal veterans

� Veterans who, while serving on active duty in the Armed Forces, participated in a United States military operation for which an Armed Forces service medal was awarded pursuant to Executive Order 12985

4. Recently separated veterans

� Veterans within 36 months from discharge or release from active duty


Web Accessibility

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Web Accessibility

• What is web accessibility?– Typically refers to making websites usable by people with disabilities so they

can use assistive technologies such as Text-To-Speech (TTS) readers and Voice-recognition software

• Federal Contractor's Online Application Selection Systems– Directive 281 (www.dol.gov/ofccp/regs/compliance/directives/dir281.htm)

seeks to ensure that employers using internet systems for applications are compliant for accessibility by persons with disabilities (visually impaired, persons without limbs, persons in a wheelchair that cannot access kiosk due to height, etc.)

• Recommended website verbiage“In compliance with the Americans with Disabilities Act Amendment Act (ADAAA), if you have a disability and would like to request an accommodation in order to apply for a position with x company, please call xxx-xx-xxxx or e-mail [email protected].”


Web Accessibility

• Check list

1. Does website provide information on how individuals with disabilities can request reasonable accommodations?

2. Can website be navigated with a screen reader?

3. Does website time out after a period of inactivity? Can users request extension before the time out occurs?

4. Does website avoid blinking, marquee or other auto-scrolling text which might trigger epileptic seizures?

5. Does your site provide captioning for all video and audio content?

6. Do all images on your site have accompanying text description?

7. Can your site be accessed without using a mouse?

8. Does your site provide fully usable online forms, PDF documents and PowerPoint materials, particularly for individuals who use screen readers?

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What Actions to StartTaking Today?


What Can You Do Today to Prepare for the Changes of Tomorrow?

1. Meet the challenge of more aggressive compensation audits by the OFCCP

– Review and update written documents that describe compensation practices and explain factors that influence compensation decisions

– Collect data requested in the revised Itemized Listing in electronic format

– Collect data in electronic format on additional factors that legitimately explain differences in pay for your organization

– Conduct an annual compensation self-evaluation

� Prior to receiving notice of an audit

� By AAP

� In a manner that allows you to anticipate what the OFCCP may find

� In a manner you find to be based on sound legal and statistical principles (to rebut what the OFCCP may find)

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2. Implement processes to collect and make readily available the documents and data that will be requested by the OFCCP in Items 8 through 13 of the revised Itemize Listing of the 30-day Scheduling Letter– Pay particular attention to Item 12 (hiring, promotion and termination data)

and Item 13 (compensation data)

3. If necessary, expand your outreach sources for veterans(see list at end of slide show)

4. If necessary, expand your outreach sources for disabled(see list at end of slide show)



5. Verify that your company’s website is accessible

– Review check list on previous slide

– Retain a third-party vendor that specializes in reviewing

websites for accessibility by disabled individuals

6. Create an internal “defense” team comprising representatives from Legal, HR, Compensation, Staffing, and IT (HRIS system)

– Develop an effective “audit ready” strategy

– Ensure actions stated above are undertaken in a timely manner, without delay, and without regard to whether a scheduling letter has been received

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QUESTIONS

AND

ANSWERS


Thank You!

Murray Simpson, Ph.D.

Manager, Consulting Services

[email protected] option1

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Appendix 1 – Outreach Sources for Veterans

– Recruit Military http://www.recruitmilitary.com

– Hire Heroes USA http://www.hireheroesusa.org or 866-915-HERO

– Army Reserve http://www.armyreserve.army.mil

– Employer Support of the Guard and Reserve http://esgr.org/about.asp

– Employers Military Hire http://employers.militaryhire.com

– Vet Jobs www.vetjobs.com

– Intelligence Careers and Defense Careers http://www.intelligencecareers.com/

– Veterans Enterprise http://www.veteransenterprise.com/

– Hire Vets First http://www.hirevetsfirst.gov

– Local One-Stop Career Centers 1-877-US2-JOBS http://www.servicelocator.org/

– Directory of regional/state offices: http://www.dol.gov/vets/aboutvets/contacts/main.htm

– State Employment Office http://www.jobbankinfo.org/

– Other source for local/regional/state contacts http://www.doleta.gov/etainfo/contacts.cfm


Appendix 2 – Outreach Sources for Disabled

– Workforce Recruitment Program for College Students with Disabilities www.wrp.gov(employers can request unlimited searches by calling (866) 327-6669)

– Job Accommodation Network (JAN) www.jan.wvu.eduEmployer

– Employer Assistance and Recruiting Network (EARN) 1-866-327-6669

– ADA Affirmative Disability Action http://www.abilityjobs.com/

– National Business and Disability Council http://www.nbdc.com/index.aspx

– Department of Veterans Affairs (VA), Vocational Rehabilitation and Employment Service http://www.vba.va.gov/bln/vre/emp_resources.htm

– State Vocational Rehabilitation (VR)

– State Governors’ Committees on Employment of People with Disabilities

– Disability Employment 101 (877)-433-7827

– U.S. Business Leadership Network (USBLN) www.usbln.org

– ADA Affirmative Disability Action http://www.abilityjobs.com/

– ABILITY Jobs www.abilityjobs.com

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Appendix 2 – Outreach Sources for Disabled (continued)

– Careers and community for people with disabilities http://www.gettinghired.com

– Career-Focused Mentoring for Youth www.dol.gov/odep/pubs/fact/cfm.htm

– Cultivating Leadership: Mentoring youth with disabilities www.dol.gov/odep/pubs/fact/cultivate.htm

– Workforce Recruitment Program (WRP) www.wrp.gov

– HirePotential: persons with disabilities, veterans, mature workers http://www.hirepotential.com/services/staffing

– Private Sector Internships for Students with Disabilities http://www.aapd.com/disability/internships

– Strategic Connections: Recruiting Candidates with Disabilities www.dol.gov/odep/pubs/fact/connect.htm

– HireVetsFirst/REALifeline www.hirevetsfirst.gov/realifelines/index.asp

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