Bogged Down in the Bayou: Don’t Get Buried by the 10 Biggest AAP & Discrimination Law Problems
What problems should federal contractors look for in preparing their organizations for possible OFCCP audits? DE Executive Director Candee Chambers and Attorney John C. Fox of Fox, Wang & Morgan P.C. retrieved and organized data from OFCCP enforcement efforts over the last twelve months. They combined this data, along with the many audit experiences of DirectEmployers Members and Fox, Wang & Morgan clients, to produce a succinct review of the top ten compliance obstacles OFCCP is currently preying upon in audits.
I. Job Groups Not Collecting “Similarly Situated” Employees
In legal terms, employees are “similarly situated” only if they share all the same “essential elements” of the job they perform, John said.
“This is something I run into all the time,” Candee said. “That means content of the job, opportunities for advancement, and wages.” If one worker could parachute into another’s job and do that job with minimal qualifications, then they should be in the same job group.
“What happens in the professionals job group is the one that’s really the nightmare because it encompasses so many different job requirements of so many different people across your organization,” Candee observed. “I strongly recommend you have upper, middle, and lower breakdowns,…because you can pick what that upper, middle, and lower pay band is.”
“Furthermore, you want smaller job groups…because [OFCCP] can do a whole lot more with your data if you have big job groups,” she added.
Affirmative Action Plans (“AAPs”) are “a legal tool, not just an HR tool,” John pointed out. Therefore, “‘similarly situated’ is critical language because every discrimination issue is based on a comparison of similarly situated people for compensation, for hire, for transfer, whatever it is, termination,” he said.
Moreover, “[t]he way the case law under Title VII has emerged, you have to be minimally qualified in every subcomponent essential element of the job,” John noted, adding that “‘close enough’ in horseshoes is not close enough in law.”
II. Inappropriate “Systemic” Compensation Analyses
“When you’re doing systemic compensation analysis, I will tell you this flat out. OFCCP always–100 times out of 100–does their analysis incorrectly, John said. Therefore, he advised the audience to pay close attention to their explanations. “To do comp, you need a lawyer . . . you need to have a Labor Economist, perhaps and you may need someone from HR depending on the kind of analysis. But you are going to first identify on the HR side all the “major” factors that affect pay,” he said.
He shared a slide outlining how to do this analysis with the following key points:
- Must analyze ALL “major” factors that affect pay (the top three are typically experience, longevity, and education, John and Candee said.)
- Must analyze and compare the pay of ONLY “similarly situated” employees
- Must analyze ONLY “pay decisions” and NOT the “current pay” amount
- May not apply class (or “systemic”) analyses to groups of similarly situated employees in groups too small to make for meaningful statistical analysis. Here is a “rule of thumb:”
- 30 or more similarly situated employees in the pool of employment decisions being compared; AND
- 5 or more similarly situated candidates of each race, sex, and/or national origin you want to compare; AND
- 5 employment decisions you wish to analyze (i.e., 5 or more “hiring” decisions, or “promotion” decisions. You should always meet that number in a comp study since you have 30 in the pool & all are paid)
- OFCCP may only go back two years before OFCCP’s Notice of Desk Audit to compare the relevant pay decisions that meet all of the above criteria
As to the major factors that affect pay, Candee advised the audience to consider “how much of that information do you have digitized in your HRIS systems?”
III. Disposition Codes for Hires and Promotions Often Do Not Properly and/or Completely Document the “Legitimate Non-Discriminatory Reason(s)” For Your Company’s Adverse Employment Action
Disposition Codes document the employer’s legitimate non-discriminatory reasons for an adverse hiring/promotion selection decision. If, when an employer runs its Disparity Analyses Report (as required by OFCCP’s Rules), it gets anything other than 0.00, that means somebody responsible for documenting the “legitimate non-discriminatory reasons” for the at-issue adverse employment action was either “out-to-lunch” or too busy.
“It is your (the employer’s) affirmative duty to collect this information. It is not OFCCP’s duty to explain away the difference between why [white] Harry was hired and Black Harry was not. That’s your job. That’s what you’re doing with those disposition codes,” John cautioned.
IV. Not Understanding What An “AAP Establishment” Is
John shared a slide with the following information on OFCCP’s regulations (at 41 CFR Part 60-2.1(d)) regarding how contractors may define an “AAP Establishment”:
- See 41 CFR 60-2.1(d): where the employee works
- See 41 CFR 60-2.1(d)(1): follow the manager rule
- See 41 CFR 60-2.1(d)2: < 50 employees in establishment
- just that establishment (with < 50 employees)
- in establishment where personnel functions occur
- in establishment where their manager is
- See 41 CFR 60-2.1(d)4: FAAP (“Functional Affirmative Action Programs”)
“A lot of people look at this as a very complicated calculus. I don’t think it’s complicated, but I think you need to sit down and think about what your architecture is with your AAP vendor or if you do it in-house with the people that are designing your AAPs,” John said.
An emerging issue involves OFCCP’s recently revised audit Scheduling Letter for Supply and Service contractors in which the agency requests (via the accompanying Itemized Listing):
“If you are a post-secondary institution or Federal contractor with a campus-like setting that maintains multiple AAPs, you must submit the information requested in this scheduling letter for all AAPs developed for campuses, schools, programs, buildings, departments, or other parts of your institution, or company located in [city and state only].”
The problem is that no one knows what this means, including OFCCP. “Even if you ask the OFCCP for an answer on that, they don’t really have one,” Candee reported. (For a detailed discussion on this point, see our story here.)
She pointed out additional issues: “What if everybody is remote now? What establishment are you auditing? Sometimes the establishments have closed. But the OFCCP still thinks that you have data for them and they were closed three years ago.”
“If you have under 50 employees in an AAP establishment then you can leave it as a standalone tiny pathetic little AAP. I say pathetic because they typically are not going to have enough employment transactions to allow for any meaningful statistical analysis,” John noted.
“But it’s worth doing because you won’t get audited. It’s something to think about,” Candee added.
V. Confusing “Protected Groups” with “Reporting Groups”
Contractors only need to conduct a discrimination analysis on legally “protected” groups; they do not need to do discrimination analyses for “reporting groups” required on federal agency forms, such as the EEO-1 Survey. Only the Congress may declare by statute who is a legally “Protected Group.”
Reporting groups include the “Two or More Races” category and the upcoming new Middle Eastern or North African (“MENA”) reporting category.
John said that he sees this confusion “in almost every AAP.”
He explained that federal law ensures that all qualified applicants/employees/former employees must receive consideration for employment “without regard to” “race, color, religion, sex, sexual orientation, gender identity, or national origin.”
John shared a slide outlining the groups that the law protects (i.e., “Protected Groups”):
- Race = Black & White
- National Origin: Hispanic/Asian/Native American/Hawaiian/Native Alaskan
- No so-called “intersectional”- racial analyses (i.e., non-Hispanics; Black women, etc.)
- BTW: “Ethnicity” is not a legal definition of anything: it is street talk
Candee and John referred the audience to their presentation the previous day for a more detailed discussion on this point.
VI. Carrying Availability Analyses Out to Decimal Places
“OFCCP has always considered this an estimate [of availability],” he noted. “They realized if you were going to calculate availability carefully it would cost you tens of thousands of dollars per AAP so they came up with (in 1972) the notion of an estimate,” he added. (See 41 CFR Section 60-2.14.)
There are two reasons why contractors should not carry out their availability analyses out to decimal places, John said. First, naysayers will get into a nitpicky discussion of whether the AAP developers really know what they are doing since few things in business are two decimal places certain. Second, should a contractor have to defend an AAP in a courtroom, “juries think you mean that data taken out to two decimals is very precise. You don’t mean that at all,” he stated. “You are talking about +/- 10%, or more,” John estimated.
VII. Too Many AAP Developers Do Not Explain to Their Customers What is in their AAPs and What They Tell Recruiters/Lawyers
“You need to know what’s in your affirmative-action plan. You need to know your data,” Candee said. An AAP is “a strategic plan for the year in your company. It’s your strategy,” she noted.
“There’s a lot of data that’s helpful for HR in there too,” John pointed out.
“I had two clients in the last two years that tell me that they got their AAPs delivered by email, saying here’s a link to where you can find it in our online library,” John reported. “There’s no interaction, no discussion with them. I know OutSolve does it differently and happily goes through it with their clientele. That’s what you want to see so you can get that knowledge and be able to defend your AAP to OFCCP (if need be) and explain it to your superiors.”
In an audit, “you need to build credibility with the OFCCP because if you don’t have that credibility, it’s only downhill from there. If you know what’s in your data and you can answer their questions, they start thinking oh, she knows what she’s talking about. And that is so important in any audit,” Candee advised.
Also, too many federal contractors run up the cost of the development of their AAPs and compensation analyses because they pay their vendor to do the company’s data clean-up at hourly rates 10x-20x the cost of HR personnel, John said.
“Don’t ever say to the OFCCP that you’ve got to scrub your data,” Candee cautioned. “Don’t ever use that term ‘scrub your data’ because they think that you’re changing your data. You’re just cleaning it up and getting it ready so it’s legible for them blah, blah, blah. But don’t ever say ‘scrubbing your data.’”
“If you are going to clean up your data … make sure you are transparent and authentic about what the date of that cleanup was so you don’t get accused of trying to intentionally mislead the OFCCP in violation of federal criminal and civil law,” John added.
VIII. Too Many Federal Contractors Fail to Deliver the AAPs to their In-House Target Audiences
John explained that the two corporate target audiences are:
- Recruiters (need the availability data to know if they are throwing the net widely and deeply enough relative to calculated availability in your AAP for Minorities and Women); and
- The contractor’s lawyers (who need the Disparity Analyses to know whether the company is potentially liable for unlawful systemic discrimination in hiring or in compensation and perhaps in the future as to “promotions” given that OFCCP is (again) expressing interest in them.
“Don’t ever forget your leadership” such as the facility manager and upper management, Candee added, again emphasizing that an AAP is a strategic plan. Contractors have authorization under the applicable regulations to do this, John noted.
IX. Too Many Contractors Fail to Ask “Why” They Have to Set a Goal for the Recruitment of Minorities and Women
There are only five reasons to set a placement goal, John said, adding that until you know the driver(s) of your goal setting need, you do not know what to fix. “If you don’t diagnose why you have to set a placement goal, it’s like a doctor trying to prescribe medicine without knowing what’s wrong with you,” he analogized.
The five placement goal drivers for AAPs for Minorities/ Women are:
- Inadequate applicant flow – AAP says 20% available, but recruiters have only 10% knocking at the front door.
- Sufficient applicant flow, but not sufficiently high caliber applicant flow to win the one-on-one competition for the job(s) available. The fix is to “tell your recruiters to fish higher in the food stream, get better-qualified candidates, and win those one-on-one competitions,” John said.
- Historical Baggage Problem – For example, you have hired above availability for the Job Group in question for the last 20 years but are still setting a Placement Goal. You hired at x% 10 years ago but the availability for women in that job has since doubled and your Utilization analyses are NOT “time weighted” as they compare your historical hires (your incumbent employees) against the CURRENT availability. The fix is to “tell your managers don’t do anything different,” John said. “You’re doing great. You’re hiring and eventually, with enough openings, you’ll be where we want to be relative to the current availability.”
- Losing Minorites and Women out the back door faster than you are hiring them in the front door. The fix is to do exit interviews, John stated. Find out if the reasons for employee exits are troublesome, such as an uncomfortable environment for someone in a protected group. “This is where you have to look inward at your company and [consider] what’s the culture?” and what are you doing to create an inclusive atmosphere. Candee said.
- Unlawful discrimination. “This is where you’ll be buddying up with the lawyers,” Candee stated. John pointed out that, in fiscal year 2023, the EEOC took home a record > $400M in discrimination backpay monies from private companies.
“You don’t have to wait for OFCCP to put a bayonet in your back” or for a plaintiff’s lawyer to send you a demand letter, John said. OFCCP regulations provide that you have an affirmative duty as a federal contractor “to go out and search like a scout if there is discrimination occurring and, if so, fix it,” he noted.
X. Too Many Contractors Confuse “Placement Goals” in their AAPs for Minorities and Women with “Hiring” Quotas
Under the three legal authorities that OFCCP enforces there are (1) “Placement Goals” (Executive Order 11246), (2) “Utilization Goals” (Section 503 of the Rehabilitation Act), and (3) “Benchmarks for Hiring” (Vietnam Era Veterans’ Readjustment Assistance Act).
The allowances [under each of these three legal authorities] are different, John explained. “You can discriminate in favor of individuals with a disability,” he said. “With protected veterans, you can have a veterans’ preference, most people believe. There’s a small concern . . . about whether this would be unlawfully discriminatory to women because the military for so long forbade women from combat, but we are now several years beyond that and female headcounts are now rapidly growing.”
In any event, they are all “recruitment goals”: the percentage of Minorities and Women, Individuals with Disabilities, and Protected Veterans you are asking your recruiters to drag, push, pull, or carry to the front door of your company so you have a chance to hire them in a non-discriminatory fashion, John stated.
That is “pretty important [to OFCCP] and is why you see every administration, including, the Biden Administration at OFCCP, emphasizing outreach and recruitment. If you don’t get minorities and women to the front door, then you can’t hire them,” John said.
If you use your Placement Goals as “Hiring” targets or quotas you must obtain, you could be found guilty of unlawful direct evidence discrimination. OFCCP would be the first to say that its Placement Goals for Minorities and Women are not quotas, nor race nor gender preferential, John said, noting OFCCP’s regulations at 41 CFR Section 60-2.16. You do not want to get this confused, particularly in light of the current heated political environment, John emphasized.
Turning goals into illegal quotas is “not the right way to fix the problem” of lacking diversity, Candee cautioned. “We see a lot of people doing that, and they basically are turning those [goals] into quotas, and legally, that’s going to get you in trouble.”