[author: Paul McGovern]
In thinking through what are the current, 2024, big ticket items for Affirmative Practice, the head reels. Will the Harvard/University of North Carolina cases lead to court action seeking to limit Affirmative Action practice – along the line of suits are already in progress relying on the decision to challenge Diversity, Equity and Inclusion (DEI) practice? Will the Supreme Court end, trim or otherwise impact the power of federal agencies to make and enforce their own rules, the “Chevron deference doctrine”? Will the Office of Management and Budget (OMB) update race and ethnicity reporting, requiring companies to report new categories such as “Middle East and North Africa” (MENA) – changes the agency indicated could come this year?
Any good therapist will tell you, when things that affect you are out of your control, grab hold of something that you can control, and do your best to manage it. It just so happens that one of last year’s biggest items affecting your affirmative action practice is tangible (if not completely defined). It is the new Scheduling Letter and Itemized Listing outlining new requirements for your desk audit submission. If nothing else, it is concrete: it went into effect on August 31, 2024. Instead of worrying about what courts or agencies might do next, concentrate on what the OFCCP has already done, and take steps to get ready for a new form of audit. Many contractors have not given these changes enough attention.
Not that knowing what to do with the document is easy. We don’t yet know how OFCCP will implement many of the changes. So, apply common sense and think through what the Itemized listing is likely to mean – or should mean. Even if your Compliance Officer does not agree with you on audit, you will have a good faith argument that you took compliance seriously and should get a gold star for trying.
So, what are the biggest of the new requirements in the new Scheduling Letter and Itemized listing, and how should you address them?
Higher-educational “campus” and “campus-like” settings: When a college or university receives a scheduling letter, if it maintains a “campus” of multiple establishments in a single city, it must submit an AAP for each location. The same applies for federal-contractors not in higher-education who maintain a “campus-like setting,” for example a biotech company that operates labs at different addresses in the same municipality.
There is an argument to be made that OFCCP is overreaching and is only entitled to the plan noted in the Scheduling letter. The OFCCP will not agree and will ask for every AAP in the same municipality, whether the locations perform similar functions or not.
Given the OFCCP’s appetite for combining employees under review into big groups for analysis, it seems wise to review the “campus” AAPs plans both individually and as if they form a single plan. Make sure that you do not lump together employees who do different things for different organizations when you perform a combined review.
Compensation: Item 7 requires that contractors produce action-oriented programs correcting “any” problem areas identified pursuant to compensation system review mandated under 41 CFR 60-2.17(b). As Circa has noted before in its blog on the related OFCCP compensation Directive 2022, this review need not be statistical. It can, for example, outline the element the contractor uses to set pay, and evaluate whether the contractor uses these factors in actual practice.
Item 19 now requires a second compensation snapshot for your prior year AAP reporting period. It seems wise to look at the two years of data both individually and together. Item 19 also requires that you provide information on the “relevant factors used to determine employee compensation,” such as education, performance ratings, and level. Make sure that you analyze how these factors influence the pay of the employees you report. Experts can help you review these as ‘control variables.’ Yes, a major decision element is whether and when to call in experts to support your program in this complex area. Circa’s partners, industry leading solutions providers, can help you here.
Artificial Intelligence: The new Item 21 asks if you are using it. Are you? An exclusion process (for example, rejecting applicants who do not have permission to work in the United States) need not involve the use of artificial intelligence, which is broadly defined as an automated pattern recognition and ranking process.
If your employer uses AI for hire, promotion or other decision making, determine where its use comes into play. Make sure you use AI in a consistent fashion and determine whether selections disfavors a protected group. If there is a statistically significant adverse impact against a protected group, it could be that the skew occurs at a stage unrelated to the use of AI – for example, the hiring manager’s decision. If use of AI does create adverse impact, you will need to go through the standard validation practices outlined at 41 CFR 60-3 to justify its use. Both AI and selection validation are complex subjects. This is another area to consider bringing in expert help.
Remember that Item 21 requires contractors to provide documentation concerning all recruitment, screening and hire policies and practices, not just those relating to AI. If you have not already, gather this information together, review it, and determine whether it outlines diverse input into a neutral selection process. Then determine whether Talent Acquisition and hiring managers are actually walking the walk that it sets out….
The Biden Executive Order on AI requires that the OFCCP produce guidance on the use of AI by October 2024. Watch this space!
Documentation, documentation, documentation: Search the Itemized Listing on the word “documentation.” It is an eye-opener how much documentation the OFCCP expects you to collect and submit with the new desk audit. It includes documentation on how you have addressed issues identified in the evaluation of your employer’s compensation system; how you set placement goals; what outreach and recruitment you undertook for individuals with disabilities; how your hiring measures against your benchmark for hiring protected veterans; whether your good faith efforts successfully addressed prior year placement goals and problem areas; and modifications taken to address issues surfaced in your Item 25 review of “personnel processes”. (The Item 25 review cannot be boilerplate. If you found a barrier to equal access, you need to show how you attempted to address it, whether the effort was successful, and if it was not successful over time, what changes you made for future success.)
One point about the use of the word “any” in the Itemized listing. Particularly for larger contractors with multiple entitles to report, a problem area or utilization particular to an element of one AAP may not be indicative of an issue broadly affecting workplace access. A standard deviation (SD) of 2.27 in a single job group with no shortfall in hires, terminations or promotions is not indicative of a pattern or trend. The Itemized listing infers that you are to go down every bunny hole. You have good, common-sense reasons not to. Instead, look for similarities across your plans and develop action-oriented to address the big-ticket items. In addition to keeping you from going mad, the focused work you do will stand you in good stead during audit because your ‘big picture’ work is likely to map to issues raised in individual plans.
Another way to address this turn over “any” rock in every establishment plan problem is to consider adopting Functional Affirmative Action Plans (FAAPS). See Circa’s blog on the pros and cons of FAAPs.
Conclusion
It will not be easy to create the data and documentation called for in the new Scheduling Letter and Itemized Listing. You will need close and continuous liaison with peers outside of your program responsible for the outreach, election, career development, and other programs central to addressing the problem areas and underutilization identified in your AAPs. Create a template for identifying program deficit areas, identifying remedial action, and tracking the data that shows the progress – or lack of progress – resulting from the pro-active steps taken. Share the template with your peers and monitor how this necessary work is done.
Because the Scheduling Letter and Itemized Listing is new, it raises as many questions as it answers. What OFCCP expects will become clearer as contractors and Agency move through the audit process. For the contractor, then, the next steps will be to see how OFCCP uses the new Scheduling Letter and Itemized Listing – and to determine whether to update affirmative action practices as a result.
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