Fourth, Another Stopper to this Attempted Rule Rewrite: Any Definition of “Evaluate” Will Do
OFCCP has well-defined this Rule over 150,000 OFCCP audits. There is now a “longstanding” practice as to what the language of 41 CFR Section 60-2.17(b)(3) means. (That word “longstanding” is in quotes because we will find in a moment that it is a loaded legal “term of art” within the meaning of the Administrative Procedure Act (“APA”). The APA operates as a limit on OFCCP’s ability to now run off and define 41 CFR Section 60-2.17(b)(3) in some new way.
And remember, the new Directive as a matter of law and as a matter of its own self-proclaimed “Interpretation” (see para 8 of the new Directive quoted above), “…does not create new legal rights or requirements or change current legal rights or requirements for contractors.”
41 CFR Section 60-2.17(b)(3) simply means that the contractor must have some evaluation, any evaluation, any kind of an evaluation whatsoever (since OFCCP’s Rule does not specify what the contractor must do other than to “evaluate” “compensation system(s).” What this has meant in the “real world” of OFCCP audits for two decades is that any of the following “evaluations,” and more, will pass and have passed OFCCP muster over 150,000 times in the last 22 years pursuant to 41 CFR Section 60-2.17(b)(3):
“Our company responds to all concerns or complaints of employees and Applicants regarding compensation to evaluate their merit.”
OR
“Our company evaluates the pay we are offering every new hire employee and at the time of every promotion or transfer of an employee.”
OR
“Our company evaluates pay periodically for selected job classifications through benchmarking surveys of compensation paid in our community for the kinds of jobs we staff.”
OR
“Our company undertakes periodic spot checks of the pay of selected employees to evaluate their pay against other similarly situated employees in their work unit and against market competitors.”
OR
“Our company annually undertakes “cohort analyses” to evaluate the pay of employees in selected job titles as part of our annual Affirmative Action Program for Minorities and Women.”
And, OFCCP has NEVER required evaluations of every pay system or every pay decision. That would be simply overwhelming for almost every contractor and far outside the paltry number of “burden hours” OFCCP has estimated over the decades for contractors to develop AAPs for Minorities and Women and as formally reported to the Office of Management and Budget. Rather, OFCCP’s “longstanding” practice and interpretation of 41 CFR Section 60-2.17(b)(3) has been that contractors could undertake spot checks, although some of the above commonly used “evaluations” are in point of fact universal evaluations of the entire pay system of interest.
Now here is the bad news for OFCCP: Most courts will enforce a “longstanding” federal agency practice interpreting an agency Rule if it is a reasonable interpretation even without publishing the practice for Notice and Comment. This is because the purpose of the APA is to make sure there is a common understanding of the compliance burden to allow the regulated community to comply and to produce a “level playing field” on which competitor companies may fairly compete. At some point, however, the federal agency follows the practice lacking a formal Notice and Comment Rulemaking uniformly enough and long enough that it stands in as a replacement for formal Notice and Comment.
See Barnhart v. Walton, 535 U.S. 212, 219-20 (2002) (the Agency’s regulations reflect the Agency’s own longstanding interpretation . . . [T]his Court will normally accord particular deference to an agency interpretation of “longstanding’ duration”); Alaska Dept. of Environmental Conservation v. EPA, 540 U.S. 461, 487 (2004) (recognizing that “longstanding agency interpretations” are entitled to particular deference, and thus upholding agency construction, in part, because it was reflected in interpretive guides the Agency had published several times); Kasten v. Saint-Gobain Performance Plastics, 563 U.S. 1, 15 (2011) (agency Rule upheld since courts must accord deference to agencies’ view in part because of “[t]he length of time the agencies have held them”); Smith v. City of Jackson, 544 U.S. 228 (2005) (“longstanding interpretation” of nearly 25 years by the U.S. Department of Labor and the EEOC as to the Age Discrimination in Employment Act supported authorization of relief on a disparate-impact theory of discrimination).
And, of course one of the interesting foibles of each of the last three OFCCP Administrations has been that they each started their work at the agency as though there had been no prior history before they arrived. History began for the first time with them. (This problem is also badly exasperated at OFCCP by the paucity of long-term senior career managers who have been there and done that. Retirements and transfers have taken a heavy toll on OFCCP’s senior managerial workforce for the last 20 years. It is difficult to even remember the succession of OFCCP District Directors (“DDs”) as the revolving door in District Offices began in the mid-2000s to spin rapidly as DDs came and went, some even before they could attend their first local Industry Liaison Group meeting. But, of course, there is a lot of prior history and OFCCP is now handcuffed by it and cannot now willy-nilly paint a different portrait of required compliance that suits them today.
So, what is a new Director to do when she arrives at OFCCP and discovers prior policy the new administration does not like. Newly arriving OFCCP Directors must BREAK the prior longstanding practice they do not like by publishing a formal Rule for Notice and Comment embodying the new compliance requirements. When a federal agency wants to sponsor a fundamental modification or change a longstanding interpretation of a Rule, the Agency must go through the Notice and Comment process the Administrative Procedure Act prescribes.
See Torch Operating Co. v. Babbitt, 172 F. Supp.2d 113, 128 (D.D.C. 2001) (the Department of Interior’s change in interpretation of the phrase “approved by FERC” was a fundamental modification to the Department’s prior long-standing interpretation, and thus required compliance with the Notice and Comment procedures required for rule amendments); Ferguson v. Ashcroft, 248 F. Supp.2d 547, 564 (M.D. La. 2003) (although agency “interpretations” are not typically subject to Notice and Comment procedures, when an interpretation departs from a longstanding agency practice it too must be promulgated pursuant to the general Administrative Procedure Act Notice and Comment procedures).
Oh DRAT! The Administrative Procedure Act: the bane of every federal agency head’s existence. They all wonder: why can’t we just adopt the Nike slogan: “Just Do it!” and do whatever we want to do (we won the election, right!)? APA formal Notice and Comment is particularly difficult in every OFCCP administration. Unfortunately, the agency typically gets little “airtime” with the Labor Department’s regulatory lawyers as the (“Rock-of-Gibraltar”) Wage and Hour Division is always the Secretary of Labor’s favorite child, followed by OSHA (in Democrat Administrations). So, do not expect much here.