Preparing for Labor Audits
By Donna M. Glover
Although the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) under the Trump Administration may lean toward compliance over enforcement, it is clear that nothing has changed yet regarding the office’s aggressive enforcement. The OFCCP conducts approximately 1,500 to 4,000 compliance audits each year, and this year appears to be no different.
This year, OFCCP mailed 1,000 corporate scheduling announcement letters to federal supply and service contractors notifying them of a potential compliance evaluation. If a contractor receives a letter, that means the office will conduct a review of the contractor’s compliance efforts. The OFCCP calculates that contractors have a minimum of 75 days to make sure they are ready. Given this advance notice, the OFCCP has stated that it will not grant extensions for “routine business reasons” and that any extension granted would be limited to 15 days.
Certain federal contractors must prepare affirmative action plans. If a contractor receives a scheduling letter, the OFCCP will conduct a “desk audit,” and the contractor must submit its plans and supporting documentation, which includes items such as Equal Employment Opportunity Commission (EEOC) reports, goal attainment report, personnel activity data, detailed compensation data and more within 30 days of receipt of the scheduling letter. After a contractor submits its affirmative action plans and supporting documentation, the OFFCP may request additional documents and/or information, and it may identify problems areas some or all of which may be resolved at the desk audit stage.
If the problem areas remain unresolved, the OFCCP will conduct an onsite audit to investigate those unresolved issues. Additionally, post-onsite follow up – such as additional document or data requests – may occur. At any stage, a compliance evaluation, the OFCCP can close the audit. Of course, the best case is receipt of a closure letter, which means that the OFCCP did not find any technical violations or other deficiencies. Conversely, the office may cite the contractor with technical violations such as the failure to post required notices. Such violations do not involve any monetary penalty; however, the contractor will need to take affirmative steps to correct the violations. If, however, the OFCCP alleges that the contractor engaged in, for example, hiring or pay discrimination, the OFCCP will seek to obtain monetary relief for the class of individuals affected by the contractor’s discriminatory actions.
Traditionally, the OFCCP has focused its efforts on supply and service contractors for compliance reviews. Since 2014, however, it has increasingly targeted construction contractors. Historically, the OFCCP has found that women and minorities (particularly African Americans) continue to be underrepresented in construction occupations. So, the risk of a constructor contractor being selected for an audit is on the rise.
Construction contractors normally will not receive a scheduling letter; rather, they may first receive a telephone call from a compliance officer and then a follow up letter scheduling an onsite audit. Unlike supply and service contractors, construction contractors do not get the benefit of a desk audit prior to an onsite audit. During the onsite audit, which may last two to three days (or more) depending on the size of the company and the number of jobs that are open, the OFCCP will interview management and visit open job sites to interview employees. The OFCCP also will collect affirmative action plans, review the contractors’ good faith efforts to achieve goals for minority and female participation and focus on compliance with the applicable 16 affirmative action steps outlined in the regulations.
Generally, those steps relate to recruitment practices, equal opportunity implementation and dissemination, equal opportunity and anti-harassment training for supervisors and managers, personnel operations and solicitation to small disadvantage business enterprises and minority and female owned business. Construction contractors must also make certain that their subcontractors and vendors are aware of their affirmative obligations under the OFCCP regulations as well as compliance with Davis-Bacon Act wage determinations. The contractor must maintain documentation to demonstrate that it has in good faith complied with those 16 steps. Failing to do so will result in technical violations of the regulations. The OFCCP will also analyze pay data for compliance with Davis-Bacon as well as for potential pay discrimination.
Those federal contractors who received a scheduling should use their time wisely to get audit ready. Construction contractors should ensure that they are audit ready at all times as they may not receive substantial advance notice of an onsite audit. All contractors should periodically conduct self-audits to help minimize potential liability and to put themselves in a position to successfully handle an OFCCP audit.
Donna M. Glover is an associate in Baker Donelson’s Baltimore office. She represents a wide variety of clients, including construction, property management, and scientific and technology solution companies, and not-for-profit organizations, some of which are federal contractors. She can be reached at email@example.com.