Quick Hit: OFCCP’s new Directive 2019-02 sets forth Early Resolution Procedures (“ERP”) to resolve violations discovered during a desk audit of contractors with multiple establishments.  OFCCP touts that “ERP allows OFCCP and contractors with multiple establishments to cooperatively develop corporate-wide compliance with OFCCP’s requirements.”  Contractors who successfully resolve violations through ERP will be spared full scale compliance evaluations, but will have to agree to conciliation agreements that will include five years of monitoring and commitments to rectify similar issues at some or all of the contractor’s other establishments.  In return, contractors will receive a five-year moratorium on compliance evaluations of some or all of their establishments.

Key Takeaway: The Directive makes a lot of sense – for OFCCP.  ERP provides OFCCP a way to obtain a conciliation agreement rectifying violations without having to expend the resources required for a full compliance evaluation.  In addition, ERP provides OFCCP a way to get contractors to address violations at establishments beyond the one at issue in the compliance evaluation.

It is far less clear, however, if ERP makes sense for contractors.  On the plus side, contractors who conciliate through ERP will be able to short-circuit intrusive and costly compliance evaluations – including onsite visits and extensive (and often disruptive) employee interviews by OFCCP.  ERP also provides, in some cases, for a moratorium from compliance evaluations for five years – which any contractor would welcome.  Finally, ERP provides a mechanism to understand early in a compliance evaluation the issues on which OFCCP is focused, and an opportunity to correct any misunderstandings in advance of an onsite inspection.

But, the benefits come at a cost – primarily in the form of monitoring periods and mandated status reports – in some cases for a period of five years.  Moreover, in only some cases will the compliance evaluation moratorium apply to more than just one of the contractor’s establishments.

As with all OFCCP initiatives, whether the Directive is a welcome development will depend on how it is implemented and the circumstances involved.

More Detail: On November 30, 2018, OFCCP issued the Directive establishing ERP.  The ERP aim to “reduce the length of compliance evaluations through early and efficient resolutions,” in a manner that “maximizes OFCCP resources.”  ERP provide contractors with multiple establishments the opportunity, if offered by OFCCP, to resolve compliance violations on a company-wide or multi-establishment basis prior to the issuance of a Predetermination Notice or Notice of Violation, and without being subjected to an onsite visit.

The Directive sets out three sets of ERP:

 1. Non-Material Violations. The Directive anticipates that “non-material problems that can be corrected immediately during a desk audit” will be addressed through a closure letter referencing “the non-material violations and their remedies.”  Such non-material problems” include “an unacceptable AAP element” and “lack of good faith efforts.”  The Directive notes that this approach is consistent with OFCCP’s current practices.

2. Material Violations: Non-Discrimination. The Directive calls for OFCCP to seek to address more substantive violations that do not involve discrimination identified during a desk audit of a specific establishment, such as those associated with “record keeping, applicant tracking, failure to implement audit and reporting systems, and failure to conduct self‐analysis,” through an “Early Resolution Conciliation Agreement with Corporate‐Wide Corrective Action” (“ERCA”).  ERCAs, if agreed to by the contractor, will require the contractor to review its remaining establishments or a negotiated subset for similar violations and, if necessary, “implement corrective actions at those establishments to eliminate the violations(s) and prevent recurrence.”  ERCAs will require “progress reports,” in which the contractor “will report the results of its analysis, findings, any corrective actions, and will provide OFCCP with all supporting documents and information reasonably related to such a review.”

If a contractor enters into an ERCA for this type of violation, “OFCCP will not schedule a new compliance evaluation at that particular establishment for a five‐year period from the effective date of the ERCA.”  But that establishment “will be under progress report monitoring for part of the five‐year period,” and other establishments may be scheduled for compliance evaluations – even if they are covered by the ERCA.

3. Material Violations: Discrimination. If material discrimination violations are found during a desk audit, the violations may be resolved through a multi-step approach.  First, the compliance officer will promptly discuss the “desk audit findings and potential for ERP resolution” with OFCCP district and regional office management.

If the compliance officer receives approval, the officer will contact the contractor to schedule “essential” interviews “by phone or videoconference” to assess the violations, as well as data in order to “identify potential affected applicants and/or employees, and calculate the estimated monetary remedy.” The Directive anticipates that contractors will be provided 14 days to provide requested information.  After OFCCP receives the information, it is to “expedite and seek to complete a refined analyses in 14‐calendar days.”  If the analyses still indicate potential discrimination, the compliance officer, Assistant District Director and/or District Director will contact the contractor to offer the ERP option.”

If the contractor seeks to engage in ERP, it must meet with OFCCP within 14-calendar days of agreeing to do so. During that meeting, the parties will discuss “OFCCP’s findings, proposed remedy, and corrective actions.” The contractor is free to provide OFCCP additional information that it contends mitigates or eliminates the discrimination indicators found by OFCCP.

As part of this ERP conciliation, OFCCP will seek “make‐whole relief for affected class members, which may include back pay, job offers to affected class members that OFCCP has found to meet minimum/preferred qualifications, salary adjustments and/or other appropriate remedies and corrective actions.”  Any ERCA reached will require the contractor to review all, or a negotiated subset, of its remaining establishments for similar violations, and implement any necessary “corrective actions at those establishments to eliminate the violations(s) and prevent recurrence.” Corrective actions “may include job offers to affected class members that OFCCP has found to meet certain qualifications, salary adjustments and/or other appropriate corrective actions.”

ERCAs will include a five-year monitoring period where contractors will submit semi-annual progress reports to OFCCP.  In such reports, “the contractor will report the results of its analysis, findings, any corrective actions, and will provide OFCCP with all supporting documents and information reasonably related to such a review.”  For contractors that enter into an ERCA, “OFCCP will not schedule any of the contractor’s establishments covered by the ERCA for a new compliance evaluation for the five‐year period, concurrent with monitoring, from the effective date of the ERCA.”

OFCCP anticipates that ERP conciliation efforts should be completed within two months, but provides that OFCCP can provide extensions if the parties are “making substantial progress towards an agreement”

Resolving the matter at this stage with an ERCA will avoid further investigation by OFCCP, including an onsite visit. However, if conciliation efforts fail during the ERP, “OFCCP will immediately request any additional data and records it needs to continue the compliance evaluation.”

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Photo of Guy Brenner Guy Brenner

Guy Brenner is a partner in the Labor & Employment Law Department and co-head of the Non-Compete & Trade Secrets Group. He has extensive experience representing employers in both single-plaintiff and class action matters, as well as in arbitration proceedings. He also regularly assists federal government contractors with the many special employment-related compliance challenges they face.

Guy represents employers in all aspects of employment and labor litigation and counseling, with an emphasis on non-compete and trade secrets issues, medical and disability leave matters, employee/independent contractor classification issues, and the investigation and litigation of whistleblower claims. He assists employers in negotiating and drafting executive agreements and employee mobility agreements, including non-competition, non-solicit and non-disclosure agreements, and also conducts and supervises internal investigations.

Photo of Alex Weinstein Alex Weinstein

As a Labor & Employment associate, Alex Weinstein represents employers in all aspects of employment litigation and counseling. One of Alex’s primary practice areas involves advising federal government contractors and subcontractors on unique employment, affirmative action and other compliance issues that arise in the government contracts sphere. Some examples of his work include developing and implementing policies and programs; conducting internal audits and investigations; preparing affirmative action plans; advising contractors and subcontractors with respect to all aspects of Office of Federal Contract Compliance Programs (OFCCP), Service Contract Act (SCA) and Davis-Bacon Act compliance; and defending clients during OFCCP and Department of Labor audits and enforcement proceedings.

Alex’s practice also includes defending companies in both federal and state courts in various industries. His litigation practice has included class and collective actions, general labor and employment, executive disputes, whistleblower claims, government contractor compliance, employee mobility disputes and wage and hour litigation. He also advises clients on all aspects of employment law, including wage and hour practices, whistleblowers, trade secret and confidential information protection in relation to the Defend Trade Secrets Act of 2016, leave policies, reductions in force, labor relations, flu vaccination policies and FMLA and ADA compliance and administration.