Tuesday, April 08, 2014

PRESIDENT OBAMA CELEBRATES EQUAL PAY DAY BY SIGNING NEW EXECUTIVE ORDER AND ISSUING A MEMO FOR FEDERAL CONTRACTORS

by Joanna Colosimo and David Morgan, Senior Consultants with DCI Consulting Group

Today, April 8, 2014, the White House hosted a press conference in honor of Equal Pay Day. Equal Pay Day symbolizes how far into 2014 women must work to earn what men earned in 2013, based on national pay averages. Lilly Ledbetter, the namesake of the Lilly Ledbetter Fair Pay Act that was signed by President Obama in 2009, kicked-off the festivities by speaking about her experiences at Goodyear Tire.

After a speech highlighting the pay gap, President Obama then signed the Executive Order prohibiting federal contractors from retaliating against employees who discuss their pay with each other. Furthermore, he is issuing a Presidential Memorandum instructing the Secretary of Labor to establish new regulations requiring federal contractors to submit summary compensation data by sex and race. According to the official White House Blog, this “will help employers take proactive efforts to ensure fair pay for all their employees.” More information about the Executive Order and the Memo can be found here. The President further called on Congress to vote “yes” for the Paycheck Fairness Act later this week. Stay tuned for a final copy of the Executive Order and Memo in a forthcoming DCI Client Alert.

Tuesday, April 01, 2014

98 MILLION DOLLAR SETTLEMENT IN UNITED STATES V. NYC FIREFIGHTER CASE

by Art Gutman, Ph.D., Professor, Florida Institute of Technology

We first reported on this case in an Alert on August 12, 2010. The case is interesting because it is a long-running adverse impact case that ultimately morphed into a disparate treatment case. Originally, the DOJ challenged two entry-level exams used by the NYC Fire Department (NYFD) on grounds of adverse impact and the Vulcan Society, which was permitted to intervene, also challenged on grounds of disparate treatment. All told, there were three major rulings by Judge Nicholas G. Garufis of the District Court for the Eastern District of New York and an appeals ruling by the 2nd Circuit. The settlement was agreed to after the 2nd Circuit ruling.

Regarding the first ruling [see 637 F.Supp. 2d 77], there was clear-cut evidence of adverse impact. Among 5,300 firefighter appointments between 1999 and 2007 only 184 blacks (out of 3,100) and 461 Hispanics (out of 4,200) were appointed. Judge Garufis evaluated the job relatedness of the two tests of the based on Guardians v. CSC (1980) [see [630 F.2d 79], a case that established five major steps for proving content validity that has since been accepted in all the circuit courts. He ruled that the NYFD did not show a sufficient relationship between firefighters' tasks and the tested abilities, the tests were written at an inappropriate reading level, and that testing professionals were not used to develop or validate the tests. He also ruled that pass/fail scores were arbitrary and unrelated to the job qualifications, and that differences in test scores were unrelated to differences in the qualifications of the candidates.

Regarding the second ruling, Judge Garufis permitted the NYFD to use a new exam that also produced adverse impact, pending proof of its job relatedness. However, he once again found the test was not valid [see 681 F. Supp. 2d 274], and this became a major issue in the disparate treatment claim. That led to the third ruling [683 F. Supp. 2d 225] in which Judge Garufis granted summary judgment for the plaintiffs on the disparate treatment claim on grounds that the NYFD did not successfully rebut prima facie evidence that it had acted with discriminatory intent when it failed to comply with acceptable test methods.

Had the third ruling stuck, it would have marked (at least in my opinion) the first ever successful disparate treatment challenge on grounds of intentional use of an invalid test known to produce adverse impact. However, the 2nd Circuit overturned the summary judgment [see 717 F.3d 72] and the settlement, reported by various sources on March 18, 2014 ensued. The 98 million dollar agreement applies to Black and Hispanics who took exams between 1999 and 2002 and did not get hired or were delayed in being hired because of the adverse impact of those tests.

HOUSE OF REPRESENTATIVES INQUIRES ABOUT DOL’S FUTURE PLANS FOR LGBT

by Rachel Gabbard, M.A., HR Analyst, and Dave Sharrer, M.S., Associate Consultant, DCI Consulting Group

In a letter addressed to Secretary of Labor Thomas Perez, 19 Democrats from the House of Representatives inquired about the extent to which the Department of Labor (DOL) plans to include lesbian, gay, bisexual, and transgender (LGBT) individuals in future equal employment initiatives. The content of the letter can be viewed here.

The letter, dated March 5, commended DOL on previous efforts to comprehend struggles faced by LGBT employees in obtaining employer benefits and family leave, but expressed that there is more work to be done in this area. The Representatives presented to DOL a list of 8 potential means of improving unemployment and discrimination faced by LGBT individuals.

Of particular interest, the letter inquired about DOL’s plans to utilize OFCCP enforcement to provide protection to LGBT employees under existing Executive Orders as well as potentially revising the sex discrimination provisions of EO 11246. The Representatives also asked about plans to incorporate sexual orientation and gender identity into the Bureau of Labor Statistics’ data collection.

The letter asked whether DOL plans to expand FMLA leave for LBGT employees, citing U.S. v. Windsor (2013), in which the U.S. Supreme Court ruled the Defense of Marriage Act unconstitutional. Additionally, the House Democrats requested guidance related to Macy v. Holder (2012), a case involving discrimination against a transgender federal employee that was classified as sex discrimination under Title VII.

It will be interesting to see what happens next. Based on the failure of the Employment Non-Discrimination Act (ENDA) to pass through Congress, it seems clear that legislative avenues for advancing LGBT employment rights are closed for now. This letter seems to signal intent to use alternative methods within the Executive Branch to accomplish that agenda. The Obama Administration has long-supported passage of ENDA, but has indicated it does not want to use the Executive Order to advance LGBT rights because that would only apply to federal contractors. Stay tuned.

WILL THE EXECUTIVE ORDER RAISING THE MINIMUM WAGE HURT CONTRACTORS?

By Mike Aamodt, Ph.D., Principal Consultant, DCI Consulting Group

On February 12, 2014, President Obama issued Executive Order 13658, increasing the hourly minimum wage paid by federal contractors from $7.25 to $10.10. The minimum wage for tipped workers will also increase from $2.13 to $4.90 per hour. These rates will be increased annually based on increases in the Consumer Price Index (decreases in the CPI will not result in a decrease in the minimum wage). The executive order will affect all new federal contracts signed on or after January 1, 2015.

It is unclear how the minimum wage increase will actually affect federal contractors and the tax payers. Labor Secretary Thomas Perez stated at a press conference that wages will increase for “hundreds of thousands,” although the Labor Department does not have any actual data on the potential effect of the executive order.

DCI’s analysis suggests that the executive order is largely symbolic and will have a minimal effect on most federal contractors: 97.1% of our clients’ non-union employees are already paid at or above $10.10 per hour. Of course, the executive order will have a larger effect on some contractors more than others. Whereas the increased minimum wage will have a negligible effect on most defense contractors, it is potentially devastating for contractors with a higher percentage of lower paid employees (e.g., janitorial, retail); especially if the federal contracts are only a small portion of the contractor’s revenue. Such contractors will be forced either to increase what they charge the federal government or opt to no longer be a federal contractor.

Both President Obama and Secretary Perez believe that the executive order will not increase the cost of new contracts to tax payers nor will contractors raise their contract amounts to pay for the increase in the minimum wage. According to Secretary Perez,
We estimate that the executive order will benefit hundreds of thousands of people directly by increasing their pay, but it will also improve taxpayers’ return on their investment. Higher wages make for a more productive workforce, thus improving the quality and efficiency of services provided to the government.

All federal agencies will be doing this within their existing budget. And the reason why this is the efficient thing to do is because when employers are paying a fair wage, they have a more efficient workforce. And when you have a workforce where you have less attrition, you have those sorts of efficiencies. So we’re confident that just like so many other private sector companies that have paid a fair wage and have low attrition and an efficient and effective workforce, that we will realize the same efficiencies here in the federal government.
The President has said many times that the federal government should set the example, and that’s exactly what we’re doing here.
If the federal government is setting the example here, it is puzzling why they did not also raise the minimum wage for federal employees. Although most federal employees are paid higher than $10.10 per hour, the minimum wage for the federal government itself is only $8.62 per hour (Grade 1, Step 1 of the 2014 general schedule).

SECRETARY OF LABOR ANNOUNCES MORATORIUM FOR TRICARE PROVIDERS

by Jana Garman, M.A, and Amanda Shapiro, M.S., Consultants, DCI Consulting Group

The Secretary of Labor, Thomas Perez, announced a moratorium on enforcement of affirmative action obligations for TRICARE providers. In a letter to several members of the Committee on Education and the Workforce and the Subcommittee Workforce Protections, Perez documented that for five years OFCCP would “limit its enforcement activities,” including the administrative closure of all open or scheduled compliance evaluations of TRICARE subcontractors. In addition to this letter to the House, OFCCP will issue an official directive that establishes the moratorium. During this five-year period, OFCCP will do “extensive outreach” which includes providing technical assistance training, convening listening sessions, and conducting webinars on OFCCP’s legal authorities and jurisdiction. This letter comes in response to several years of resistance from TRICARE providers on OFCCP jurisdiction.

OFCCP has a history of maintaining that TRICARE reimbursement establishes coverage as a supply and service contract under Executive Order 11246, VEVRAA and Section 503. The 2010 case of OFCCP v. Florida Hospital of Orlando brought to question this assumption and resulted in a favorable ruling for OFCCP with the conclusion that Orlando Hospital is a federal “subcontractor” subject to OFCCP enforcement actions, as discussed in greater detail in a prior blog by DCI Consulting. Resulting from this ruling, all hospitals and other health care providers that (1) met the $50,000 and 50 employee minimum requirements for contractor status and (2) accepted TRICARE reimbursement, became subject to OFCCP jurisdiction. An appeal was filed by Florida Hospital and other related cases have followed, demonstrating the unwillingness for TRICARE providers to accept this determination of jurisdiction without further discussion.

TRICARE providers breathed a sigh of relief in 2012 when President Obama signed into law the National Defense Authorization Act (NDAA), including an exemption for them from coverage as federal contractors. OFCCP responded by rescinding Directive 293 on coverage of health care providers and insurers. Still, OFCCP pressed forward on the continuing case with Florida Hospital, arguing jurisdiction under their definition of a subcontractor as “Under which any portion of the contractor’s obligation under any one or more contracts is performed, undertaken or assumed” by a subcontracting party. Until the current moratorium, it remained unclear whether OFCCP would maintain jurisdiction in cases with TRICARE providers. Although the moratorium is a temporary solution, other actions are simultaneously being taken to more permanently address the issue, such as Rep. Tim Walberg’s efforts to pass H.R. 3633: Protecting Health Care Providers from Increased Administrative Burdens Act. Wahlberg is the Chairman of the Subcommittee Workforce Protection and a recipient of the letter from Perez.

As a reminder, the moratorium does not preclude TRICARE providers from affirmative action obligations if they also hold separate prime contracts or subcontracts that meet the thresholds for compliance. Additionally, any complaints of discrimination submitted to OFCCP will continue to be investigated.

OFCCP ONSITE REVIEWS: BACK AND BETTER THAN EVER

by David Morgan, M.S., and Keli Wilson, M.A., Senior Consultants, DCI Consulting Group

OFCCP onsite visits had previously been on the decline, and were virtually non-existent as recently as fiscal year end 2013. However, onsite visits appear to be back, and OFCCP is focusing on compensation. This is not surprising given the agency’s compensation enforcement initiative catapulted by Directive 2013-03 (formerly known as Directive 307). The onsite reviews are typically preceded by frequent data requests for compensation variables during the desk audit.

The agency’s purpose as it relates to compensation-focused onsite investigations appears to be two-fold. First, investigators are interested in collecting information for off-site analysis, such that pay analysis groupings (PAGs) can be developed and analyzed using regression analysis. Recall that PAGs are Directive 2013-03 terminology meaning “group[s] of employees (potentially from multiple job titles, units, categories and/or job groups) who are comparable for purposes of the contractor's pay practices.” This type of onsite information collection may also be accompanied by close examination of positions in the workforce, including verifying that employees are doing work consistent with their job titles and descriptions. Second, investigators are interested in gathering evidence of compensation discrimination that is anecdotal in nature. This is apparent in the Federal Contractor Compliance Manual, which is the OFCCP procedural guide to conducting compliance evaluations, and through our awareness of OFCCP’s desire to schedule numerous manager and employee interviews while onsite.

In addition to the typical pay enforcement approaches that OFCCP has historically taken, the agency continues to examine contractors’ steering practices (i.e., whether or not certain groups of employees are disproportionately placed into certain jobs or families of jobs). It is clear that recent onsite visits are no exception to this enforcement strategy. Although the Department of Labor does not track OFCCP onsite visits in its public enforcement database, it is important to note that they are trending upward and are likely to continue to increase in fiscal year 2014.

OFCCP’S FY 2015 BUDGET – WHAT TO EXPECT FROM OFCCP

by Joanna Colosimo, M.A., Senior Consultant, and Vinaya Sakpal, M.A., Selection Analyst, DCI Consulting Group

Secretary of Labor Thomas Perez released President Obama’s FY 2015 budget on March 4, 2014, including a request for over $107 million for OFCCP. The total increase in the budget amount this fiscal year is almost $3 million, including 710 FTE (full-time equivalent) employees. The OFCCP budget may be viewed here.

In the FY 2014 budget, OFCCP proposed to increase its pay equity enforcement, as witnessed during recent audits with an increased focus on compensation. The same compensation enforcement trend is expected to continue in 2015, as outlined by an additional $1.1 million in the budget dedicated to strengthening efforts to eliminate pay discrimination affecting women. The FY 2015 budget request proposes an additional 10 FTEs to assist with this enforcement effort. Contractors should take note and prepare for further scrutiny related to gender-focused compensation differences in audits.

The budget request also outlines the agency’s accomplishments from funding used for FY 2013, including the completion of a total of 4,110 compliance evaluations resulting in over $7.8 million in back pay to almost 9,300 victims of discrimination. OFCCP achieved 97% of its compliance evaluation target as seen in the agency’s annual performance report of 2013. Further, OFCCP indicated it nearly tripled the number of compensation cases settled between FY 2010-2012.

Additional highlights in the budget request help outline future initiatives for OFCCP:

1. Increased enforcement
OFCCP proposes to complete 3,840 supply and service compliance evaluations that will examine federal contractors’ obligations under the statutes and executive order that OFCCP enforces. OFCCP proposes to complete 450 construction contractor reviews in FY 2015, for a total of 4,290 completed compliance evaluations. This makes a 2% increase over the FY 2013 target of 4,220. The FY 2014 target for total completed compliance evaluations is identical to FY 2015.

2. Scheduling Letter Changes
The budget outlines the intention of OFCCP to approve and release a revised scheduling letter and complaint form this year (FY 2014). Changes to the scheduling letter were proposed to collect disaggregate compensation data during a desk audit, job group and job title personnel activity data, among other changes. OFCCP will need Office of Management and Budget (OMB) approval before altering the scheduling letter and complaint forms. The proposed changes to the scheduling letter currently do not include additional requests related to the newly revised regulatory updates to Section 503 and VEVRAA.

3. Compensation Data Collection Tool
OFCCP plans to issue a Notice of Proposed Rulemaking (NPRMs) on a compensation data collection tool this year (FY 2014). An Advanced NPRM (ANPRM) was released in August 2011 regarding the development of a data collection instrument that would collect sex- and race-based compensation information from contractors. This would be a similar tool to the EO Survey that was rescinded in 2006.

4. Sex Discrimination Guidelines
OFCCP plans to update the existing sex discrimination guidelines as a part of the 2014-2015 fiscal years. The update to the sex discrimination guidelines has been an OFCCP initiative for several years; yet, to date, they have not been updated. There is speculation in the contractor community that the updates to the Sex Discrimination Guidelines may codify components of compensation Directive 307. Further speculation indicates that OFCCP may revise the sex discrimination guidelines so that contractors are required to share their gender-based compensation analyses with OFCCP.

5. Eliminating Discrimination in the construction industry
Evidence of egregious discrimination cases were seen in the construction industry and OFCCP will continue to ensure equal opportunity for women and minorities in FY 2015. OFCCP plans to take a number of steps toward this, which includes focusing more on larger and first-time contractors and contractors with high-impact ‘mega’ projects.

Friday, March 21, 2014

DISTRICT COURT JUDGE RULES IN FAVOR OF OFCCP’S NEW SECTION 503 RULE

by Dave Sharrer, M.S., Associate Consultant, DCI Consulting Group

A ruling was issued today by District Judge Emmet Sullivan in the case of Associated Builders & Contractors, Inc. v. Patricia A. Shiu in the United States District Court for the District of Columbia (the ruling may be viewed here). Associated Builders and Contractors (ABC) is a trade organization that represents the construction industry, including many federal contractors. The organization brought suit against Shiu, Director of OFCCP, to challenge the revisions to Section 503 of the Rehabilitation Act. The new rules take effect on Monday, March 24, 2014.

The Plaintiff’s suit claimed that OFCCP:
  1. Exceeded the agency’s statutory authority under Section 503, including imposing a data collection requirement that violates the Americans with Disabilities Act
  2. Failed to provide a rational explanation for the changes in the policy
  3. Failed to comply with the Regulatory Flexibility Act and Small Business Act
In his ruling, Judge Sullivan denied the ABC’s motion to enjoin portions of Section 503 and granted OFCCP’s cross motion for summary judgment. As a result, the new regulations will take effect on Monday as initially scheduled. Stay tuned for more information.

Monday, March 17, 2014

DIRECTIVE 307: A YEAR IN REVIEW

by Keli Wilson, M.A., Senior Consultant, Vinaya Sakpal, M.A., Selection Intern, and Mike Aamodt, Ph.D., Principal Consultant, DCI Consulting Group

It has been more than a year since OFCCP rescinded its Compensation Standards and issued Directive 307. As a result of this protocol change, OFCCP adopted a new method for grouping individuals for the purposes of reviewing compensation data. These groups are called Pay Analysis Groups (PAGs), which is a group of employees (potentially from multiple job titles, units, categories and/or job groups) who are comparable for purposes of the contractor’s pay practices (Directive 307). DCI Consulting Group released many blog articles over the past year related to the impact of Directive 307 in compliance evaluations; such as the change in policies for evaluating compensation data, the effects on the unit of analysis for conducting pay analyses, issues related to performing subgroup analyses and other audit trends.

Some additional trends we are noticing in compliance evaluations since the release of Directive 307 are worth highlighting to contractors. First, OFCCP has been initially screening Item 11 compensation data at the job group or salary grade level rather than by job title. This initial screen allows OFCCP to manage audits and determine whether to proceed with a focused review of the compensation system. However, once OFCCP receives an employment roster with individualized employee data, the actual compensation analysis is being conducted at the job title level. Although Directive 307 alludes to large PAGs, we have not yet seen these types of groupings during the early stages of an audit.

A second trend we have noticed is the scheduling of compensation phone interviews to learn about the contractor’s overall compensation system. OFCCP will use these phone interviews to better understand the factors used to determine pay (e.g., skills, responsibility, market data, education, performance ratings) and the different types of pay (e.g., base, overtime, shift, commission, bonus).

Although Directive 307 will eventually result in some major changes in how OFCCP conducts business, many of these changes have yet to take place. OFCCP has a continued focus on fair pay in the workplace, as emphasized in the FY 2015 budget requests. OFCCP plans to hire ten FTE workers with the “expertise to conduct the complex data analyses necessary for evaluating pay practices” (FY 2015 Budget). DCI will keep you updated via blog releases on any staff additions or new compensation trends observed in audits.

VETS ISSUES NOTICE OF PROPOSED RULEMAKING

by Amanda Shapiro, M.S., Consultant, DCI Consulting Group

The Veteran’s Employment and Training Service (VETS) recently published a Notice of Proposed Rulemaking (NPRM) for the reporting requirements under VEVRAA, currently known as the VETS-100 and VETS-100A reports.

The most significant change is the departure from reporting data by individual protected veteran category to an aggregate “protected veteran” count. Currently the collected data cannot be combined for a total, as employees are able to be counted in each category for which they qualify (thus, overlap might occur if categories were combined). VETS felt this would lead to more meaningful numbers for reporting to Congress and for contractors’ affirmative action efforts. They also cited improved employee privacy (i.e., if few disabled veterans are employed) as support for aggregate reporting. This change and others are summarized below:
  • Report veterans count in the aggregate rather than for each of the protected categories of veterans
  • Removal of “obsolete” rules at 41 C.F.R. part 61-250, thus removing the requirement to file VETS-100 reports
    • VETS does not believe any contracts entered into before December 1, 2003 still exist
    • This will make VETS's rules consistent with the soon-to-be-effective VEVRAA regulations issued by OFCCP
  • Change the name of the reporting from VETS-100A to VETS-4212
  • Revision to terms and definitions in Section 61-300.2 (e.g., addition of “protected veteran” and “active duty wartime or campaign badge veteran” and the removal of “covered veteran” and “other protected veteran”). 
  • Revise text of the reporting requirements clause included in Government contracts and subcontracts
VETS proposes that contractors begin complying with the reporting requirements in the revised regulations one year after the effective date of the final rule, thus these changes will not affect the 2014 VETS-100A reporting.

Comments on the proposed rule may be submitted through the Federal eRulemaking Portal (www.regulations.gov) under RIN number 1293-AA20 before April 25th.