New OFCCP Rule Changes Investigative Process—to the Detriment of Contractors

The US Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) recently issued a new final rule that will change how the agency investigates and enforces allegations of discrimination against federal contractors subject to EO 11246. The August 4 rule, which goes into effect on September 5, 2023, largely dismantles the policies established by a 2020 rule, which provided detailed notice and evidentiary standards for the agency’s pre-enforcement and conciliation procedures.

The 2020 Rule

The OFCCP finalized a rule in 2020 aimed at enhancing efficiency and “increas[ing] clarity and transparency” for federal contractors. [1] To accomplish these objectives, the 2020 rule established procedures and standards governing the agency’s obligations during the pre-enforcement and conciliation process.

The 2020 rule formalized a requirement that the OFCCP (1) issue a Pre-Determination Notice (PDN) to a contractor before issuing a Notice of Violation (NOV) and (2) provide the contractor with a 30-day window to respond to the PDN and rebut the agency’s findings prior to OFCCP’s referring a case for potential enforcement. The 2020 rule also allowed a contractor to expedite the conciliation process by waiving its right to a PDN or NOV and instead enter directly into conciliation discussions with the agency.

Crucially, the 2020 rule established heightened evidentiary requirements for the OFCCP to meet to support its claims in a PDN or NOV and compelled the agency to disclose in “sufficient detail” exactly what evidence—both quantitative and qualitative—it had discovered during its investigation.

The model and variables for any statistical analysis used by the OFCCP in preparing the PDN were to be included in that disclosure to allow the contractor to replicate the analysis and provide a response or rebuttal if applicable. Significantly, these standards provided contractors with ample information needed for assessing a claim of discrimination and determining an appropriate response.

The 2023 Rule

The OFCCP’s new final rule rescinds many of the standards and procedures established in the 2020 rule and, ostensibly, offers a more “flexible” approach to the pre-enforcement and conciliation process. [2] There are numerous changes in the 2023 rule, [3] but among the most significant is the elimination of the clear evidentiary standards governing PDNs.

The 2023 rule retains the requirement that, should the OFCCP uncover a potential violation, the agency must provide the contractor with a PDN prior to issuing an NOV. [4] However, the 2023 rule shortens the window for contractors to respond to a PDN from 30 days to 15 days (with extensions granted only for good cause). Moreover, under the 2023 rule, if the OFCCP identifies new evidence later in its investigation, the agency can identify those violations directly in an NOV or a Show Cause Notice (the final notice) without having to include this evidence in the PDN.

Notably, the 2023 rule abandons the requirement that the agency must meet specific evidentiary standards before it can issue a PDN or NOV. The 2023 rule also removes the requirement that the agency specify in “sufficient detail” the specific forms of “quantitative” and “qualitative” evidence it uncovered that supports its finding of discrimination and omits the definitions of and references to quantitative and qualitative evidence and practical significance altogether.

The 2023 rule also disposes of the OFCCP’s obligation to disclose the evidence supporting its finding of discrimination, including the statistical models and variables relied upon in the agency’s analysis. The OFCCP states that, despite the elimination of these obligations, “the PDN will continue to describe OFCCP’s preliminary findings of potential discrimination and any other potential violations to enable the contractor to understand OFCCP’s position and provide a substantive response. OFCCP will tailor the PDN to the facts and circumstances of each compliance evaluation.” [5]

Further, the new final rule makes important changes to the conciliation process. While the 2023 rule retains the expedited conciliation option, which allows a contractor to enter directly into conciliation if it chooses to bypass the notification procedures, the 2023 rule clarifies—and seemingly lowers—the level of effort required by the agency during such conciliation efforts. The OFCCP’s regulations provide that it should make “reasonable efforts” to “secure compliance through conciliation and persuasion.” [6]

While the 2020 rule did not specifically address what was meant by “reasonable efforts,” the 2023 rule clarifies that “reasonable efforts” will be construed in line with the conciliation provisions of Title VII. The US Supreme Court, however, has interpreted the conciliation provisions of Title VII to give the agency significant discretion, noting that an agency can determine for itself “the kind and amount of communication with an employer” that is appropriate during conciliation. [7]

The 2023 rule goes into effect on September 5, 2023 and “applies to any pre-enforcement notices and actions issued on or after the effective date.” In those instances where the OFCCP has issued a PDN to a contractor under the 2020 rule standards, but then proceeds to issue an NOV or Show Cause Notice after September 5, 2023, the 2023 rule standards will “apply to those notices.” [8]

Implications for Contractors

Contractors should be aware that the 2023 rule will provide the OFCCP with significantly more discretion and flexibility with respect to how it approaches the pre-enforcement and conciliation process. As such, contractors should anticipate increased variability in their interactions with the agency, as reliance on past experiences will not effectively serve as a blueprint for future investigations or pre-enforcement proceedings.

With the OFCCP’s process becoming clearer, contractors should take proactive measures to audit their policies, practices, and workforce data to understand their compliance with nondiscrimination laws before the OFCCP becomes involved.

Moving forward under the 2023 rule, contractors should engage with counsel as soon as an OFCCP audit commences. This will allow the contractor to work proactively to analyze its workforce information and understand how produced data may be analyzed by the OFCCP, which, in turn, will allow a contractor to respond to any PDN to determine if more information is needed to provide an adequate response or rebuttal.

If a contractor receives a PDN from the OFCCP on or after September 5, 2023, it will need to act swiftly to determine whether a response within the condensed time frame is necessary or good cause exists for an extension. Counsel can assist in ascertaining whether the contractor should consider expedited conciliation and support the contractor in navigating its negotiations with the OFCCP during the conciliation process.