Five New Directives From the OFCCP for Federal Contractors

The Office of Federal Contract Compliance Programs (OFCCP) ended the summer of 2018 by issuing five new policy directives. Although directives do not change applicable laws or regulations or establish legally enforceable rights or obligations, they are instructive as to the OFCCP’s enforcement and compliance policies and procedures. Federal contractors and subcontractors should familiarize themselves with these latest releases from the OFCCP and watch for additional guidance in the coming months.

The Evolving Religious Exemption (Directive 2018-03)

Directive 2018-03 instructs OFCCP staff to consider recent developments in the law regarding religious-exercising organizations and individuals, including recent U.S. Supreme Court decisions and White House Executive Orders addressing the broad freedoms and antidiscrimination protections that must be afforded religious-exercising organizations and individuals under the U.S. Constitution and federal law. Notably, the OFCCP has not yet addressed these legal developments in its regulations or formal guidance, and the Directive neither overturns Executive Order 11246 and its regulations (which cover sexual orientation and gender identity) nor directly expands the religious exemption. But, the Directive does supersede any previous guidance inconsistent with these legal developments, including the section in OFCCP’s Frequently Asked Questions: Sexual Orientation and Gender Identity regarding “Religious Employers and Religious Exemption.”

New Territory for Focused Review Audits (Directive 2018-04)

Focused review audits — although rarely invoked historically — involve in-depth examination of a contractor’s compliance with certain federal affirmative action obligations, including an on-site visit. Directive 2018-04 states that a portion of future scheduling lists will include focused reviews as to each of the three authorities that OFCCP enforces — Executive Order 11246, Section 503 of the Rehabilitation Act and the Vietnam Era Veterans Readjustment Assistance Act (VEVRAA). Many of the OFCCP’s recent audits have focused on compliance with the Executive Order, so examination of Section 503 and VEVRRA compliance will be new territory. OFCCP staff are in the process of developing standard protocol for conducting focused reviews (which will be publicly available in FAQs before the next scheduling list is issued) and contractor education and compliance assistance resources. 

More Transparent Analysis of Contractor Compensation Practices (Directive 2018-05)

Since 2013, the OFCCP has relied on murky Directive 2013-03 (Procedures for Reviewing Contractor Compensation Systems and Practices) to describe its analytical procedures when evaluating potential systematic compensation violations of Executive Order 11246. With the Trump administration’s OFCCP thematic nod to transparency, Directive 2018-05 rescinds Directive 2013-03 and purports to: 

• Clarify and provide additional information to contractors about its approach to conducting compensation evaluations.
• Support compliance and compensation self-analyses by contractors under applicable law and OFCCP regulations and practices.
• Generally improve compensation analysis consistency and efficiency during audits.

This Directive provides welcome information about the agency's practices and approaches to determining similarly situated employees, creating pay analysis groups, conducting statistical analysis and modeling, and other analytical matters for conducting sound compensation compliance evaluations and contractors' self-audits. 

A New Contractor Recognition Program (Directive 2018-06)

The stated purpose of Directive 2018-06 is to recognize contractors that are innovative thought leaders among their peers for achieving diverse and inclusive workplaces with high-quality, high-performing compliance programs and initiatives. This is part of the OFCCP’s efforts to expand the agency’s reach while providing compliance assistance to contractors and helping contractors reduce the cost and burden of compliance. The OFCCP’s proactive approach will also provide contractors with a range of compliance assistance tools and resources, including:  

• A contractor recognition program that highlights implementable best or model contractor practices.
• A contractor mentoring program that leverages contractors to help their peers improve compliance.
• Other initiatives that provide opportunities for contractors to collaborate or provide feedback to OFCCP on its compliance assistance efforts.

Affirmative Action Program Verification Initiative (Directive 2018-07)

Currently, contractors’ annual affirmative action programs (AAPs) are not provided to the OFCCP except in response to an audit. Directive 2018-07 establishes an initiative to consider a program for verifying compliance by all contractors with its annual AAP obligations. This program may include: 

• Annual compliance certification with AAP requirements for contractors (with increased likelihood of being identified for an audit for contractors that fail to certify compliance).
• Compliance checks to verify contractor compliance with AAP requirements.
• Requesting proffer of the AAP by contractors requesting extensions of time to provide supporting data in response to an audit letter.
• Developing information technology to collect and facilitate review of AAPs provided by contractors.

OFCCP will also prepare a public outreach and education campaign on this initiative, encouraging contractors to contact the agency for compliance assistance regarding AAPs.