[Federal Register Volume 85, Number 218 (Tuesday, November 10, 2020)]
[Rules and Regulations]
[Pages 71553-71575]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24858]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Office of Federal Contract Compliance Programs
41 CFR Parts 60-1, 60-2, 60-300, and 60-741
[OFCCP-2019-0007-0001]
RIN 1250-AA10
Nondiscrimination Obligations of Federal Contractors and
Subcontractors: Procedures To Resolve Potential Employment
Discrimination
AGENCY: Office of Federal Contract Compliance Programs, Labor.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Department of Labor (``the Department'') publishes
this final rule to codify procedures that the Office of Federal
Contract Compliance Programs (``OFCCP'' or ``the agency'') uses to
resolve potential discrimination and other material violations of the
laws and regulations administered by OFCCP applicable to Federal
contractors and subcontractors, add clarifying definitions to specify
the types of evidence OFCCP uses to support its discrimination
findings, and correct the title of OFCCP's agency head.
DATES: These regulations are effective December 10, 2020.
FOR FURTHER INFORMATION CONTACT: Tina Williams, Director, Division of
Policy and Program Development, Office of Federal Contract Compliance
Programs, 200 Constitution Avenue NW, Room C-3325, Washington, DC
20210. Telephone: (202) 693-0103 (voice) or (202) 693-1337 (TTY).
SUPPLEMENTARY INFORMATION:
Background
A. Legal Authority
OFCCP administers and enforces Executive Order 11246, as amended
[[Page 71554]]
(E.O. 11246); section 503 of the Rehabilitation Act of 1973, as
amended, 29 U.S.C. 793 (section 503); and the Vietnam Era Veterans'
Readjustment Assistance Act of 1974, as amended, 38 U.S.C. 4212
(VEVRAA); and their implementing regulations.\1\ Collectively, these
laws require Federal contractors and subcontractors \2\ to take
affirmative action to ensure equal employment opportunity, and not
discriminate on the basis of race, color, religion, sex, sexual
orientation, gender identity, national origin, disability, or status as
a protected veteran. Additionally, E.O. 11246 prohibits a contractor
from discharging or otherwise discriminating against applicants or
employees who inquire about, discuss, or disclose their compensation or
that of others, subject to certain limitations.
---------------------------------------------------------------------------
\1\ OFCCP will also begin enforcing Section 4 of Executive Order
13950, ``Combating Race and Sex Stereotyping'' for Federal contracts
or subcontracts entered on or after November 21, 2020. OFCCP is
currently implementing this Executive order.
\2\ Hereinafter, the terms ``contractor'' and ``Federal
contractor'' are used to refer collectively to contractors and
subcontractors that fall under OFCCP's authority, unless otherwise
expressly stated.
---------------------------------------------------------------------------
Issued in 1965, and amended several times in the intervening years,
E.O. 11246 has two principal purposes. First, it prohibits covered
Federal contractors and subcontractors from discriminating against
employees and applicants because of race, color, religion, sex, sexual
orientation, gender identity, national origin, or because they inquire
about, discuss, or disclose their compensation or that of others,
subject to certain limitations. Second, it requires covered Federal
contractors and subcontractors to take affirmative action to ensure
equal employment opportunity.
The requirements in E.O. 11246 generally apply to any business or
organization that (1) holds a single Federal contract, subcontract, or
federally assisted construction contract in excess of $10,000; (2) has
Federal contracts or subcontracts that combined total in excess of
$10,000 in any 12-month period; or (3) holds Government bills of
lading, serves as a depository of Federal funds, or is an issuing and
paying agency for U.S. savings bonds and notes in any amount. Supply
and service contractors with 50 or more employees and a single Federal
contract or subcontract of $50,000 or more also must develop and
maintain an affirmative action program that complies with 41 CFR part
60-2. Construction contractors have different affirmative action
requirements under E.O. 11246 at 41 CFR part 60-4.
Enacted in 1973, and amended since, the purpose of section 503 is
twofold. First, section 503 prohibits employment discrimination on the
basis of disability by Federal contractors. Second, it requires each
covered Federal contractor to take affirmative action to employ and
advance in employment qualified individuals with disabilities. The
requirements in section 503 generally apply to any business or
organization that holds a single Federal contract or subcontract in
excess of $15,000.\3\ Contractors with 50 or more employees and a
single Federal contract or subcontract of $50,000 or more also must
develop and maintain an affirmative action program that complies with
41 CFR part 60-741, subpart C.
---------------------------------------------------------------------------
\3\ Effective October 1, 2010, the coverage threshold under
section 503 increased from $10,000 to $15,000, in accordance with
the inflationary adjustment requirements in 41 U.S.C. 1908. See
Federal Acquisition Regulation; Inflation Adjustment of Acquisition-
Related Thresholds, 75 FR 53129 (Aug. 30, 2010).
---------------------------------------------------------------------------
Enacted in 1974 and amended in the intervening years, VEVRAA
prohibits Federal contractors and subcontractors from discriminating
against employees and applicants because of status as a protected
veteran (defined by the statute to include disabled veterans, recently
separated veterans, Armed Forces Service Medal Veterans, and active
duty wartime or campaign badge veterans). It also requires each covered
Federal contractor and subcontractor to take affirmative action to
employ and advance in employment these veterans. The requirements in
VEVRAA generally apply to any business or organization that holds a
single Federal contract or subcontract in excess of $150,000.\4\
Contractors with 50 or more employees and a single Federal contract or
subcontract of $150,000 or more also must develop and maintain an
affirmative action program that complies with 41 CFR part 60-300,
subpart C.
---------------------------------------------------------------------------
\4\ Effective October 1, 2015, the coverage threshold under
VEVRAA increased from $100,000 to $150,000, in accordance with the
inflationary adjustment requirements in 41 U.S.C. 1908. See Federal
Acquisition Regulation; Inflation Adjustment of Acquisition-Related
Thresholds, 80 FR 38293 (July 2, 2015).
---------------------------------------------------------------------------
Pursuant to these laws, receiving a Federal contract comes with a
number of responsibilities. Contractors are required to comply with all
provisions of these laws as well as the rules, regulations, and
relevant orders of the Secretary of Labor. Where OFCCP finds
noncompliance under any of the three laws or their implementing
regulations, it utilizes established procedures to either facilitate
resolution \5\ or proceed to administrative enforcement as necessary to
secure compliance.\6\ A contractor found in violation who fails to
correct violations of OFCCP's regulations may, after the opportunity
for a hearing, have its contracts canceled, terminated, or suspended
and/or may be subject to debarment.\7\
---------------------------------------------------------------------------
\5\ 41 CFR 60-1.28, 60-1.33, 60-300.62, 60-300.64, 60-741.62,
and 60-741.64; Federal Contract Compliance Manual Chapter 8 (Dec.
2019); Directive 2019-02, ``Early Resolution Procedures'' (Nov. 30,
2018); Directive 2018-01, ``Use of Predetermination Notices (PDN)''
(Feb. 27, 2018).
\6\ 41 CFR 60-1.26, 60-300.65, and 60-741.65.
\7\ 41 CFR 60-1.27, 60-300.66, and 60-741.66.
---------------------------------------------------------------------------
B. Overview of Rule
The Department publishes this final rule to increase clarity and
transparency for Federal contractors, establish clear parameters for
OFCCP resolution procedures, and enhance the efficient enforcement of
equal employment opportunity laws. The rule will help OFCCP to increase
the number of contractors that the agency evaluates and focus on
resolving stronger cases through the strategic allocation of limited
agency resources. The procedures codified in the final rule aim to
achieve that end by increasing the transparency of OFCCP's operations
so that contractors and OFCCP can resolve potential violations through
a clear, mutual understanding of the issues. The final rule also
enables OFCCP to pursue resolution of stronger cases efficiently and as
early in the compliance evaluation process as possible, through the
Predetermination Notice (PDN) procedures and the early resolution
conciliation option. Critically, the final rule establishes consistent
parameters for findings and preliminary findings of discrimination, and
provides contractors with more certainty as to OFCCP's operative
standards for compliance evaluations, and provides guardrails on the
agency's issuance of pre-enforcement notices. The Department issues
this rule as an exercise of its enforcement discretion to focus OFCCP's
resources on those cases with the strongest evidence. This approach is
neither compelled nor prohibited by Title VII and OFCCP case law.
On December 30, 2019 (84 FR 71875), the Department published a
notice of proposed rulemaking (NPRM) to codify provisions that provide
contractors with greater certainty about the procedures that OFCCP
follows during compliance evaluations to resolve employment
discrimination and other material violations of the laws it enforces.
Specifically, the Department proposed
[[Page 71555]]
to codify two formal notices that the agency uses when it finds
potential violations: The PDN and the Notice of Violation (NOV). Since
1988, these procedures have been embedded in the Federal Contract
Compliance Manual (FCCM), the primary document used by agency staff as
the procedural framework for the execution of quality and timely
compliance evaluations and complaint investigations. The Department
proposed to clarify the different types of evidence that it uses to
support a PDN or NOV through the addition of definitions for
``statistical evidence'' and ``nonstatistical evidence.'' To increase
efficiency, the Department also proposed to codify an option that
allows contractors to expedite the conclusion of a compliance
evaluation by entering directly into a conciliation agreement prior to
issuance of a PDN or NOV. Finally, the Department proposed to update
outdated references to the official title of OFCCP's agency head from
``Deputy Assistant Secretary'' to ``Director.''
After careful consideration of the comments received in response to
its proposal, the Department has decided to finalize the rule with
several key changes. First, the final rule clarifies that the
evidentiary standards OFCCP must meet in order to issue a PDN in a
discrimination case must also be met before issuing NOVs. Second, OFCCP
changed the terms that the final rule defines from ``statistical
evidence'' and ``nonstatistical evidence'' to ``quantitative evidence''
and ``qualitative evidence,'' to provide greater clarity as to the
types of evidence that OFCCP collects and how it uses the different
types of evidence to support the issuance of pre-enforcement notices.
Third, the final rule differentiates the procedures followed for
disparate treatment and disparate impact theories of discrimination,
which have separate, although similar, elements, and provides clarity
on the evidentiary standards OFCCP will have to meet to issue pre-
enforcement notices under each legal theory. Fourth, the final rule
requires OFCCP to provide qualitative evidence supporting a finding of
discriminatory intent for all cases proceeding under a disparate
treatment theory, subject to certain enumerated exceptions. Fifth, in
order to issue a PDN or NOV in cases involving a disparate impact
theory of discrimination, the final rule requires OFCCP to identify the
policy or practice of the contractor causing the adverse impact with
factual support demonstrating why such policy or practice has a
discriminatory effect. Sixth, the final rule clarifies that OFCCP must
explain in detail the basis for its findings in pre-enforcement
notices, obtain approval from the OFCCP Director or acting agency head,
and, upon the contractor's request, provide the model and variables
used in the agency's statistical analysis and an explanation for any
variable that was excluded from the statistical analysis. Seventh, in
the final rule OFCCP extends the amount of time contractors have to
respond to a PDN to 30 days with the possibility of extension, as
opposed to the 15 days proposed in the NPRM, in response to comments
requesting more time to respond. These changes are fully explained
below. In addition, in response to several commenters, OFCCP provides
additional guidance in this preamble on how it will measure practical
significance.
This final rule is an Executive Order (E.O.) 13771 regulatory
action. Pursuant to the Congressional Review Act (5 U.S.C. 801 et
seq.), OIRA designated that this rule is not a ``major rule,'' as
defined by 5 U.S.C. 804(2). Details on the estimated costs of this rule
can be found in the economic analysis below.
C. Need for Rulemaking
As stated above, the Department believes this rule is needed to
increase clarity and transparency for Federal contractors, establish
clear parameters for OFCCP resolution procedures, and enhances the
efficient enforcement of equal employment opportunity laws, but one
commenter, a compliance consulting firm, specifically questioned the
need for rulemaking. The commenter objected to codification of OFCCP's
resolution procedures, asserting that it would be better for OFCCP to
update the FCCM or the agency's directives system. OFCCP is guided by
four central principles: Certainty, efficiency, recognition, and
transparency. This focus is informed at least in part by criticisms the
agency received in previous years that OFCCP has at times lacked
sufficient transparency, clarity, certainty, and timeliness in its
dealings with contractors, and criticisms stating that the agency has
brought cases without an adequate evidentiary foundation.\8\ While many
of these criticisms have been addressed by directives and other
guidance in the intervening years, this final rule further addresses
such concerns by codifying procedures that already exist in the FCCM
and agency guidance with some additional modifications to improve
clarity and transparency. The FCCM and agency directives are not
legally binding and have not gone through formal notice and public
comment. Therefore, they do not provide the same level of certainty
that this final rule does. See, e.g., Promoting Regulatory Openness
Through Good Guidance (PRO Good Guidance), 85 FR 53163 (Aug. 28, 2020);
see also E.O. 13924, Sec. 6(e), 85 FR 31353, 31355 (May 22, 2020)
(``All rules of evidence and procedure should be public, clear, and
effective.''); id. Sec. 6(i) (``Administrative enforcement should be
free of unfair surprise.'').\9\ A notice-and-comment rulemaking process
also ensures that the public's views are heard and that the agency
gains the benefit of public input that can improve the content of the
final rule. Codifying the use of PDNs, NOVs, and an early conciliation
option promotes predictability, efficiency, and timeliness.
Additionally, the final rule establishes guardrails on the agency's
issuance of pre-enforcement notices and the allocation of agency
resources by providing clear evidentiary standards that OFCCP must meet
to pursue preliminary findings and findings. The Department will
continue to examine means of furthering both these goals through other
rulemakings and guidance documents, as appropriate.
---------------------------------------------------------------------------
\8\ See, e.g., U.S. Chamber of Commerce, OFCCP: Right Mission,
Wrong Tactics--Recommendations for Reform (Sept. 21, 2017),
www.uschamber.com/report/ofccp-right-mission-wrong-tactics-recommendations-reform.
\9\ OFCCP will update the FCCM in light of this final rule and
revise or repeal any directives as needed.
---------------------------------------------------------------------------
Section by Section Analysis
A. Definitions
To provide greater clarity and certainty to Federal contractors,
the rule defines ``qualitative evidence'' and ``quantitative
evidence,'' which OFCCP uses to support a finding or preliminary
finding of discrimination in a PDN or NOV. In the NPRM, OFCCP proposed
to add definitions for ``nonstatistical evidence'' and ``statistical
evidence.'' In response to comments on the proposed definitions, the
Department revises the terms to ``qualitative evidence'' and
``quantitative evidence,'' respectively, and provides additional
clarifying language in the final rule to address issues raised by
commenters.
The term ``qualitative evidence'' is defined in the final rule to
include the various types of documents, testimony, and interview
statements that OFCCP collects during its compliance evaluations
relevant to a finding of discrimination, and clarifies the purposes for
which it will be used.
[[Page 71556]]
The term ``quantitative evidence'' is included to clarify the
support needed for OFCCP to determine that there is a statistically
significant disparity in a contractor's employment selection or
compensation outcomes affecting a group protected under OFCCP's laws.
The definition of ``quantitative evidence'' in the final rule also
includes quantitative analyses, such as cohort analyses, which are
comparisons of similarly situated individuals or small groups of
applicants or employees that are numerical in nature but do not use
hypothesis testing techniques. Both terms are germane to the resolution
procedures that this rule codifies.
The change in terminology helps better capture the distinction
between these types of evidence. The term ``qualitative evidence''
gives an affirmative, descriptive label to the types of evidence that
fall into that category. The term ``quantitative evidence'' better
encapsulates OFCCP's analytical evidence given the agency's use of
descriptive statistics and non-parametric and cohort analyses, in
addition to a variety of statistical tests based on hypothesis testing.
Quantitative analysis involves numerical comparisons, but it is not
limited to the sort of hypothesis testing that OFCCP typically performs
in systemic assessments of pay or selection outcomes, which might be
more clearly thought of as ``statistical evidence.'' By contrast, the
term ``quantitative evidence'' comfortably describes all these types of
numerical analyses.
The change in terminology also allows a clear delineation of the
rules governing the sufficiency of the evidence required for OFCCP to
issue a PDN or NOV. As explained more fully below, the Department has
decided that, subject to certain exceptions, OFCCP will issue a PDN or
NOV only if there is quantitative (i.e., statistical or other
numerical) evidence, practical significance, and qualitative evidence.
The broader definition of quantitative evidence means that OFCCP does
not necessarily need statistical evidence; and the Department similarly
changed the title of nonstatistical evidence to qualitative evidence.
The exceptions to the general rule also use these modified definitions,
as discussed below.
1. Qualitative Evidence
The definition of ``qualitative evidence'' provides a nonexhaustive
list of types of anecdotal and other evidence that OFCCP considers
before and relies upon in issuing a PDN. Such evidence is not the
result of statistical analysis or other quantitative comparisons, and
may be probative of a contractor's discriminatory or non-discriminatory
intent. In response to comments received, and in order to provide
greater clarity, the definition in the final rule has been revised to
further clarify the meaning of qualitative evidence, and to provide
additional explanation regarding how OFCCP uses it during its
compliance evaluations.
Before issuing a PDN, OFCCP assesses qualitative evidence obtained
during the course of its compliance evaluations. In order to proceed
under a disparate treatment theory of liability, OFCCP must generally
provide qualitative evidence that justifies a finding of discriminatory
intent, whether on its own or in combination with quantitative
evidence. Qualitative evidence in such cases may include factual
testimony, interview statements, written communications, documentation,
internal company policies, or other evidence that supports an inference
of intentional discrimination towards members of a protected class,
particularly when made by a decision maker involved in the action under
investigation, or evidence that weighs against such an inference.
Importantly, OFCCP may proceed with issuing a PDN where the qualitative
evidence is particularly strong, such as when the agency encounters a
facially discriminatory policy or a contractor has admitted to
discriminatory conduct.
Examples of qualitative evidence from previous OFCCP compliance
reviews help illustrate the meaning of the term. For example, consider
a company president who sent an email to managers stating his concern
that women were unable to lift heavy objects and that, if women were
hired for stockroom positions, there would be a higher risk of on-the-
job injuries, which would impact the company's profitability. If this
rationale was used to exclude women from stockroom positions due to
their sex, rather than basing selection on applicants' physical ability
to perform the required tasks, the president's email would be an
example of qualitative evidence supporting an inference of
discriminatory intent. Often the evidence is less direct: In a hiring
case involving management trainee positions for which prior sales and
customer service experience were stated criteria, OFCCP gathered
qualitative evidence regarding individual rejected applicants who had
much stronger experience in those areas than certain hires.
Qualitative evidence may include information obtained through
testimony or other documentation of individuals who were denied
information or who were provided misleading or contradictory
information about the contractor's employment or compensation practices
in circumstances that suggest discriminatory treatment based on a
protected characteristic. OFCCP may also consider interview statements
or other documentary evidence concerning a contractor using broad
discretion or subjectivity in hiring, promotion, or compensation
decisions in conjunction with evidence suggesting the discretion or
subjectivity has been used to discriminate based on a protected
characteristic, although the final rule clarifies that the mere fact
broad discretion or subjectivity exists does not, in and of itself,
demonstrate that an employment action is discriminatory.\10\ Testimony
or interview statements that OFCCP relies upon in issuing a PDN may not
consist wholly of mere assumptions or purely speculative reasoning
about the contractor's actions, but must include some objective factual
basis from which to infer discriminatory intent. For example, a
witness's statement merely conveying his or her subjective belief that
the contractor discriminated would not be sufficient. However, a
witness's statement that a particular manager discriminated against him
or her that was backed by specific examples of problematic or unequal
treatment would be evidence of discriminatory intent.
---------------------------------------------------------------------------
\10\ See, e.g., OFCCP v. Analogic Corp., 2017-OFC-00001, at 41
n.60 (Rec. Dec. & Order Mar. 22, 2019) (``[t]he fact that hiring
criteria or practices are subjective, and are thus susceptible to
discriminatory application, is only marginally relevant to the
question of discriminatory intent in the absence of proof that the
criteria were, in fact, applied in a discriminatory manner.'')
(quoting Gay v. Waiters' & Dairy Lunchmen's Union, Local No. 30, 694
F.2d 531, 554 (9th Cir. 1982)); see generally Wal-Mart Stores Inc.
v. Dukes, 564 U.S. 338, 355 (2011) (holding policy of allowing
supervisory discretion over employment matters showed ``the opposite
of a uniform employment practice that would provide commonality
needed for a class action'' claiming disparate treatment of female
workers); cf. White v. Rice, 46 F.3d 1130 (4th Cir. 1995) (``such a
subjective belief [of gender discrimination] cannot serve as the
basis for judicial relief'').
---------------------------------------------------------------------------
OFCCP may also use qualitative evidence to rebut a contractor's
explanation for statistical disparities or its critique of OFCCP's
statistical analysis. For example, in one recent case a contractor
argued that OFCCP should have included in its statistical analysis a
variable to account for applicants who held an asbestos removal
license, which was a requirement for employment. OFCCP presented
qualitative evidence consisting of a hiring official's testimony that
he hired workers without an asbestos removal license, testimony from an
individual who attended a
[[Page 71557]]
recruiting session where the contractor stated that it provided a 4-day
training course for new hires on asbestos removal, and testimony from
the owner who started the asbestos training school onsite.\11\
---------------------------------------------------------------------------
\11\ See OFCCP v. WMS Solutions, Inc., 2015-OFC-09, (Rec. Dec. &
Order May 12, 2020).
---------------------------------------------------------------------------
One comment requested that the final rule require anecdotal
evidence as a condition of issuing a PDN, and that anecdotal evidence
should be defined consistent with established authority as evidence
that leads to an inference of disparate treatment. OFCCP has amended
the final rule to require qualitative evidence, along with sufficient
quantitative evidence and practical significance (as specified below),
for all PDNs issued under a disparate treatment theory of liability,
with clearly delineated exceptions. OFCCP has also revised the
definition of qualitative evidence as described in the preceding
paragraphs to clarify that anecdotal evidence includes facts that are
relevant to determining a contractor's discriminatory or non-
discriminatory intent, the business necessity (or lack thereof) of a
challenged policy or practice, or whether the contractor has otherwise
complied with its non-discrimination obligations.\12\
---------------------------------------------------------------------------
\12\ To be clear, evidence demonstrating that the challenged
selection procedure is consistent with business necessity does not
need to be provided by OFCCP, but rather by the contractor. Once
provided, however, such evidence may be relevant when the agency is
determining whether to issue an NOV or SCN.
---------------------------------------------------------------------------
Other comments on OFCCP's proposed definition of ``nonstatistical
evidence'' (now ``qualitative evidence'' in this final rule) sought to
have testimony on the extent of ``subjectivity involved in making
employment decisions'' removed as an example, or to provide further
explanation as to how and when subjectivity could be used to support
findings of discrimination. OFCCP declines to remove this example
altogether because first-hand testimony about the level of subjectivity
involved in a decision may, in certain cases, bolster other evidence of
disparity.\13\ For example, in one case,\14\ OFCCP gathered qualitative
evidence to investigate a hiring issue where African-American
applicants were disproportionately screened out based on two
disposition codes, one of which related to a subjectively applied
credit check. In that case, OFCCP gathered statements from rejected
applicants in the disfavored group who met all qualification
requirements but, according to the contractor's disposition codes, were
rejected because of a ``bad'' credit check without being given the
opportunity to address the results. Additionally, OFCCP determined
based on evidence obtained from the recruiters who evaluated the credit
checks that the recruiters were unable to provide any objective
standards that were used to screen out applicants. Such evidence
demonstrating the level of subjectivity involved in employment
decisions, in connection with other evidence, may be helpful to OFCCP
in making a preliminary finding that the contractor then has an
opportunity to rebut. However, as stated above, the Department agrees
that the mere fact that a contractor has supervisory discretion in its
employment decisions is not by itself probative of discriminatory
intent. OFCCP has qualified the appropriate use of such evidence in the
final rule, explaining in the regulatory text that documents about the
extent of discretion or subjectivity involved in making employment
decisions may be used as qualitative evidence, but only in conjunction
with evidence suggesting the discretion or subjectivity has been used
to discriminate based on a protected characteristic.
---------------------------------------------------------------------------
\13\ Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 990-91
(1988) (``If an employer's undisciplined system of subjective
decision-making has precisely the same effect as a system pervaded
by impermissible intentional discrimination, it is difficult to see
why Title VII's proscription against discriminatory actions should
not apply in both. . . . We conclude, accordingly, that subjective
or discretionary employment practices may be analyzed under the
disparate impact approach. . . .'').
\14\ OFCCP v. Bank of America, 1997-OFC-16, at 14 (Final Dec. &
Order Apr. 21, 2016).
---------------------------------------------------------------------------
The Department notes that qualitative evidence may also weigh
against a finding of discrimination, depending on the surrounding facts
and circumstances. Although mere compliance with basic legal
obligations will not be considered by the agency as dispositive
evidence weighing against a finding of discrimination, OFCCP may
consider testimony and other documentation that includes indicia that a
contractor has made good faith efforts to comply with its equal
employment opportunity obligations. For instance, a contractor may
provide evidence that it has taken specific actions to advance equal
employment opportunity as evidence that it did not discriminate
intentionally. A contractor may also show evidence of actions taken to
correct discrimination issues that a contractor may have identified
during annual reviews of its selection and compensation systems. For
disparate treatment cases, OFCCP will consider such evidence in
conjunction with other qualitative and quantitative evidence to inform
a decision on whether to issue a PDN alleging a pattern and practice of
intentional discrimination.
2. Quantitative Evidence
As discussed above, the final rule uses a definition of
quantitative evidence rather than statistical evidence as in the
proposed rule. The most important difference is that the definition of
quantitative evidence is broader than statistical evidence. OFCCP uses
a number of quantitative measures to determine whether a particular
disparity in employment selection or compensation is sufficiently
robust to support a finding of discrimination. The final rule thus
clarifies that quantitative comparisons, such as ``cohort analyses,''
and summary data that reflect a contractor's differential selections
and/or compensation between similarly situated individuals are included
within the definition of ``quantitative evidence.'' OFCCP did not
receive any comments suggesting that OFCCP reclassify this type of
evidence, likely because the proposed definition of statistical
evidence was specific to hypothesis-testing techniques. However, OFCCP
believes the more exacting distinction in the final rule between
quantitatively driven evidence and anecdotal evidence provides greater
clarity to stakeholders. Comparative analyses, such as cohort analysis,
while quantitative in nature, are distinct from hypothesis-based
statistical measures. In some cases, statistical regression analysis
cannot be reliably performed due to small sample sizes or the lack of
meaningful, quantifiable variables by which to conduct the analysis.
OFCCP may use numerical cohort analysis or small group assessment
techniques in possible combination with a global test for these cases.
The relevant employee group used for the small group analyses will
generally align with how the contractor establishes specific positions
and job groups, provided the job functions and responsibilities of
particular positions are similar. In other circumstances, a general
comparison of outcomes shown through simple numeric ratios may
demonstrate disparities between the number of individuals hired in
comparison to the available pool of qualified applicants in a protected
membership class. For example, OFCCP can generally infer hiring
discrimination when a contractor's workforce for a particular position
is comprised of 95% from one racial group and 5% from all other racial
groups combined, yet qualified applicants for that position comprised
[[Page 71558]]
50% for the first racial group and 50% for the other racial groups.
OFCCP also uses statistical measures.\15\ As described in the NPRM,
the most familiar statistical measure is the standard deviation, which
represents a standardized measure of the difference between selection
rates or compensation between groups. The U.S. Supreme Court has
described a disparity as ``suspect to a social scientist'' when a
statistic from ``large samples'' falls more than ``two or three
standard deviations'' from its expected value under a null
hypothesis.\16\ In general, the null hypothesis employed by OFCCP for
purposes of its regression analyses assumes that the contractor's
employment decisions are non-discriminatory and that there are no
relevant differences between racial groups or genders in the relevant
employee or applicant population after the agency controls for the
major, measurable variables used by the contractor in its decision-
making.\17\ The greater the number of standard deviations, the less
likely such a statistical disparity would be produced by chance were
the null hypothesis correct, and the more likely the null hypothesis
may reasonably be rejected.\18\
---------------------------------------------------------------------------
\15\ Some examples of the statistical measures that OFCCP may
use are the Chi square, Fisher's exact, Z-test, and regression
analyses that measure disparities in terms of standard deviations.
As discussed further below, OFCCP considers statistical evidence in
combination with qualitative evidence and the practical significance
of a disparity as part of a comprehensive approach to decision-
making about the issuance of pre-enforcement notices.
\16\ See Castaneda v. Partida, 430 U.S. 482, 496 n.17 (1977)
(``As a general rule for large samples, if the difference between
the expected value and the observed number is greater than two or
three standard deviations, then the hypothesis that the jury drawing
was random would be suspect to a social scientist.''); see also
Hazelwood Sch. Dist. v. United States, 433 U.S. 299, 311 n.17 (1977)
(providing that ``a fluctuation of more than two or three standard
deviations would undercut the hypothesis that decisions were being
made randomly with respect to race'').
\17\ To be more precise, the null hypothesis for the statistical
regression analyses that OFCCP conducts during its compliance
reviews comprises the following three assumptions: (1) The
contractor's decisions were made using non-biased criteria, (2) the
skills and competencies evaluated by the contractor's non-biased
criteria are normally distributed throughout the relevant employee
or applicant population without regard to race or gender, and (3)
the agency's statistical modeling is able to accurately capture the
non-biased criteria used by the contractor in its selection and/or
compensation decisions.
\18\ See David H. Kaye & David A. Freedman, ``Reference Guide on
Statistics,'' National Academy of Sciences (2011), www.fjc.gov/sites/default/files/2012/SciMan3D07.pdf, at 250-51.
---------------------------------------------------------------------------
To estimate the probability of selection and compensation
disparities occurring by chance, OFCCP has historically conducted
regression analyses of selection and compensation outcomes, which seek
to control for the major, measurable variables used by the contractor
in its decision-making. The final rule provides, as did the NPRM, that
a disparity in employment selection rates or rates of compensation is
statistically significant by reference to any one of these statements:
(1) The disparity is two or more times larger than its standard error
(i.e., a standard deviation of two or more); (2) the Z statistic has a
value greater than two; or (3) the probability value is less than 0.05.
OFCCP requests information from the contractor regarding the
qualifications it seeks in hiring after identifying an initial
disparity in selections. Likewise it requests additional information
from contractors regarding pay variables after identifying initial
indicators. OFCCP uses the information provided by the contractor to
perform its regression analyses in an effort to tailor the analyses to
each contractor's specific compensation or personnel practices
pertaining to groupings of similarly situated individuals. In
circumstances where the contractor does not provide such variables,
OFCCP will utilize measurable variables generally used by employers in
selection and compensation decisions in conducting the regression
analysis.
OFCCP may exclude a variable as tainted only when OFCCP determines
that the variable reflects underlying discrimination or is being used
as pretext. For example, if a contractor's compensation system depends
heavily on the amount of revenue an employee brings in, but there is
evidence that the contractor directs more lucrative sales prospects to
men because they are men, it may be appropriate to exclude a revenue-
generation variable in the regression analysis to that extent. Another
example may be where there is evidence that a contractor does not apply
the variable in a uniform fashion, such as considering or weighing the
variable differently for individuals belonging to different demographic
groups. OFCCP will disclose any exclusions to the contractor at the
time it provides its quantitative analysis and provide the contractor
with an opportunity to rebut exclusion of the variable at issue.
For OFCCP to consider the major, measurable parameters and
variables that the contractor uses in its selection or compensation
practices, the contractor must provide the preferred qualifications
that it uses along with sufficient data for OFCCP to include such
variables in its regression analysis. OFCCP will assess all of the
variables that a contractor provides, including preferred
qualifications. If OFCCP concludes that a variable should not be
included in its analysis, it will explain why and allow the contractor
an opportunity to rebut, as provided in the previous paragraph.
The Department received a few comments specific to the proposed
definition of ``statistical evidence'' (now ``quantitative evidence''
in the final rule). The comments suggest that OFCCP should ensure that
the definition accounts for all factors impacting an employment or
compensation decision, allows OFCCP to tailor models to contractor
practices, and groups only similarly situated employees. OFCCP's
definition of quantitative evidence provides a list of parameters and
variables generally used by employers that OFCCP will use in its
hypothesis testing. It does not list every conceivable variable, nor is
that necessary.\19\ With that said, the list included in the definition
is not exhaustive, and OFCCP has left the final definition flexible
enough to include variables used by contractors in their employment
practices. The definition will allow OFCCP to tailor statistical models
based on contractor practices and form groups that meet the relevant
``similarly situated'' standard in the context of a potential systemic
discrimination case.
---------------------------------------------------------------------------
\19\ OFCCP need not account for every conceivable variable, See,
e.g., Bazemore v. Friday, 478 U.S. 385, 400 (1986) (``[I]t is clear
that a regression analysis that includes less than `all measurable
variables' may serve to prove a plaintiff's case.''); McClain v.
Lufkin Indus., Inc., 519 F.3d 264, 280 (5th Cir. 2008) (``However,
in selecting an appropriate pool and performing regression analysis
in Title VII cases, the Supreme Court has taught that a plaintiff's
regression analysis need not include `all measurable variables.''')
(citing Bazemore, 478 U.S. at 400); Mozee v. Am. Commercial Marine
Serv. Co., 940 F.2d 1036, 1045 (7th Cir. 1991) (same).
---------------------------------------------------------------------------
Another commenter requested clarification as to whether OFCCP's
treatment of statistical evidence applies to only claims of disparate
treatment, or also to disparate impact claims. OFCCP applies
quantitative evidence, as defined in the final rule, in the same manner
for disparate treatment and disparate impact class claims, as both
claims require evidence of a disparity between favored and disfavored
groups. In addition, for disparate treatment claims, quantitative
evidence may support an inference of intentional discrimination, while
for disparate impact claims, quantitative evidence may support an
inference that a specific policy or practice is causing a disparate
impact.
[[Page 71559]]
The Department is aware that its statistical methods have been
criticized, including by commenters in this rulemaking.\20\ OFCCP uses
established statistical methods in its analyses, but nonetheless the
Department is considering whether to further examine, either in a
rulemaking or in subregulatory guidance, the agency's methodologies,
including issues such as variables used, as it did in a 2018 directive
on analyzing compensation.\21\ However, such a project is outside the
scope of this rulemaking.
---------------------------------------------------------------------------
\20\ See supra note 8.
\21\ Directive 2018-05, ``Analysis of Contractor Compensation
Practices During a Compliance Evaluation'' (Aug. 24, 2018).
---------------------------------------------------------------------------
3. Practical Significance
Practical significance within the framework of equal employment
opportunity enforcement refers to whether an observed disparity in
employment opportunities or outcomes reflects meaningful harm to the
disfavored group.\22\ The concept focuses on the contextual impact or
importance of the disparity, rather than its likelihood of occurring by
chance as in measures of statistical significance. OFCCP uses measures
of practical significance as a tool of enforcement discretion to ensure
it is targeting the strongest cases in its compliance reviews with the
most compelling evidence, as well as a safeguard against the
limitations of statistical modeling when attempting to explain complex
human phenomena. Modeling need not and cannot capture every facet of
human interaction in the workplace, or of contractors' evaluations of
employees and applicants; but when outcomes among what appear to be
similarly situated individuals differ greatly, OFCCP can be more
confident that discrimination at work. Given OFCCP's limited resources,
considering practical significance helps the agency ensure that it is
directing its efforts effectively. Weighing practical significance as
one of the thresholds for issuing pre-enforcement notices is thus an
important part of OFCCP's comprehensive approach to compliance
evaluations.
---------------------------------------------------------------------------
\22\ See Practical Significance in EEO Analysis Frequently Asked
Questions, Question #5, www.dol.gov/agencies/ofccp/faqs/practical-significance.
---------------------------------------------------------------------------
Five comments addressed the issue of ``practical significance'' in
OFCCP's compliance reviews. One comment recommended against such a
definition due to variance among the measures of practical significance
used in different employment scenarios, while another comment
recommended against requiring practical significance prior to issuing a
PDN as it would create an unnecessary barrier to investigating
discrimination. Three commenters asked the Department to add a
definition to the final rule. Two commenters sought clarity and greater
certainty so that contractors would know how the term, as used in the
regulation, would be applied. One comment added that a significant
shortcoming of the proposed regulation was that it did not require an
assessment of practical significance before issuing adverse findings.
Another comment specifically requested a definition with express
standards that OFCCP would apply in assessing practical significance so
that OFCCP's use of practical significance could be part of
negotiations with the contractor.
The Department declines to add a specific definition for the term
in the final rule because there is not a settled definition in the
relevant academic literature and a variety of measures may be
appropriate to use in any given case. The Department will continue to
evaluate that position and propose a new rulemaking if it determines
that such thresholds should be codified. However, in order to provide
more clarity for contractors, the Department describes below common
types of practical-significance measures and explains the metrics that
OFCCP will customarily use moving forward. The Department believes that
providing these guidelines for both its compliance officers and
contractors will help make OFCCP's compliance reviews more transparent
and efficient. These guidelines are particularly useful given that the
final rule generally requires that OFCCP find any disparity that forms
the basis for an allegation of discrimination to be practically
significant before issuing a PDN or NOV.
There is no single, specific measurement of practical significance
appropriate to all compensation, hiring, promotion, and termination
decisions. There are several common measures of practical significance
discussed in scholarly literature from the labor economics field.\23\
Some of the measures of practical significance that have been used by
OFCCP include size-of-selection shortfall; ``four-fifths rule'' (or
``80 percent rule''); odds ratio; percentage of pay disparity; and the
Type II squared semi-partial correlation coefficient. For example, with
regard to using the size of shortfall, one practical significance
threshold is a shortfall of at least two \24\ in a hiring analysis
where, based on the number of applicants and hires, the expectation
would be for a contractor to have hired at least two additional members
of the disfavored group in a neutral selection process. The ``four-
fifths rule'' or ``80 percent rule'' is a measure of practical
significance that relies on the ``impact ratio''--if the selection rate
for a disfavored group is less than 80 percent of the selection rate
for the favored group, it is generally considered evidence of adverse
impact.\25\ Odds ratios can also be used, which refer to the ratio of
the odds of one group being selected compared to the odds of another
group. Odds ratio takes into account both the selection and rejection
rates of the disfavored group and can bolster the statistically
significant findings.\26\
---------------------------------------------------------------------------
\23\ For an overview of the most common measures of practical
significance, see Frederick Oswald, Eric Dunleavy & Amy Shaw,
``Measuring Practical Significance in Adverse Impact Analysis'' in
Adverse Impact Analysis: Understanding Data, Statistics, and Risk,
Scott B. Morris & Eric Dunleavy (Eds.) (2017), www.researchgate.net/publication/314245607_Measuring_practical_significance_in_adverse_impact_analysis
; and Joseph Gastwirth, ``Some Recurrent Problems in Interpreting
Statistical Evidence in Equal Employment Cases,'' Law, Probability &
Risk (2017).
\24\ OFCCP v. TNT Crust, 2004-OFC-3, at 21 (Order on Liability
Sept. 10, 2007) (``Generally, it is inappropriate to require
validity evidence or to take enforcement action where the number of
persons and the difference in selection rates are so small that the
selection of one different person for one job would shift the result
from adverse impact against one group to a situation in which that
group has a higher selection rate than the other group.'').
\25\ 41 CFR 60-3.4(D).
\26\ But see Kaye & Freedman, supra note 18 at 235 (observing
that ``[a]lthough the odds ratio has desirable mathematical
properties, its meaning may be less clear than that of the selection
ratio or the simple difference'').
---------------------------------------------------------------------------
In the employment selection context, OFCCP will ordinarily use the
impact ratio as its measure of practical significance, which is the
ratio of employee selection rates between the disfavored and favored
group. The impact ratio is a common measurement of practical
significance that has been used since the 1970s.\27\ This statistical
measure has the advantages of simplicity and clarity.
---------------------------------------------------------------------------
\27\ See 41 CFR 60-3.4(D).
---------------------------------------------------------------------------
OFCCP utilizes a sliding scale to assess whether the impact ratio
in a particular matter indicates that a disparity is practically
significant. OFCCP's determination to issue a pre-enforcement notice
depends on the strength of the relevant qualitative and quantitative
evidence, as well as whether the disparity is practically significant.
OFCCP uses the following thresholds to assess practical significance in
the selection context to determine whether to issue pre-enforcement
notices:
[[Page 71560]]
Impact Ratio of Selection Rates
> 0.9 Very Unlikely
0.8-0.9 Unlikely
0.7-0.8 Likely
< 0.7 Very Likely
An impact ratio of 0.8 is a frequently cited benchmark in the equal
employment opportunity literature for determining whether the impact
ratio of a selection disparity is practically significant, as described
above, which is why OFCCP adopts it as the hinge point between a likely
and unlikely finding of practical significance for selection
decisions.\28\ For impact ratios below 0.9, OFCCP will apply its
discretion in determining whether to issue a pre-enforcement notice
according to the strength or weakness of the evidence in particular
cases, but the agency will require strong additional supporting
evidence when the impact ratio is between 0.8 and 0.9. In addition,
because the impact ratio is a less effective statistical measure when
selection rates are very small, OFCCP utilizes a 3% disparity between
the selection rates of disfavored and favored groups as a general
minimum threshold for a finding of practical significance, although
there may be situations with very low selection rates, such as a 4%
selection rate for the favored group and a 1% selection rate for the
disfavored group, where the odds ratio and other evidence would still
support a finding of practical significance.\29\
---------------------------------------------------------------------------
\28\ See 41 CFR 60-3.4; Uniform Guidelines on Employee Selection
Procedures Section 4D (``A selection rate for any race, sex, or
ethnic group which is less than four-fifths (\4/5\) (or eighty
percent) of the rate for the group with the highest rate will
generally be regarded by the Federal enforcement agencies as
evidence of adverse impact, while a greater than four-fifths rate
will generally not be regarded by Federal enforcement agencies as
evidence of adverse impact.'').
\29\ For example, if the selection rate of a favored group is
10%, OFCCP will generally not find practical significance unless the
selection rate for the disfavored group is 7% or less, even though
the impact ratio would be 0.7 (or less). See, e.g., Oswald,
Dunleavy, & Shaw, ``Measuring Practical Significance in Adverse
Impact Analysis,'' supra note 23, at 104 (``The spirit of the [4/
5ths] rule [i.e. that a selection disparity is not practically
significant unless the impact ratio is less than 0.8] can . . . be
violated when very small disparities do not satisfy the 4/5ths rule
[and thus would be found practically significant]. For example,
hiring 3.5% of disadvantaged applicants versus 5% of advantaged
applicants is a mere 1.5% difference in selection rates, but is an
impact ratio of [0.7] . . . .'').
---------------------------------------------------------------------------
In the compensation context, OFCCP's standard measure of practical
significance will be the percentage difference in compensation, which
refers to the percentage difference between the mean compensation of
employees within the disfavored group in proportion to the mean
compensation of employees within the favored group. As with selection
rates, OFCCP's determination of whether to issue a pre-enforcement
notice depends on the practical significance of the compensation
disparity in combination with the strength of the relevant qualitative
and quantitative evidence. OFCCP will use the following thresholds to
assess practical significance in the compensation context:
Size of Compensation Disparity
< 1% Very Unlikely
1-2% Unlikely
2-5% Likely
> 5% Very Likely
OFCCP has used a 1% compensation disparity as a threshold in some
previous interactions with contractors, such that the agency did not
proceed with issuing pre-enforcement notices if compensation
disparities were below that level. This guidance formalizes that
threshold as a clear benchmark for the issuance of pre-enforcement
notices. For compensation disparities above 1%, the agency has
discretion in determining whether to issue a pre-enforcement notice
according to the facts and circumstances of individual cases, but OFCCP
will be unlikely to determine that a compensation disparity below 2% is
practically significant unless there is additional strong supporting
evidence. When compensation disparities are greater than 5%, OFCCP will
nearly always find that a compensation disparity is practically
significant if the agency also determines that its statistical model is
sound. In rare cases, OFCCP may also apply more rigorous practical
significance tests to measure the import of compensation disparities,
such as the standardized difference between disfavored and favored
groups or the Type II squared semi-partial correlation, which help
ensure the agency is applying its practical significance standard
relatively uniformly across administrative cases.
OFCCP will use the measures above to make an informed decision on
the potential strength of the case and whether, in light of the
quantitative and qualitative evidence, the size of an observed
disparity justifies moving forward with enforcement procedures.
B. Resolution Procedures
This final rule codifies many of OFCCP's currently used procedures
with adjustments to provide greater clarity, certainty, and
transparency to contractors, to ensure that OFCCP appropriately
allocates its resources by proceeding with cases that have solid
evidentiary support and meaningful impact, to establish guidelines and
guardrails on the agency's issuance of pre-enforcement notices, and to
encourage appropriate early resolution with contractors.
OFCCP's Existing Compliance Evaluation and Resolution Procedures
OFCCP determines whether a Federal contractor has met the legal
obligations of E.O. 11246, section 503, VEVRAA, and their implementing
regulations during a compliance evaluation.\30\ The agency uses a
neutral selection process to schedule contractors for compliance
evaluations.\31\ A compliance evaluation consists of one or any
combination of the following investigative procedures, as set forth in
OFCCP's implementing regulations: A compliance review, an offsite
review of records, a compliance check, or a focused review.\32\ With
the exception of the compliance check, the purpose of which is to
determine whether the contractor maintains required records and to
provide related compliance assistance, the other types of compliance
evaluations that OFCCP undertakes may result in the agency making a
preliminary determination, through its collection and analysis of
information provided by the contractor, that the information reviewed
indicates the contractor has discriminated against members of a
protected class in hiring, promotion, termination, compensation, or
other employment practices. Because OFCCP evaluates all of a contractor
establishment's employment processes, the agency has focused on
identifying and resolving systemic discrimination. Findings often are
supported by
[[Page 71561]]
statistical evidence, particularly in compliance reviews.
---------------------------------------------------------------------------
\30\ OFCCP also ensures compliance with these laws by
investigating complaints filed by applicants and employees who
believe that a Federal contractor discriminated against them.
However, the resolution procedures for complaints differ from
compliance evaluations and would not be altered by this rule. For
complaint resolution procedures, see FCCM Chapter 6 and 41 CFR 60-
1.24, 60-300.61, and 60-741.61. The FCCM is available at
www.dol.gov/agencies/ofccp/manual/fccm.
\31\ The majority of OFCCP's compliance evaluations are for
supply and service contractors. OFCCP increased the number of
contractors on its supply and service scheduling list over the past
three fiscal years, from 801 in FY 2017 to 3,500 in FY 2019. The FY
2020 scheduling list is comprised of 2,250 establishments. A
description of OFCCP's current scheduling methodology for supply and
service contractors is available on the agency's website at
www.dol.gov/sites/dolgov/files/ofccp/scheduling/files/SL20R1_SupplyService_Methodology_FinalFEDQA508c.pdf. The 2020
scheduling list for construction consists of 200 establishments. A
description of OFCCP's current scheduling methodology for
construction contractors is available at www.dol.gov/sites/dolgov/files/ofccp/scheduling/files/SL20R1_Construction_Methodology_FinalFEDQA508c.pdf.
\32\ See 41 CFR 60-1.20(a), 60-300.60(a), and 60-741.60(a). The
resolution procedures described in this rule do not apply to
compliance checks.
---------------------------------------------------------------------------
Preliminary findings of discrimination in a compliance evaluation
trigger OFCCP's resolution procedures. At the beginning of this
process, the agency discusses its preliminary findings with the
contractor. This discussion also serves to familiarize the contractor
with OFCCP's resolution procedures, including the agency's current
options for early resolution.\33\ If the preliminary findings are not
resolved at that stage, OFCCP formalizes the preliminary findings in a
PDN, a letter that is sent to the contractor following review and
approval by the Director or acting agency head.\34\ To determine
whether the evidence of discrimination is sufficient to warrant a PDN,
OFCCP considers whether a disparity identified during the compliance
evaluation is practically significant and whether quantitative evidence
and qualitative evidence supports the preliminary finding. OFCCP will
always seek out qualitative evidence during compliance evaluations,
regardless of the strength of the quantitative evidence. As discussed
more fully below, there may be factors applicable in a particular case
that explain why OFCCP could not obtain either quantitative or
qualitative evidence during its evaluation.
---------------------------------------------------------------------------
\33\ OFCCP prioritizes the early and efficient resolution of
potential discrimination. See Directive 2019-02, ``Early Resolution
Procedures'' (Nov. 30, 2018), www.dol.gov/agencies/ofccp/directives/2019-02. The rule does not codify OFCCP's early resolution
procedures themselves. It does, however, provide a framework for
OFCCP and contractors to explore expedited conciliation options,
such as the early resolution procedures set forth in Directive 2019-
02.
\34\ See Directive 2018-01, ``Use of Predetermination Notices
(PDN)'' (Feb. 27, 2018). OFCCP issued this directive to ensure that
PDNs be used in all compliance evaluations with preliminary
discrimination findings, both individual and systemic. Directive
2018-01 is available at www.dol.gov/agencies/ofccp/directives/2018-01. Prior to the directive, use of PDNs was discretionary and
reserved for systemic discrimination findings. See FCCM, Chapter 8
(detailing the procedures that OFCCP follows for issuing PDNs).
---------------------------------------------------------------------------
OFCCP issues the PDN to encourage communication with contractors
and provide them an opportunity to respond to preliminary findings
prior to the issuance of a more formal NOV. If a contractor does not
sufficiently rebut the preliminary findings identified in the PDN that
evidence of unlawful discrimination exists, OFCCP issues the NOV
following approval by the Director or acting agency head to notify the
contractor that the agency found discrimination violations of one or
more of the laws it enforces. Under this final rule, the PDN will
explain the basis for the agency's preliminary findings, i.e., by
identifying the statistically significant disparity or other
quantitative evidence, describing the practical significance of that
disparity, and describing how the relevant qualitative evidence
supports the particular theory of discrimination. Upon request, OFCCP
will also provide contractors with information sufficient to recreate
the agency's quantitative findings and in some cases may be able to do
so even before the PDN has been issued. Contractors are invited to
respond to the PDN, and the agency must consider the response in
determining whether to issue an NOV.
The NOV lists the corrective actions that are required to resolve
those violations, and invites conciliation. OFCCP responds in the NOV
(or in a simultaneously provided reply) to any new arguments or
information raised by the contractor in its PDN response.\35\ After
issuing the NOV, OFCCP generally pursues a written conciliation
agreement with any contractor willing to correct the violation or
deficiency identified in the NOV.\36\ A conciliation agreement is a
binding written agreement between a contractor and OFCCP that details
specific contractor commitments, actions, or both that it will
undertake in order to resolve the violations set forth in the
agreement. Conciliation agreements were codified in OFCCP's regulations
in 1979. OFCCP is committed to active engagement with the contractor to
conciliate a matter, and has issued directives detailing how the agency
will prioritize the efficient resolution of violations it finds in its
compliance evaluations.\37\ If the contractor is unwilling to enter
into a conciliation agreement to correct the violations, OFCCP issues a
Show Cause Notice (SCN) requiring the contractor to provide reasons
demonstrating why formal enforcement proceedings by the Solicitor of
Labor or other appropriate action should not be instituted.
---------------------------------------------------------------------------
\35\ See FCCM, Chapter 8; see also FCCM, Key Terms and Phrases.
\36\ In rare circumstances, OFCCP may determine that settlement
is not appropriate and refer a matter at this stage directly to the
Office of the Solicitor of Labor to pursue formal enforcement
proceedings rather than pursuing a conciliation agreement. See 41
CFR 60-1.26(b), 60-300.62, 60-300.65(a), 60- 741.62(a), 60-
741.65(a). OFCCP strongly disfavors this route.
\37\ See Directive 2020-02, ``Efficiency in Compliance
Evaluations'' (Apr. 17, 2020), www.dol.gov/agencies/ofccp/directives/2020-02; Directive 2020-03, ``Pre-Referral Mediation
Program'' (Apr. 17, 2020), www.dol.gov/agencies/ofccp/directives/2020-03.
---------------------------------------------------------------------------
Material violations that are not discriminatory in nature also
trigger OFCCP's resolution procedures for compliance evaluations.
Rather than initiating resolution with a PDN for violations that do not
involve discrimination, OFCCP generally begins the process with an NOV
before proceeding to a conciliation agreement,\38\ or the SCN as a last
resort. For cases in which the contractor either denies access or
otherwise fails to submit information requested in OFCCP's OMB-approved
scheduling letters, OFCCP issues the SCN without first issuing an NOV
for material violations that are non-discriminatory in nature; as
discussed more fully later in this preamble, this practice will
continue under this final rule.\39\
---------------------------------------------------------------------------
\38\ FCCM, Chapter 8F00; FCCM, Chapter 8H00. For example, OFCCP
may issue an NOV and enter into a conciliation agreement for failure
to maintain records in accordance with 41 CFR 60-1.12, 60-300.80,
and 60-741.80, or for failure to maintain affirmative action
programs as required by 41 CFR part 60-2, 41 CFR part 60-300,
subpart C, and 41 CFR part 60-741, subpart C.
\39\ See FCCM, Chapter 8D01 (explaining that OFCCP issues the
SCN without first issuing an NOV when a contractor fails to provide
the records, information, or data requested in the scheduling letter
and when the contractor refuses to provide access to its premises
for an onsite review).
---------------------------------------------------------------------------
Recently, OFCCP has promoted the efficient resolution of material
violations for multi-establishment Federal contractors with early
resolution procedures laid out in an agency directive.\40\ These
procedures allow OFCCP and contractors to work together to resolve
violations or indications of violations without resorting to formal
process, including litigation before an administrative law judge.
---------------------------------------------------------------------------
\40\ See Directive 2019-02, ``Early Resolution Procedures''
(Nov. 30, 2018), www.dol.gov/ofccp/regs/compliance/directives/dirindex.htm.
---------------------------------------------------------------------------
In addition, OFCCP has recently prioritized alternative dispute
resolution to help resolve cases at the conciliation or pre-litigation
phase, which ensures prompt remedies and avoids the delay, expense, and
uncertainty of litigation. OFCCP has established an Ombuds Service that
can help facilitate settlement discussions at the conciliation stage,
as well as a Pre-Referral Mediation Program that provides for a full
pre-litigation administrative mediation following an SCN and prior to
referral to the Solicitor of Labor. Although the rule text does not
directly address the Ombuds Service or Pre-Referral Mediation Program,
these programs are compatible and consistent with the goals and
procedures established by the rule, and the agency intends to continue
providing both programs in conjunction with these procedures.
[[Page 71562]]
Resolution Procedures Provisions of the Final Rule
The Department proposed in the NPRM to codify many of OFCCP's
resolution procedures in its E.O. 11246, section 503, and VEVRAA
regulations at 41 CFR parts 60-1, 60-300, and 60-741, respectively. The
proposed regulatory text was the same in each part, except that one
subparagraph of the section 503 regulations, at 41 CFR 60-741.62(b),
retains an existing provision concerning remedial benchmarks specific
to the section 503 regulatory scheme that is not present in the other
parts.
Specifically, the Department proposed to codify the procedures that
OFCCP follows when determining whether to issue a PDN or NOV for
discrimination and other material violations. As a matter of
enforcement discretion and prioritization of resources, the Department
proposed issuing a PDN only after considering statistical evidence,
practical significance, and nonstatistical evidence. Additionally,
under the proposed rule, OFCCP would have only issued a PDN without
nonstatistical evidence when OFCCP's statistical evidence indicates a
confidence level of 99% or higher, which equates to three or more
standard deviations or a p value of 0.01 or less. Furthermore, the
Department proposed to codify the availability of an expedited
conciliation option.\41\
---------------------------------------------------------------------------
\41\ The Department did not propose to codify OFCCP's early
resolution procedures per se. Rather, the NPRM acknowledged the
early resolution option, which is governed by agency directives.
---------------------------------------------------------------------------
The Department has decided to finalize the early conciliation
option and the codification of its PDN and NOV procedures with changes
from the proposed rule, as noted above. To repeat, the significant
changes are that the final rule clarifies that issuance of NOVs is
governed by the same evidentiary standards as issuance of PDNs;
clarifies the standards OFCCP uses when determining whether to issue a
pre-enforcement notice under a disparate treatment and/or disparate
impact theory of discrimination; requires OFCCP to provide qualitative
evidence supporting a finding of discriminatory intent to proceed under
a disparate treatment theory, subject to certain enumerated exceptions;
requires OFCCP to identify the policy or practice of the contractor
causing the adverse impact with factual support demonstrating why such
policy or practice has a discriminatory effect to issue a PDN or NOV
under a disparate impact theory; explains that OFCCP must explain in
detail the basis for its finding (including, if applicable and as
described further below, the reasons for any lack of qualitative
evidence) and obtain the Director's (or acting agency head's) approval
to issue a PDN or NOV; and provides that, upon the contractor's
request, OFCCP will provide the model and variables used in its
statistical analysis and an explanation for any variable that was
excluded from the statistical analysis.
In the rest of this section, the Department describes the final
rule's resolution procedures, including the changes from the NPRM, and
responds to relevant comments. The Department refers to the section and
paragraph numbers in 41 CFR 60-1.33, which concerns E.O. 11246. As
described below, the Department adopts the same provisions in the
regulations for VEVRAA (41 CFR part 60-300) and section 503 (41 CFR
part 60-741).
1. Predetermination Notice
Section 60-1.33(a) of the final rule allows OFCCP to issue a PDN if
a compliance evaluation indicates evidence sufficient to support a
preliminary finding of disparate treatment or disparate impact,\42\
subject to certain parameters, which are discussed below.\43\ Multiple
commenters sought clarity on what thresholds OFCCP would use in
evaluating evidence supporting an allegation of disparate impact
discrimination. The final rule provides clarity by providing distinct
provisions for disparate treatment and disparate impact claims. It also
requires the OFCCP Director or acting agency head to approve issuance
of a PDN.
---------------------------------------------------------------------------
\42\ Here and elsewhere in this final rule, references to
evidence sufficient to support a preliminary finding or finding of
disparate treatment or disparate impact refer to the amount of
evidence OFCCP requires to continue forward with its review. Whether
the evidence is sufficient to pursue formal enforcement proceedings
is a separate and later determination made by the Solicitor of
Labor.
\43\ One commenter recommended that OFCCP make PDNs mandatory
rather than discretionary in cases involving discrimination. OFCCP
made this policy change in 2018 with Directive 2018-01, the stated
purpose of which is to ``establish the consistent use of PDNs for
discrimination cases, both individual and systemic.'' Directive
2018-01, ``Use of Predetermination Notices (PDN)'' (Feb. 27, 2018),
www.dol.gov/agencies/ofccp/directives/2018-01. Since then, the
change has been embedded in the FCCM and now this final rule.
---------------------------------------------------------------------------
(a) Disparate Treatment Theory of Liability
Subject to certain exceptions discussed below, paragraph (a)(1)
provides that OFCCP may issue a PDN under a disparate treatment theory
of liability if the agency (i) provides quantitative evidence; (ii)
demonstrates that the unexplained disparity is practically significant;
and (iii) provides qualitative evidence that, in combination with other
evidence, supports both a finding of discriminatory intent by the
contractor and a finding that the contractor's discriminatory intent
caused the disparate treatment.
The NPRM would have required nonstatistical evidence if OFCCP's
statistical evidence indicated a disparity of less than three standard
deviations and, conversely, would have allowed claims to proceed
without nonstatistical evidence if OFCCP's statistical evidence
indicated a disparity of three standard deviations or greater. The
Department has decided to require qualitative evidence in all disparate
treatment cases as the general default. Qualitative evidence is very
important to support a preliminary finding of intentional
discrimination, which is a fundamental element of disparate treatment
claims. Indeed, in some instances qualitative evidence is direct,
powerful, and on its own can prove disparate treatment. Quantitative
evidence of statistical significance alone, by contrast, can only
provide an inference of intent because at base it is able to prove only
that, if the null hypothesis is correct, then the observed outcome is
highly unlikely to have occurred by chance. It thus remains possible
that the observed statistical disparities were the result of something
other than unlawful discrimination.\44\ Nevertheless, statistical
evidence can be important evidence because it assesses actions taken by
the company over a course of time and across multiple employees, which
may be indicative of discriminatory intent.\45\ The final rule thus
clarifies that there is no set quantum of qualitative evidence; rather,
[[Page 71563]]
the required strength of the qualitative evidence depends on the
strength of the quantitative evidence and the extent of the practical
significance.
---------------------------------------------------------------------------
\44\ See supra note 16. It is important to remember that a
rejection of the null hypothesis due to the magnitude of a
statistical disparity does not by itself mean that an alternative
hypothesis--for example, that a contractor discriminated against its
applicants or employees--is true. Instead, other assumptions
underlying the null hypothesis (see supra note 17) could be flawed,
and/or there may be alternative hypotheses that explain the data.
See, e.g., Kaye & Freedman, supra note 18, at 257; see also Coleman
v. Quaker Oats Co., 232 F.3d 1271, 1283 (9th Cir. 2000) (finding a
disparity with a p-value of ``3 in 100 billion'' did not demonstrate
age discrimination because the defendant ``never contend[ed] that
the disparity occurred by chance, just that it did not occur for
discriminatory reasons. When other pertinent variables were factored
in, the statistical disparity diminished and finally disappeared'').
Nevertheless, if there is a plausible alternative explanation, the
factual basis for such explanation should be identified by the
contractor during its audit so that the alternative may be included
in OFCCP's model.
\45\ Of course, in cases where there have been findings of
discrimination, quantitative evidence may also demonstrate the harm
suffered by the affected class.
---------------------------------------------------------------------------
As discussed above, the Department's definition of quantitative
evidence includes nonstatistical, but quantitative, analysis such as
cohort analyses. Subject to the enumerated exceptions in the final
rule, qualitative evidence must also be present for OFCCP to issue a
pre-enforcement notice in cases where OFCCP is relying on
nonstatistical quantitative evidence for the same reason that
qualitative evidence is required where OFCCP is relying on statistical
evidence. Nonstatistical quantitative comparisons can also be used by
OFCCP to support other statistical evidence that shows statistically
significant disparities; however, OFCCP must also have qualitative
evidence to proceed with the issuance of pre-enforcement notices in
such cases unless one of the final rule's enumerated exceptions
applies.
Paragraph (a)(2) provides three exceptions to paragraph (a)(1)'s
general criteria that OFCCP must satisfy when it alleges findings or
preliminary findings of disparate treatment discrimination. The three
exceptions encompass situations where the Department believes it is a
worthwhile use of OFCCP's resources to proceed with a case despite not
satisfying all three requirements of paragraph (a)(1). For the reasons
stated above relating to the importance of qualitative evidence, the
Department has not adopted the NPRM's proposal to allow PDNs to be
issued on the basis of statistical evidence alone when the disparity
shown was three standard deviations or more. However, as discussed more
fully below, one of the exceptions allows OFCCP to proceed with a case
if the agency finds an extraordinarily compelling disparity. In that
situation, the reasons for requiring qualitative evidence have less
force, and OFCCP deems it appropriate to continue without qualitative
evidence.
Paragraph (a)(2)(i) ensures that OFCCP can move forward with
issuing a PDN when the qualitative evidence by itself is sufficient to
support a preliminary finding of disparate treatment, regardless of
quantitative evidence.\46\ For example, during a compliance review or
focused review OFCCP could uncover direct evidence that a contractor
took adverse employment action against a protected group of employees,
or circumstantial evidence that, e.g., members of a protected group
with superior qualifications were denied selections that were awarded
to similarly situated members of another group with inferior
qualifications. If this evidence were sufficiently strong, OFCCP should
be able to move forward with a PDN without findings of statistical and
practical significance, and paragraph (a)(2)(i) makes sure the agency
has that flexibility.
---------------------------------------------------------------------------
\46\ See supra note 42. This is how individual discrimination
cases are traditionally proven. See McDonnell Douglas Corp. v.
Green, 411 U.S. 792, 802 (1973) (describing traditional burden-
shifting analysis under Title VII); see also Desert Palace Inc. v.
Costa, 539 U.S. 90 (2003) (describing the burden of proof in mixed-
motive cases under Title VII).
---------------------------------------------------------------------------
Paragraph (a)(2)(ii) is designed to capture the ``inexorable zero''
concept from Title VII case law and other rare situations where the
numerical disparities are so overwhelming that, in OFCCP's judgment,
additional evidence of discriminatory intent is unnecessary to support
a preliminary finding.\47\ In the context of an OFCCP compliance
evaluation, this could occur, e.g., when the disparity in selections
for a given job between a favored and disfavored group is so
extraordinarily compelling that by itself the evidence strongly
supports a preliminary finding of disparate treatment. For example, a
court in a famous Title VII case found the ``inexorable zero'' standard
satisfied by a trucking company that had hired 57 white truckers in
Atlanta but no black truckers--even though at the time Atlanta was 22%
African-American--and in Los Angeles had hired 372 white truckers but
only two black truckers.\48\
---------------------------------------------------------------------------
\47\ Cf. Int'l Bhd. of Teamsters v. United States, 431 U.S. 324,
342 n.23 (1977) (``[The] fine tuning of the statistics could not
have obscured the glaring absence of minority line drivers. As the
Court of Appeals remarked, the company's inability to rebut the
inference of discrimination came not from a misuse of statistics but
from `the inexorable zero.' '') (citing United States v. T.I.M.E.-
D.C. Inc., 517 F.2d 299, 315 (5th Cir. 1975)); Valentino v. U.S.
Postal Serv., 674 F.2d 56, 72-73 (D.C. Cir. 1982) (``small numbers
are not per se useless, especially if the disparity shown is
egregious. The `inexorable zero' can raise an inference of
discrimination even if the subgroup analyzed is relatively
small.''); cf. also Hazelwood Sch. Dist., 433 U.S. at 307-08
(``Where gross statistical disparities can be shown, they alone may
in a proper case constitute prima facie proof of a pattern or
practice of discrimination.'') (citing Int'l Bhd. of Teamsters, 431
U.S. at 339)); Analogic Corp., 2017-OFC-00001, at 39 (``Courts have
held evidence of gross statistical disparity alone may be sufficient
to establish a pattern and practice case of intentional
discrimination.'').
\48\ See T.I.M.E.-D.C., Inc., 517 F.2d at 315 n.29, vacated on
other grounds, 431 U.S. 324 (1977) (vacating judgment with respect
to individual relief but otherwise upholding the 5th Circuit's
finding regarding the ``inexorable zero'' standard).
---------------------------------------------------------------------------
The Department believes this safety valve for overwhelming
quantitative evidence is appropriate for OFCCP's enforcement strategy.
Nevertheless, the Department declines to lift the requirement for
qualitative evidence in other cases. The Department acknowledges that
the requirement for qualitative evidence in all other cases is neither
compelled nor prohibited by Title VII case law. This is by design and
central to the purpose of this rule. The Department is sensitive to
past criticisms that OFCCP over-relied on statistical modeling or used
models that did not properly account for contractors' legitimate,
nondiscriminatory employment practices. The Department also wants to
direct OFCCP's resources to the most compelling cases and those most
likely to have a practical impact. Requiring qualitative evidence
responds to those criticisms and better directs OFCCP's efforts. This
requirement helps ensure that OFCCP's cases are well-grounded in fact,
that its presentations are likely to be persuasive in resolution
efforts, that its referrals for litigation are credible, and that it is
using its resources effectively. This is also consistent with the view
of commenters who argued that solely relying on statistical evidence is
rarely appropriate in disparate treatment cases (where discriminatory
intent must be established as the cause of the disparate treatment),
and thus should be reserved for only egregious cases.\49\ As stated
previously, OFCCP will seek to develop supporting qualitative evidence
in all of its cases, including those with gross numerical or
statistical disparities. In those rare circumstances where OFCCP issues
a PDN based on evidence of extraordinary numerical or statistical
disparities and no supporting qualitative evidence, OFCCP will provide
an explanation for the lack of qualitative evidence and justification
for the agency's decision to proceed with resolution procedures in the
PDN, allowing the contractor an opportunity to respond.
---------------------------------------------------------------------------
\49\ Supra note 47.
---------------------------------------------------------------------------
Finally, paragraph (a)(2)(iii) is an exception clarifying that
OFCCP may issue a PDN in the absence of qualitative evidence if the
contractor has prevented OFCCP from compiling qualitative evidence. For
example, OFCCP may proceed without qualitative evidence if the
contractor has prevented OFCCP from interviewing employees who may have
knowledge of facts relevant to a preliminary indicator of
discrimination during compliance evaluations, or has destroyed or
failed to produce personnel or employment records that similarly may
have contained information relevant to a preliminary indicator of
discrimination.\50\ The Department
[[Page 71564]]
believes this exception is necessary to avoid creating an incentive for
contractors not to comply with OFCCP compliance evaluations.
---------------------------------------------------------------------------
\50\ See 41 CFR 60-1.12(e), 60-1.43, 60-3.15, 60-300.80-81, and
60-741.80-81.
---------------------------------------------------------------------------
(b) Disparate Impact Theory of Liability
Paragraph (a)(3) sets out OFCCP's evidentiary standard for findings
or preliminary findings of discrimination premised on a disparate
impact theory. Title VII's statutory text, as well as interpretive case
law, requires not only that the plaintiff must demonstrate the
existence of an adverse impact on a protected group, but that it must
identify the particular employment practice causing that impact, unless
the elements of the employer's decision-making process cannot be
separated for analysis.\51\ For findings of discrimination premised on
a disparate impact theory, paragraph (a)(3) therefore requires OFCCP to
first demonstrate that a disparity has both sufficient quantitative
evidence and is practically significant (paragraphs (a)(3)(i) and
(ii)), and second to identify the policy or practice of the contractor
causing the disparate impact (paragraph (a)(3)(iii)).\52\ As the
Supreme Court has said, disparate-impact liability is concerned not
with statistical imbalances alone but on the eradication of policies
that form ``artificial, arbitrary, and unnecessary barriers'' to
disfavored groups.\53\
---------------------------------------------------------------------------
\51\ 42 U.S.C. 2000e(k)(1). See generally Ricci v. DeStefano,
557 U.S. 557, 577-78 (2009).
\52\ Consistent with note42, supra, the final rule does not
require OFCCP, at the PDN stage, to provide evidence that would
rebut the contractor's burden of demonstrating that the selection
procedure in question has been properly validated. This is in part
because, under OFCCP's regulations, a contractor is not required to
validate selection procedures until it is aware of an adverse
impact, see 41 CFR 60-3.4(C), which it may not be until OFCCP issues
the PDN.
\53\ Texas Dep't of Hous. & Cmty. Affairs v. Inclusive
Communities Project, Inc., 576 U.S. 519, 543 (2015) (quoting Griggs
v. Duke Power Co., 401 U.S. 424, 431 (1971)); see also id. at 542
(``[A] disparate-impact claim that relies on a statistical disparity
must fail if the plaintiff cannot point to a defendant's policy or
policies causing that disparity. A robust causality requirement
ensures that `[r]acial imbalance . . . does not, without more,
establish a prima facie case of disparate impact' and thus protects
defendants from being held liable for racial disparities they did
not create.'') (quoting Wards Cove Packing Co. v. Atonio, 490 U.S.
642, 653 (1989)). Although Inclusive Communities involved a
disparate impact claim under the federal Fair Housing Act, courts
have applied the case in the Title VII context as well. See, e.g.,
Davis v. District of Columbia, 925 F.3d 1240, 1251 (D.C. Cir. 2019);
Gagliano v. Mabus, No. 15-cv-2299, 2019 WL 3306293, at *2 (S.D. Cal.
July 23, 2019); see also Inclusive Communities, 576 U.S. at 539-40
(describing the analysis required under the FHA as analogous to the
disparate impact standard under Title VII).
---------------------------------------------------------------------------
OFCCP received a few comments seeking clarity on whether the
evidentiary thresholds for issuance of a PDN apply to disparate impact
findings or just disparate treatment findings and stating that
statistical evidence is only relevant to disparate treatment because
the NPRM suggested that statistical evidence can support an inference
of discriminatory intent. The quantitative evidence and practical
significance requirements apply to findings and preliminary findings of
disparate impact. The Department here requires the same level of
quantitative evidence as it does for disparate treatment claims--in
both kinds of cases, typically a two-standard-deviation showing of
disparate results after accounting for relevant variables to establish
a statistically significant disparity. OFCCP also requires practical
significance for the same reasons it requires it for disparate
treatment claims: to prioritize agency resources, to be especially
confident in its statistical findings, and to ensure it is bringing
compelling cases.\54\
---------------------------------------------------------------------------
\54\ Of course, quantitative evidence also demonstrates that a
disparity exists.
---------------------------------------------------------------------------
For disparate impact cases, the PDN must also specifically identify
the policy or practice that is causing an adverse impact,\55\ and
provide factual support to explain how the particular policy or
practice is causing the discriminatory effect. This is typically
accomplished using statistical evidence to demonstrate that the
identified policy or practice specifically is causing the disparity.
However, consistent with the Title VII statute and relevant case law,
if the elements of the decision-making process cannot be separated for
analysis, OFCCP may issue the PDN without identifying the exact step
causing disparate impact.\56\ This could include, for instance, if a
contractor has destroyed or failed to maintain records of its
employment policies or processes preventing OFCCP from analyzing
specific steps of the process. OFCCP expects to invoke this exception
rarely.
---------------------------------------------------------------------------
\55\ 41 CFR 60-3.3A; see also Analogic Corp., 2017-OFC-00001, at
31 (``In order to establish a disparate impact violation, OFCCP must
demonstrate Analogic `uses a particular employment practice that
causes a disparate impact on the basis of [a protected
characteristic.]'') (citing 42 U.S.C. 2000e-2(k)(1)(A)(i); Wal-Mart
Stores Inc. v. Dukes, 564 U.S. 338 (2011); Wards Cove Packaging Co.,
490 U.S. at 657; Connecticut v. Teal, 457 U.S. 440, 446 (1982);
Robinson v. Metro-North Commuter R.R. Co., 267 F.3d 147, 160 (2d
Cir. 2001)); see also Griggs, 401 U.S. at 431 (``[Title VII]
proscribes not only overt discrimination but also practices that are
fair in form, but discriminatory in operation. The touchstone is
business necessity. If an employment practice which operates to
exclude [African Americans] cannot be shown to be related to job
performance, the practice is prohibited.''); see also TNT Crust,
2004-OFC-3, at 35 (finding employer discriminated against Hispanic
applicants by requiring that laborers possess basic English skills,
which resulted in an adverse impact and was not demonstrably related
to legitimate business necessities) (citing Griggs, 401 U.S. at 431-
32)).
\56\ 42 U.S.C. 2000e-(k)(1)(B)(i); see also Analogic Corp.,
2017-OFC-00001, at 33 (``Courts have determined the Title VII
exception to the general rule requiring a plaintiff to identify a
specific employment practice caused the disparity is applicable only
when the plaintiff has demonstrated the elements of the decision-
making process cannot be separated for analysis.'') (citing Davis v.
Cintas Corp., 717 F.3d 476, 496 (6th Cir. 2013); Bennett v. Nucor
Corp., 656 F.3d 892, 817-18 (8th Cir. 2011)); Lufkin Indus., Inc.,
519 F.3d at 278 (collecting cases in which courts found employment
practices were ``not capable of separation for analysis'').
---------------------------------------------------------------------------
(c) Disclosure to Contractors
Multiple comments asked OFCCP to provide more descriptive detail on
the evidence that supports preliminary findings in the PDN, to include
the type of employment action resulting in a preliminary finding, and
to provide enough information so the contractor can investigate the
preliminary findings and respond. The agency has taken significant
steps in recent years to be more transparent and believes that the
level of specificity that contractors seek is already required by the
FCCM and recent directives.\57\ To provide greater certainty, the
agency recommits specifically to be transparent in disclosing the
quantitative evidence, the determination of potential significance, and
a summary of the relevant qualitative evidence OFCCP has accumulated,
where applicable. Paragraph (a)(4) requires that the PDN disclose the
quantitative and qualitative evidence relied upon by OFCCP in
sufficient detail to allow contractors to investigate allegations and
meaningfully respond. The PDN also must contain an explanation for the
agency's finding of practical significance. However, OFCCP may withhold
personal identifying information from the description of the
qualitative evidence if the information is protected from disclosure
under recognized governmental privileges, or if providing that
information would otherwise violate confidentiality or privacy
protections afforded by law. As stated previously, when the exception
[[Page 71565]]
in paragraph (a)(2)(ii) applies, OFCCP will disclose why, in the
absence of qualitative evidence, the agency is issuing the PDN based on
evidence of an extraordinarily compelling disparity alone. In addition,
upon the contractor's request, OFCCP must also provide the model and
variables used in its statistical analysis and an explanation for why
any variable proposed by the contractor was excluded from the
statistical analysis.
---------------------------------------------------------------------------
\57\ Chapter 8E01 of the FCCM states, ``[The PDN] description
will include identification of the discrimination victim(s), e.g.,
the affected class or individual(s); the employment action(s) giving
rise to the preliminary findings; and the basis for the liability
determination (e.g., disparate treatment in the selection of
minority technicians). The PDN should also include facts and the
results of analyses that support the preliminary determination and
recommended remedies. Typically, the PDN includes the magnitude of
the impact in terms of shortfalls or pay disparities and the measure
of statistical certainty (e.g., standard deviation).'' See also
FCCM, Letter L-35. OFCCP also provides guidance on what to
communicate to contractors in Directive 2018-08, ``Transparency in
OFCCP Compliance Activities'' (Sept. 2018), www.dol.gov/agencies/ofccp/directives/2018-08, and Directive 2018-05, see supra note 21.
---------------------------------------------------------------------------
One commenter sought clarity on how OFCCP weighs evidence provided
by the contractor to rebut preliminary findings. However, further
guidance on the weighing of that kind of evidence is not well-suited to
regulatory text, as how OFCCP evaluates a contractor's response depends
on the particular facts under review in each case. That same commenter
expressed concern regarding the amount of qualitative evidence required
before issuing a PDN and asked OFCCP to include language in the final
rule to quantify how much nonstatistical evidence is needed for OFCCP
to make a preliminary finding. As discussed previously, the amount of
evidence available--as well as its quality, credibility, and content,
which may range from innocuous to very concerning--will depend on the
facts of each compliance evaluation, and it is impracticable for OFCCP
to prescribe a set volume or specific characteristics of qualitative
evidence that would be sufficient in every conceivable evaluation. The
evidence OFCCP examines and chooses to reject or rely upon will be
based on the overall facts and circumstances of each particular case.
The PDN will provide sufficient information to contractors to be able
to understand OFCCP's finding and to meaningfully respond.
Similarly, the Department received comments seeking a definition
for ``material'' violation and clarity on what the agency considers
``preliminary findings.'' The Department did not propose these
definitions in the NPRM and declines to add definitions for these terms
to the final rule. Definitions for the terms are not needed. The final
rule provides significant clarity regarding, and guardrails for
issuing, pre-enforcement notices. To the extent commenters were
concerned with material but non-discriminatory violations, (e.g.,
recordkeeping, failure to implement audit and reporting systems), those
also trigger OFCCP's resolution procedures for compliance
evaluations.\58\ Rather than sending a PDN for potential violations
that do not involve discrimination, OFCCP generally sends an NOV before
proceeding to a conciliation agreement, or the SCN as a last
resort.\59\ This final rule codifies use of the NOV for all material
violations, with the exception of cases in which the contractor either
denies access or otherwise fails to submit information requested in
OFCCP's OMB-approved scheduling letters. For those cases, OFCCP will
continue its current practice of proceeding directly to issuing an SCN
to expedite resolution of those issues.
---------------------------------------------------------------------------
\58\ FCCM, Chapter 8F00; FCCM, Chapter 8H00. For example, OFCCP
may issue an NOV and enter into a conciliation agreement for failure
to maintain records in accordance with 41 CFR 60-1.12, 60-300.80,
and 60-741.80, or for failure to maintain affirmative action
programs as required by 41 CFR part 60-2, 41 CFR part 60-300,
subpart C, and 41 CFR part 60-741, subpart C.
\59\ In some instances, OFCCP issues the SCN without first
issuing an NOV for material violations that are non-discriminatory
in nature. See FCCM, Chapter 8D01 (explaining that OFCCP issues the
SCN without first issuing an NOV when a contractor fails to provide
the records, information, or data requested in the scheduling letter
and when the contractor refuses to provide access to its premises
for an onsite review).
---------------------------------------------------------------------------
(d) Response Deadline
In response to several comments, paragraph (a)(5) of the final rule
increases the time for contractors to respond to a PDN from 15 to 30
days with the possibility of an extension. OFCCP believes that with all
of the information being provided to a contractor in the PDN, including
the summary of evidence, and the option to request additional
information about the statistical analysis, that a contractor will
likely need 30 days to respond, with the possibility of an extension
for good cause shown.
2. Notice of Violation
Section 60-1.33(b) of the final rule governs NOVs. The Department
did not receive any comments solely concerning the NOV, with some
commenters generally addressing both the PDN and NOV thresholds.
Nevertheless, the Department has decided to revise Sec. 60-1.33(b) to
make it clear that NOVs alleging discrimination findings are subject to
the same requirements as PDNs, and that OFCCP will fully consider the
arguments raised and information provided by contractors in response to
PDNs.
Section 60-1.33(b)(1) explains that OFCCP may issue an NOV if,
following OFCCP's review of any response by the contractor pursuant to
paragraph (a)(5), the agency has evidence sufficient to support a
finding of disparate treatment and/or disparate impact
discrimination,\60\ or that the contractor has committed other material
violations of the equal opportunity clause. The NOV informs the
contractor that corrective action is required and invites conciliation
through a written agreement. This section also requires the OFCCP
Director or acting agency head to approve an NOV before it is issued.
---------------------------------------------------------------------------
\60\ See note 42, supra.
---------------------------------------------------------------------------
Paragraph (b)(1) codifies use of the NOV for all material
violations. An NOV is the first formal notification a contractor
receives for a material violation that does not involve discrimination.
However, consistent with current OFCCP policy and practice, the final
rule allows OFCCP to proceed straight to a SCN if the asserted
violation is that the contractor has denied OFCCP access to individuals
or documents or otherwise failed to submit information requested in
OFCCP's OMB-approved scheduling letters. These types of violations
require expedited treatment because they directly inhibit OFCCP's
compliance evaluations and cause delays in resolution of those
evaluations. The Department did not intend for the NPRM to require an
NOV for these types of violations and makes the exception explicit in
the final rule.
Paragraphs (b)(2) through (4) govern specifically NOVs that allege
a finding of discrimination. Paragraph (b)(2) provides that OFCCP will
only issue an NOV alleging a finding of discrimination if the
contractor has not sufficiently rebutted the preliminary findings
identified in the PDN or if the contractor failed to respond. Paragraph
(b)(3) clarifies that the requirements for issuing a PDN also apply to
an NOV alleging a discrimination violation. Finally, paragraph (b)(4)
clarifies that OFCCP must reasonably address all concerns and defenses
raised by the contractor in response to the PDN.
3. Show Cause Notice
SCNs are governed by existing sections in the Code of Federal
Regulations.\61\ The Department did not propose to revise those
sections and does not now adopt any revisions.
---------------------------------------------------------------------------
\61\ 41 CFR 60-1.28, 60-300.64, and 60-741.64.
---------------------------------------------------------------------------
OFCCP may issue SCNs when the OFCCP Director has reasonable cause
to believe that a contractor has violated an equal opportunity clause.
As noted above, the final rule retains OFCCP's ability, consistent with
current practice, to proceed directly to issuing a SCN for cases in
which the contractor either denies access or otherwise fails to submit
information requested in OFCCP's OMB-approved scheduling letters. In
discrimination cases, SCNs generally follow issuance of an NOV
[[Page 71566]]
and the contractor's rejection of OFCCP's offer to conciliate or a
failure of conciliation. Notwithstanding a rejection or failure of
conciliation, pre-referral mediation remains a viable option for
contractors who have received a SCN. If a contractor raises new or
different information or arguments in response to an NOV, the agency's
policy is to address those issues before or coincident with issuing a
SCN. The Department notes the evidentiary standards that must be met in
order to issue PDNs and NOVs in discrimination cases must also be met
in order to issue a SCN in such cases; this is the most reasonable
reading of the regulation's current requirement that the Director must
have ``reasonable cause'' to believe a violation has occurred in order
to issue a SCN, so no change to the regulatory text is needed. The
Department also notes that meeting the evidentiary standards for
issuing PDNs and NOVs does not necessarily mean that a case is legally
sufficient to initiate litigation. The Solicitor of Labor retains
authority to pursue formal enforcement proceedings and will do so only
after determining that the required legal elements of a disparate
treatment and/or disparate impact claim, as relevant, are satisfied.
4. Conciliation Agreements
Before this rule, Sec. 60-1.33 provided for conciliation
agreements. The Department has retained this provision without
substantive change as Sec. 60-1.33(c) of the final rule.\62\
---------------------------------------------------------------------------
\62\ The Department added a comma between ``complaint
investigation'' and ``or other review'' in the first sentence of
this provision.
---------------------------------------------------------------------------
5. Expedited Conciliation Option
This rule clarifies in Sec. 60-1.33(d) that Federal contractors
have the option to bypass the PDN and NOV procedures to enter directly
into a conciliation agreement when there are preliminary findings of
material violations, regardless of whether those violations involve
discrimination. This option for conciliation may suit contractors who
wish to expedite the resolution of discrimination or other material
violations. Recently, OFCCP has sought to promote the efficient
resolution of material violations for multi-establishment Federal
contractors with early resolution procedures.\63\ The final rule
furthers the agency's efforts to improve efficiency and prioritize
early resolution of cases by codifying an expedited option for
resolution that would apply to compliance reviews in their early
stages.
---------------------------------------------------------------------------
\63\ See supra note 40.
---------------------------------------------------------------------------
The Department received six comments relevant to the expedited
conciliation option. One contractor organization specifically asked
OFCCP to endorse use of the Early Resolution Procedures (ERP) and Early
Resolution Conciliation Agreements (ERCAs) in its final rule and codify
the process. While the Department fully endorses use of ERP and ERCAs
as an expedited conciliation option, and the agency intends to continue
using this option where a contractor is interested, it declines to
codify the procedures at this time. OFCCP only recently began using ERP
and ERCAs to promote corporate-wide compliance, and the procedures are
still evolving as the program matures. Under the current procedures,
OFCCP may alert contractors of their option to conciliate even before
the agency issues a PDN, and the contractor has the option to initiate
the resolution procedures. If material violations exist, the contractor
may agree to participate in ERP, ultimately resulting in an ERCA. The
agency will continue to provide subregulatory guidance on these
procedures as the program develops.
One commenter requested establishment of a pre-PDN conference
between the contractor and the agency to discuss the issues that OFCCP
intends to identify in the PDN. OFCCP's current practice is to engage
in the equivalent of a pre-PDN conference through regular contact with
the contractor, and the agency is committed to continuing to do so.\64\
Likewise, the ERP process requires a pre-PDN conference to discuss the
potential ERCA if a contractor expresses interest in pursuing one.
However, the Department believes it is premature to require a pre-PDN
conference in all matters. Between the PDN, NOV, and SCN, there already
are three mandatory notices that provide the contractor information
about OFCCP's findings (or preliminary findings) of discrimination, as
well as opportunities for the contractor to respond to each one, before
a matter is referred for enforcement. Adding another step would likely
add unnecessary delay. Moreover, OFCCP already offers early
conciliation as well as its Ombuds Service for assistance with
complaints about the agency's conduct. The agency will continue to
evaluate whether a mandatory formal pre-PDN conference would be
helpful, but declines to adopt that procedure at this time.
---------------------------------------------------------------------------
\64\ Chapter 2O00 of the FCCM states, ``After advising the
contractor of its compliance evaluation findings, the [compliance
officer] must provide formal notification through a PDN . . . when
there are preliminary indicators of discrimination.''
---------------------------------------------------------------------------
Other comments expressed concern that the early resolution option
would coerce contractors into conciliation by combining data from
multiple establishments and that OFCCP would use the early resolution
option as a way, in the words of one commenter, ``to circumvent legal
standards by OFCCP personnel through initiation of discussions about
resolution of merely `potential' employment discrimination that does
not meet legal standards.'' OFCCP does not and will not use early
resolution procedures to coerce contractors or to circumvent legal
standards, and the Department has revised Sec. 60-1.33(d) to make it
clear that contractors' participation must be voluntary. This language
should not be interpreted to be coercive. It is intended to be
permissive. One commenter further suggested that the Department should
not allow OFCCP staff to initiate discussions about expedited
conciliation options. While the Department appreciates the commenter's
concern, the Department believes that allowing OFCCP staff to inform
contractors that expedited conciliation is an available option is
important to ensure that contractors are aware of that option. However,
the final rule clarifies that OFCCP staff may not require or insist
that the contractor avail itself of the expedited conciliation option.
OFCCP's headquarters office also provides oversight of early resolution
conciliations to ensure a degree of consistency in their content.
Finally, OFCCP declines to change the label of this section, as
suggested by one comment.
6. Severability
The Department has decided to include a severability provision as
part of this final rule. To the extent that any provision of this final
rule is declared invalid by a court of competent jurisdiction, the
Department intends for all other provisions that are capable of
operating in the absence of the specific provision that has been
invalidated to remain in effect.
C. Miscellaneous Comments
A number of comments are not addressed above because they are not
directly germane to the provisions of the final rule. Eight comments
were not posted to Regulations.gov either because of lack of relevance
to the proposed rule or because they were exact duplicates of an
already posted comment. One comment was withdrawn after posting because
the submitter subsequently provided a revised version that was posted
instead.
[[Page 71567]]
One commenter noted that age discrimination is not mentioned in the
proposed rule. That is because none of the laws that OFCCP enforces
protect applicants or employees from discrimination on the basis of
age. The Age Discrimination in Employment Act, the primary Federal law
prohibiting age discrimination in employment, is enforced and
administered by the Equal Employment Opportunity Commission.
Three comments pertained to previously issued OFCCP guidance about
how the agency analyzes compensation discrimination.\65\ The comments
asked for clarification regarding how OFCCP groups employees for pay
analysis and which neutrality tests OFCCP uses to determine whether pay
variables are neutral. One of the comments suggested that the
Department should rescind the OFCCP policy directive that provides
guidance on how the agency analyzes compensation to determine whether
discrimination may be present.\66\ The Department declines at this time
to expand the scope of this rule to include further guidance concerning
pay analysis groupings specifically or to rescind its compensation
directive. The Department appreciates the input received and is
considering addressing its methods of compensation analysis in a future
rulemaking or in new guidance documents.
---------------------------------------------------------------------------
\65\ See Directive 2018-01, ``Use of Predetermination Notices
(PDN)'' (Feb. 27, 2018), www.dol.gov/agencies/ofccp/directives/2018-01. OFCCP issued this directive to ensure that PDNs be used in all
compliance evaluations with preliminary discrimination findings,
both individual and systemic. Prior to the directive, use of PDNs
was discretionary and reserved for systemic discrimination findings.
See FCCM, Chapter 8 (detailing the procedures that OFCCP follows for
issuing PDNs).
\66\ Id.
---------------------------------------------------------------------------
Finally, five comments specifically requested that the comment
period be extended. After considering those requests, the Department
determined that the original 30-day comment period provided adequate
time for the public to comment on the proposed rule. Notably, the
Administrative Procedure Act (APA) does not set forth a mandatory
minimum time for public comments, but rather more generally requires an
``opportunity to participate in the rule making through submission of
written data, views, or arguments.'' \67\ OFCCP posted its declination
letter on Regulations.gov as a supplement to the proposed rule on
January 27, 2020.
---------------------------------------------------------------------------
\67\ 5 U.S.C. 553(c). Thirty-day public comment periods are
broadly viewed as permissible under the APA, particularly where, as
here, the proposal is fairly straightforward and is not detailed or
highly technical in nature. See, e.g., Conn. Light & Power Co. v.
Nuclear Regulatory Comm'n., 673 F.2d 525, 534 (D.C. Cir. 1982)
(upholding a thirty-day comment period even though the ``technical
complexity'' of the regulation was ``such that a somewhat longer
comment period might have been helpful''); Conference of State Bank
Supervisors v. Office of Thrift Supervision, 792 F. Supp. 837, 844
(D.D.C. 1992) (upholding the sufficiency of a thirty-day comment
period).
---------------------------------------------------------------------------
D. Changes in 41 CFR Parts 60-300 and 60-741
OFCCP has separate regulations concerning E.O. 11246, VEVRAA, and
section 503. No commenter suggested that OFCCP's resolution procedures
or the proposed definitions should be applied differently depending on
the law the agency is enforcing. The Department thus adopts the same
definitions and provisions on resolution procedures in 41 CFR part 60-
300 (VEVRAA) and 41 CFR part 60-741 (section 503) that are described
above for 41 CFR part 60-1 (E.O. 11246).
E. Agency Head Title
The final rule replaces outdated references to the official title
of OFCCP's agency head in E.O. 11246 regulations, from ``Deputy
Assistant Secretary'' to ``Director,'' throughout the entirety of 41
CFR parts 60-1 and 60-2. The Department made the same change to the
regulations implementing VEVRAA and section 503 through final rules in
2013.\68\ The Department made the change after the Department of Labor
abolished the Employment Standards Administration in November 2009.
This restructuring resulted in the change of title for OFCCP's agency
head, from ``Deputy Assistant Secretary'' (reporting to the head of the
Employment Standards Administration) to ``Director'' reporting directly
to the Secretary of Labor. The Department received no comments on this
change and adopts it in the final rule.
---------------------------------------------------------------------------
\68\ See 41 CFR 60-300.2(h) and 60-741.2(f); see also 78 FR
58613 (Sept. 24, 2013); 78 FR 58681 (Sept. 24, 2013).
---------------------------------------------------------------------------
Executive Order 12866 (Regulatory Planning and Review) and Executive
Order 13563 (Improving Regulation and Regulatory Review)
Under E.O. 12866, OMB's Office of Information and Regulatory
Affairs (OIRA) determines whether a regulatory action is significant
and, therefore, subject to the requirements of E.O. 12866 and OMB
review. Section 3(f) of E.O. 12866 defines a ``significant regulatory
action'' as an action that is likely to result in a rule that: (1) Has
an annual effect on the economy of $100 million or more, or adversely
affects in a material way a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local or tribal governments or communities (also referred to as
economically significant); (2) creates serious inconsistency or
otherwise interferes with an action taken or planned by another agency;
(3) materially alters the budgetary impacts of entitlement grants, user
fees, or loan programs, or the rights and obligations of recipients
thereof; or (4) raises novel legal or policy issues arising out of
legal mandates, the President's priorities, or the principles set forth
in E.O. 12866. OMB has determined that this rule is a significant
regulatory action under E.O. 12866 and has reviewed the final rule.
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), OIRA
designated that this rule is not a ``major rule,'' as defined by 5
U.S.C. 804(2).
E.O. 13563 directs agencies to adopt a regulation only upon a
reasoned determination that its benefits justify its costs; tailor the
regulation to impose the least burden on society, consistent with
obtaining the regulatory objectives; and in choosing among alternative
regulatory approaches, select those approaches that maximize net
benefits. E.O. 13563 recognizes that some benefits are difficult to
quantify and provides that, where appropriate and permitted by law,
agencies may consider and discuss qualitatively values that are
difficult or impossible to quantify, including equity, human dignity,
fairness, and distributive impacts.
A. Need for Rulemaking
The final rule addresses stakeholder concerns by codifying the use
of PDNs, NOVs, and an early conciliation option that already exist in
the FCCM and agency guidance, such as directives. The FCCM and agency
directives are not legally binding and have not gone through formal
notice and public comment. They thus do not provide the same level of
clarity, transparency, and certainty that this final rule does. The
final rule also modifies those procedures to improve clarity and
transparency, establish guardrails on the agency's issuance of pre-
enforcement notices, and further the strategic allocation of limited
agency resources.
B. Discussion of Impacts
In this section, the Department presents a summary of the costs
associated with the codified procedures and modifications in this
rulemaking. In the NPRM, the Department utilized the General Services
Administration's System for Award Management (SAM) database to identify
the number of contractors who may be impacted by the
[[Page 71568]]
rule.\69\ Those registered in the SAM database consist of contractor
firms, and other entities such as state and local governments and other
organizations that are interested in Federal contracting opportunities,
and other forms of Federal financial assistance. In the NPRM, the
Department acknowledged that the SAM number likely resulted in an
overestimation because the system captures firms that do not meet the
jurisdictional dollar thresholds for the three laws that OFCCP
enforces, and it captures contractor firms for work performed outside
the United States by individuals hired outside the United States, over
which OFCCP does not have authority.
---------------------------------------------------------------------------
\69\ U.S. General Services Administration, System for Award
Management, data released in monthly files, www.sam.gov. In the
NPRM, OFCCP used August 2019 data and identified 420,000 contractors
that may be impacted by the proposed rule.
---------------------------------------------------------------------------
The Department received no comments on using the SAM database to
determine the affected contractor universe in the NPRM. However, in the
final rule, the Department reevaluated the contractors likely to be
affected and decided to utilize the Employment Information Report (EEO-
1) data, which identifies the number of contractors that could be
scheduled for a compliance evaluation. By using the EEO-1 Report data,
the Department mitigates the problems identified with the SAM data that
resulted in the overestimation of the contractor universe. The EEO-1
Report must be filed by covered Federal contractors who: (1) Have 50 or
more employees; (2) are prime contractors or first-tier subcontractors;
and (3) have a contract, subcontract, or purchase order amounting to
$50,000 or more. OFCCP schedules only contractors who meet those
thresholds for compliance evaluations. While the Department
acknowledges that all Federal contractors may learn their EEO
requirements in order to comply with the laws that OFCCP enforces, only
those contractors scheduled for a compliance evaluation are likely to
have a need to learn the resolution procedures because only those
contractors may need to interact with OFCCP through these new
resolution procedures. Further, because this rule stipulates procedures
OFCCP must follow if it desires to issue a PDN or NOV, unless and until
a contractor is scheduled for a compliance evaluation, the contractor
need not familiarize itself with these changes. This change
significantly alters the number of contractors possibly impacted by the
final rule, reducing the number to 26,514.\70\ The Department believes
the updated number of contractors is a more accurate estimation of
those entities possibly impacted by the final rule and still likely
overstates the number of entities that will take time to familiarize
themselves.
---------------------------------------------------------------------------
\70\ OFCCP obtained the total number of contractors from the
most recent EEO-1 Report data available, which is from FY 2018.
---------------------------------------------------------------------------
1. Cost of Rule Familiarization
OFCCP acknowledges that 5 CFR 1320.3(b)(1)(i) requires agencies to
include in the burden analysis the estimated time it takes for
contractors to review and understand the instructions for compliance.
To minimize the burden, OFCCP will publish compliance assistance
materials such as a fact sheet and answers to frequently asked
questions.
In line with recent assessments in other rulemakings, the agency
has determined that either a Human Resources Manager (SOC 11-3121) or a
Lawyer (SOC 23-1011) would review the rule. OFCCP estimates that 50
percent of the reviewers would be human resources managers and 50
percent would be in-house counsel. Thus, the mean hourly wage rate
reflects a 50/50 split between human resources managers and lawyers.
The mean hourly wage of a human resources manager is $62.29 and the
mean hourly wage of a lawyer is $69.86.\71\ Therefore, the average
hourly wage rate is $66.08 (($62.29 + $69.86)/2). OFCCP adjusted this
wage rate to reflect fringe benefits such as health insurance and
retirement benefits, as well as overhead costs such as rent, utilities,
and office equipment. The agency used a fringe benefits rate of 46
percent \72\ and an overhead rate of 17 percent,\73\ resulting in a
fully loaded hourly compensation rate of $107.71 ($66.08 + ($66.08 x 46
percent) + ($66.08 x 17 percent)). The estimated labor cost to
contractors is reflected in Table 1, below.
---------------------------------------------------------------------------
\71\ BLS, Occupational Employment Statistics, Occupational
Employment and Wages, May 2019, www.bls.gov/oes/current/oes_nat.htm.
\72\ BLS, Employer Costs for Employee Compensation, www.bls.gov/ncs/data.htm. Wages and salaries averaged $24.26 per hour worked in
2017, while benefit costs averaged $11.26, which is a benefits rate
of 46 percent.
\73\ Cody Rice, U.S. Environmental Protection Agency, ``Wage
Rates for Economic Analyses of the Toxics Release Inventory
Program,'' (June 10, 2002), www.regulations.gov/document?D=EPA-HQ-OPPT-2014-0650-0005.
Table 1--Labor Cost
----------------------------------------------------------------------------------------------------------------
Fully loaded
Major occupational groups Average hourly Fringe benefit Overhead rate hourly
wage rate rate compensation
----------------------------------------------------------------------------------------------------------------
Human Resources Managers and Lawyers........ $66.08 46% 17% $107.71
----------------------------------------------------------------------------------------------------------------
The agency estimates that it will take a minimum of 30 minutes (\1/
2\ hour) for a human resources manager or lawyer at each contractor
firm to either read the rule or read the compliance assistance
materials provided by OFCCP to learn more about the codified
procedures. One commenter, a contractor organization, asserted that the
agency underestimated the time needed to become familiar with the
proposed rule. The commenter provided an alternate estimate of two to
three hours. OFCCP acknowledges that the precise amount of time each
company will take to become familiar with understanding the new
regulations is difficult to estimate. The elements that the agency uses
in its calculation take into account the length and complexity of the
rule. Thus, OFCCP has decided to retain its initial estimate of one-
half hour for rule familiarization. The one-half hour estimate is an
average across all contractors and accounts for the time needed to read
the rule or read the compliance assistance materials provided by OFCCP
to learn more about the codified procedures.
Another contractor organization asserted that the agency's
calculations did not account for the use of outside third parties that
are used by Federal contractors and subcontractors to fully understand
a contractor's obligations under the proposed regulations. The
commenter surveyed its constituents and provided an estimate between
$1,000 and $5,000 for outside assistance. The commenter did not provide
specific data on the
[[Page 71569]]
characteristics of the contractors surveyed. The Department notes that
some companies may decide to outsource familiarization with the new
procedures, just as some companies may wait until OFCCP initiates an
investigation before familiarizing themselves with the new procedures,
but OFCCP does not anticipate that companies will incur both in-house
and third party familiarization costs. The Department thus declines to
add these third-party costs to its estimate in addition to the costs
already calculated.
Consequently, the estimated burden for rule familiarization is
13,257 hours (26,514 contractor firms x \1/2\ hour). The Department
calculates the total estimated cost of rule familiarization as
$1,427,911 (13,257 hours x $107.71/hour) in the first year, which
amounts to a 10-year annualized cost of $162,519 at a discount rate of
3 percent (which is $6.13 per contractor firm) or $190,002 at a
discount rate of 7 percent (which is $7.17 per contractor firm). Table
2, below, reflects the estimated regulatory familiarization costs for
the final rule.
Table 2--Regulatory Familiarization Cost
------------------------------------------------------------------------
------------------------------------------------------------------------
Total number of contractors............................. 26,514
Time to review rule..................................... 30 minutes
Human Resources Managers fully loaded hourly $107.71
compensation...........................................
Regulatory familiarization cost in the first year....... $1,427,911
Annualized cost with 3 percent discounting.............. $162,519
Annualized cost per contractor with 3 percent $6.13
discounting............................................
Annualized cost with 7 percent discounting.............. $190,002
Annualized cost per contractor with 7 percent $7.17
discounting............................................
------------------------------------------------------------------------
The rule does not include any additional costs because it adds no
new requirements or burdens on contractors. When the Department uses a
perpetual time horizon to allow for cost comparisons under E.O. 13771,
the perpetual annualized cost is $81,215 at a 7 percent discount rate
in 2016 dollars.\74\
---------------------------------------------------------------------------
\74\ To comply with E.O. 13771 accounting, the Department
multiplied the rule familiarization cost for Year 1 ($1,427,911) by
the GDP deflator (0.9582) to convert the cost to 2016 dollars
($1,368,224). The Department used this result to determine the
perpetual annualized cost ($106,456) at a discount rate of 7 percent
in 2016 dollars. Assuming the rule takes effect in 2020, the
Department divided $106,456 by 1.07\4\, which equals $81,215.
---------------------------------------------------------------------------
2. Cost Savings
OFCCP expects contractors impacted by the rule will experience cost
savings. Specifically, the clarity provided in the new definitions, as
well as the clarity of OFCCP's procedures related to resolution of
material violations, provides certainty to contractors of what is
required as well as an option for contractors to more expeditiously
resolve the violations.
If the rule increases clarity for Federal contractors, this impact
most likely will yield cost savings to taxpayers (if contractor fees
decrease because they do not need to engage third party representatives
to interpret OFCCP's procedures and requirements). In addition, by
increasing clarity for both contractors and for OFCCP, the rule may
reduce costs associated with resolving preliminary findings and
violations through conciliation by making it clearer to both sides at
the outset what is required by the regulation.
3. Benefits
E.O. 13563 recognizes that some rules have benefits that are
difficult to quantify or monetize but are nevertheless important and
states that agencies may consider such benefits. This rule has equity
and fairness benefits, which are explicitly recognized in E.O. 13563.
The rule is designed to achieve these benefits by:
Supporting more effective enforcement of prohibitions
against certain types of employment discrimination;
Increasing fairness for contractors by providing more
transparency and certainty on the agency's resolution procedures;
Establishing guardrails on the agency's issuance of pre-
enforcement notices;
Providing more efficient remedies to workers victimized by
employment discrimination by effectuating corporate-wide corrective
actions in conciliation agreements that may reach more victims than
standard establishment-based conciliation agreements;
Facilitating a more efficient option for contractors to
resolve potential discrimination by providing notice of OFCCP's
preliminary findings earlier in the compliance review process; and
Furthering the strategic allocation of limited agency
resources.
C. Alternatives
In addition to the approach proposed in the rule, the Department
considered alternative approaches. The Department considered leaving
OFCCP's resolution procedures described only in agency subregulatory
guidance. Though OFCCP codified ``conciliation agreements'' in 1979,
the agency's other resolution procedures, namely the PDN and NOV, have
only been explained in subregulatory guidance. Maintaining the status
quo has led to OFCCP's inconsistent use of the PDN across agency
offices, creating inefficiencies and leading to greater uncertainty for
Federal contractors. Though the agency has taken recent subregulatory
measures to increase consistency and certainty, codifying these agency
resolution procedures will have a stronger impact and promote more
efficient enforcement of E.O. 11246, section 503, and VEVRAA than the
status quo alternative.
The Department also considered different types of evidentiary
standards for OFCCP to issue PDNs and NOVs. For example, the Department
considered mandating a higher threshold for statistical significance,
such as the three-standard-deviation threshold proposed in the NPRM,
and not mandating qualitative evidence. The Department ultimately
determined that requiring statistical evidence with two standard
deviations or other quantitative evidence, a finding of practical
significance, and appropriate qualitative evidence best balances all
the equities involved and promotes efficient and effective allocation
of resources.
Regulatory Flexibility Act and Executive Order 13272 (Consideration of
Small Entities)
The agency did not receive any public comments on the Regulatory
Flexibility Analysis.
The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq.,
establishes ``as a principle of regulatory issuance that agencies shall
endeavor, consistent with the objectives of the rule and applicable
statutes, to fit regulatory and informational requirements to the scale
of the business organizations and governmental jurisdictions subject to
regulation.'' Public Law 96-354. The RFA requires agencies to consider
the impact of a regulation on a wide range of small entities including
small businesses, not-for-profit organizations, and small governmental
jurisdictions. Agencies must review whether a rule would have a
significant economic impact on a substantial number of small entities.
See 5 U.S.C. 603. If the rule would, then the agency must prepare a
regulatory flexibility analysis as
[[Page 71570]]
described in the RFA.\75\ However if an agency determines that the rule
would not be expected to have a significant economic impact on a
substantial number of small entities, then the head of the agency may
so certify and the RFA does not require a regulatory flexibility
analysis. See 5 U.S.C. 605. The certification must include a statement
providing the factual basis for this determination and the reasoning
should be clear.
---------------------------------------------------------------------------
\75\ Id.
---------------------------------------------------------------------------
The Department does not believe that this rule will have a
significant economic impact on a substantial number of small entities.
The final rule will most likely affect small firms in the construction
industry (NAICS Sector 23) and small firms in the management of
companies and enterprises industry (NAICS Sector 55). The annualized
cost for both industries at a discount rate of 7 percent for rule
familiarization is $7.17 per entity ($50.33 in the first year) which is
far less than 1 percent of the annual revenue of the smallest of the
small entities affected by the final rule (0.01% for construction and
0.02% for management of companies and enterprises). Accordingly, the
Department certifies that the final rule will not have a significant
economic impact on a substantial number of small entities. That is
consistent with the Department's analysis in the NPRM.
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 requires that OFCCP consider
the impact of paperwork and other information collection burdens
imposed on the public. See 44 U.S.C. 3507(d). An agency may not collect
or sponsor the collection of information or impose an information
collection requirement unless the information collection instrument
displays a currently valid OMB control number. See 5 CFR 1320.5(b)(1).
The Department has determined that there is no new requirement for
information collection associated with this rule. The information
collection contained in the existing E.O. 11246, section 503, and
VEVRAA regulations are currently approved under OMB Control Number
1250-0001 (Construction Recordkeeping and Reporting Requirements), OMB
Control Number 1250-0003 (Recordkeeping and Reporting Requirements--
Supply and Service), OMB Control Number 1250-0004 (Office of Federal
Contract Compliance Programs Recordkeeping and Reporting Requirements
Under the Vietnam Era Veterans' Readjustment Assistance Act of 1974, as
Amended), and OMB Control Number 1250-0005 (Office of Federal Contract
Compliance Programs Recordkeeping and Reporting Requirements Under
Rehabilitation Act of 1973, as Amended Section 503). Consequently, this
rule does not require review by the OMB under the authority of the
Paperwork Reduction Act.
Executive Order 13132 (Federalism)
The Department has reviewed the rule in accordance with E.O. 13132
regarding federalism, and has determined that it does not have
``federalism implications.'' This rule will not ``have substantial
direct effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.''
Executive Order 13175 (Consultation and Coordination With Indian Tribal
Governments)
The rule does not have tribal implications under E.O. 13175 that
requires a tribal summary impact statement. The rule does not have
substantial direct effects on one or more Indian tribes, on the
relationship between the Federal Government and Indian tribes, or on
the distribution of power and responsibilities between the Federal
Government and Indian tribes.
List of Subjects
41 CFR Parts 60-1 and 60-2
Administrative practice and procedure, Civil rights,
Discrimination, Employment, Equal employment opportunity, Government
contracts, Government procurement, Labor.
41 CFR Parts 60-300 and 60-741
Administrative practice and procedure, Civil rights,
Discrimination, Employment, Equal employment opportunity, Government
contracts, Government procurement, Individuals with disabilities,
Labor, Veterans.
Craig E. Leen,
Director, Office of Federal Contract Compliance Programs.
For the reasons stated in the preamble, the Office of Federal
Contract Compliance Programs amends 41 CFR parts 60-1, 60-2, 60-300,
and 60-741 as follows:
PART 60-1--OBLIGATIONS OF CONTRACTORS AND SUBCONTRACTORS
0
1. The authority citation for part 60-1 continues to read as follows:
Authority: Sec. 201, E.O. 11246, 30 FR 12319, 3 CFR, 1964-1965
Comp., p. 339, as amended by E.O. 11375, 32 FR 14303, 3 CFR, 1966-
1970 Comp., p. 684, E.O. 12086, 43 FR 46501, 3 CFR, 1978 Comp., p.
230, E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258 and E.O.
13672, 79 FR 42971.
0
2. In part 60-1, except for Sec. 60-1.3, revise all references to
``Deputy Assistant Secretary'' to read ``Director''.
0
3. Amend Sec. 60-1.3 by removing the definition for ``Deputy Assistant
Secretary'' and adding definitions for ``Director'', ``Qualitative
evidence'', and ``Quantitative evidence'' in alphabetical order to read
as follows:
Sec. 60-1.3 Definitions.
* * * * *
Director means the Director, Office of Federal Contract Compliance
Programs (OFCCP) of the United States Department of Labor, or his or
her designee.
* * * * *
Qualitative evidence includes but is not limited to testimony,
interview statements, and documents about biased statements, remarks,
attitudes, or acts based upon membership in a protected class,
particularly when made by a decision maker involved in the action under
investigation; testimony, interview statements, and documents about
individuals denied or given misleading or contradictory information
about employment or compensation practices, in circumstances suggesting
discriminatory treatment based on a protected characteristic;
testimony, interview statements, and documents about the extent of
discretion or subjectivity involved in making employment decisions, in
conjunction with evidence suggesting the discretion or subjectivity has
been used to discriminate based on a protected characteristic; or other
anecdotal evidence relevant to determining a contractor's
discriminatory or non-discriminatory intent, the business necessity (or
lack thereof) of a challenged policy or practice, or whether the
contractor has otherwise complied with its non-discrimination
obligations. Qualitative evidence may not be based solely on subjective
inferences or the mere fact of supervisory discretion in employment
decisions. The Office of Federal Contract Compliance Programs (OFCCP)
may also consider qualitative evidence in the form of a contractor's
efforts to advance equal employment opportunity beyond mere compliance
with legal obligations in determining whether intentional
discrimination has occurred.
Quantitative evidence includes hypothesis testing, controlling for
the major, measurable parameters, and variables used by the contractor
[[Page 71571]]
(including, as appropriate, preferred qualifications, other demographic
variables, test scores, geographic variables, performance evaluations,
years of experience, quality of experience, years of service, quality
and reputation of previous employers, years of education, years of
training, quality and reputation of credentialing institutions, etc.),
related to the probability of outcomes occurring by chance and/or
analyses reflecting statements concluding that a disparity in
employment selection rates or rates of compensation is statistically
significant by reference to any one of these statements:
(1) The disparity is two or more times larger than its standard
error (i.e., a standard deviation of two or more);
(2) The Z statistic has a value greater than two; or
(3) The probability value is less than 0.05. It also includes
numerical analysis of similarly situated individuals, small groups, or
other characteristics, demographics or outcomes where hypothesis-
testing techniques are not used.
* * * * *
0
4. Revise Sec. 60-1.33 to read as follows:
Sec. 60-1.33 Resolution procedures.
(a) Predetermination Notice. If a compliance review or other review
by OFCCP indicates evidence sufficient to support a preliminary finding
of disparate treatment and/or disparate impact discrimination, OFCCP
may issue a Predetermination Notice, subject to the following
parameters and the approval of the Director or acting agency head:
(1) For allegations included in a Predetermination Notice involving
a disparate treatment theory of liability, OFCCP must:
(i) Provide quantitative evidence as defined in this part;
(ii) Demonstrate that the unexplained disparity is practically
significant; and
(iii) Provide qualitative evidence as defined in this part that, in
combination with other evidence, supports both a finding of
discriminatory intent by the contractor and a finding that the
contractor's discriminatory intent caused the disparate treatment.
(2) OFCCP may issue a Predetermination Notice under a disparate
treatment theory of liability without satisfying all three components
listed in paragraph (a)(1) of this section only if:
(i) The qualitative evidence by itself is sufficient to support a
preliminary finding of disparate treatment;
(ii) The evidence of disparity between a favored and disfavored
group is so extraordinarily compelling that by itself it is sufficient
to support a preliminary finding of disparate treatment; or
(iii) Paragraphs (a)(1)(i) and (ii) of this section are satisfied
and the contractor denied OFCCP access to sources of evidence that may
be relevant to a preliminary finding of discriminatory intent. This may
include denying access to its employees during a compliance evaluation
or destroying or failing to produce records the contractor is legally
required to create and maintain.
(3) For allegations included in a Predetermination Notice involving
a disparate impact theory of liability, OFCCP must:
(i) Provide quantitative evidence as defined in this part;
(ii) Demonstrate the unexplained disparity is practically
significant; and
(iii) Identify the specific policy or practice of the contractor
causing the adverse impact, unless OFCCP can demonstrate that the
elements of the contractor's selection procedures are incapable of
separation for analysis.
(4) The Predetermination Notice must disclose the quantitative and
qualitative evidence relied on by OFCCP in sufficient detail to allow
contractors to investigate allegations and meaningfully respond. OFCCP
will seek to obtain qualitative evidence in all cases in which it
issues a Predetermination Notice; however, if the exception in
paragraph (a)(2)(ii) of this section applies, OFCCP will disclose why,
in the absence of qualitative evidence, the agency is issuing the
Predetermination Notice based on evidence of an extraordinarily
compelling disparity alone. In addition, upon the contractor's request,
OFCCP must also provide the model and variables used in any statistical
analysis and an explanation for why any variable proposed by the
contractor was excluded from that analysis. However, OFCCP may withhold
personal identifying information from the description of the
qualitative evidence if the information is protected from disclosure
under recognized governmental privileges, or otherwise if providing
that information would violate confidentiality or privacy protections
afforded by law.
(5) Any response to a Predetermination Notice must be submitted by
the contractor within 30 calendar days of receipt of the Notice, which
deadline OFCCP may extend for good cause.
(b) Notice of Violation. (1) If, following OFCCP's review of any
response by the contractor pursuant to paragraph (a)(5) of this
section, the agency has evidence sufficient to support a finding of
disparate treatment and/or disparate impact discrimination, as
established in the parameters and exceptions in paragraph (a) of this
section, or that the contractor has committed other material violations
of the equal opportunity clause (with the exception of violations for
denying access or failing to submit records in response to OFCCP's
Office of Management and Budget (OMB)-approved Scheduling Letters, for
which OFCCP may proceed directly to issuing a Show Cause Notice), OFCCP
may issue a Notice of Violation to the contractor requiring corrective
action and inviting conciliation through a written agreement, subject
to approval by the Director or acting agency head.
(2) OFCCP may issue a Notice of Violation alleging a finding of
discrimination following issuance of a Predetermination Notice if the
contractor does not respond or provide a sufficient response within 30
calendar days of receipt of the Predetermination Notice, subject to
approval by the Director or acting agency head, unless OFCCP has
extended the Predetermination Notice response time for good cause
shown.
(3) The Notice of Violation must disclose the quantitative and
qualitative evidence relied on by OFCCP in sufficient detail to allow
contractors to investigate allegations and meaningfully respond. OFCCP
will seek to obtain qualitative evidence in all cases in which it
issues a Notice of Violation, however, if the exception in paragraph
(a)(2)(ii) of this section applies, OFCCP will disclose why, in the
absence of qualitative evidence, the agency is issuing the Notice of
Violation based on evidence of an extraordinarily compelling disparity
alone. In addition, upon the contractor's request, OFCCP must also
provide the model and variables used in any statistical analysis and an
explanation why any variable proposed by the contractor was excluded
from that analysis. However, OFCCP may withhold personal identifying
information from the description of the qualitative evidence if the
information is protected from disclosure under recognized governmental
privileges, or otherwise if providing that information would violate
confidentiality or privacy protections afforded by law.
(4) The Notice of Violation must address all relevant concerns and
defenses raised by the contractor in response to the Predetermination
Notice.
(c) Conciliation agreement. If a compliance review, complaint
investigation, or other review by OFCCP or its representative indicates
a material
[[Page 71572]]
violation of the equal opportunity clause, and:
(1) If the contractor, subcontractor or bidder is willing to
correct the violations and/or deficiencies; and
(2) If OFCCP or its representative determines that settlement
(rather than referral for consideration of formal enforcement) is
appropriate, a written agreement shall be required. The agreement shall
provide for such remedial action as may be necessary to correct the
violations and/or deficiencies noted, including, where appropriate (but
not necessarily limited to), remedies such as back pay and retroactive
seniority.
(d) Expedited conciliation option. A contractor may voluntarily
waive the procedures set forth in paragraphs (a) and/or (b) of this
section to enter directly into a conciliation agreement. OFCCP may
inform the contractor of this expedited conciliation option, but may
not require or insist that the contractor avail itself of the expedited
conciliation option.
(e) Severability. Should a court of competent jurisdiction hold any
provision(s) of this section to be invalid, such action will not affect
any other provision of this section.
PART 60-2--AFFIRMATIVE ACTION PROGRAMS
0
5. The authority citation for part 60-2 continues to read as follows:
Authority: Sec. 201, E.O. 11246, 30 FR 12319, E.O. 11375, 32 FR
14303, as amended by E.O. 12086, 43 FR 46501, and E.O. 13672, 79 FR
42971.
Sec. 60-2.1, 60-2.2, and 60-2.31 [Amended]
0
6. In Sec. Sec. 60-2.1, 60-2.2, and 60-2.31, remove ``Deputy Assistant
Secretary'' everywhere it appears and add ``Director'' in its place.
PART 60-300--AFFIRMATIVE ACTION AND NONDISCRIMINATION OBLIGATIONS
OF FEDERAL CONTRACTORS AND SUBCONTRACTORS REGARDING DISABLED
VETERANS, RECENTLY SEPARATED VETERANS, ACTIVE DUTY WARTIME OR
CAMPAIGN BADGE VETERANS, AND ARMED FORCES SERVICE MEDAL VETERANS
0
7. The authority citation for part 60-300 continues to read as follows:
Authority: 29 U.S.C. 793; 38 U.S.C. 4211 and 4212; E.O. 11758
(3 CFR, 1971-1975 Comp., p. 841).
0
8. Amend Sec. 60-300.2 by redesignating paragraphs (t) through (cc) as
paragraphs (v) through (ee) and adding new paragraphs (t) and (u) to
read as follows:
Sec. 60-300.2 Definitions.
* * * * *
(t) Qualitative evidence includes but is not limited to testimony,
interview statements, and documents about biased statements, remarks,
attitudes, or acts based upon membership in a protected class,
particularly when made by a decision maker involved in the action under
investigation; testimony, interview statements, and documents about
individuals denied or given misleading or contradictory information
about employment or compensation practices, in circumstances suggesting
discriminatory treatment based on a protected characteristic;
testimony, interview statements, and documents about the extent of
discretion or subjectivity involved in making employment decisions, in
conjunction with evidence suggesting the discretion or subjectivity has
been used to discriminate based on a protected characteristic; or other
anecdotal evidence relevant to determining a contractor's
discriminatory or non-discriminatory intent, the business necessity (or
lack thereof) of a challenged policy or practice, or whether the
contractor has otherwise complied with its non-discrimination
obligations. Qualitative evidence may not be based solely on subjective
inferences or the mere fact of supervisory discretion in employment
decisions. The Office of Federal Contract Compliance Programs (OFCCP)
may also consider qualitative evidence in the form of a contractor's
efforts to advance equal employment opportunity beyond mere compliance
with legal obligations in determining whether intentional
discrimination has occurred.
(u) Quantitative evidence includes hypothesis testing, controlling
for the major, measurable parameters, and variables used by the
contractor (including, as appropriate, preferred qualifications, other
demographic variables, test scores, geographic variables, performance
evaluations, years of experience, quality of experience, years of
service, quality and reputation of previous employers, years of
education, years of training, quality and reputation of credentialing
institutions, etc.), related to the probability of outcomes occurring
by chance and/or analyses reflecting statements concluding that a
disparity in employment selection rates or rates of compensation is
statistically significant by reference to any one of these statements:
(1) The disparity is two or more times larger than its standard
error (i.e., a standard deviation of two or more);
(2) The Z statistic has a value greater than two; or
(3) The probability value is less than 0.05. It also includes
numerical analysis of similarly situated individuals, small groups, or
other characteristics, demographics or outcomes where hypothesis-
testing techniques are not used.
* * * * *
0
9. Revise Sec. 60-300.62 to read as follows:
Sec. 60-300.62 Resolution procedures.
(a) Predetermination Notice. If a compliance review or other review
by OFCCP indicates evidence sufficient to support a preliminary finding
of disparate treatment and/or disparate impact discrimination, OFCCP
may issue a Predetermination Notice, subject to the following
parameters and the approval of the Director or acting agency head:
(1) For allegations included in a Predetermination Notice involving
a disparate treatment theory of liability, OFCCP must:
(i) Provide quantitative evidence as defined in this part;
(ii) Demonstrate that the unexplained disparity is practically
significant; and
(iii) Provide qualitative evidence as defined in this part that, in
combination with other evidence, supports both a finding of
discriminatory intent by the contractor and a finding that the
contractor's discriminatory intent caused the disparate treatment.
(2) OFCCP may issue a Predetermination Notice under a disparate
treatment theory of liability without satisfying all three components
listed in paragraph (a)(1) of this section only if:
(i) The qualitative evidence by itself is sufficient to support a
preliminary finding of disparate treatment;
(ii) The evidence of disparity between a favored and disfavored
group is so extraordinarily compelling that by itself it is sufficient
to support a preliminary finding of disparate treatment; or
(iii) Paragraphs (a)(1)(i) and (ii) of this section are satisfied
and the contractor denied OFCCP access to sources of evidence that may
be relevant to a preliminary finding of discriminatory intent. This may
include denying access to its employees during a compliance evaluation
or destroying or failing to produce records the contractor is legally
required to create and maintain.
(3) For allegations included in a Predetermination Notice involving
a disparate impact theory of liability, OFCCP must:
(i) Provide quantitative evidence as defined in this part;
[[Page 71573]]
(ii) Demonstrate the unexplained disparity is practically
significant; and
(iii) Identify the specific policy or practice of the contractor
causing the adverse impact, unless OFCCP can demonstrate that the
elements of the contractor's selection procedures are incapable of
separation for analysis.
(4) The Predetermination Notice must disclose the quantitative and
qualitative evidence relied on by OFCCP in sufficient detail to allow
contractors to investigate allegations and meaningfully respond. OFCCP
will seek to obtain qualitative evidence in all cases in which it
issues a Predetermination Notice; however, if the exception in
paragraph (a)(2)(ii) of this section applies, OFCCP will disclose why,
in the absence of qualitative evidence, the agency is issuing the
Predetermination Notice based on evidence of an extraordinarily
compelling disparity alone. In addition, upon the contractor's request,
OFCCP must also provide the model and variables used in any statistical
analysis and an explanation for why any variable proposed by the
contractor was excluded from that analysis. However, OFCCP may withhold
personal identifying information from the description of the
qualitative evidence if the information is protected from disclosure
under recognized governmental privileges, or otherwise if providing
that information would violate confidentiality or privacy protections
afforded by law.
(5) Any response to a Predetermination Notice must be submitted by
the contractor within 30 calendar days of receipt of the Notice, which
deadline OFCCP may extend for good cause.
(b) Notice of Violation. (1) If, following OFCCP's review of any
response by the contractor pursuant to paragraph (a)(5) of this
section, the agency has evidence sufficient to support a finding of
disparate treatment and/or disparate impact discrimination, as
established in the parameters and exceptions in paragraph (a) of this
section, or that the contractor has committed other material violations
of the equal opportunity clause (with the exception of violations for
denying access or failing to submit records in response to OFCCP's
Office of Management and Budget (OMB)-approved Scheduling Letters, for
which OFCCP may proceed directly to issuing a Show Cause Notice), OFCCP
may issue a Notice of Violation to the contractor requiring corrective
action and inviting conciliation through a written agreement, subject
to approval by the Director or acting agency head.
(2) OFCCP may issue a Notice of Violation alleging a finding of
discrimination following issuance of a Predetermination Notice if the
contractor does not respond or provide a sufficient response within 30
calendar days of receipt of the Predetermination Notice, subject to
approval by the Director or acting agency head, unless OFCCP has
extended the Predetermination Notice response time for good cause
shown.
(3) The Notice of Violation must disclose the quantitative and
qualitative evidence relied on by OFCCP in sufficient detail to allow
contractors to investigate allegations and meaningfully respond. OFCCP
will seek to obtain qualitative evidence in all cases in which it
issues a Notice of Violation, however, if the exception in paragraph
(a)(2)(ii) of this section applies, OFCCP will disclose why, in the
absence of qualitative evidence, the agency is issuing the Notice of
Violation based on evidence of an extraordinarily compelling disparity
alone. In addition, upon the contractor's request, OFCCP must also
provide the model and variables used in any statistical analysis and an
explanation why any variable proposed by the contractor was excluded
from that analysis. However, OFCCP may withhold personal identifying
information from the description of the qualitative evidence if the
information is protected from disclosure under recognized governmental
privileges, or otherwise if providing that information would violate
confidentiality or privacy protections afforded by law.
(4) The Notice of Violation must address all relevant concerns and
defenses raised by the contractor in response to the Predetermination
Notice.
(c) Conciliation agreement. If a compliance review, complaint
investigation, or other review by OFCCP or its representative indicates
a material violation of the equal opportunity clause, and:
(1) If the contractor, subcontractor or bidder is willing to
correct the violations and/or deficiencies; and
(2) If OFCCP or its representative determines that settlement
(rather than referral for consideration of formal enforcement) is
appropriate, a written agreement shall be required. The agreement shall
provide for such remedial action as may be necessary to correct the
violations and/or deficiencies noted, including, where appropriate (but
not necessarily limited to), remedies such as back pay and retroactive
seniority.
(d) Expedited conciliation option. A contractor may voluntarily
waive the procedures set forth in paragraphs (a) and/or (b) of this
section to enter directly into a conciliation agreement. OFCCP may
inform the contractor of this expedited conciliation option, but may
not require or insist that the contractor avail itself of the expedited
conciliation option.
(e) Severability. Should a court of competent jurisdiction hold any
provision(s) of this section to be invalid, such action will not affect
any other provision of this section.
PART 60-741--AFFIRMATIVE ACTION AND NONDISCRIMINATION OBLIGATIONS
OF FEDERAL CONTRACTORS AND SUBCONTRACTORS REGARDING INDIVIDUALS
WITH DISABILITIES
0
10. The authority citation for part 60-741 continues to read as
follows:
Authority: 29 U.S.C. 705 and 793; E.O. 11758 (3 CFR, 1971-1975
Comp., p. 841).
0
11. Amend Sec. 60-741.2 by redesignating paragraphs (s) through (bb)
as paragraphs (u) through (dd) and adding new paragraphs (s) and (t) to
read as follows:
Sec. 60-741.2 Definitions.
* * * * *
(s) Qualitative evidence includes but is not limited to testimony,
interview statements, and documents about biased statements, remarks,
attitudes, or acts based upon membership in a protected class,
particularly when made by a decision maker involved in the action under
investigation; testimony, interview statements, and documents about
individuals denied or given misleading or contradictory information
about employment or compensation practices, in circumstances suggesting
discriminatory treatment based on a protected characteristic;
testimony, interview statements, and documents about the extent of
discretion or subjectivity involved in making employment decisions, in
conjunction with evidence suggesting the discretion or subjectivity has
been used to discriminate based on a protected characteristic; or other
anecdotal evidence relevant to determining a contractor's
discriminatory or non-discriminatory intent, the business necessity (or
lack thereof) of a challenged policy or practice, or whether the
contractor has otherwise complied with its non-discrimination
obligations. Qualitative evidence may not be based solely on subjective
inferences or the mere fact of supervisory discretion in employment
[[Page 71574]]
decisions. The Office of Federal Contract Compliance Programs (OFCCP)
may also consider qualitative evidence in the form of a contractor's
efforts to advance equal employment opportunity beyond mere compliance
with legal obligations in determining whether intentional
discrimination has occurred.
(t) Quantitative evidence includes hypothesis testing, controlling
for the major, measurable parameters, and variables used by the
contractor (including, as appropriate, preferred qualifications, other
demographic variables, test scores, geographic variables, performance
evaluations, years of experience, quality of experience, years of
service, quality and reputation of previous employers, years of
education, years of training, quality and reputation of credentialing
institutions, etc.), related to the probability of outcomes occurring
by chance and/or analyses reflecting statements concluding that a
disparity in employment selection rates or rates of compensation is
statistically significant by reference to any one of these statements:
(1) The disparity is two or more times larger than its standard
error (i.e., a standard deviation of two or more);
(2) The Z statistic has a value greater than two; or
(3) The probability value is less than 0.05. It also includes
numerical analysis of similarly situated individuals, small groups, or
other characteristics, demographics or outcomes where hypothesis-
testing techniques are not used.
* * * * *
0
12. Revise Sec. 60-741.62 to read as follows:
Sec. 60-741.62 Resolution procedures.
(a) Predetermination Notice. If a compliance review or other review
by OFCCP indicates evidence sufficient to support a preliminary finding
of disparate treatment and/or disparate impact discrimination, OFCCP
may issue a Predetermination Notice, subject to the following
parameters and the approval of the Director or acting agency head:
(1) For allegations included in a Predetermination Notice involving
a disparate treatment theory of liability, OFCCP must:
(i) Provide quantitative evidence as defined in this part;
(ii) Demonstrate that the unexplained disparity is practically
significant; and
(iii) Provide qualitative evidence as defined in this part that, in
combination with other evidence, supports both a finding of
discriminatory intent by the contractor and a finding that the
contractor's discriminatory intent caused the disparate treatment.
(2) OFCCP may issue a Predetermination Notice under a disparate
treatment theory of liability without satisfying all three components
listed in paragraph (a)(1) of this section only if:
(i) The qualitative evidence by itself is sufficient to support a
preliminary finding of disparate treatment;
(ii) The evidence of disparity between a favored and disfavored
group is so extraordinarily compelling that by itself it is sufficient
to support a preliminary finding of disparate treatment; or
(iii) Paragraphs (a)(1)(i) and (ii) of this section are satisfied
and the contractor denied OFCCP access to sources of evidence that may
be relevant to a preliminary finding of discriminatory intent. This may
include denying access to its employees during a compliance evaluation
or destroying or failing to produce records the contractor is legally
required to create and maintain.
(3) For allegations included in a Predetermination Notice involving
a disparate impact theory of liability, OFCCP must:
(i) Provide quantitative evidence as defined in this part;
(ii) Demonstrate the unexplained disparity is practically
significant; and
(iii) Identify the specific policy or practice of the contractor
causing the adverse impact, unless OFCCP can demonstrate that the
elements of the contractor's selection procedures are incapable of
separation for analysis.
(4) The Predetermination Notice must disclose the quantitative and
qualitative evidence relied on by OFCCP in sufficient detail to allow
contractors to investigate allegations and meaningfully respond. OFCCP
will seek to obtain qualitative evidence in all cases in which it
issues a Predetermination Notice; however, if the exception in
paragraph (a)(2)(ii) of this section applies, OFCCP will disclose why,
in the absence of qualitative evidence, the agency is issuing the
Predetermination Notice based on evidence of an extraordinarily
compelling disparity alone. In addition, upon the contractor's request,
OFCCP must also provide the model and variables used in any statistical
analysis and an explanation for why any variable proposed by the
contractor was excluded from that analysis. However, OFCCP may withhold
personal identifying information from the description of the
qualitative evidence if the information is protected from disclosure
under recognized governmental privileges, or otherwise if providing
that information would violate confidentiality or privacy protections
afforded by law.
(5) Any response to a Predetermination Notice must be submitted by
the contractor within 30 calendar days of receipt of the Notice, which
deadline OFCCP may extend for good cause.
(b) Notice of Violation. (1) If, following OFCCP's review of any
response by the contractor pursuant to paragraph (a)(5) of this
section, the agency has evidence sufficient to support a finding of
disparate treatment and/or disparate impact discrimination, as
established in the parameters and exceptions in paragraph (a) of this
section, or that the contractor has committed other material violations
of the equal opportunity clause (with the exception of violations for
denying access or failing to submit records in response to OFCCP's
Office of Management and Budget (OMB)-approved Scheduling Letters, for
which OFCCP may proceed directly to issuing a Show Cause Notice), OFCCP
may issue a Notice of Violation to the contractor requiring corrective
action and inviting conciliation through a written agreement, subject
to approval by the Director or acting agency head.
(2) OFCCP may issue a Notice of Violation alleging a finding of
discrimination following issuance of a Predetermination Notice if the
contractor does not respond or provide a sufficient response within 30
calendar days of receipt of the Predetermination Notice, subject to
approval by the Director or acting agency head, unless OFCCP has
extended the Predetermination Notice response time for good cause
shown.
(3) The Notice of Violation must disclose the quantitative and
qualitative evidence relied on by OFCCP in sufficient detail to allow
contractors to investigate allegations and meaningfully respond. OFCCP
will seek to obtain qualitative evidence in all cases in which it
issues a Notice of Violation, however, if the exception in paragraph
(a)(2)(ii) of this section applies, OFCCP will disclose why, in the
absence of qualitative evidence, the agency is issuing the Notice of
Violation based on evidence of an extraordinarily compelling disparity
alone. In addition, upon the contractor's request, OFCCP must also
provide the model and variables used in any statistical analysis and an
explanation why any variable proposed by the contractor was excluded
from that analysis. However, OFCCP may withhold personal identifying
information from the description of the qualitative evidence if the
information is protected from
[[Page 71575]]
disclosure under recognized governmental privileges, or otherwise if
providing that information would violate confidentiality or privacy
protections afforded by law.
(4) The Notice of Violation must address all relevant concerns and
defenses raised by the contractor in response to the Predetermination
Notice.
(c) Conciliation agreement. If a compliance review, complaint
investigation, or other review by OFCCP or its representative indicates
a material violation of the equal opportunity clause, and:
(1) If the contractor, subcontractor or bidder is willing to
correct the violations and/or deficiencies; and
(2) If OFCCP or its representative determines that settlement
(rather than referral for consideration of formal enforcement) is
appropriate, a written agreement shall be required. The agreement shall
provide for such remedial action as may be necessary to correct the
violations and/or deficiencies noted, including, where appropriate (but
not necessarily limited to), remedies such as back pay and retroactive
seniority.
(d) Remedial benchmarks. The remedial action referenced in
paragraph (c) of this section may include the establishment of
benchmarks for the contractor's outreach, recruitment, hiring, or other
employment activities. The purpose of such benchmarks is to create a
quantifiable method by which the contractor's progress in correcting
identified violations and/or deficiencies can be measured.
(e) Expedited conciliation option. A contractor may voluntarily
waive the procedures set forth in paragraphs (a) and/or (b) of this
section to enter directly into a conciliation agreement. OFCCP may
inform the contractor of this expedited conciliation option, but may
not require or insist that the contractor avail itself of the expedited
conciliation option.
(f) Severability. Should a court of competent jurisdiction hold any
provision(s) of this section to be invalid, such action will not affect
any other provision of this section.
[FR Doc. 2020-24858 Filed 11-9-20; 8:45 am]
BILLING CODE 4510-CM-P