Remember the new math? That was the short-lived teaching philosophy
that rewarded students for following the right process, even if
they reached the wrong answer.
Government policy on affirmative action has long been a similar
exercise. If contractors followed the technical requirements of
the law, they usually got a free pass—even if their policies
resulted in little tangible progress for women and minorities in
the workplace.
But as of 2001, new math is out.
Late last year, the federal Office of Contract Compliance Programs
(OFCCP) completed its first major overhaul in 30 years of regulations
governing affirmative action programs. The new rules took effect
on December 13, 2000.
The many technical changes in the new regulations are less significant
than the shift in focus. The government now wants to see contractors
targeting results, not just designing a policy in order to show
compliance. And it has backed up this goal with a powerful new tool—a
bi-annual survey of workforce and compensation data that gives the
OFCCP a road map for conducting audits.
The new regulations apply to any organization with 50 or more employees
that:
Many employers are covered by federal affirmative-action requirements
without realizing it. This happens most often when a company enters
into a subcontract to provide goods or services to another company
without realizing that the prime contractor is doing business with
the federal government. However, the same situation also can arise
as a result of a failure in communication between a company’s
sales department and its human-resources department or in-house
legal counsel.
Even though the new rules cover all but the smallest contractors,
small- to medium-sized businesses are likely to feel the greatest
impact. The agency’s traditional lack of enforcement has allowed
some contractors to fly under the radar, giving only lip service
to affirmative action in a belief that the likelihood of being audited
was small.
That is no longer so. While the giant contractors have long been
aggressive and proactive about affirmative action—knowing
that the government was looking over their shoulder—smaller
players now are likely to face similar scrutiny.
As was true under prior regulations, covered employers are required
to adopt a formal affirmative-action program, documented by a written
plan. An acceptable program must include procedures for reviewing
all employment related practices, ensuring equal-employment opportunity
and implementing good faith efforts to employ and advance women
and minorities.
If a company was compliant before, the rules are written in such
a way that it is likely to be compliant now. In fact, several aspects
of the rules simplify the affirmative-action process for contractors.
For example:
Under the new regulations, the agency also indicates a greater
willingness to consider plans based on a business function or line
of business, without regard to geographic locations. Such plans
will have to be individually negotiated with top OFCCP officials
in advance.
Even though employers may find some aspects of the new compliance
program easier to manage, they also must deal with the agency’s
substantial change in focus. The new regulations place less emphasis
on the “boilerplate” language to be included in the
written plan and require greater attention to the practical operation
of the employer’s entire affirmative-action program. As described
by OFCCP, the new regulations are intended to refocus emphasis from
the development of a written affirmative-action plan “that
complies with highly prescriptive standards, to a performance based
standard that effectively implements an affirmative-action program
into the overall management plan of the contractor.”
In addition, OFCCP has promised aggressive efforts to uncover and
remedy pay discrimination. Contractors targeted by the agency on
this issue face the prospect of expensive litigation and, potentially,
significant damages. Even the allegation of pay disparities can
also lead to internal morale problems and employee lawsuits.
Employment Survey
The regulations give OFCCP a powerful new tool for measuring compliance
and results. All covered employers will need to complete an equal-opportunity
survey, which includes highly detailed information on the company’s
equal-employment opportunities and affirmative-action program activities;
its personnel categorized by gender, race and ethnicity; and compensation
data for minorities and non-minorities by gender.
The new regulations also place greater emphasis on the requirement
that employers make every reasonable effort to identify the gender,
race and ethnicity of every employee and applicant for employment.
In addition, the regulations require employers to adopt new standards
for race and ethnicity classification in line with the October 1997
decisions of the federal Office of Management and Budget.
The agency plans to survey approximately half of the contracting
community each year. About 50,000 contractors received the first
survey earlier this year, and the next wave of surveys will be arriving
shortly. On an ongoing basis, contractors can expect to complete
the EEO survey every other year.
No contractor should take the survey lightly. The document gives
OFCCP a road map for identifying contractors that are likely to
be out of compliance, and the survey data will almost certainly
be a key tool in deciding which companies will be audited—a
process that carries substantial costs and risks. As a result, companies
should get proper counsel before completing the EEO survey and should
always have their attorneys review the document before it is sent
to the government.
The agency specifically notes that one of the goals of the survey
is “to improve the deployment of scarce federal government
resources toward contractors most likely to be out of compliance.”
Translation: Big Brother is watching.
In the past, failing to implement a required affirmative-action
program did not expose an employer to significant risks. OFCCP had
limited resources to conduct audits of covered employers and was
therefore unlikely to discover a failure to comply. Moreover, even
when the agency did discover that a covered employer had failed
to adopt an affirmative-action program, the employer could almost
always avoid any adverse consequences by simply agreeing to implement
the program going forward.
But as a result of the equal-employment survey and new methods
for checking compliance, OFCCP is more likely to discover that a
covered contractor is failing to fulfill its affirmative-action
obligations. The agency’s focus on systemic discrimination,
especially with regard to pay, makes it increasingly likely that
an OFCCP audit will result in the agency seeking to recover monetary
damages.
By implementing an appropriate affirmative-action program, an employer
can reduce the likelihood of a comprehensive audit and increase
the likelihood that, if audited, the employer will receive a clean
bill of health. When implementing a program for the first time—or
updating and evaluating an existing program—companies should:
What’s Next
Even with the new regulations in place, the future of affirmative
action is far from clear. In 1995, the Supreme Court held in the
Adarand case that race-conscious federal programs are subject to
the most stringent level of constitutional review—but failed
to resolve whether the disputed program (or any affirmative action
program) could satisfy this strict level of scrutiny. After another
six years of litigation, Adarand is back on the Supreme Court docket
this year, giving the justices another opportunity to rule on the
constitutionality of affirmative action.
The Bush administration, meanwhile, is less favorably inclined
toward affirmative action and may be less aggressive in enforcing
compliance or funding the OFCCP in its watchdog role.
But contractors cannot afford to be complacent and hope that affirmative
action goes away. The OFCCP regulations are the law of the land.
Any contractor that ignores the regulations—or fails to take
them seriously—is at risk.
Most businesses that embrace diversity also discover a bottom-line
payback. They find more qualified employees, they enrich their workforce
with new perspectives and ideas and they align their marketing strategy
to serve an increasingly diverse world.
David Goldstein is a partner in labor and employment law at the
Minneapolis law firm of Faegre & Benson. His e-mail address
is dgoldstein@faegre.com.