Did You Survive OFCCP Audit Season? Ten Items To Consider For Current And Future Audit Preparation

Monday, May 1, 2006 - 01:00

Federal government contracts are often a source of big business for employers. But with big business can come big problems, especially for those government contractors and subcontractors who do not fulfill the affirmative action obligations tied to their contractor status. How big can the problems be? In fiscal year 2005, the Office of Federal Contract Compliance Programs (the "OFCCP") collected a record of $45,156,462 in financial recoveries for aggrieved workers.1 Are you a government contractor or subcontractor who wants to keep your money out of this coffer? To avoid monetary penalties, and even the possible loss of government contracts, government contractors must fulfill their affirmative action obligations.

But how will the OFCCP know whether or not you are complying with your affirmative action obligations? The OFCCP typically selects about 2,000 to 4,000 contractor and subcontractor establishments for compliance evaluations each fiscal year.2 The OFCCP distributes compliance evaluation letters (or "audit letters") to selected government contractors and subcontractors (collectively "contractors"). These letters require government contractors to submit a host of data relating to their affirmative action obligations, which allows the OFCCP to perform what is known as a desk audit. The data submitted in response to the audit letters allows the OFCCP to determine if it will go beyond the desk audit phase and require an on-site audit of the contractor's facility.

Whether you fared poorly in this year's audit or want to be prepared for potential audits, every government contractor should have a firm grasp on the following ten items in order to retain both government contracts and money that would otherwise be paid as penalties to aggrieved employees.

1. Current Year Affirmative Action Plan

A current year affirmative action plan will be first on the list of items requested by the OFCCP in a desk audit. Pursuant to OFCCP regulations, all federal contractors and subcontractors with 50 or more employees and a single contract of $50,000 or more must annually write an affirmative action plan covering women and minorities for each of their establishments. OFCCP regulations spell out the specifics of affirmative action plans, but in brief, an affirmative action plan consists of:

1. An organizational profile showing, typically by department, the number of men, women, and minorities per job title to demonstrate the staffing patterns within an organization;

2. The formation of job groups, covering all jobs, which consist of jobs with similar functions, pay ranges and opportunities;

3. A determination of minority and female availability, per job group, based on the minorities and women that can be promoted from feeder job groups within the organization and recruited from the area in which the employer typically recruits;

4. A comparison of incumbency to availability for each job group; and

5. Placement goals for each job group in which the percentage of minorities or women employed is less than the availability for the given job group. Placement goals are not rigid quotas or set asides. Placement goals also do not supersede merit selection procedures, nor do they provide the contractor with a justification to engage in discriminatory hiring practices.

The formation of a women and minorities affirmative action plan is an intricate and often time-consuming process. Plans should be made annually to avoid the last-minute pre-audit rush.

2. Prior Year Affirmative Action Plan

Contractors who are audited will be asked to discuss their progress in achieving the placement goals set in the prior year's affirmative action plan. In addition, in the event of an on-site audit, contractors will be asked to produce their prior year affirmative action plan. So, it is important for contractors to have a prior year affirmative action plan in their records.

3. Adverse Impact Analysis

As a part of creating an affirmative action plan, contractors must analyze employment actions for adverse impact on women and minorities. This involves analysis of hires, promotions and terminations that occurred during the course of the prior affirmative action year (and potentially for the current affirmative action year depending on when the audit letter is received). As with the preparation of a women and minorities affirmative action plan, compiling the data for adverse impact analysis is often more time consuming than the analysis itself thanks to software applications that assist with statistical analysis. Thus, it behooves contractors to keep accurate records of the employment actions taken throughout the affirmative action year.

4. Veterans And Disabled Workers Plan - Self Identification

Audit letters will also require covered contractors to submit a copy of their veterans and disabled workers affirmative action plan. Pursuant to the Vietnam Era Veterans' Readjustment Assistance Act of 1974, contractors must create an affirmative action plan covering veterans if they have a contract of $100,000 or more. Pursuant to Section 503 of the Rehabilitation Act of 1973, contractors must create an affirmative action plan for disabled workers if they have 50 or more employees and a contract of $50,000 or more. Many contractors opt to combine these plans into one comprehensive plan document.

Unlike the women and minorities plan, the veterans and disabled workers plan does not require statistical data analysis. The plan does, however, require regular compliance with the obligation to seek self identification. Contractors must regularly ask employees to self identify as protected veterans or disabled workers.3 Because self identification forms ask about disability status in addition to veteran status, they should be distributed only after a firm offer of employment is made, or better still, only to current employees. While self identification is voluntary (and contractors cannot force employees to self identify), contractors should regularly distribute self identification forms to fulfill their affirmative action obligations.

5. EEO-1s

All federal contractors and subcontractors with 50 or more employees and contracts of $10,000 or more must annually file a Standard Form 100 (EEO-1 Report).4 In addition, all private employers who are subject to Title VII of the Civil Rights Act of 1964 as amended with 100 or more employees are required to file an EEO-1 Report. In audit letters, the OFCCP will typically ask for copies of EEO-1 reports for the prior 3 years. Accordingly, contractors should maintain readily available copies of their filed EEO-1 reports.

6. Job Postings

All federal contractors and subcontractors with a single contract of $10,000 or more, or the aggregation of lesser contracts which, in 12 calendar months, total $10,000 or more, are covered under the OFCCP's regulations prohibiting discrimination and requiring affirmative action.5 Contractors with contracts of over $100,000 taking effect on or after December 1, 2003 ($25,000 for earlier contracts) have additional affirmative action obligations. One example of such an additional affirmative action requirement is to list job postings with an appropriate local employment service office of the state employment security agency. During an audit, the OFCCP will check with the state employment security agency to see whether contractors are listing job openings with these services.

7. I-9s

Pursuant to the Immigration Reform and Control Act, employers must use form I-9 to verify the lawful employment status of all new hires. Employers must retain completed I-9 forms for three years after the date of hire or one year after the date of termination, whichever is later. If an OFCCP audit proceeds to the on-site stage, the OFCCP will inspect a contractor's I-9s. Ensure that I-9s are accurate and stored in an easily accessible manner.

8. Employment Law Posters

Are the employment law posters around your facility current? If not, consider obtaining the most current federal and state law postings for display around your facility. Make sure to include postings of the facility's current affirmative action and equal employment opportunity policies. Maintaining current postings is a quick and easy way to update the facility, prepare for audit, and impress OFCCP officials who participate in an on-site audit of your facility.

9. General Facility Appearance

Look beyond the federal and state law postings that you are required to have. Are there other types of postings visible that should not be present? Any inappropriate posters, stickers, photographs, etc., should be removed from your facility. Remember, if an audit proceeds to the on-site phase, the OFCCP is not simply looking for affirmative action violations. The OFCCP will examine I-9s, look for work place discrimination, and even investigate for wage and hour issues. You want to bolster the overall appearance of your facility because first impressions are important.

10. Diversity Progress

Keep tabs on your progress in achieving a diverse workforce. Did your recruiters participate in diversity job fairs? Were you successful in promoting women or minorities within your organization? Audit letters require contractors to submit a discussion of the progress that they have made in achieving the placement goals set at the start of the prior affirmative action year, as well as the good faith efforts that contractors have made to achieve their placement goals. Keeping track of your diversity efforts will not only ensure that you are prepared for an OFCCP audit, it will provide positive reinforcement and project a favorable image to your staff and to the public, demonstrating that you are an employer who takes diversity seriously.

Lauren M. Mazur is an Associate in WolfBlock's Employment Services Practice Group. She can be reached at (215) 977-2131.

Please email the author at lmazur@wolfblock.com with questions about this article.