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On November 29, the OFCCP filed an administrative complaint against Cargill Meat Solutions, a federal contractor, alleging that the company violated Executive Order 11246, by favoring Asian and Pacific Islander applicants over applicants of other races and by favoring male applicants over female applicants.  In the complaint, the OFCCP alleges that over 4,000 qualified applicants were unlawfully rejected based only on their race or sex.  Significantly, the OFCCP seeks cancellation of the company's government contracts worth more than $550 million.

In the last several months, the EEOC has also filed two high-profile lawsuits against employers for alleged discriminatory hiring practices.  In September, the EEOC filed a lawsuit against Bass Pro Shops in the U.S. District Court, District of Massachusetts, alleging that the company engaged in a pattern or practice of failing to hire African-American and Hispanic applicants.  In the lawsuit, the EEOC alleges that managers made overt racist comments acknowledging the company's discriminatory hiring practices, and stated that African-American applicants did not fit their corporate profile.

In October, the EEOC filed a lawsuit against Texas Roadhouse in the U.S. District Court, Southern District of Texas, alleging that the company systematically failed to hire individuals over 40 years of age for "front of the house" positions.  In the lawsuit, the EEOC alleges that only 1.9% of the "front of the house" employees are over 40 years of age (which the EEOC believes is a statistically significant disparity when compared to the general population, industry statistics, and the applicant pool) and that the company instructed managers to hire younger employees by emphasizing youth in its hiring training.

At this point, these enforcement actions by the OFCCP and EEOC have not resulted in any final determinations or judgments.  Nevertheless, these enforcement actions serve as a useful reminder for employers of all sizes to continually monitor their hiring practices and periodically train managers who have hiring responsibilities to ensure compliance with federal, state, and local laws.

OFCCP ’s Director, Patricia Shiu, stated in a webchat held on July 12, 2011 that the OFCCP will review the “few comments received” and “will make a determination regarding the letter and the itemized listing in the very near future.” She further stated “our goal is to complete our consideration of the comments, any revisions needed, and return the document with any appropriate revisions to OMB by no later than the end of July.” Shiu added that the OFCCP will follow Office of Information and Regulatory Affairs protocol and will provide a second public comment period prior to issuing a final Scheduling Letter and itemized listing. Although the current Scheduling Letter and listing are set to expire September 30, 2011, Shiu stated “we do not anticipate that an emergency extension will be needed.”

The second comment period regarding the OFCCP’s proposed Scheduling Letter changes has not been announced. However, it appears fairly certain that Scheduling Letter changes will be enacted for audits conducted after September 30, 2011.
 

An employer that has not sufficiently documented its hiring and other personnel decisions can face serious problems during an audit, where it has the burden of explaining why particular decisions were made. If the employer does not have a system of recording and maintaining information about its hiring and other personnel decisions, it will be very difficult to recreate the decision-making process during the audit.

Not only must a federal contractor ensure that all personnel activity is documented in order to successfully navigate an audit, it must also take steps to maintain the documentation on a longer term basis. While OFCCP regulations require covered employers to maintain all applicable records for a minimum of two years, many federal and state record retention laws exceed that requirement. Federal and state statutes of limitations on bringing employment claims may also counsel in favor of retaining records for longer than the two year period required by OFCCP.

One record OFCCP will not review during new audits is the I-9 Form used by employers to verify the identity and U.S. employment eligibility of hired individuals. OFCCP Director Patricia Shiu recently announced that OFCCP will no longer inspect employers’ I-9 Forms during on-site compliance reviews. Director Shiu indicated that a new directive pertaining to I-9 inspections would soon be issued.
 

Settlements In Hiring Discrimination Cases

As reported in BNA’s Daily Labor Report, this month alone, OFCCP has announced the approval of three consent decrees which settled allegations of discrimination in hiring. In all three matters, the case was generated not by the filing of an individual complaint of discrimination, but by an OFCCP compliance audit which uncovered apparent statistical evidence of discrimination. On October 7, 2010, OFCCP announced that it had entered into a consent decree with one of the nation’s largest Coca-Cola bottlers. The litigation arose out of an OFCCP compliance audit of the employer’s Charlotte facility, during which OFCCP concluded there was evidence of a statistically significant adverse impact on minority applicants for sales support positions. The employer agreed to pay a class of African-American and Hispanic applicants $495,000.

In a consent decree filed with the United States Department of Labor’s Office of Administrative Law Judges on October 20, OFCCP and a Texas employer settled allegations of sex discrimination in hiring which arose out of an OFCCP compliance evaluation at one of the employer’s California facilities. The employer agreed to pay $167,000 to members of a class of female applicants, to hire some of the applicants and to provide future compliance reports to OFCCP. The very next day, OFCCP announced that it had entered into a $570,000 settlement with a subsidiary of Tyson Foods in another hiring discrimination case. That case was also generated by an OFCCP compliance audit which uncovered a statistically significant adverse impact in hiring which disfavored white and African-American applicants and favored Hispanic applicants.

All three settlements serve as timely reminders of the benefits federal contractors can obtain by following the hiring practices prescribed in their affirmative action plans, properly tracking applicant flow data, and analyzing that data regularly to determine whether the hiring practices are generating any potential adverse impact. Failure to do so creates the risk of potential liability even without the filing of a complaint by an applicant, if OFCCP conducts a routine compliance audit.

OFCCP Jurisdiction Over Health Care Providers

In an unrelated development also reported in the Daily Labor Report, OFCCP continues to assert jurisdiction over health care providers that provide services to federal employees pursuant to a government contract or subcontract. On October 18, a Department of Labor Administrative Law Judge found that a Florida hospital which provides medical services to active and retired military personnel, pursuant to a contract with another federal contractor administering a health care plan for those individuals, was a federal subcontractor covered by E.O 11246, and was subject to OFCCP’s jurisdiction. The Administrative Law Judge relied on a case decided last year, which held that University of Pittsburgh Medical Center branches are federal subcontractors because they have a contract with the federal Office of Personnel Management to provide health care services to federal employees. That ruling is currently being challenged in United States District Court.
 

What contracts are covered by EO 11246? In general, a covered contract is one whereby the contractor agrees to supply goods or services to a federal administrative agency or department. Special rules apply to banks and construction contractors. A subcontract is covered if the subcontractor furnishes supplies, services or property necessary for the performance of any one or more covered primary contracts, or if the subcontractor agrees to perform any portion of the covered contractor’s obligations to the government. Generally speaking, receipt of some form of federal financial assistance does not create a covered contract. However, employers should examine the terms of any federal agreements to ensure that the agreement itself does not require an affirmative action plan.

If you are required to have an affirmative action plan, the plan, or separate plans, must cover each of your establishments, even if only one establishment has the covered contract. OFCCP defines an establishment as a facility which produces goods or services such as a factory, office, store or mine. Although it is clear that all of a contractor’s establishments must have a plan even when only one has a federal contract, questions related to when a parent or subsidiary must have a plan simply because a related corporate entity has a covered contract can be more difficult to answer. Whether some or all of the entities must have an AAP turns on whether the corporate entities are truly separate, a question that is answered using a multifactor test. The most important factor is common control of labor and employee relations.