Employers with Federal Contracts, Are You Ready for an OFCCP Audit?

How to be prepared if you’re about to face an audit by the Office of Federal Contract Compliance Programs (OFCCP).

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Employers with Federal Contracts, Are You Ready for an OFCCP Audit?

Here's what you need to know about employers with federal contracts, are you ready for an OFCCP audit?:

  • The OFCCP's purpose is to make sure employers doing business with the federal government avoid engaging in discriminatory practices against workers.
  • To meet the OFCCP's criteria and pass the audit, contractors and subcontractors must comply with three Equal Employment Opportunity (EEO) laws.
  • In getting ready for an OFCCP audit, employers may look to HIRE's initiatives as a blueprint for their own fair hiring and recruiting practices.

Don’t be caught off guard if you’re about to face an audit by the Office of Federal Contract Compliance Programs (OFCCP).

The OFCCP is a function of the U.S. Department of Labor (DOL). Its purpose is to make sure employers doing business with the federal government avoid engaging in discriminatory practices against workers when:

  • Recruiting
  • Hiring
  • Paying
  • Promoting
  • Terminating
  • Transferring

Under the Equal Employment Opportunity (EEO) guidelines or Title VII of the 1964 Civil Rights Act, any form of discrimination is prohibited based on an individual’s

  • Race
  • Ethnicity
  • National origin
  • Gender
  • Age
  • Disability
  • Gender identity
  • Sexual orientation

You probably already know what to expect if you’re a long-time federal contractor. But whether you’re a new or veteran contractor, an overview of the auditing process can prepare you for the outcome and increase the chances that you’ll comply with federal rules.

The office’s history

The idea for the OFCCP dates to June 25, 1941, when Pres. Franklin D. Roosevelt signed Executive Order 8802 into law. The order prohibited federal contractors in the defense industry from discriminating against workers based on race and national origin.

Labor leader and civil rights activist A. Philip Randolph urged President Roosevelt to issue the order. Randolph founded the first Black union in the U.S., the Brotherhood of Sleeping Car Porters, in 1935.

Congress established the OFCCP as it’s known today in 1965. Nearly every U.S. president, from Harry S. Truman to Barack Obama, has signed legislation to uphold the office.

The office conducts audits to ensure contractors are complying with its EEO rules.

The audit’s three predominant laws

To meet the OFCCP’s criteria and pass the audit, contractors and subcontractors must comply with three Equal Employment Opportunity (EEO) laws:

  • Section 503 of the Rehabilitation Act of 1973. The law protects people with disabilities from discrimination. Employees who believe they’ve been unfairly targeted or discriminated against may file a complaint with DOL. The department pledges to investigate the complaint based on any facts and circumstances under review.
  • Executive Order 11246. Besides prohibiting companies from discriminating against employees under Title VII, the order prohibits companies from discriminating against employees and job applicants for discussing, asking about, or disclosing their pay or someone else’s.
  • Vietnam Era Veterans Readjustment Assistance Act of 1974 (VEVRAA). This law looks out for veterans’ well-being in the workplace. Not only must contractors and subcontractors avoid discriminating against veterans, but they’re also expected to actively recruit, hire, promote, and retain former service people.

Who must comply

Your company must comply with OFCCP rules if it:

  • Has a federally assisted construction contract, single federal contract, or subcontract amounting to more than $10,000.
  • Has federal contracts or subcontracts that add up to more than $10,000 in fees within a period of 12 months.
  • Functions as a depository for federal funds or issues and is a paying agent for U.S. savings bonds, regardless of the amount or have what’s called government bills of lading.

The OFCCP also requires your company to:

  • Create an affirmative action program (AAP) if it has 50 or more workers and at least one contract that amounts to $50,000 or more; and
  • Develop an AAP under the OFCCP that helps contractors and subcontractors handle and resolve compliance issues if it has 50 or more employees and at least one contract that amounts to $150,000 or more.

The OFCCP starts the audit by sending eligible employers a scheduling letter.

A pre-audit checklist

The OFCCP starts the audit by sending eligible employers a scheduling letter. Before the audit begins, you should be able to provide information in each of the following categories:

  • Recruiting practices. The OFCCP will examine the sources your company uses to recruit candidates and whether it’s posting all its openings on its intranet and the state’s job board. You’ll need to be able to explain whether your company is recruiting applicants from diverse talent sources.
  • A complete list of every person who applied for a job at your organization, including each one’s gender, race, and national origin. You must be able to explain how far the applicants got through the hiring process. Also, be ready to explain whether the available applicants’ pool reflects the person your company eventually hired.
  • Information on promotions and terminations. The OFCCP will investigate whether your company promotes or terminates nonwhites, whites, women, and men at disparate rates.
  • Pay equity. Pay disparity will raise a “red flag” with the OFCCP. The office will want to know whether your organization equitably compensates employees who hold the same or similar positions. The office also will factor in commissions, bonuses, and other types of incentive pay in its examination.
  • A duplicate copy of your company’s affirmative action plan. Your plan should show how your organization intends to reach its race- and gender-focused diversity goals.
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Three audit focus areas

Besides providing information in the previous checklist, you’ll need to provide the OFCCP with proof of information in the following three areas:

Technical compliance

  • Proof that your organization is on the Employment Service Delivery System list
  • VETS-4212 reports (see DOL’s eLaw to find out if you must submit these reports.)
  • Copies of your company’s written policies on Equal Employment Opportunity/Affirmative Action, non-discrimination, anti-harassment, and maternity leave
  • Proof that EEO statements on purchase orders have the correct terminology
  • Copies of all self-identification forms you have
  • Notification of your AAP’s availability for inspection, including location and viewing hours

 Personnel activities

  • Personnel files
  • Recruiting policies and practices
  • Position opening announcements
  • Applications
  • Job descriptions
  • Internally and externally posted job openings and advertisements
  • Paperwork for each stage in the hiring process
  • Minimum qualification preferences
  • Termination letters for ex-employees
  • Information on involuntary and voluntary firings

Compensation

  • Pay data on each employee
  • Factors involved in pay decisions
  • A policy on how compensation is decided

The HIRE coalition

The OFCCP and DOL formed a partnership called the Hiring Initiative to Reimagine Equity (HIRE) to rethink recruiting and hiring practices focused on equal employment opportunities and expanded access to good jobs for workers.

COVID-19’s negative impact on employment, especially for underserved and underrepresented employee populations, fueled the partnership, according to DOL.

The DOL offers contractors and subcontractors OFCCP compliance assistance.

In getting ready for an OFCCP audit, employers may look to HIRE’s initiatives as a blueprint for their own fair hiring and recruiting practices. According to the DOL and the OFCCP, HIRE will:

  • Host meetings to evaluate contractors’ and subcontractors’ employment policies and practices to reimagine fairness and expand opportunities in hiring.
  • Identify ways to remove unnecessary barriers to hiring and promote effective hiring and recruiting practices to cultivate a diverse pool of qualified job applicants.
  • Promote fairness in using tech-based hiring systems.
  • Develop resources to promote innovative and evidence-based recruiting and hiring practices that advance equity.

Along with HIRE, DOL offers contractors and subcontractors OFCCP compliance assistance.

Compliance help guide

The OFCCP’s assistance portal provides:

  • Technical assistance for small contractors, educational institutions, the construction industry, and the supply and service sector.
  • Recordkeeping guidance for VEVRAA, Executive Order 11246, and applicant tracking.

The same portal also has information on what contractors can expect when dealing with the OFCCP.

The AAP portal

In February 2022, the OFCCP created a portal for contractors and subcontractors to enter, track, and submit AAPs.

The U.S. Government Accountability Office developed the portal because the OFCCP didn’t have a timely and efficient system for employers as contractors and subcontractors to submit AAP documents.

The takeaway

The various OFCCP portals have lots of data and details. But the checklists can make it easier to cross off every requirement you’ll need to pass the audit successfully.

Also, DOL and the OFCCP help with audit preparation so you can keep your recruiting and hiring practices EEO-compliant.

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