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OFCCP Audits Focus on Systemic Discrimination

July 20, 2007

The OFCCP reports coordination of EO Surveys with statistical analysis techniques to predict "systemic discrimination" in order to target its compliance audits. The result from using data from 3,723 establishments that responded to the EO Survey, together with the findings from 2,651 completed compliance evaluations was that 89 cases of systemic discrimination were found.  In 2006, the OFCCP recovered a record $51.5 million for over 15,000 workers. Of the recovery, 88% was collected for cases of systemic discrimination in the application process because of unlawful employment policy or practice.

Government contractors are selected for audit in several ways including the use of a mathematical model that predicts the likelihood of a finding of systemic discrimination. The model analyzes data from five years of OFCCP compliance evaluations to formally identify and characterize relationships between reported EEO-1 workforce profiles and findings of discrimination.

I have been involved is several of these style OFCCP audits and the approach is the same. The audit is triggered by an anomaly in a business’ EO Survey which shows a statistical disparity in either hires or terminations. For example, the percentage of minority applicants differs by more than 80% from the percentage of minorities hired (the four-fifths rule). The investigation into the disparity in the hiring process follows the road map set out in the OFCCP’s Compliance Manual as follows:

  • Summarizing the hiring process by obtaining an employer’s summary
  • Establishing the minimum objective criteria for the position.
  • Evaluating the Pass/Fail Points for disparate impact (i.e., when does an applicant move to the next step of the process).
  • Evaluating both the objective and subjective criteria for uniform application to all applicants and for business relatedness.
  • Evaluating specific safeguards as to the application of selection criteria including how well each is documented for each applicant.
  • Measuring statistical disparity by Impact Ratio Analysis (IRA) of each step and criteria.

There are many problems with the OFCCP’s investigatory process, a few of which are described as follows:

1.    The OFCCP loathes subjective hiring criteria. I had a client who required that its customer service candidates be "personable and friendly". The OFCCP started out with the position that this was not a "job-related" criteria. When that didn’t fly with its own legal department, the OFCCP interviewed every hiring manager and asked them to define how it applied the "personable and friendly criteria". When the hiring manager responses weren’t exactly the same, the OFCCP found adverse impact because the hiring procedures weren’t uniformly applied to all applicants.

2.    The OFCCP’s standard for adequate record keeping of each hiring decision is extremely high and it finds that inadequate records are a form of systemic discrimination.

3.    Finding adverse impact based on the four-fifths rule is a joke in terms of its lack of statistical significance. The rule has its origin in the EEOC’s Uniform Guidelines on Employee Selection Procedures. However, knowing that the OFCCP uses this flawed measure makes it all the more important to use this measuring stick when self-assessing your employment practices. George Lenard makes this observation on his employment blawg.

Once the OFCCP makes a finding of a prima facie case of pattern and practice discrimination, it will presume that all members of the class are victims of discrimination and assess liability against the contractor.   The employer can only argue about who is eligible for an award and how much. This is where the employer must decide to dig in its heals and litigate or settle.

A settlement with the OFCCP for systemic discrimination in the hiring process will include back pay plus interest and job offers to the affected class, internal mandated and OFCCP approved training, follow up reporting to the OFCCP and publicity in the form of an OFCCP Press Release