OFCCP to Re-Open Audits in Effort to Purge Private Sector “DEI”

Prominent and respected news outlets are reporting that the newly-minted Director OFCCP announced to OFCCP staff via email that she will be completing an extensive review of the agency’s activities and outlined how she intends to have OFCCP join the Trump administration’s efforts to root out diversity, equity, and inclusion programs.

According to news reports, OFCCP Director Catherine Eschbach is reported to have told OFCCP staff that the agency will need to “verify” that contractors have “wound down” use of EO 11246 affirmative action plans, after the date provided for in President Trump’s recent executive orders. Director Eschbach also shared that this effort could include examining previously submitted AAPs to see if they “indicate the presence of longstanding unlawful discrimination”. No further details are being reported as to what this review of previously submitted plans will look like, including how far back they intend to go, and if the reviews will cover just the initial AAP submission or include information submitted in response to requests for information made by OFCCP during the audit.

This development is likely alarming to federal contractor employers who have been required to hand over sensitive and detailed employment data—including employee-level pay data—to the OFCCP in compliance evaluations or “audits” over the past several years. Typically audits end with either a closure letter when no violations are found, or a negotiated conciliation agreement if they are. If settlement is reached after the case is taken before an Administrative Law Judge, it is called a consent decree. In any case, contractors have assumed for decades that the end of an audit is the end of the matter, not that audits will be re-opened at some later date and reevaluated using potentially different criteria.

Director Eschbach has been quoted from her email to OFCCP staff referring to the reviews as an “autopsy” of the agency’s activities stating that “[m]ost of what OFCCP had been doing was out of step, if not flat out contradictory, to our country’s laws, and all reform options are on the table.” It is unclear at this point the extent to which the OFCCP’s review may result in new charges against federal contractors, as opposed to just being used to reform agency policies and practices, but Director Eschbach is quoted as saying that the OFCCP intends to join the administration efforts to “root out” diversity, equity, and inclusion programs by reviewing federal contractors’ AAPs and potentially referring matters to other agencies.

President Trump’s Executive Order 14173, which revoked EO 11246, orders “all agencies to enforce our longstanding civil-rights laws and to combat illegal private-sector DEI preferences, mandates, policies, programs, and activities.”

Section 4 of the EO is titled, “Encouraging the Private Sector to End Illegal DEI Discrimination and Preferences,” and orders each executive agency to “identify up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars,” provide “[o]ther strategies to encourage the private sector to end illegal DEI discrimination and preferences,” and identify “[l]itigation that would be potentially appropriate for Federal Lawsuits.”

If the OFCCP plans on investigating federal contractors, it is unclear under what authority the agency plans to do so. The OFCCP’s investigatory and enforcement authority was entirely the creation of Executive Order 11246, which President Trump rescinded in full. The OFCCP has not yet removed the regulations implementing EO 11246 from the Code of Federal Regulations, but it is difficult to imagine how those regulations can be legally enforced when the underlying authority for them has been revoked.

The OFCCP would most likely refer matters to the EEOC—with which it has long held a “memorandum of understanding” allowing for information sharing—because the EEOC was created by Title VII of the Civil Rights Act and retains enforcement authority (it cannot be revoked by an executive order, only an act of Congress). Presumably, the EEOC could then perform its own investigation, potentially side-stepping the OFCCP’s lack of investigatory authority.

The OFCCP’s regulations implementing EO 11246 also provides that the OFCCP Director “may refer matters to the Department of Justice with a recommendation for the institution of judicial enforcement proceedings” (41 C.F.R. § 60-1.26(c)). The regulations go on to note, “There are no procedural prerequisites to a referral to the Department of Justice. Such referrals may be accomplished without proceeding through the conciliation procedures in this chapter, and a referral may be made at any stage in the procedures under this chapter.”

It is also unclear how far back the OFCCP maintains federal contractor records and data, and how far back the agency’s review will reach. However, if Title VII is the authority they intend to invoke, the statute provides that charges must be filed with the EEOC within 180 days of the alleged discriminatory act(s). Note that this timeframe can be extended to up to 300 days if there is a state or local law that prohibits the same discrimination and the complainant initially files a complaint with such state or local authority, but that is unlikely to apply to the OFCCP’s new review.

Berkshire will continue to monitor developments closely. If you have questions about this or any other federal contractor compliance-related issues, please do not hesitate to contact us at bai@berkshireassociates.com.