Three Years Later, the Next Shoe Drops: OMB Approves Revised OFCCP Scheduling Letter

Significant changes are just over the horizon for federal contractors and subcontractors, as the Office of Management and Budget (OMB) has approved the revised Scheduling Letter and Itemized Listing (Scheduling Letter) proposed by the Office of Federal Contract Compliance Programs (OFCCP). Three years after the OFCCP first submitted a revised Scheduling Letter to the OMB for approval, the Agency published a notice in the Federal Register on September 30th, announcing that the OMB has approved the revised Letter for use until March, 31, 2016. The revised Scheduling Letter will require contractors, at the outset of a compliance review, to submit to OFCCP individualized compensation data, personnel activity data broken out by each racial subgroup (rather than in two groupings – minorities and non-minorities), and additional materials to demonstrate compliance with the new regulations that became effective earlier this year, overhauling contractor obligations under the Veterans' Readjustment Assistance Act (VEVRAA) and Section 503 of the Rehabilitation Act.

The "big ticket" item approved by OMB is the requirement that contractors submit individualized compensation data at the outset of every desk audit. This is a substantial change from the prior obligation to produce only aggregate data on the average compensation of males, females, minorities and non-minorities by salary range, grade or level. The new Scheduling Letter also significantly expands the definition of "compensation" to include hours worked, incentive pay, merit increases, locality pay and overtime. These revisions illustrate OFCCP's ever-increasing focus on compensation issues. They also serve to re-emphasize how important it is for contractors to conduct privileged analyses of their compensation prior to audit so that they can better understand their vulnerabilities and perhaps take corrective action to address disparities prior to submitting their data for review.

Other changes in the revised Scheduling Letter include a requirement that contractors submit all personnel activity data by each racial subgroup rather than by grouping all minorities together for purposes of analysis. This will result in a substantial increase in the number of analyses under review and a multiplication of the potential areas of vulnerability, as the OFCCP will now be armed with data to compare selection rates between and across minority subgroups. The new Scheduling Letter will also include requirements related to the new obligations with respect to veterans and individuals with disabilities.

We can report one piece of good news in connection with OMB's action. The original revisions proposed by OFCCP would have resulted in submission of data by job title, in addition to by job group as currently required. Contractors strongly objected to this change on the basis that it would substantially increase the administrative burden of preparing affirmative action plans and would result in exponentially more analyses for the OFCCP to scrutinize. OFCCP backed off this requirement, and the new Scheduling Letter will still allow contractors to submit their data on either a job group basis or a job title basis, but will not require both.

The new Scheduling Letter provides just the latest set of obligations and burdens that contractors and subcontractors now face if they decide to do business with the federal government. In the past few months, the OFCCP has been incredibly active on the regulatory front, issuing a Notice of Proposed Rulemaking (NPRM) for a compensation data collection tool, an NPRM on Prohibitions Against Pay Secrecy Policies and Actions, a Directive regarding contractors' nondiscrimination obligations with respect to sexual orientation and gender identity, and further guidance (in the form of FAQs) regarding implementation of the new VEVRAA and Section 503 regulations. On top of that, the Administration is currently conducting "listening sessions" with stakeholders on the recently-issued Executive Order on Fair Pay and Safe Workplaces, which promises again to impose substantial new obligations on those who seek to do business with the federal government.