Held at the end of July and into the beginning of August, this year’s National Industry Liaison Group (NILG) conference once again offered the opportunity to learn from fellow affirmative action and equal employment opportunity practitioners and lawmakers. In this article, Affirmity’s Christine Avila and Patrick McNiel, PhD discuss some of the biggest talking points from the event: from changes to the scheduling letter, to artificial intelligence and recent Supreme Court cases.
- The OFCCP Offered a Timely Reminder About Updates to Item 19 of the Scheduling Letter
- There’s an Ongoing Discussion About Valid Approaches to Item 22
- OFCCP Advice on Handling Campus-Like Settings
- Regional Directors Share Common Audit Issues
- Taking the Temperature of the Room on the OFCCP’s New Expedited Conciliation Procedures
- Item 21 Isn’t Just About AI
- Reminder: The OFCCP Has Issued Guidance on AI
- State and Local-Level AI Laws Continue to Grow in Number
- The Industry Reflects on Recent Landmark Supreme Court Cases
- Smaller Updates of Note: EEO-1 Component 2, FAAPs, and Updated Race Categories
1) The OFCCP Offered a Timely Reminder About Updates to Item 19 of the Scheduling Letter
This year’s NILG conference was the first since the OFCCP made adjustments to its scheduling letter in August 2023, ensuring the changes were a key topic of discussion. Among the more significant of last year’s changes were those made to Item 19: previously, organizations had to submit a single snapshot of their employee data covering the current plan year. The revisions in August 2023 require employers to submit a second snapshot covering the prior plan year.
When the OFCCP receives these two snapshots, they’ll likely look at them individually, but they may also combine them. Before submission, contractors will want to reconcile both snapshots, which will involve looking for instances where:
- Employees are in different jobs or different locations, and ensure that these changes are documented in historical transactions
- Employees are not found in both snapshots, and confirm that they’re included in your hires or terminations, as applicable.
Overall, you will want to understand what your pay analysis will look like from the OFCCP’s perspective: running an analysis on both years separately, and running a combined analysis that uses a repeated measure design (because the OFCCP is going to stack them and analyze both figures at once). The OFCCP has discussed looking at changes from one snapshot to another, and could potentially look at aspects such as promotions and merit increases to uncover compensation problems.
There are plenty of further considerations regarding Item 19 beyond the two snapshot requirement. For example, organizations are warned that they should anticipate the OFCCP using the job groups they create when analyzing pay. If you have various titles that aren’t actually similar to each other combined in a job group, you may encounter issues—so ideally, you should look carefully at your job structure and make some strategic adjustments in order to avoid creating unnecessary problems.
When submitting employee records, you need to include factors that can affect pay, such as education, prior work experience, tenure, and geographic differences. These are details you may not already have digitized in your HRIS, so it’s worth getting them together before a scheduling letter arrives.
Finally, with respect to Item 19, you’ll also have to include documentation or any policies related to your compensation practices, and be prepared to talk about that during your audit. This includes how starting pay is set, how compensation adjustments happen, and when compensation is reviewed.
2) There’s an Ongoing Discussion About Valid Approaches to Item 22
Item 22 was a new addition to the scheduling letter’s August 2023 update. It requires contractors to prove that they have conducted an analysis of their compensation systems to determine if there are gender-, race-, or ethnicity-based disparities in pay. There are a few widely discussed options to satisfy this requirement:
- If you have performed a pay analysis through your outside counsel, or a vendor like Affirmity at the direction of outside counsel, you have the option to provide a redacted version of this privileged pay analysis. (Note: This is not an option we would recommend due to the sensitive nature of this information.)
- Submit an alternative, non-privileged pay analysis done using a separate test.
- Provide an affidavit attesting to your compliance with Item 22 without providing a report.
Speakers at the conference had a range of thoughts on the specifics of the latter two approaches (and all agreed that organizations should not use the first). Particularly, if going the affidavit route, organizations should bear in mind that it needs to include detail on when the compensation analysis was conducted, the employees included and excluded, and the types of pay that were analyzed.
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3) OFCCP Advice on Handling Campus-Like Settings
The OFCCP has clarified that, in the event of an audit, organizations operating on a campus (or campus-like setting) must submit all AAPs that cover that campus. This requirement applies most obviously to universities, but it also applies to hospitals or any business with multiple buildings on a single site. You may submit one single AAP for the whole campus, or multiple AAPs to cover different legal entities and different buildings (remember to check your EEO-1 reports for consistency between the AAP and EEO-1 reports). Review your job group structure carefully, especially if you have one AAP covering the entire campus. Keep in mind that the OFCCP is using job groups not just for reviewing availability and placement goals, but also for compensation and adverse impact. Make sure your job groups are narrowly tailored to jobs that are similar in content, opportunities, and wages.
4) Regional Directors Share Common Audit Issues
During the usual OFCCP regional director panel closing out the show, attendees were again reminded that record keeping is a common violation uncovered during audits. Panelists urged contractors to be cautious during system changes, such as moving to a new HRIS or ATS—make sure that you retain access to the records from your previous system.
During the same panel, issues with timeliness were also raised: contractors under audit were urged to be quicker in responding to the OFCCP when it reaches out with questions through the course of an audit.
Another issue highlighted was inconsistent dispositioning in applicant data, and it was suggested that contractors should endeavor to ensure all ATS users are trained on the dispositions in the system and how to apply them correctly.
Finally, the OFCCP reminded everyone that it runs a series of compliance assistance opportunities throughout the year, across the country, and virtually. Directors revealed that attendance at these events has typically been quite low, and they feel that contractors would benefit from the information covered in these sessions.
5) Taking the Temperature of the Room on the OFCCP’s New Expedited Conciliation Procedures
Shortly before the conference began, the OFCCP issued a new directive regarding expedited conciliation procedures, replacing a previous directive from 2019. In the event that the OFCCP uncovers violations in the audit it’s conducting, it may offer an expedited conciliation procedure in order to try to work with the contractor to see if those violations exist across other locations or even enterprise-wide.
The idea is that when contractors engage with this procedure, they would work with the OFCCP to agree what the violations are, the remedial actions required, and the extent to which these remedies should be applied organization-wide. The OFCCP would give the contractor a three-year moratorium on compliance evaluations, though this applies only to the AAPs covered by the conciliation agreement, and the contractor would still have to issue periodic progress reports to the agency.
During NILG, the OFCCP’s regional directors were strongly encouraging contractors under audit to participate in the expedited conciliation procedure if offered. Vendors and attorneys speaking at the event, however, were markedly less keen on the idea, suggesting that it’s only really in the OFCCP’s best interest and not necessarily in that of the contractor.
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6) Item 21 Isn’t Just About AI
Circling back to the OFCCP’s adjustments to the scheduling letter, we now have Item 21 requiring contractors to “Identify and provide information and documentation of policies, practices, or systems used to recruit, screen, and hire, including the use of artificial intelligence, algorithms, automated systems or other technology-based selection procedures.”
Though the OFCCP wants to hear about any AI component of your selection systems, speakers at NILG stressed that Item 21 isn’t just about AI—the OFCCP has even received “N/A” responses from contractors who have misunderstood the requirement. Instead, it is a wider request for you to explain your selection system and recruiting process.
7) Reminder: The OFCCP Has Issued Guidance on AI
Though Item 21 isn’t exclusively focused on AI, the technology is undeniably a topic on everybody’s minds. Indeed, at NILG this year, every other session was either explicitly about artificial intelligence or had a large component regarding it.
The OFCCP issued guidance on AI at the end of April, prompted by an executive order from the Biden administration. The main thrust of the OFCCP’s advice is that it expects contractors to treat AI selection assessment tools like they would any other kind of tool. You must assess them for fairness, bias, and adverse impact. It additionally provided the following best practices:
- Understand and articulate the business need for any AI selection tools
- Assess the job-relatedness of factors tested by your tools
- Give applicants advance notice that AI-based selection tools are in use
- Provide instructions for requesting an accommodation
- Regularly assess results of AI tools for adverse impact
- Look for alternative job-related selection tools with less impact if adverse impact is found
- Ask AI tool vendors to share results of system fairness studies prior to purchase
This reflects similar guidance from the Society for Industrial and Organizational Psychology (SIOP) and trends in state-level employment law. We would add that it’s advisable to talk to AI tool vendors about all these issues as part of your tool selection process. For example, you should ask how a vendor would handle the accommodations people with disabilities may need. If they aren’t thinking about these issues, the tool may not be suitable.
Additionally, regarding the guidance around AI tool adverse impact, we would caution organizations that this must be balanced against validity. Even if an alternative tool results in less adverse impact, if it doesn’t have validity for its intended use, it’s not a viable alternative.
Our recommendations for the use of AI are to:
- Vet vendors
- Vet data used to train AI
- Train AI users
- Conduct adverse impact analysis
- Prepare for Item 21—even if you are not under audit or on CSAL
Remember that contractors can’t delegate compliance obligations to their vendors. Contactors are ultimately responsible for potential adverse impact caused by AI.
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8) State and Local-Level AI Laws Continue to Grow in Number
It is worth noting the large number of AI laws enacted and being considered at state and local levels. As of the time of writing, the following states and local governments have already enacted AI-related laws relevant to the employment space:
- California
- Colorado
- Connecticut
- Delaware
- Illinois
- Indiana
- Maryland
- Montana
- New York
- Oregon
- Tennessee
- Texas
- Virginia
Meanwhile, the following states and local governments have proposed laws in the pipeline:
- Florida
- Maine
- Massachusetts
- New Mexico
- Ohio
- Oklahoma
- Pennsylvania
- South Carolina
- Vermont
- Washington
9) The Industry Reflects on Recent Landmark Supreme Court Cases
A number of recent landmark supreme court cases were topics of discussion at NILG, reflecting a wider trend of analysis among legal commentators in the media and on legal blogs.
Securities and Exchange Commission v. Jarkesy
The Supreme Court has ruled that exclusive use of agency tribunals with no option for jury trials for entities charged with civil violations is not consistent with the seventh amendment to the constitution. This case may map onto OFCCP operations and could weaken enforcement capabilities by essentially forcing jury trials. Consequently, commentators at NILG and beyond are suggesting that the era of administrative law judges may be over for the OFCCP—with the caveat that it may be some time before practices change.
Loper Bright Enterprises v. Raimondo
In this ruling, the Supreme Court effectively overruled Chevron deference, which states that when a law is ambiguous, courts should defer to reasonable interpretations made by the federal agencies.
The Supreme Court found that in this case, Chevron deference conflicts with the Administrative Procedures Act, which gives interpretation of ambiguity to the courts rather than regulators. The ruling does not overturn the concept of Skidmore deference, which states that agency expertise and persuasiveness should still be considered.
While the Supreme Court has stated that prior administrative actions and decisions made under Chevron deference are not overturned, commentators believe that it’s likely that laws made under Chevron deference will be vulnerable to reinterpretation if challenged. It’s therefore likely that the ruling will result in a high degree of regulatory chaos.
Corner Post v. Board of Governors of the Federal Reserve System
This ruling concerned the time limit for the judicial review of rulemaking under the Administrative Procedure Act. Previously, the statute of limitations was six years from the time a rule was enacted—the ruling effectively leaves the door open for challenging any rule, by extending the time limit to six years from the date a rule causes harm to an entity.
In combination with the other rulings above, it’s likely that these rulings are causing a great deal of consternation for the federal regulatory agencies. At NILG, the OFCCP stated that it is not yet ready to talk about the issue.
Muldrow v. City of St. Louis
This ruling has implications for the threshold for “significant harm” in discrimination cases. Previously, this has been interpreted to involve major employment decisions—lost promotions, loss of raises, or firings. The ruling concerned a female police officer who was transferred from one unit to another, resulting in the loss of certain privileges (access to a car, and plain clothes work in a more prestigious unit).
The Supreme Court has effectively ruled that any harm resulting from discriminatory actions is enough harm. Commentators believe that this may have implications for DE&I programs that lead to advantages for some groups.
Groff v. Dejoy
Similar to Muldrow v. City of St. Louis, this ruling redefines understood thresholds, this time in reference to “undue hardship” when companies are compelled to make religious accommodations. Previously the threshold was “de minimis”—any kind of small hardship imposed on the company. The ruling moves towards a threshold that is instead “substantial increased costs in relation to the conduct of its particular business”. The end-result is that companies will be compelled to try harder to make religious accommodations.
10) Smaller Updates of Note: EEO-1 Component 2, FAAPs, and Updated Race Categories
In last year’s NILG roundup, it was mentioned that the EEOC was aware of the patchwork approach to compensation data collection at state level and that it was working on federal-level measures that would be available for public comment in the future. A year on, and the message is still that something is coming, and it’s likely to be different from the prior Component 2, the agency’s previous attempt at studying contractors’ compensation data.
Also of note, representatives from the OFCCP at NILG have expressed a desire to increase the number of Functional Affirmative Action Plans (FAAPs). Particularly, the agency cites the increase in remote workers as a driving factor behind preferring this alternative to establishment-based plans.
Finally, the OFCCP has reiterated that updated race categories are coming, among them a MENA (Middle Eastern, North African) category, but are not in place yet. The agency is working closely with the EEOC in order to ensure alignment with EEO-1 filing requirements.
Discover how Affirmity can help you prepare for affirmative action planning and audit activity. Check out our affirmative action plan services or contact us for more information.
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About Our Authors
Christine Avila, Manager, Consulting Services, has been with Affirmity since 2010. She manages a team of consultants and advises clients in a variety of industries on affirmative action, equal employment opportunity, and diversity issues. Prior to joining Affirmity, Mrs. Avila had seven years of compliance experience as well as four years of recruiting experience for companies in the media and finance industries. Mrs. Avila has served on the North Texas Industry Liaison Group (NTILG) Board since 2011. Connect with her on LinkedIn.
Patrick McNiel, PhD, is a principal business consultant for Affirmity. Dr. McNiel advises clients on issues related to workforce measurement and statistical analysis, diversity and inclusion, OFCCP and EEOC compliance, and pay equity. Dr. McNiel has over ten years of experience as a generalist in the field of Industrial and Organizational Psychology and has focused on employee selection and assessment for most of his career. He received his PhD in I-O Psychology from the Georgia Institute of Technology. Connect with him on LinkedIn.