Kurt Ronn

Companies may not even know their hiring practices are discriminatory, but a lack of awareness won’t protect talent managers and the organizations they serve from paying the steep price for non-OFCCP compliance.

The Internet has made it easier for everyone to apply for a job. But it has also made it easier for companies to inadvertently discriminate against job seekers.

The Office of Federal Contract Compliance Programs (OFCCP), a division of the Department of Labor’s Employment Standards Administration, oversees federal government contractors’ hiring practices. The OFCCP is charged with finding and penalizing organizations that discriminate against job seekers, and its work — ensuring compliance with employment regulations with respect to discrimination and affirmative action — keeps the organization awfully busy.

Organizational efforts to remedy systemic hiring discrimination can cost a great deal, but not being compliant is even more expensive. In 2006 and 2007 combined, the OFCCP collected more than $100 million in settlements from federal contractors with noncompliant recruitment and hiring practices.

To avoid this unnecessary cost to both the bottom line and brand reputation, federal contractors and talent managers must scrutinize their recruitment processes and quickly fix any problems before an audit occurs.

Increased Applicant Scrutiny

In 2006, the OFCCP implemented the now-infamous Internet Applicant regulation. This ruling defines how an expression of interest for employment acquired through electronic media actually can be considered an application for government contractors. To monitor and regulate this rule, the OFCCP established four criteria that deem how, when and why a person becomes an Internet Applicant.

Prior to implementation of the Internet Applicant rule, the OFCCP generally only received and reviewed applicant data from individuals who were interviewed for particular positions. However, the change in the definition of “applicant,” necessitated by the onset of the Internet age, has resulted in federal contractors being required to maintain data that formerly was not reviewed by compliance auditors. This includes “expressions of interest” ranging from resume-database searches to all resumes retrieved from a university job fair.

With the new regulation, the agency also defined specific electronic data techniques that would be considered in determining compliance when gathering and reviewing electronic expressions of interest. The ruling introduced a new “basic qualifications” standard, which in combination with the other criteria defining an Internet Applicant, set clear guidelines on the records government contractors must keep as they receive electronic expressions of interest.

With the OFCCP’s changing focus, the Internet Applicant regulations now require government contractors to capture data that will allow the OFCCP to more easily assess and identify the presence of systemic discrimination.

A Shift in Focus

Once focused primarily on good-faith efforts, the OFCCP now heavily targets systemic discrimination, be it intentional or unintentional. The rationale is that, regardless of intent, discrimination inflicts damage on an organization’s applicants. The OFCCP’s shift in focus has increased federal contractors’ risk of noncompliance by expanding what data government contractors are required to track.

The OFCCP indicates that in 30 percent of its audits, recordkeeping violations are uncovered. Prior to the OFCCP’s heightened scrutiny, companies were able to make changes or correct problems at their convenience. Now, once a company has been issued a violation, the agency seeks data to confirm it has promptly implemented compliant recruitment processes.

Therefore, the longer companies wait to amend flawed practices, the greater the likelihood the OFCCP will uncover and penalize them for systemic discrimination in hiring practices.

Since the implementation of the Internet Applicant ruling in early 2006, companies have had more than two years to re-evaluate and, where necessary, correct their recruitment processes to ensure regulation compliance. As the ruling ages and all OFCCP auditors become focused on enforcing the regulation, the number of recordkeeping audits has increased. Many of the OFCCP auditors are new and, as they gain additional experience, likely will increase the frequency and the analytical nature of the audits.

Compliance Is Costly

As noted earlier, preparing for compliance can be an expensive proposition. But it’s not nearly as expensive as the penalty for noncompliance, which can easily reach seven figures or more.

Many companies are unaware of the potentially dire consequences of a failed audit. When a scheduling letter is received, the company must conduct an internal investigation of hiring practices and work to gather appropriate information in the 30 days allowed to respond to the audit.

During that process, valuable time is taken away from the daily work tasks of recruiting and hiring managers, legal counsel, internal employees and other management.

Regardless of the OFCCP’s final decision in a case, the work required to defend questionable recruitment processes can become lengthy and expensive. Noncompliance causes a multiplier effect of penalties, including loss of time and work focus. It also can result in top talent leaving the company and top candidates refusing to consider opportunities with the organization.

Thus the risks associated with noncompliance can be extremely significant to an organization’s growth and progress.

New Era, New Penalties

Before the Internet Applicant regulations and the OFCCP training initiative, penalties for noncompliance were not as substantial as they are today. Prior to the OFCCP’s shift in focus to systemic discrimination, a poultry processing company accused of discrimination was forced to pay $75,000 in back pay and interest, as well as make job offers to affected class members until 23 people accepted positions. Although this penalty is significant, the repercussions for discrimination are much more severe now that auditors have training and access to additional data mandated by the regulations.

In 2007, the same poultry processing corporation was forced to pay $1 million in back pay and interest and extend offers to 462 people in the classes affected by the systemic discrimination. Clearly, the OFCCP is focused on class-action, make-whole remedies, rather than individual cases of discrimination. Data undiscoverable years ago is now accessible due to the increased recordkeeping required by the Internet Applicant regulations.

Since the auditors are more experienced, more knowledgeable and privy to additional recruitment data, OFCCP fines should continue to increase. In the age of systemic discrimination, it is imperative federal contractors are in compliance with regulations to avoid escalating penalties.

Carefully Evaluate 10 Key Factors

Because the OFCCP has begun thoroughly investigating federal contractors’ practices to eradicate systemic discrimination, it is imperative organizations prepare appropriately. HR and talent management leaders are obligated to regularly develop, analyze and review affirmative action plans to make sure they’re in accordance with current regulations. If irregularities are found, companies must proactively amend their recruitment practices. Rather than wait until the OFCCP sends a scheduling letter to begin audit preparations, organizations should be prepared.

Federal contractors should analyze 10 factors to improve compliance with OFCCP regulations:

• Evaluate the organization's applicant tracking system (ATS). Using updated recordkeeping technology can significantly mitigate the risks associated with noncompliance.
• Select a random sample of positions across multiple divisions/functions. By sampling a random group of positions, compliance can be evaluated across the entire organization. Rather than focus on a specific department, a broad sampling likely will reveal company-wide shortcomings.
• Follow the process from job posting to hire. Systemic discrimination can occur at any point in the hiring process. Therefore, positions should be evaluated from posting to hire to determine if there are any insufficiencies.
• Basic qualifications should be clear and documented. Basic qualifications determine who is or isn't considered to be a candidate for a position. Qualifications must be clearly articulated and documented to ensure all eligible candidates are fairly considered.
• Document resume-database searches. Database searches must accurately reflect the basic qualifications listed for the position, so recruiters must pay special attention to keywords used. Searches must not go beyond the basic qualification criteria, or some candidates may inadvertently become applicants.
• Analyze race, ethnicity and sex data-collection procedures. When a person becomes an applicant for a position, voluntary race, ethnicity and sex information must be requested and recorded. This will ensure an adverse impact analysis can be accurately performed.
• Review tests or questionnaires. Tests must be applicable to the job requirements in order to be considered valid. A test that is not relevant for a position should not be required, as it could disproportionately exclude certain demographic groups from consideration as candidates.
• Did managers interview people not in the ATS? By identifying interviewees not in the company's ATS, companies can determine additional methods by which applicants are being received. Policies should be implemented to account for these individuals.
• Assess record-retention policy interview notes. Federal contractors must maintain recruitment records for up to two years from the position's date of hire. Records must be kept for this time period to guarantee all data is available for review in the event of an OFCCP audit.
• Examine third-party recruitment vendors. Companies using third-party vendors cannot pass liability for noncompliance to the vendor. So if utilizing a third-party search firm, the company must be certain the vendor operates in compliance with OFCCP regulations.

Act Now to Change Faulty Practices

In the past, the OFCCP often conducted drive-by audits by simply evaluating a company’s affirmative action plan and narrative. But those days are gone. In recent years, the OFCCP adopted a new approach that moved away from individual or isolated discrimination cases and shifted toward analyzing patterns indicating company-wide systemic discrimination. In doing so, the OFCCP has more than doubled the back-pay settlements spurred by evidence of systemic discrimination.

Companies are finding the OFCCP is much more strategic in its approach to systemic discrimination. If the OFCCP finds signs of significant systemic discrimination within a company, the agency will even put other scheduled audits on hold to look for similar signs in the company’s open audits. By evaluating recruitment practices from beginning to end, the OFCCP can pinpoint areas in which adverse impact occurred repeatedly.

The consequences of systemic hiring discrimination can damage a company from several different angles, all of which have enduring impacts. Rather than discovering noncompliance penalties firsthand, federal contractors must update their hiring practices to coincide with OFCCP regulations. As recruitment compliance evolves, recruitment processes should, too. Don’t wait until it’s too late.

View original publication at Talent Management Magazine online