Nondiscrimination Obligations of Federal Contractors and Subcontractors: Procedures To Resolve Potential Employment Discrimination

 
CONTENT
Federal Register, Volume 84 Issue 249 (Monday, December 30, 2019)
[Federal Register Volume 84, Number 249 (Monday, December 30, 2019)]
[Proposed Rules]
[Pages 71875-71887]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27258]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Office of Federal Contract Compliance Programs
41 CFR Parts 60-1, 60-2, 60-300, and 60-741
RIN 1250-AA10
Nondiscrimination Obligations of Federal Contractors and
Subcontractors: Procedures To Resolve Potential Employment
Discrimination
AGENCY: Office of Federal Contract Compliance Programs (OFCCP), Labor.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Office of Federal Contract Compliance Programs (``OFCCP''
or ``the agency'') proposes to codify procedures that the agency
currently uses to resolve potential discrimination and other material
violations of these laws by federal contractors and subcontractors; add
clarifying definitions to specify the types of evidence OFCCP will use
to support its discrimination findings; and, correct the title of
OFCCP's agency head.
DATES: To be assured of consideration, comments must be received on or
before January 29, 2020.
ADDRESSES: Comments may be submitted, identified by Regulatory
Information Number (RIN) 1250-AA10, by any of the following methods:
     Electronically: The Federal eRulemaking portal: http://www.regulations.gov. Follow the instructions found on that website for
submitting comments.
     Mail, Hand Delivery, or Courier: Addressed to Harvey D.
Fort, Deputy Director, Division of Policy and Program Development,
Office of Federal Contract Compliance Programs, 200 Constitution Avenue
NW, Room C-3325, Washington, DC 20210.
    Instructions: Please submit one copy of your comments by only one
method. For faster submission, we encourage commenters to transmit
their comment electronically via the www.regulations.gov website.
Comments that are mailed to the address provided above must be
postmarked before the close of the comment period. All submissions
received must include OFCCP's name and RIN for this rulemaking.
Comments submitted in response to the notice, including any personal
information provided, become a matter of public record and will be
posted on www.regulations.gov. Receipt of submissions will not be
acknowledged; however, the sender may request confirmation that a
submission was received by telephoning OFCCP at (202) 693-0103 (voice)
or (202) 693-1337 (TTY) (these are not toll-free numbers).
    The Department will make all comments received, including any
personal information provided, available for public inspection during
normal business hours at Room C-3325, 200 Constitution Avenue NW,
Washington, DC 20210. If you need assistance to review the comments,
the Department will provide you with appropriate aids such as readers
or print magnifiers. Copies of this notice may be obtained in
alternative formats (large print, braille, audio recording) upon
request by calling the numbers listed
[[Page 71876]]
above. To schedule an appointment to review the comments and/or to
obtain this Notice of Proposed Rulemaking (NPRM) in an alternate
format, please contact OFCCP at the telephone numbers or address listed
above.
FOR FURTHER INFORMATION CONTACT: Harvey D. Fort, Deputy Director,
Division of Policy and Program Development, Office of Federal Contract
Compliance Programs, 200 Constitution Avenue NW, Room C-3325,
Washington, DC 20210. Telephone: (202) 693-0103 (voice) or (202) 693-
1337 (TTY).
SUPPLEMENTARY INFORMATION:
I. Overview
    The goal of this proposed rule is to provide federal contractors
and subcontractors \1\ with greater certainty about the procedures that
OFCCP follows during compliance evaluations to resolve employment
discrimination and other material violations found under Executive
Order 11246, as amended (E.O. 11246); section 503 of the Rehabilitation
Act, as amended, 29 U.S.C. 793 (section 503); and the Vietnam Era
Veterans' Readjustment Assistance Act of 1974, as amended, 38 U.S.C.
4212 (VEVRAA); and, their implementing regulations. The proposed rule
would codify procedures for two formal notices that OFCCP uses when the
agency finds potential violations: The Predetermination Notice (PDN)
and the Notice of Violation (NOV). Since 1988, these procedures have
been embedded in the Federal Contract Compliance Manual (FCCM), the
primary document used by agency staff as a procedural framework to
execute quality and timely compliance evaluations and complaint
investigations. Additionally, the proposal promotes efficiency by
clarifying that contractors have the option to expedite OFCCP's normal
resolution procedures for discrimination findings by entering directly
into a conciliation agreement prior to issuance of a PDN or NOV,
allowing for expedited conclusion to OFCCP's compliance evaluations.
The proposed rule also clarifies the strength of evidence agency staff
must find before issuing a PDN or NOV. Finally, the proposed rule would
replace outdated references to the official title of OFCCP's agency
head, from ``Deputy Assistant Secretary'' to ``Director.''
---------------------------------------------------------------------------
    \1\ Hereinafter, the terms ``contractor'' and ``federal
contractor'' are used to refer to contractors and subcontractors
with direct federal contracts and/or federally assisted construction
contracts, unless otherwise expressly stated.
---------------------------------------------------------------------------
    This proposed rule is expected to be an Executive Order (E.O.)
13771 regulatory action. Details on the estimated costs of this
proposed rule can be found in the rule's economic analysis.
II. Background
    OFCCP administers and enforces E.O. 11246, section 503, and VEVRAA,
and their implementing regulations. Collectively, these laws require
federal contractors to take affirmative action to ensure equal
employment opportunity, and not discriminate on the basis of race,
color, religion, sex, sexual orientation, gender identity, national
origin, disability, or status as a protected veteran. Additionally,
E.O. 11246 prohibits a contractor from discharging or otherwise
discriminating against applicants or employees who inquire about,
discuss, or disclose their compensation or that of others, subject to
certain limitations.
    OFCCP determines whether a federal contractor has met these legal
obligations during a compliance evaluation.\2\ The agency uses a
neutral process to schedule contractors for compliance evaluations.\3\
A compliance evaluation consists of one or any combination of the
following investigative procedures, as set forth in OFCCP's
implementing regulations: Compliance review, offsite review of records,
compliance check, or focused review.\4\ With the exception of the
compliance check, the purpose of which is solely to determine whether
the contractor maintains required records, OFCCP may find that a
contractor discriminated in hiring, promotion, termination,
compensation, or other employment practices based on information
collected during a compliance evaluation. Such findings, in most cases,
must be supported by statistical evidence.
---------------------------------------------------------------------------
    \2\ OFCCP also ensures compliance with these laws by
investigating complaints filed by applicants and employees who
believe that a federal contractor discriminated against them.
However, the resolution procedures for complaints differ from
compliance evaluations and would not be altered by this proposed
rule. For complaint resolution procedures, see FCCM Chapter 6 and 41
CFR 60-1.24, 41 CFR 60-300.61, and 41 CFR 60-741.61. The FCCM is
available at https://www.dol.gov/ofccp/regs/compliance/fccm/fccmanul.htm (last accessed Aug. 5, 2019).
    \3\ The majority of OFCCP's compliance evaluations are for
supply and service contractors. OFCCP increased the number of
contractors on its supply and service scheduling list over the past
three fiscal years, from 801 in FY 2017 to 3,500 in FY 2019. A
description of OFCCP's current scheduling methodology for supply and
service contractors is available on the agency's website at https://www.dol.gov/ofccp/scheduling/ (last accessed Aug. 12, 2019). The
neutral scheduling process for construction contractors is currently
under review by OFCCP.
    \4\ See 41 CFR 60-1.20(a), 60-300.60(a) and 60-741.60(a). The
resolution procedures described in this proposed rule would not
apply to compliance checks.
---------------------------------------------------------------------------
    Preliminary findings of discrimination in a compliance evaluation
trigger OFCCP's resolution procedures. When OFCCP finds sufficient
evidence of discrimination, the agency sends a PDN to inform the
contractor of the agency's preliminary findings.\5\ To determine
whether the evidence of discrimination is sufficient to warrant a PDN,
OFCCP considers whether an employment or compensation disparity
identified during the compliance evaluation is both practically and
statistically significant.\6\ OFCCP uses a number of tests to determine
whether an employment selection or compensation practice has enough
statistical significance to support a conclusion of discrimination.\7\
The most familiar test is the standard deviation test. The standard
deviation test represents a standardized measure of the difference
between two selection rates, and employment discrimination case law has
adopted confidence levels that are similar to those accepted among
social scientists. The U.S. Supreme Court has described an outcome as
``suspect to a social scientist'' when a statistic from ``large
samples'' falls more than ``two or three standard deviations'' from its
expected value under a null hypothesis of neutrality.\8\ The greater
the number of
[[Page 71877]]
standard deviations, the less likely the difference was produced by
chance (e.g., 5.0 standard deviations represents a less than 1 in 1.7
million probability that the occurrence happened by chance). OFCCP
conducts regression analyses of hiring and compensation outcomes which
control for major, measurable variables, to determine the probability
of hiring and compensation outcomes occurring by chance. OFCCP will
issue PDNs in matters premised on statistical evidence only if the
variable of interest is statistically significant and the probability
value (``p value'') is less than 0.05 (roughly equivalent to two
standard deviations) if there is corroborating nonstatistical evidence,
or 0.01 (roughly equivalent to three standard deviations) in the
absence of corroborating nonstatistical evidence.\9\ This approach is
in keeping with--neither compelled nor prohibited by--Title VII and
OFCCP case law, which generally holds that two or more standard
deviations is sufficient to establish a prima facie case of
discrimination.\10\
---------------------------------------------------------------------------
    \5\ See Directive 2018-01, ``Use of Predetermination Notices
(PDN)'' (Feb. 27, 2018). OFCCP issued this directive to ensure that
PDNs be used in all compliance evaluations with preliminary
discrimination findings, both individual and systemic. OFCCP
directives are available at https://www.dol.gov/ofccp/regs/compliance/directives/dirindex.htm (last accessed Aug. 5, 2019).
Prior to the directive, use of PDNs was discretionary and reserved
for systemic discrimination findings. See FCCM, Chapter 8,
Resolution of Noncompliance (Oct. 2014) (detailing the procedures
that OFCCP follows for issuing PDNs).
    \6\ In the EEO context, practical significance refers to whether
an observed disparity in employment opportunities or outcomes
reflects meaningful harm to the disfavored group. The concept
focuses on the contextual impact or importance of the disparity
rather than its likelihood of occurring by chance. OFCCP recently
published guidance on how it applies statistical and practical
significance to evaluate compliance evaluations with potential
discrimination. See OFCCP's Practical Significance Frequently Asked
Questions at https://www.dol.gov/ofccp/regs/compliance/faqs/PracticalSignificanceEEOFAQs.htm#Q5 (last accessed October 1, 2019).
    \7\ Some examples of the statistical measures that OFCCP may use
are the Chi square, Fisher's exact, Z-test, and standard deviation.
    \8\ See Castaneda v. Partida, 430 U.S. 482, 496 n.17 (1977)
(``As a general rule for large samples, if the difference between
the expected value and the observed number is greater than two or
three standard deviations, then the hypothesis that the jury drawing
was random would be suspect to a social scientist.''). See also
Hazelwood School Dist. v. United States, 433 U.S. 299, 311 n.17
(1977) (providing that ``a fluctuation of more than two or three
standard deviations would undercut the hypothesis that decisions
were being made randomly with respect to race'').
    \9\ The p value confidence level is similar to the confidence
level associated with the standard deviation test. A p value of less
than 0.05 indicates that there is a less than five percent
likelihood that an observed disparity occurred by chance, and a
standard deviation of two shows a less than 4.55 percent likelihood
that an observed disparity occurred by chance.
    \10\ See fn 8, supra; see also, e.g., Adams v. Ameritech Servs.,
Inc., 231 F.3d 414, 424 (7th Cir. 2000) (``Two standard deviations
is normally enough to . . . giv[e] rise to a reasonable inference
that the hiring was not race-neutral; the more standard deviations
away, the less likely the factor in question played no role in the
decisionmaking process.''); Malave v. Potter, 320 F.3d 321, 327 (2d
Cir. 2003) (vacating summary judgment for employer and instructing
district court to determine whether the plaintiff can show ``a
statistically significant disparity of two standard deviations'');
Anderson v. Zubieta, 180 F.3d 339-40 (D.C. Cir. 1999) (``Many of the
disparities are far in excess of 1.96 standard deviations. Under our
case law, this level of statistical significance is sufficient to
establish a prima facie case of both disparate treatment and
disparate impact.'' (citations omitted)); OFCCP v. Bank of America,
No. 1997-OFC-016, slip op. at 9, 2016 WL 2941106 (Dep't of Labor
Apr. 21, 2016) (``Courts have consistently found significance in
disparities exceeding the two standard deviation mark. See Hazelwood
School Dist. v. U.S., 433 U.S. 299, 308, n.14 (1977); Adams v.
Ameritech, 231 F.3d 414, 424 (7th Cir. 2000). . . . The more severe
the statistical disparity, the less additional evidence is needed to
prove that the reason was race discrimination. Very extreme cases of
statistical disparity may permit the trier of fact to conclude
intentional race discrimination occurred without needing additional
evidence.'' (citations omitted)).
---------------------------------------------------------------------------
    Statistical evidence plays a crucial role in OFCCP's enforcement.
The proposed rule is intended to provide clarity and transparency in
OFCCP's methods. OFCCP requests comments for improving certainty in
setting parameters for statistical evidence, including methodologies,
minimum sample sizes, data groupings, methodological limitations, and
ways to improve objectivity.
    Before issuing a PDN, the agency also considers whether
nonstatistical evidence, such as a cohort analysis, demonstrates an
intent to discriminate. In some cases, however, when statistical
evidence is very strong, OFCCP may issue the PDN without nonstatistical
evidence. There may be other factors applicable in a particular case
which explain why OFCCP could not uncover nonstatistical evidence
during its investigation despite the strength of the statistical
evidence. Additionally, OFCCP may find similar patterns of disparity in
multiple years or at multiple establishments of a federal contractor
that warrant issuing a PDN without nonstatistical evidence. In
practice, as an exercise of enforcement discretion, OFCCP will pursue
matters where the statistical data are not corroborated by
nonstatistical evidence of discrimination only if the statistical
evidence is exceptionally strong.\11\
---------------------------------------------------------------------------
    \11\ The proposed rule clarifies that, absent nonstatistical
evidence, OFCCP will only pursue a matter when discrimination is
indicated by statistically significant evidence at the 99 percent
confidence level (i.e., three standard deviations, or a p value of
0.01 or less). Note, however, that for multiple findings of
discrimination without nonstatistical evidence present at a given
contractor establishment, or at multiple facilities of the same
contractor, OFCCP may issue a PDN where at least one finding is
supported by statistically significant evidence at the 99 percent
confidence level and may include additional findings that are
supported by statistically significant evidence at the 95 percent
confidence level (i.e., two standard deviations, or a p value of
0.05 or less) or above.
---------------------------------------------------------------------------
    OFCCP issues the PDN to encourage communication with contractors
and provide them an opportunity to respond to preliminary findings
prior to the issuance of a more formal NOV. If a contractor does not
sufficiently rebut the preliminary findings identified in the PDN that
evidence of unlawful discrimination exists, OFCCP issues the NOV to
notify the contractor that the agency found discrimination violations
of one or more of the laws it enforces.
    The NOV, also a letter, lists the corrective actions that are
required to resolve those violations, and invites conciliation.\12\
After issuing the NOV, OFCCP generally pursues a written conciliation
agreement with any contractor willing to correct the violation or
deficiency identified in the NOV.\13\ A conciliation agreement is a
binding written agreement between a contractor and OFCCP that details
specific contractor commitments, actions, or both to resolve the
violations set forth in the agreement.\14\ Conciliation agreements were
codified in OFCCP's regulations in 1979.\15\ If the contractor is
unwilling to enter into a conciliation agreement to correct the
violations, OFCCP issues a show cause notice (SCN) requiring the
contractor to provide reasons demonstrating why formal enforcement
proceedings by the Solicitor of Labor or other appropriate action
should not be instituted.\16\ This proposed rule would codify the PDN
and NOV as procedures that have proven effective to remedy findings of
discrimination.\17\
---------------------------------------------------------------------------
    \12\ See FCCM Chapter 8, Resolution of Noncompliance and Key
Terms and Phrases (Oct. 2014).
    \13\ In rare circumstances, OFCCP may determine that settlement
is not appropriate and refer a matter at this stage directly to the
Office of the Solicitor of Labor to pursue formal enforcement
proceedings rather than pursuing a conciliation agreement. See 41
CFR 60-1.26(b), 60-300.62, 60-300.65(a), 60-741.62(a). 60-741.65(a).
    \14\ See FCCM, Key Terms and Phrases and 41 CFR 60-1.33, 60-
300.62, and 60-741.62.
    \15\ See Compliance Responsibility for Equal Employment
Opportunity, 44 FR 77000 (Dec. 28 1979).
    \16\ See 41 CFR 60-1.28, 60-300.64, and 60-741.64. See also,
FCCM Chapter 8, Resolution of Noncompliance.
    \17\ The NOV and PDN have been included in the FCCM since 1988.
As an example of their effectiveness, OFCCP obtained $44 million for
more than 37,000 employees and job seekers between January 2017 and
December 2019 using these resolution procedures.
---------------------------------------------------------------------------
    Similarly, material violations that are not discriminatory in
nature also trigger OFCCP's resolution procedures for compliance
evaluations.\18\ Rather than initiating resolution with a PDN for
violations that do not involve discrimination, OFCCP generally begins
the process with a NOV before proceeding to a conciliation agreement,
or the SCN as a last resort.\19\ With this proposed rule, OFCCP would
codify use of the NOV for all material violations.
---------------------------------------------------------------------------
    \18\ FCCM Chapter 8F00, When to Use a Notice of Violation and
Chapter 8H00, When to Use a Conciliation Agreement (Oct. 2014). For
example, OFCCP may issue a NOV and enter into a CA for failure to
maintain records in accordance with 41 CFR 60-1.12, 41 CFR 60-
300.80, and 41 CFR 60-741.80, or for failure to maintain affirmative
action programs as required by 41 CFR part 60-2, 41 CFR part 60-300,
subpart C, and 41 CFR part 60-741, subpart C.
    \19\ In some instances, OFCCP issues the SCN without first
issuing a NOV for material violations that are non-discriminatory in
nature. See FCCM Chapter 8D01, When a Show Cause Notice is Required
(Oct. 2014) (explaining that OFCCP issues the SCN without first
issuing a NOV when a contractor fails to provide the records,
information, or data requested in the scheduling letter and when the
contractor refuses to provide access to its premises for an onsite
review).
---------------------------------------------------------------------------
    Additionally, this proposed rule clarifies that federal contractors
have
[[Page 71878]]
the option to bypass the PDN and NOV procedures to enter directly into
a conciliation agreement when there are preliminary findings of
material violations, regardless of whether those violations involve
discrimination. This option for conciliation may suit contractors who
wish to expedite the resolution of discrimination or other material
violations. Recently, OFCCP has sought to incentivize the efficient
resolution of material violations for multi-establishment federal
contractors with early resolution procedures.\20\ The proposed rule
would further the agency's efforts to improve efficiency, codifying an
expedited option for resolution that would apply to compliance reviews
in their early stages.
---------------------------------------------------------------------------
    \20\ See Directive 2019-02, ``Early Resolution Procedures''
(Nov. 30, 2018), available at https://www.dol.gov/ofccp/regs/compliance/directives/dirindex.htm (last accessed Sept. 27, 2019).
The proposed rule would not codify OFCCP's early resolution
procedures per se. It would, however, allow OFCCP and contractors to
explore expedited conciliation options, such as the early resolution
procedures set forth in Directive 2019-02.
---------------------------------------------------------------------------
    To further these efficiency objectives and to provide greater
certainty to federal contractors, the proposed rule also defines
``statistical evidence'' and ``nonstatistical evidence'' to clarify the
different types of evidence OFCCP will use to support a PDN or NOV.
Specifically, statistical evidence should be based on hypothesis
testing related to the probability of the allegedly discriminatory
outcome occurring by chance, at the confidence levels accepted in
relevant employment discrimination case law.\21\ The standard deviation
represents a standardized measure of the difference between two rates.
As mentioned above, the greater the number of standard deviations, the
less likely the difference was produced by chance (e.g., 5.0 standard
deviations represents a less than 1 in 1.7 million probability that the
occurrence happened by chance). In support of an OFCCP discrimination
PDN or NOV, a statistician can conclude that a variable of interest is
statistically significant if, controlling for major, measurable
variables, a disparity exists that is greater than two standard
deviations (equivalent to a p value of less than 0.05 and a confidence
value of 95 percent or higher). As noted in the proposed regulatory
text and preamble discussion regarding predetermination notices, for
matters without nonstatistical evidence, OFCCP will only pursue matters
if the statistical evidence shows a disparity of at least three
standard deviations or a p value of .01 or less. The definition of
``statistical evidence'' provides a nonexhaustive list of variables
frequently used by employers that OFCCP's regression analyses will
control for, as appropriate, in its analyses. This provides greater
clarity to the contractor community regarding OFCCP's analytical
methods while providing OFCCP the flexibility to exclude variables from
its analyses that, consistent with established statistical methods, may
be inappropriate to include, such as those that are discriminatory.
---------------------------------------------------------------------------
    \21\ Castaneda v. Partida, 430 U.S. 482, 496 n.17 (1977);
Hazelwood School Dist. v. United States, 433 U.S. 299, 311 n.17
(1977).
---------------------------------------------------------------------------
    In addition to codifying resolution procedures, the proposed rule
replaces outdated references to the official title of OFCCP's agency
head in E.O. 11246 regulations, from ``Deputy Assistant Secretary'' to
``Director.'' OFCCP made the same change to the regulations
implementing VEVRAA and section 503 through final rules in 2013.\22\
OFCCP made this change after the Department of Labor abolished the
Employment Standards Administration. This restructuring resulted in the
change of title for OFCCP's agency head, from ``Deputy Assistant
Secretary'' (reporting to the head of the Employment Standards
Administration) to ``Director'' reporting directly to the Secretary of
Labor.
---------------------------------------------------------------------------
    \22\ Affirmative Action and Nondiscrimination Obligations of
Contractors and Subcontractors Regarding Special Disabled Veterans,
Veterans of the Vietnam Era, Disabled Veterans, Recently Separated
Veterans, Active Duty Wartime or Campaign Badge Veterans, and Armed
Forces Service Medal Veterans, 78 FR 58613 (Sept. 24, 2013), and
Affirmative Action and Nondiscrimination Obligations of Contractors
and Subcontractors Regarding Individuals With Disabilities, 78 FR
58681 (Sept. 24, 2013).
---------------------------------------------------------------------------
III. Statement of Legal Authority
    Issued in 1965, and amended several times in the intervening years,
E.O. 11246 has two principal purposes. First, it prohibits covered
Federal contractors and subcontractors from discriminating against
employees and applicants because of race, color, religion, sex, sexual
orientation, gender identity, national origin, or because they inquire
about, discuss, or disclose their compensation or that of others
subject to certain limitations. Second, it requires covered Federal
contractors and subcontractors to take affirmative action to ensure
equal employment opportunity. The nondiscrimination and affirmative
action obligations of Federal contractors and subcontractors cover all
aspects of employment.
    The requirements in E.O. 11246 generally apply to any business or
organization that (1) holds a single Federal contract, subcontract, or
federally assisted construction contract in excess of $10,000; (2) has
Federal contracts or subcontracts that combined total in excess of
$10,000 in any 12-month period; or (3) holds Government bills of
lading, serves as a depository of Federal funds, or is an issuing and
paying agency for U.S. savings bonds and notes in any amount. Supply
and service contractors with 50 or more employees and a single Federal
contract or subcontract of $50,000 or more also must develop and
maintain an affirmative action program that complies with 41 CFR part
60-2. Construction contractors have different affirmative action
requirements under E.O. 11246 at 41 CFR part 60-4.
    Enacted in 1973, and amended since, the purpose of section 503 is
twofold. First, section 503 prohibits employment discrimination on the
basis of disability by Federal contractors and subcontractors. Second,
it requires each covered Federal contractor and subcontractor to take
affirmative action to employ and advance in employment qualified
individuals with disabilities. The requirements in section 503
generally apply to any business or organization that holds a single
Federal contract or subcontract in excess of $15,000.\23\ Contractors
with 50 or more employees and a single Federal contract or subcontract
of $50,000 or more also must develop and maintain an affirmative action
program that complies with 41 CFR part 60-741, subpart C.
---------------------------------------------------------------------------
    \23\ Effective October 1, 2010, the coverage threshold under
Section 503 increased from $10,000 to $15,000, in accordance with
the inflationary adjustment requirements in 41 U.S.C. 1908. See,
Federal Acquisition Regulation; Inflation Adjustment of Acquisition-
Related Thresholds, 75 FR 53129 (Aug. 30, 2010).
---------------------------------------------------------------------------
    Enacted in 1974 and amended in the intervening years, the purpose
of VEVRAA is twofold. First, VEVRAA prohibits federal contractors and
subcontractors from discriminating against employees and applicants
because of status as a protected veteran (defined by the statute to
include disabled veterans, recently separated veterans, Armed Forces
Service Medal Veterans, and active duty wartime or campaign badge
veterans).\24\ Second, it requires each covered Federal contractor and
subcontractor to take affirmative action to employ and advance in
employment these veterans. The requirements in VEVRAA generally apply
to any business or organization that holds a single Federal contract or
[[Page 71879]]
subcontract in excess of $150,000.\25\ Contractors with 50 or more
employees and a single Federal contract or subcontract of $150,000 or
more also must develop and maintain an affirmative action program that
complies with 41 CFR part 60-300, subpart C.
---------------------------------------------------------------------------
    \24\ Since the statute was enacted, OFCCP's regulations have
further defined ``protected veteran'' to include ``active duty
wartime or campaign badge veterans.'' See, 41 CFR 60-300.2(a) and
(q).
    \25\ Effective October 1, 2015, the coverage threshold under
VEVRAA increased from $100,000 to $150,000, in accordance with the
inflationary adjustment requirements in 41 U.S.C. 1908. See, Federal
Acquisition Regulation; Inflation Adjustment of Acquisition-Related
Thresholds, 80 FR 38293 (July 2, 2015).
---------------------------------------------------------------------------
    Pursuant to these laws, receiving a Federal contract comes with a
number of responsibilities. Contractors are required to comply with all
provisions of these laws as well as the rules, regulations, and
relevant orders of the Secretary of Labor. Where OFCCP finds potential
noncompliance concerns under any of the three laws or their
implementing regulations it utilizes established procedures to either
facilitate resolution,\26\ or proceed to administrative enforcement as
necessary to secure compliance.\27\ A contractor found in violation who
fails to engage in appropriate resolution procedures may have its
contracts canceled, terminated, or suspended and/or may be subject to
debarment after the opportunity for a hearing.\28\
---------------------------------------------------------------------------
    \26\ FCCM Chapter 8, Directive 2018-01, Directive 2019-02, 41
CFR 60-1.28, 60-1.33, 60-300.62, 60-300.64, 60-741.62, and 60-
741.64.
    \27\ 41 CFR 60-1.26, 60-300.65, and 60-741.65.
    \28\ 41 CFR 60-1.27, 60-300.66, and 60-741.66.
---------------------------------------------------------------------------
IV. Proposed Revisions
    This rulemaking proposes to update outdated references to the head
of the agency from ``Deputy Assistant Secretary'' to the correct title
of ``Director'' throughout the entirety of 41 CFR parts 60-1 and 60-2.
It also proposes to add two new definitions and revise a definition in
part 60-1, and update parts 60-1, 60-300 and 60-741 to codify
established policy and procedures for resolving discrimination and
other material violations.
Revised Sections
41 CFR Part 60-1--Obligations of Contractors and Subcontractors
    Several sections will be revised throughout 41 CFR part 60-1
because all instances of ``Deputy Assistant Secretary'' would be
replaced with the term ``Director.'' The revised sections would include
41 CFR 60-1.2, 60-1.5, 60-1.7, 60-1.9, 60-1.10, 60-1.21, 60-1.23, 60-
1.24, 60-1.25, 60-1.26, 60-1.27, 60-1.28, 60-1.29, 60-1.30, 60-1.31,
60-1.41, 60-1.42, 60-1.43, and 60-1.46. These revisions would correct
part 60-1 to the current title for the head of OFCCP.
Subpart A--Preliminary Matters; Equal Opportunity Clause; Compliance
Reports
Section 60-1.3 Definitions
    For this section, the NPRM proposes to add two definitions and
replace a definition. The term ``Nonstatistical evidence'' would be
added to codify the definition OFCCP uses in guidance.\29\ The term
``Statistical evidence'' clarifies the necessary support for OFCCP to
determine that there is a statistically significant disparity caused by
an employment action or compensation decision. Both terms are germane
to the resolution procedures that this NPRM proposes to codify.
---------------------------------------------------------------------------
    \29\ Directive 2018-05, ``Analysis of Contractor Compensation
Practices During a Compliance Evaluation'' (Aug. 24, 2018),
available at https://www.dol.gov/ofccp/regs/compliance/directives/dirindex.htm (last accessed May 16, 2019).
---------------------------------------------------------------------------
    OFCCP would also replace the definition of ``Deputy Assistant
Secretary'' in this section with the definition of ``Director''
published in OFCCP's regulations implementing VEVRAA and section
503.\30\
---------------------------------------------------------------------------
    \30\ 41 CFR parts 60-300 and 60-741, respectively.
---------------------------------------------------------------------------
Subpart B--General Enforcement; Compliance Review and Complaint
Procedure
Section 60-1.33 Conciliation Agreements
    The NPRM proposes to revise Sec.  60-1.33 by changing the title to
``Resolution Procedures'', and incorporating three new subsections:
``Predetermination Notice,'' ``Notice of Violation,'' and ``Expedited
Conciliation Option.'' The resolution procedures would be in the
following order: ``Predetermination Notice,'' ``Notice of Violation,''
``Conciliation Agreements'', and ``Expedited Conciliation Option.''
    This revised section would bring the resolution procedures
described in the regulations in line with the longstanding resolution
procedures that OFCCP utilizes. The update would codify use of the PDN
to resolve discrimination violations, would codify the use of the NOV
and an expedited conciliation option to resolve discrimination and
other material violations, and would codify the types of evidence
necessary to find discrimination violations for a PDN or NOV.
41 CFR Part 60-2--Affirmative Action Programs
    All instances of ``Deputy Assistant Secretary'' and ``DAS'' will be
replaced throughout this part with the term ``Director.'' Specifically,
the following sections will be revised: Sec. Sec.  60-2.1, 60-2.2, and
60-2.31. These revisions would correct part 60-2 to the current title
for the head of OFCCP.
41 CFR Part 60-300--Affirmative Action and Nondiscrimination
Obligations of Federal Contractors and Subcontractors Regarding
Disabled Veterans, Recently Separated Veterans, Active Duty Wartime or
Campaign Badge Veterans, and Armed Forces Service Medal Veterans
Subpart A--Preliminary Matters; Equal Opportunity Clause
Section 60-300.2 Definitions
    For this section, the NPRM proposes to add definitions. The terms
``Nonstatistical evidence'' and ``Statistical evidence'' would be added
for the same reasons as proposed for section 60-1.3.
Subpart D--General Enforcement and Complaint Procedures
Section 60-300.62 Conciliation Agreements
    The NPRM proposes to revise section 60-300.62 in the same manner as
section 60-1.33: changing the title to ``Resolution Procedures,'' and
incorporating three new subsections: ``Predetermination Notice,''
``Notice of Violation,'' and ``Expedited Conciliation Option.'' The
resolution procedures would be in the following order:
``Predetermination Notice,'' ``Notice of Violation,'' ``Conciliation
Agreements,'' and ``Expedited Conciliation Option.''
41 CFR Part 60-741--Affirmative Action and Nondiscrimination
Obligations of Federal Contractors and Subcontractors Regarding
Individuals With Disabilities
Subpart A--Preliminary Matters; Equal Opportunity Clause
Section 60-741.2 Definitions
    For this section, the NPRM proposes to add definitions. The terms
``Nonstatistical evidence'' and ``Statistical evidence'' would be added
for the same reasons as proposed for section 60-1.3.
Subpart D--General Enforcement and Complaint Procedures
Section 60-741.62 Conciliation Agreements
    The NPRM proposes to revise section 60-741.62 in the same manner as
section 60-1.33: changing the title to ``Resolution Procedures,'' and
incorporating three new subsections: ``Predetermination Notice,''
``Notice of
[[Page 71880]]
Violation,'' and ``Expedited Conciliation Option.'' The resolution
procedures would be in the following order: ``Predetermination
Notice,'' ``Notice of Violation,'' ``Conciliation Agreements,''
``Remedial Benchmarks,'' and ``Expedited Conciliation Option.''
Executive Order 12866 (Regulatory Planning and Review) and Executive
Order 13563 (Improving Regulation and Regulatory Review)
    Under Executive Order 12866, OMB's Office of Information and
Regulatory Affairs (OIRA) determines whether a regulatory action is
significant and, therefore, subject to the requirements of Executive
Order 12866 and OMB review. Section 3(f) of Executive Order 12866
defines a ``significant regulatory action'' as an action that is likely
to result in a rule that: (1) Has an annual effect on the economy of
$100 million or more, or adversely affects in a material way a sector
of the economy, productivity, competition, jobs, the environment,
public health or safety, or State, local or tribal governments or
communities (also referred to as economically significant); (2) creates
serious inconsistency or otherwise interferes with an action taken or
planned by another agency; (3) materially alters the budgetary impacts
of entitlement grants, user fees, or loan programs, or the rights and
obligations of recipients thereof; or (4) raises novel legal or policy
issues arising out of legal mandates, the President's priorities, or
the principles set forth in Executive Order 12866. The Office of
Management and Budget has determined that this proposed rule is a
significant regulatory action under Executive Order 12866 and has
reviewed the proposed rule.
    Executive Order 13563 directs agencies to propose or adopt a
regulation only upon a reasoned determination that its benefits justify
its costs; tailor the regulation to impose the least burden on society,
consistent with obtaining the regulatory objectives; and in choosing
among alternative regulatory approaches, select those approaches that
maximize net benefits. Executive Order 13563 recognizes that some
benefits are difficult to quantify and provides that, where appropriate
and permitted by law, agencies may consider and discuss qualitatively
values that are difficult or impossible to quantify, including equity,
human dignity, fairness, and distributive impacts.
The Need for the Regulation
    The proposed regulatory changes are needed to provide certainty
regarding the procedures that OFCCP follows during compliance
evaluations to resolve employment discrimination and other material
violations. The proposed rule is designed to codify procedures for two
formal notices, the PDN and the NOV, used by OFCCP when the agency
finds potential violations. The proposal promotes efficiency by
clarifying that contractors have the option to expedite OFCCP's normal
resolution procedures for discrimination findings by entering directly
into a conciliation agreement prior to issuance of a PDN or NOV,
allowing for a quicker conclusion to OFCCP's compliance evaluations.
Discussion of Impacts
    In this section, the Department presents a summary of the costs
associated with the clarified procedures proposed in this notice of
proposed rulemaking. The Department determined that there are
approximately 420,000 entities registered in the General Services
Administration's System for Award Management (SAM) database.\31\
Entities registered in the SAM database consist of contractor firms,
and other entities such as state and local governments and other
organizations that are interested in federal contracting opportunities,
and other forms of federal financial assistance. The total number of
entities in the SAM database fluctuates and is posted on a monthly
basis. The current database includes approximately 420,000 entities.
Thus, the Department determines that 420,000 entities are a reasonable
representation of the number of entities that may or may not be
affected by the proposed rule. This SAM number, however, likely results
in an overestimation for two reasons: The system captures firms that do
not meet the jurisdictional dollar thresholds for the three laws that
OFCCP enforces, and it captures contractor firms for work performed
outside the United States by individuals hired outside the United
States, over which OFCCP does not have authority. On the other hand,
there is at least one reason to believe that the data may result in an
underestimation because SAM data does not include all
subcontractors.\32\
---------------------------------------------------------------------------
    \31\ U.S. General Services Administration, System for Award
Management, data released in monthly files, available at https://www.sam.gov (last accessed Aug. 13, 2019). The SAM database is an
estimate with the most recent download of data occurring August
2019.
    \32\ However, this underestimation may be partially offset
because of the overlap among contractors and subcontractors; a firm
may have a subcontract on some activities but have a contract on
others and thus in fact be included in the SAM data.
---------------------------------------------------------------------------
    The estimated labor cost to contractors is reflected in Table 1,
below. The mean hourly wage of Human Resources Managers (SOC 11-3121)
is $60.91.\33\ The Department adjusted this wage rate to reflect fringe
benefits such as health insurance and retirement benefits, as well as
overhead costs such as rent, utilities, and office equipment. The
Department used a fringe benefits rate of 46 percent \34\ and an
overhead rate of 17 percent,\35\ resulting in a fully loaded hourly
compensation rate for Human Resources Managers of $99.28 ($60.91 +
($60.91 x 46 percent) + ($60.91 x 17 percent)).
---------------------------------------------------------------------------
    \33\ BLS, Occupational Employment Statistics, Occupational
Employment and Wages, May 2018, https://www.bls.gov/oes/current/oes_nat.htm (last accessed Aug. 13, 2019).
    \34\ BLS, Employer Costs for Employee Compensation, https://www.bls.gov/ncs/data.htm. Wages and salaries averaged $24.26 per
hour worked in 2017, while benefit costs averaged $11.26, which is a
benefits rate of 46 percent.
    \35\ Cody Rice, U.S. Environmental Protection Agency, ``Wage
Rates for Economic Analyses of the Toxics Release Inventory
Program,'' (June 10, 2002), https://www.regulations.gov/document?D=EPA-HQ-OPPT-2014-0650-0005 (last accessed Aug. 13, 2019).
---------------------------------------------------------------------------
Cost of Rule Familiarization
    The Department acknowledges that 5 CFR 1320.3(b)(1)(i) requires
agencies to include in the burden analysis for a new information
collection requirement the estimated time it takes for contractors to
review and understand the instructions for compliance. To minimize the
burden, OFCCP will publish compliance assistance materials such as a
fact sheet and answers to frequently asked questions.
    The Department believes that human resources managers at each
contractor firm would be the employees responsible for understanding
the new regulation. Therefore, the Department estimates that it will
take a minimum of 30 minutes (\1/2\ hour) for a human resources manager
at each contractor firm to either read the proposed rule, or read the
compliance assistance materials provided by OFCCP to learn more about
the codified procedures. Consequently, the estimated burden for rule
familiarization is 210,000 hours (420,000 contractor firms x \1/2\
hour). The Department calculates the total estimated cost of rule
familiarization as $20,848,800 (210,000 hours x $99.28/hour) in the
first year, which amounts to a 10-year annualized cost of $2,372,928 at
a discount rate of 3 percent (which is $5.65 per contractor firm) or
$2,774,206 at a discount rate of 7 percent (which is $6.61 per
contractor firm). The Department seeks public comments regarding the
estimated number of firms that would review this rule, the estimated
time to review the rule, and whether human resources
[[Page 71881]]
managers would be the most likely staff members to review the rule.
Table 1, below, reflects the estimated regulatory familiarization costs
for the proposed rule.
                Table 1--Regulatory Familiarization Cost
------------------------------------------------------------------------

------------------------------------------------------------------------
Total number of contractors.............................         420,000
Time to review rule.....................................      30 minutes
Human Resources Managers fully loaded hourly                      $99.28
 compensation...........................................
Regulatory familiarization cost in the first year.......     $20,848,800
Annualized cost with 3 percent discounting..............      $2,372,928
Annualized cost per contractor with 3 percent                      $5.65
 discounting............................................
Annualized cost with 7 percent discounting..............      $2,774,206
Annualized cost per contractor with 7 percent                      $6.61
 discounting............................................
------------------------------------------------------------------------
The proposed rule does not include any additional costs because it adds
no new requirements. The perpetual annualized cost at 7 percent
discounting is $1,068,622 in 2016 dollars.
Cost Savings
    The Department expects contractors impacted by the rule will
experience cost savings. Specifically, the clarity provided in the new
definitions, as well as the clarity of OFCCP's procedures related to
resolution of material violations, provides certainty to contractors of
what is required as well as an option for contractors to more
expeditiously resolve the violations.
    If the proposed rule increases clarity for federal contractors,
this impact most likely will yield cost savings to taxpayers (if
contractor fees decrease because they do not need to engage third party
representatives to interpret OFCCP's procedures and requirements). In
addition, by increasing clarity for both contractors and for OFCCP
enforcement, the proposed rule may reduce the number and costs of
enforcement proceedings by making it clearer to both sides at the
outset what is required by the regulation.
Benefits
    Executive Order 13563 recognizes that some rules have benefits that
are difficult to quantify or monetize but are nevertheless important,
and states that agencies may consider such benefits. This rule has
equity and fairness benefits, which are explicitly recognized in
Executive Order 13563. The NPRM is designed to achieve these benefits
by:
     Supporting more effective enforcement of the prohibition
against employment discrimination;
     Increasing fairness for contractors by providing more
transparency and certainty on the agency's resolution procedures;
     Providing more efficient remedies to workers victimized by
employment discrimination by effectuating corporate-wide corrective
actions in conciliation agreements that may reach more victims than
standard establishment-based conciliation agreements; and
     Facilitating a more efficient option for contractors to
resolve potential discrimination by providing notice of OFCCP's
preliminary findings earlier in the compliance review process.
Analysis of Rulemaking Alternatives
    In addition to the approach proposed in the NPRM, OFCCP considered
alternative approaches. OFCCP considered leaving its resolution
procedures described only in agency subregulatory guidance. Though
OFCCP codified ``conciliation agreements'' in 1979, the agency's other
resolution procedures, namely the PDN and NOV, have only been explained
in subregulatory guidance. Maintaining the status quo has led OFCCP to
inconsistent use of the PDN across agency offices, creating
inefficiencies and leading to greater uncertainty for federal
contractors. Though the agency has taken recent subregulatory measures
to increase consistency and certainty, codifying these agency
resolution procedures would have a stronger impact and promote more
efficient enforcement of Executive Order 11246 than the status quo
alternative.
    OFCCP also considered revising its resolution procedures, but
decided to codify them without modification. Creating new procedures
would create new costs to train agency staff and familiarize
contractors on the new procedures. Additionally, the longstanding
procedures have proven effective as a means for the agency to
communicate its findings to contractors and providing contractors an
opportunity to respond, facilitating greater understanding and
ultimately resolution. OFCCP seeks comments on other possible
alternatives that would minimize the impact of this NPRM while still
accomplishing the goals of this rule.
Regulatory Flexibility Act and Executive Order 13272 (Consideration of
Small Entities)
    The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq.,
establishes ``as a principle of regulatory issuance that agencies shall
endeavor, consistent with the objectives of the rule and applicable
statutes, to fit regulatory and informational requirements to the scale
of the business organizations and governmental jurisdictions subject to
regulation.'' Public Law 96-354. The RFA requires agencies to consider
the impact of a proposed regulation on a wide-range of small entities
including small businesses, not-for-profit organizations, and small
governmental jurisdictions.
    Agencies must review whether a proposed or final rule would have a
significant economic impact on a substantial number of small entities.
See 5 U.S.C. 603. If the rule would, then the agency must prepare a
regulatory flexibility analysis as described in the RFA.\36\
---------------------------------------------------------------------------
    \36\ Id.
---------------------------------------------------------------------------
    However if an agency determines that the rule would not be expected
to have a significant economic impact on a substantial number of small
entities, then the head of the agency may so certify and the RFA does
not require a regulatory flexibility analysis See 5 U.S.C. 605. The
certification must include a statement providing the factual basis for
this determination and the reasoning should be clear.
    The Department must determine the compliance costs of this proposed
rule on small contractor firms, and whether these costs will be
significant for a substantial number of small contractor firms (i.e.,
small firms that enter into contracts with the federal government). If
the estimated compliance costs for affected small contractor firms are
less than 3 percent of small contractor firms' revenues, the Department
considers it appropriate to conclude that this proposed rule will not
have a significant economic impact on small contractor firms.
    A threshold of 3 percent of revenues has been used in prior
rulemakings for the definition of significant economic impact. See,
e.g., 79 FR 60634 (October 7, 2014, Establishing a Minimum Wage for
Contractors) and 81 FR 39108 (June 15, 2016, Discrimination on the
Basis of Sex). This threshold is also consistent with that sometimes
used by other agencies. See, e.g., 79 FR 27106 (May 12, 2014,
Department of Health and Human Services rule stating that under its
agency guidelines for conducting regulatory flexibility analyses,
actions that do not negatively affect costs or revenues by more than 3
percent annually are not economically significant). The Department
believes that its use of a 3 percent of revenues significance criterion
is appropriate.
    A standard definition of ``substantial'' impact has not been
established; however, the EPA provided a determination chart to decide
whether a
[[Page 71882]]
substantial impact exists. If the percentage of all small entities
subject to the rule that are experiencing a given economic impact (in
this case 3 percent of revenue or greater) is greater than or equal to
15 percent of all entities within that industry, then the economic
impact should be considered substantial. The Department has used a
threshold of 15 percent of small entities in prior rulemakings for the
definition of substantial number of small entities. See, e.g., 79 FR
60633 (October 7, 2014, Establishing a Minimum Wage for Contractors).
According to the Small Business Administration's (SBA's) Guide for
Government Agencies: How to Comply with the Regulatory Flexibility Act,
the determination of what constitutes a substantial number of small
entities is open to interpretation, and is primarily dependent on the
size of the industry.\37\ Analysts should determine both the total
number and percentage of regulated small entities experiencing
significant economic impacts when determining whether a substantial
number of small entities may be significantly affected.\38\
---------------------------------------------------------------------------
    \37\ Small Business Administration, A Guide for Government
Agencies: How to Comply with the Regulatory Flexibility Act (August
2017), https://www.sba.gov/sites/default/files/advocacy/How-to-Comply-with-the-RFA-WEB.pdf.
    \38\ Final Guidance for EPA Rulewriters: Regulatory Flexibility
Act (November 2006), section 2.7.2, https://www.epa.gov/sites/production/files/2015-06/documents/guidance-regflexact.pdf (last
accessed Sept. 27, 2019).
---------------------------------------------------------------------------
    To analyze the proposed rule's impact on small contractor firms,
the Department used as data sources the SBA's Table of Small Business
Size Standards \39\ and the U.S. Census Bureau's Statistics of U.S.
Businesses (SUSB).\40\ Since federal contractors are not limited to
specific industries, the Department assessed the impact of this
proposed rule across 19 industrial classifications. Because data
limitations do not allow the Department to determine which of the small
firms within these industries are federal contractors, the Department
assumes that these small firms are not significantly different from the
small federal contractors that will be directly affected by the
proposed rule.
---------------------------------------------------------------------------
    \39\ See https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf (last accessed Sept. 27, 2019).
    \40\ See https://www.census.gov/data/tables/2012/econ/susb/2012-susb-annual.html (last accessed Sept. 27, 2019).
---------------------------------------------------------------------------
    The Department used the following steps to estimate the cost of the
proposed rule per small contractor firm as measured by a percentage of
total annual receipts. First, the Department used Census SUSB data that
disaggregates industry information by firm size in order to perform a
robust analysis of the impact on small contractor firms. The Department
applied the SBA small-business size standards to the SUSB data to
determine the number of small firms in the affected industries. Then
the Department used receipts data from the SUSB to calculate the cost
per firm as a percentage of total receipts by dividing the estimated
first year cost and the annualized cost per firm discounted at a 7
percent rate by the average annual receipts per firm. The methodology
and results of two industries (construction and management of companies
and enterprises) are presented in Tables 2 and 3.
    In sum, the increased first year cost and annualized cost of
compliance resulting from the proposed rule are de minimis relative to
the revenue at small contractor firms no matter their size. All of the
industries had a first year cost and annualized cost per firm as a
percentage of receipts of less than 3 percent. For instance, the first
year cost for the construction industry is estimated to range from 0.00
percent of revenue for firms that have average annual receipts of
approximately $35.3 million to 0.09 percent of revenue for firms that
have average annual receipts below $52,000. Likewise, the annualized
cost for the construction industry is estimated to range from 0.00
percent of revenue for firms that have average annual receipts of
approximately $35.3 million to 0.01 percent of revenue for firms that
have average annual receipts below $52,000. Management of companies and
enterprises is the industry with the highest relative first year costs,
with a range of 0.00 percent for firms that have average annual
receipts of approximately $2.3 million to 0.15 percent for firms that
have average annual receipts below $31,000. With respect to the
annualized costs for the management of companies and enterprises
industry, the impact as a percentage of revenue ranges from 0.00
percent for firms that have average annual receipts of approximately
$2.3 million to 0.02 percent for firms that have average annual
receipts below $31,000.
    Therefore, the Department does not expect this rule to have a
significant economic impact on a substantial number of small entities.
The annualized cost at a discount rate of 7 percent for rule
familiarization is $6.61 per entity ($46.39 in the first year) which is
far less than 1 percent of the annual revenue of the smallest of the
small entities affected by the proposed rule. Accordingly, OFCCP
certifies that the proposed rule would not have a significant economic
impact on a substantial number of small entities.
BILLING CODE 4510-CM-P
[[Page 71883]]
[GRAPHIC] [TIFF OMITTED] TP30DE19.000
[[Page 71884]]
[GRAPHIC] [TIFF OMITTED] TP30DE19.001
BILLING CODE 4510-CM-C
Paperwork Reduction Act
    The Paperwork Reduction Act of 1995 requires that OFCCP consider
the impact of paperwork and other information collection burdens
imposed on the public. See 44 U.S.C. 3507(d). An agency may not collect
or sponsor the collection of information or impose an information
collection requirement unless the information collection instrument
displays a currently valid OMB control number. See 5 CFR 1320.5(b)(1).
    OFCCP has determined that there is no new requirement for
information collection associated with this proposed rule. The
information collection contained in the existing Executive Order 11246
regulations are currently approved under OMB Control Number 1250-0001
(Construction Recordkeeping and Reporting Requirements) and OMB Control
Number 1250-0003 (Recordkeeping and Reporting Requirements--Supply and
Service). Consequently, this proposed rule does not require review by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act.
Unfunded Mandates Reform Act of 1995
    For purposes of the Unfunded Mandates Reform Act of 1995, 2 U.S.C.
1532, this proposed rule does not include any Federal mandate that may
result in excess of $100 million in expenditures by state, local, and
tribal governments in the aggregate or by the private sector.
Executive Order 13132 (Federalism)
    OFCCP has reviewed this proposed rule in accordance with Executive
Order 13132 regarding federalism, and has determined that it does not
have ``federalism implications.'' This rule will not ``have substantial
direct effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.''
Executive Order 13175 (Consultation and Coordination With Indian Tribal
Governments)
    This proposed rule does not have tribal implications under
Executive Order 13175 that requires a tribal summary impact statement.
The proposed rule does not have substantial direct effects on one or
more Indian tribes, on the relationship between the Federal Government
and Indian tribes, or on the distribution of power and responsibilities
between the Federal Government and Indian tribes.
List of Subjects
41 CFR Parts 60-1 and 60-2
    Administrative practice and procedure, Civil rights,
Discrimination, Employment, Equal employment opportunity, Government
contracts, Government procurement, Labor.
41 CFR Parts 60-300 and 60-741
    Administrative practice and procedure, Civil rights,
Discrimination, Employment, Equal employment opportunity, Government
contracts,
[[Page 71885]]
Government procurement, Individuals with disabilities, Labor, Veterans.
Craig E. Leen,
Director, Office of Federal Contract Compliance Programs.
    For the reasons stated in the preamble, the Office of Federal
Contract Compliance Programs proposes to amend 41 CFR parts 60-1, 60-2,
60-300, and 60-741 as follows:
PART 60-1 [AMENDED]
0
1. The authority citation for part 60-1 continues to read as follows:
    Authority: Sec. 201, E.O. 11246, 30 FR 12319, 3 CFR, 1964-1965
Comp., p. 339, as amended by E.O. 11375, 32 FR 14303, 3 CFR, 1966-
1970 Comp., p. 684, E.O. 12086, 43 FR 46501, 3 CFR, 1978 Comp., p.
230, E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258 and E.O.
13672, 79 FR 42971.
0
2. In part 60-1, remove the words ``Deputy Assistant Secretary'' and
adding in their place the word ``Director''.
0
3. Amend Sec.  60-1.3 by removing the definition for ``Deputy Assistant
Secretary'' and adding definitions for ``Director'', ``Nonstatistical
evidence'' and ``Statistical evidence'' in alphabetical order to read
as follows:
Sec.  60-1.3   Definitions.
* * * * *
    Director means the Director, Office of Federal Contract Compliance
Programs of the United States Department of Labor, or his or her
designee.
* * * * *
    Nonstatistical evidence may include testimony about biased
statements, remarks, attitudes, or acts based upon membership in a
protected class; differential treatment through review of comparators,
cohorts, or summary data reflecting differential selections,
compensation and/or qualifications; testimony about individuals denied
or given misleading or contradictory information about employment or
compensation practices; testimony about the extent of discretion or
subjectivity involved in making employment decisions; or other
anecdotal or supporting evidence.
* * * * *
    Statistical evidence means hypothesis testing, controlling for the
major, measureable parameters and variables used by employers
(including, as appropriate, other demographic variables, test scores,
geographic variables, performance evaluations, years of experience,
quality of experience, years of service, quality and reputation of
previous employers, years of education, years of training, quality and
reputation of credentialing institutions, etc.), related to the
probability of outcomes occurring by chance and/or analyses reflecting
statements concluding that a difference in employment selection rates
or compensation decisions is statistically significant by reference to
any one of these statements:
    (1) The disparity is two or more times larger than its standard
error (i.e., a standard deviation of two or more);
    (2) The Z statistic has a value greater than two; or
    (3) The probability value is less than 0.05.
* * * * *
0
4. Revise section 60-1.33 to read as follows:
Sec.  60-1.33   Resolution Procedures.
    (a) Predetermination Notice. If a compliance review or other review
by OFCCP indicates preliminary findings of discrimination, OFCCP will
only issue a predetermination notice after first considering these
factors: Whether the unexplained disparity is both practically and
statistically significant (as described in this part's definition of
``Statistical evidence'') and, where relevant, whether nonstatistical
evidence demonstrates an intent to discriminate. If OFCCP cannot
corroborate statistical evidence with nonstatistical evidence, OFCCP
will issue a predetermination notice only when the statistical evidence
is significant at a confidence level of 99% or higher, which equates to
three or more standard deviations or a p value of 0.01 or less. A
contractor must respond to a predetermination notice within 15 calendar
days of receipt of the notice, which OFCCP may extend for good cause.
    (b) Notice of Violation. If a compliance review or other review by
OFCCP indicates preliminary findings of discrimination or other
material violations of the equal opportunity clause, OFCCP may issue a
notice of violation to provide notice to the contractor requiring
corrective action and inviting conciliation through a written
agreement. For discrimination violations, OFCCP may issue the notice of
violation following issuance of a predetermination notice if the
contractor does not respond or provide a sufficient response within 15
calendar days of receipt of the notice, unless OFCCP has extended the
predetermination notice response time for good cause shown.
    (c) Conciliation Agreement. If a compliance review, complaint
investigation or other review by OFCCP or its representative indicates
a material violation of the equal opportunity clause, and
    (1) If the contractor, subcontractor or bidder is willing to
correct the violations and/or deficiencies, and
    (2) If OFCCP or its representative determines that settlement
(rather than referral for consideration of formal enforcement) is
appropriate, a written agreement shall be required. The agreement shall
provide for such remedial action as may be necessary to correct the
violations and/or deficiencies noted, including, where appropriate (but
not necessarily limited to), remedies such as back pay and retroactive
seniority.
    (d) Expedited Conciliation Option. A contractor may waive the
procedures set forth in paragraphs (a) and/or (b) of this section to
enter directly into a conciliation agreement.
PART 60-2--AFFIRMATIVE ACTION PROGRAMS
0
5. The authority citation for part 60-2 continues to read as follows:
    Authority: Sec. 201, E.O. 11246, 30 FR 12319, E.O. 11375, 32 FR
14303, as amended by E.O. 12086, 43 FR 46501, and E.O. 13672, 79 FR
42971.
Sec.  60-2.1   [Amended]
0
6. Amend Sec.  60-2.1 by removing the words ``Deputy Assistant
Secretary'' and adding in their place ``Director''.
Sec.  60-2.2   [Amended]
0
7. Amend Sec.  60-2.2 by removing the words ``Deputy Assistant
Secretary'' and adding in their place ``Director''.
Sec.  60-2.31   [Amended]
0
8. Amend Sec.  60-2.31 by removing the words ``Deputy Assistant
Secretary'' and adding in their place ``Director.''
PART 60-300--AFFIRMATIVE ACTION AND NONDISCRIMINATION OBLIGATIONS
OF FEDERAL CONTRACTORS AND SUBCONTRACTORS REGARDING DISABLED
VETERANS, RECENTLY SEPARATED VETERANS, ACTIVE DUTY WARTIME OR
CAMPAIGN BADGE VETERANS, AND ARMED FORCES SERVICE MEDAL VETERANS
0
9. The authority citation for part 60-300 continues to read as follows:
    Authority: 29 U.S.C. 793; 38 U.S.C. 4211 and 4212; E.O. 11758 (3
CFR, 1971-1975 Comp., p. 841).
0
10. Amend section 60-300.2 by adding definitions for ``Nonstatistical
evidence'' and ``Statistical evidence'' in alphabetical order to read
as follows:
Sec.  60-300.2   Definitions.
* * * * *
[[Page 71886]]
    Nonstatistical evidence may include testimony about biased
statements, remarks, attitudes, or acts based upon membership in a
protected class; differential treatment through review of comparators,
cohorts, or summary data reflecting differential selections,
compensation and/or qualifications; testimony about individuals denied
or given misleading or contradictory information about employment or
compensation practices; testimony about the extent of discretion or
subjectivity involved in making employment decisions; or other
anecdotal or supporting evidence.
* * * * *
    Statistical evidence means hypothesis testing, controlling for the
major, measureable parameters and variables used by employers
(including, as appropriate, other demographic variables, test scores,
geographic variables, performance evaluations, years of experience,
quality of experience, years of service, quality and reputation of
previous employers, years of education, years of training, quality and
reputation of credentialing institutions, etc.), related to the
probability of outcomes occurring by chance and/or analyses reflecting
statements concluding that a difference in employment selection rates
or compensation decisions is statistically significant by reference to
any one of these statements:
    (1) The disparity is two or more times larger than its standard
error (i.e., a standard deviation of two or more);
    (2) The Z statistic has a value greater than two; or
    (3) The probability value is less than 0.05.
* * * * *
0
11. Revise section 60-300.62 to read as follows:
Sec.  60-300.62   Resolution Procedures.
    (a) Predetermination Notice. If a compliance review or other review
by OFCCP indicates preliminary findings of discrimination, OFCCP will
only issue a predetermination notice after first considering these
factors: Whether the unexplained disparity is both practically and
statistically significant (as described in this part's definition of
``Statistical evidence'') and, where relevant, whether nonstatistical
evidence demonstrates an intent to discriminate. If OFCCP cannot
corroborate statistical evidence with nonstatistical evidence, OFCCP
will issue a predetermination notice only when the statistical evidence
is significant at a confidence level of 99% or higher, which equates to
three or more standard deviations or a p value of 0.01 or less. A
contractor must respond to a predetermination notice within 15 calendar
days of receipt of the notice, which OFCCP may extend for good cause.
    (b) Notice of Violation. If a compliance review or other review by
OFCCP indicates preliminary findings of discrimination or other
material violations of the equal opportunity clause, OFCCP may issue a
notice of violation to provide notice to the contractor requiring
corrective action and inviting conciliation through a written
agreement. For discrimination violations, OFCCP may issue the notice of
violation following issuance of a predetermination notice if the
contractor does not respond or provide a sufficient response within 15
calendar days of receipt of the notice, unless OFCCP has extended the
predetermination notice response time for good cause shown.
    (c) Conciliation Agreement. If a compliance review, complaint
investigation or other review by OFCCP or its representative indicates
a material violation of the equal opportunity clause, and
    (1) If the contractor, subcontractor or bidder is willing to
correct the violations and/or deficiencies, and
    (2) If OFCCP or its representative determines that settlement
(rather than referral for consideration of formal enforcement) is
appropriate, a written agreement shall be required. The agreement shall
provide for such remedial action as may be necessary to correct the
violations and/or deficiencies noted, including, where appropriate (but
not necessarily limited to), remedies such as back pay and retroactive
seniority.
    (d) Expedited Conciliation Option. A contractor may waive the
procedures set forth in paragraphs (a) and/or (b) of this section to
enter directly into a conciliation agreement.
PART 60-741--AFFIRMATIVE ACTION AND NONDISCRIMINATION OBLIGATIONS
OF FEDERAL CONTRACTORS AND SUBCONTRACTORS REGARDING INDIVIDUALS
WITH DISABILITIES
0
12. The authority citation for part 60-741 continues to read as
follows:
    Authority: 29 U.S.C. 705 and 793; E.O. 11758 (3 CFR, 1971-1975
Comp., p. 841).
0
13. Amend section 60-741.2 by adding definitions for ``Nonstatistical
evidence'' and ``Statistical evidence'' in alphabetical order to read
as follows:
Sec.  60-741.2   Definitions.
* * * * *
    Nonstatistical evidence may include testimony about biased
statements, remarks, attitudes, or acts based upon membership in a
protected class; differential treatment through review of comparators,
cohorts, or summary data reflecting differential selections,
compensation and/or qualifications; testimony about individuals denied
or given misleading or contradictory information about employment or
compensation practices; testimony about the extent of discretion or
subjectivity involved in making employment decisions; or other
anecdotal or supporting evidence.
* * * * *
    Statistical evidence means hypothesis testing, controlling for the
major, measureable parameters and variables used by employers
(including, as appropriate, other demographic variables, test scores,
geographic variables, performance evaluations, years of experience,
quality of experience, years of service, quality and reputation of
previous employers, years of education, years of training, quality and
reputation of credentialing institutions, etc.), related to the
probability of outcomes occurring by chance and/or analyses reflecting
statements concluding that a difference in employment selection rates
or compensation decisions is statistically significant by reference to
any one of these statements:
    (1) The disparity is two or more times larger than its standard
error (i.e., a standard deviation of two or more);
    (2) The Z statistic has a value greater than two; or
    (3) The probability value is less than 0.05.
* * * * *
0
14. Revise section 60-741.62 to read as follows:
Sec.  60-741.62   Resolution Procedures.
    (a) Predetermination Notice. If a compliance review or other review
by OFCCP indicates preliminary findings of discrimination, OFCCP will
only issue a predetermination notice after first considering these
factors: Whether the unexplained disparity is both practically and
statistically significant (as described in this part's definition of
``Statistical evidence'') and, where relevant, whether nonstatistical
evidence demonstrates an intent to discriminate. If OFCCP cannot
corroborate statistical evidence with nonstatistical evidence, OFCCP
will issue a predetermination notice only when the statistical evidence
is
[[Page 71887]]
significant at a confidence level of 99% or higher, which equates to
three or more standard deviations or a p value of 0.01 or less. A
contractor must respond to a predetermination notice within 15 calendar
days of receipt of the notice, which OFCCP may extend for good cause.
    (b) Notice of Violation. If a compliance review or other review by
OFCCP indicates preliminary findings of discrimination or other
material violations of the equal opportunity clause, OFCCP may issue a
notice of violation to provide notice to the contractor requiring
corrective action and inviting conciliation through a written
agreement. For discrimination violations, OFCCP may issue the notice of
violation following issuance of a predetermination notice if the
contractor does not respond or provide a sufficient response within 15
calendar days of receipt of the notice, unless OFCCP has extended the
predetermination notice response time for good cause shown.
    (c) Conciliation Agreement. If a compliance review, complaint
investigation or other review by OFCCP or its representative indicates
a material violation of the equal opportunity clause, and
    (1) If the contractor, subcontractor or bidder is willing to
correct the violations and/or deficiencies, and
    (2) If OFCCP or its representative determines that settlement
(rather than referral for consideration of formal enforcement) is
appropriate, a written agreement shall be required. The agreement shall
provide for such remedial action as may be necessary to correct the
violations and/or deficiencies noted, including, where appropriate (but
not necessarily limited to), remedies such as back pay and retroactive
seniority.
    (d) Remedial benchmarks. The remedial action referenced in
paragraph (c) of this section may include the establishment of
benchmarks for the contractor's outreach, recruitment, hiring, or other
employment activities. The purpose of such benchmarks is to create a
quantifiable method by which the contractor's progress in correcting
identified violations and/or deficiencies can be measured.
    (e) Expedited Conciliation Option. A contractor may waive the
procedures set forth in paragraphs (a) and/or (b) of this section to
enter directly into a conciliation agreement.
[FR Doc. 2019-27258 Filed 12-27-19; 8:45 am]
 BILLING CODE 4510-CM-P