RIN 1250-AA10

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Dated: October 10, 2020.

John Busterud,

Regional Administrator, Region IX.

Part 52, Chapter I, Title 40 of the Code

of Federal Regulations is amended as

follows:

PART 52—APPROVAL AND

PROMULGATION OF

IMPLEMENTATION PLANS

■1. The authority citation for Part 52

continues to read as follows:

Authority: 42 U.S.C. 7401 et seq.

Subpart D—Arizona

■2. In 52.120(e), amend Table 1 under

the heading ‘‘Part D Elements and Plans

(Other than for the Metropolitan

Phoenix and Tucson Areas)’’ by adding

an entry for ‘‘Arizona State

Implementation Plan Revision: Hayden

Sulfur Dioxide Nonattainment Area for

the 2010 SO

2

NAAQS’’ after the entry

for ‘‘SIP Revision: Hayden Lead

Nonattainment Area, excluding

Appendix C.’’

§ 52.120 Identification of plan.

* * * * *

(e) * * *

T

ABLE

1—EPA-A

PPROVED

N

ON

-R

EGULATORY AND

Q

UASI

-R

EGULATORY

M

EASURES

[Excluding certain resolutions and statutes, which are listed in tables 2 and 3, respectively]

1

Name of SIP provision Applicable geographic

or nonattainment area

or title/subject State submittal date EPA approval date Explanation

*******

Part D Elements and Plans (other than for the Metropolitan Phoenix or Tucson Areas)

*******

Arizona State Imple-

mentation Plan Re-

vision: Hayden Sul-

fur Dioxide Non-

attainment Area for

the 2010 SO

2

NAAQS. Chapter 3,

Chapter 8, Appendix

A, and Appendix B.

Hayden, AZ Sulfur Di-

oxide Nonattain-

ment Area.

March 9, 2017 ........... [INSERT FEDERAL

REGISTER CITA-

TION], November

10, 2020.

Adopted by the Arizona Department of Envi-

ronmental Quality and submitted to the

EPA as an attachment to letter dated

March 8, 2017. The EPA approved the

emissions inventory element and affirmed

that the State had met the new source re-

view requirements for the area. The EPA

disapproved the attainment demonstration,

RACM/RACT, enforceable emission limita-

tions, RFP, and contingency measure ele-

ments.

*******

1

Table 1 is divided into three parts: Clean Air Act Section 110(a)(2) State Implementation Plan Elements (excluding Part D Elements and

Plans), Part D Elements and Plans (other than for the Metropolitan Phoenix or Tucson Areas), and Part D Elements and Plans for the Metropoli-

tan Phoenix and Tucson Areas.

* * * * *

■3. Section 52.124 is amended by

revising paragraph (c) to read as follows:

§ 52.124 Part D disapproval.

* * * * *

(c) The following portions of the

‘‘Arizona State Implementation Plan

Revision: Hayden Sulfur Dioxide

Nonattainment Area for the 2010 SO

2

NAAQS’’ are disapproved because they

do not meet the requirements of Part D

of the Clean Air Act:

(1) Attainment demonstration,

(2) Reasonably available control

measures/reasonably available control

technology,

(3) Enforceable emission limitations,

(4) Reasonable further progress, and

(5) Contingency measures.

[FR Doc. 2020–23030 Filed 11–9–20; 8:45 am]

BILLING CODE 6560–50–P

DEPARTMENT OF LABOR

Office of Federal Contract Compliance

Programs

41 CFR Parts 60–1, 60–2, 60–300, and

60–741

[OFCCP–2019–0007–0001]

RIN 1250–AA10

Nondiscrimination Obligations of

Federal Contractors and

Subcontractors: Procedures To

Resolve Potential Employment

Discrimination

AGENCY

: Office of Federal Contract

Compliance Programs, Labor.

ACTION

: Final rule.

SUMMARY

: The U.S. Department of Labor

(‘‘the Department’’) publishes this final

rule to codify procedures that the Office

of Federal Contract Compliance

Programs (‘‘OFCCP’’ or ‘‘the agency’’)

uses to resolve potential discrimination

and other material violations of the laws

and regulations administered by OFCCP

applicable to Federal contractors and

subcontractors, add clarifying

definitions to specify the types of

evidence OFCCP uses to support its

discrimination findings, and correct the

title of OFCCP’s agency head.

DATES

: These regulations are effective

December 10, 2020.

FOR FURTHER INFORMATION CONTACT

: Tina

Williams, 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

:

Background

A. Legal Authority

OFCCP administers and enforces

Executive Order 11246, as amended

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OFCCP will also begin enforcing Section 4 of

Executive Order 13950, ‘‘Combating Race and Sex

Stereotyping’’ for Federal contracts or subcontracts

entered on or after November 21, 2020. OFCCP is

currently implementing this Executive order.

2

Hereinafter, the terms ‘‘contractor’’ and ‘‘Federal

contractor’’ are used to refer collectively to

contractors and subcontractors that fall under

OFCCP’s authority, unless otherwise expressly

stated.

3

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).

4

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).

5

41 CFR 60–1.28, 60–1.33, 60–300.62, 60–300.64,

60–741.62, and 60–741.64; Federal Contract

Compliance Manual Chapter 8 (Dec. 2019);

Directive 2019–02, ‘‘Early Resolution Procedures’’

(Nov. 30, 2018); Directive 2018–01, ‘‘Use of

Predetermination Notices (PDN)’’ (Feb. 27, 2018).

6

41 CFR 60–1.26, 60–300.65, and 60–741.65.

7

41 CFR 60–1.27, 60–300.66, and 60–741.66.

(E.O. 11246); section 503 of the

Rehabilitation Act of 1973, 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.

1

Collectively,

these laws require Federal contractors

and subcontractors

2

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.

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 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. Second, it

requires each covered Federal contractor

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.

3

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.

Enacted in 1974 and amended in the

intervening years, 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). It

also 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

subcontract in excess of $150,000.

4

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.

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

noncompliance under any of the three

laws or their implementing regulations,

it utilizes established procedures to

either facilitate resolution

5

or proceed

to administrative enforcement as

necessary to secure compliance.

6

A

contractor found in violation who fails

to correct violations of OFCCP’s

regulations may, after the opportunity

for a hearing, have its contracts

canceled, terminated, or suspended

and/or may be subject to debarment.

7

B. Overview of Rule

The Department publishes this final

rule to increase clarity and transparency

for Federal contractors, establish clear

parameters for OFCCP resolution

procedures, and enhance the efficient

enforcement of equal employment

opportunity laws. The rule will help

OFCCP to increase the number of

contractors that the agency evaluates

and focus on resolving stronger cases

through the strategic allocation of

limited agency resources. The

procedures codified in the final rule aim

to achieve that end by increasing the

transparency of OFCCP’s operations so

that contractors and OFCCP can resolve

potential violations through a clear,

mutual understanding of the issues. The

final rule also enables OFCCP to pursue

resolution of stronger cases efficiently

and as early in the compliance

evaluation process as possible, through

the Predetermination Notice (PDN)

procedures and the early resolution

conciliation option. Critically, the final

rule establishes consistent parameters

for findings and preliminary findings of

discrimination, and provides

contractors with more certainty as to

OFCCP’s operative standards for

compliance evaluations, and provides

guardrails on the agency’s issuance of

pre-enforcement notices. The

Department issues this rule as an

exercise of its enforcement discretion to

focus OFCCP’s resources on those cases

with the strongest evidence. This

approach is neither compelled nor

prohibited by Title VII and OFCCP case

law.

On December 30, 2019 (84 FR 71875),

the Department published a notice of

proposed rulemaking (NPRM) to codify

provisions that provide contractors with

greater certainty about the procedures

that OFCCP follows during compliance

evaluations to resolve employment

discrimination and other material

violations of the laws it enforces.

Specifically, the Department proposed

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See, e.g., U.S. Chamber of Commerce, OFCCP:

Right Mission, Wrong Tactics—Recommendations

for Reform (Sept. 21, 2017), www.uschamber.com/

report/ofccp-right-mission-wrong-tactics-

recommendations-reform.

9

OFCCP will update the FCCM in light of this

final rule and revise or repeal any directives as

needed.

to codify two formal notices that the

agency uses when it finds potential

violations: The 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 the procedural

framework for the execution of quality

and timely compliance evaluations and

complaint investigations. The

Department proposed to clarify the

different types of evidence that it uses

to support a PDN or NOV through the

addition of definitions for ‘‘statistical

evidence’’ and ‘‘nonstatistical

evidence.’’ To increase efficiency, the

Department also proposed to codify an

option that allows contractors to

expedite the conclusion of a compliance

evaluation by entering directly into a

conciliation agreement prior to issuance

of a PDN or NOV. Finally, the

Department proposed to update

outdated references to the official title of

OFCCP’s agency head from ‘‘Deputy

Assistant Secretary’’ to ‘‘Director.’’

After careful consideration of the

comments received in response to its

proposal, the Department has decided to

finalize the rule with several key

changes. First, the final rule clarifies

that the evidentiary standards OFCCP

must meet in order to issue a PDN in a

discrimination case must also be met

before issuing NOVs. Second, OFCCP

changed the terms that the final rule

defines from ‘‘statistical evidence’’ and

‘‘nonstatistical evidence’’ to

‘‘quantitative evidence’’ and

‘‘qualitative evidence,’’ to provide

greater clarity as to the types of

evidence that OFCCP collects and how

it uses the different types of evidence to

support the issuance of pre-enforcement

notices. Third, the final rule

differentiates the procedures followed

for disparate treatment and disparate

impact theories of discrimination,

which have separate, although similar,

elements, and provides clarity on the

evidentiary standards OFCCP will have

to meet to issue pre-enforcement notices

under each legal theory. Fourth, the

final rule requires OFCCP to provide

qualitative evidence supporting a

finding of discriminatory intent for all

cases proceeding under a disparate

treatment theory, subject to certain

enumerated exceptions. Fifth, in order

to issue a PDN or NOV in cases

involving a disparate impact theory of

discrimination, the final rule requires

OFCCP to identify the policy or practice

of the contractor causing the adverse

impact with factual support

demonstrating why such policy or

practice has a discriminatory effect.

Sixth, the final rule clarifies that OFCCP

must explain in detail the basis for its

findings in pre-enforcement notices,

obtain approval from the OFCCP

Director or acting agency head, and,

upon the contractor’s request, provide

the model and variables used in the

agency’s statistical analysis and an

explanation for any variable that was

excluded from the statistical analysis.

Seventh, in the final rule OFCCP

extends the amount of time contractors

have to respond to a PDN to 30 days

with the possibility of extension, as

opposed to the 15 days proposed in the

NPRM, in response to comments

requesting more time to respond. These

changes are fully explained below. In

addition, in response to several

commenters, OFCCP provides

additional guidance in this preamble on

how it will measure practical

significance.

This final rule is an Executive Order

(E.O.) 13771 regulatory action. Pursuant

to the Congressional Review Act (5

U.S.C. 801 et seq.), OIRA designated

that this rule is not a ‘‘major rule,’’ as

defined by 5 U.S.C. 804(2). Details on

the estimated costs of this rule can be

found in the economic analysis below.

C. Need for Rulemaking

As stated above, the Department

believes this rule is needed to increase

clarity and transparency for Federal

contractors, establish clear parameters

for OFCCP resolution procedures, and

enhances the efficient enforcement of

equal employment opportunity laws,

but one commenter, a compliance

consulting firm, specifically questioned

the need for rulemaking. The

commenter objected to codification of

OFCCP’s resolution procedures,

asserting that it would be better for

OFCCP to update the FCCM or the

agency’s directives system. OFCCP is

guided by four central principles:

Certainty, efficiency, recognition, and

transparency. This focus is informed at

least in part by criticisms the agency

received in previous years that OFCCP

has at times lacked sufficient

transparency, clarity, certainty, and

timeliness in its dealings with

contractors, and criticisms stating that

the agency has brought cases without an

adequate evidentiary foundation.

8

While many of these criticisms have

been addressed by directives and other

guidance in the intervening years, this

final rule further addresses such

concerns by codifying procedures that

already exist in the FCCM and agency

guidance with some additional

modifications to improve clarity and

transparency. The FCCM and agency

directives are not legally binding and

have not gone through formal notice and

public comment. Therefore, they do not

provide the same level of certainty that

this final rule does. See, e.g., Promoting

Regulatory Openness Through Good

Guidance (PRO Good Guidance), 85 FR

53163 (Aug. 28, 2020); see also E.O.

13924, Sec. 6(e), 85 FR 31353, 31355

(May 22, 2020) (‘‘All rules of evidence

and procedure should be public, clear,

and effective.’’); id. Sec. 6(i)

(‘‘Administrative enforcement should be

free of unfair surprise.’’).

9

A notice-and-

comment rulemaking process also

ensures that the public’s views are

heard and that the agency gains the

benefit of public input that can improve

the content of the final rule. Codifying

the use of PDNs, NOVs, and an early

conciliation option promotes

predictability, efficiency, and

timeliness. Additionally, the final rule

establishes guardrails on the agency’s

issuance of pre-enforcement notices and

the allocation of agency resources by

providing clear evidentiary standards

that OFCCP must meet to pursue

preliminary findings and findings. The

Department will continue to examine

means of furthering both these goals

through other rulemakings and guidance

documents, as appropriate.

Section by Section Analysis

A. Definitions

To provide greater clarity and

certainty to Federal contractors, the rule

defines ‘‘qualitative evidence’’ and

‘‘quantitative evidence,’’ which OFCCP

uses to support a finding or preliminary

finding of discrimination in a PDN or

NOV. In the NPRM, OFCCP proposed to

add definitions for ‘‘nonstatistical

evidence’’ and ‘‘statistical evidence.’’ In

response to comments on the proposed

definitions, the Department revises the

terms to ‘‘qualitative evidence’’ and

‘‘quantitative evidence,’’ respectively,

and provides additional clarifying

language in the final rule to address

issues raised by commenters.

The term ‘‘qualitative evidence’’ is

defined in the final rule to include the

various types of documents, testimony,

and interview statements that OFCCP

collects during its compliance

evaluations relevant to a finding of

discrimination, and clarifies the

purposes for which it will be used.

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10

See, e.g., OFCCP v. Analogic Corp., 2017–OFC–

00001, at 41 n.60 (Rec. Dec. & Order Mar. 22, 2019)

(‘‘[t]he fact that hiring criteria or practices are

subjective, and are thus susceptible to

discriminatory application, is only marginally

relevant to the question of discriminatory intent in

the absence of proof that the criteria were, in fact,

applied in a discriminatory manner.’’) (quoting Gay

v. Waiters’ & Dairy Lunchmen’s Union, Local No.

30, 694 F.2d 531, 554 (9th Cir. 1982)); see generally

Wal-Mart Stores Inc. v. Dukes, 564 U.S. 338, 355

(2011) (holding policy of allowing supervisory

discretion over employment matters showed ‘‘the

opposite of a uniform employment practice that

would provide commonality needed for a class

action’’ claiming disparate treatment of female

workers); cf. White v. Rice, 46 F.3d 1130 (4th Cir.

1995) (‘‘such a subjective belief [of gender

discrimination] cannot serve as the basis for judicial

relief’’).

The term ‘‘quantitative evidence’’ is

included to clarify the support needed

for OFCCP to determine that there is a

statistically significant disparity in a

contractor’s employment selection or

compensation outcomes affecting a

group protected under OFCCP’s laws.

The definition of ‘‘quantitative

evidence’’ in the final rule also includes

quantitative analyses, such as cohort

analyses, which are comparisons of

similarly situated individuals or small

groups of applicants or employees that

are numerical in nature but do not use

hypothesis testing techniques. Both

terms are germane to the resolution

procedures that this rule codifies.

The change in terminology helps

better capture the distinction between

these types of evidence. The term

‘‘qualitative evidence’’ gives an

affirmative, descriptive label to the

types of evidence that fall into that

category. The term ‘‘quantitative

evidence’’ better encapsulates OFCCP’s

analytical evidence given the agency’s

use of descriptive statistics and non-

parametric and cohort analyses, in

addition to a variety of statistical tests

based on hypothesis testing.

Quantitative analysis involves

numerical comparisons, but it is not

limited to the sort of hypothesis testing

that OFCCP typically performs in

systemic assessments of pay or selection

outcomes, which might be more clearly

thought of as ‘‘statistical evidence.’’ By

contrast, the term ‘‘quantitative

evidence’’ comfortably describes all

these types of numerical analyses.

The change in terminology also

allows a clear delineation of the rules

governing the sufficiency of the

evidence required for OFCCP to issue a

PDN or NOV. As explained more fully

below, the Department has decided that,

subject to certain exceptions, OFCCP

will issue a PDN or NOV only if there

is quantitative (i.e., statistical or other

numerical) evidence, practical

significance, and qualitative evidence.

The broader definition of quantitative

evidence means that OFCCP does not

necessarily need statistical evidence;

and the Department similarly changed

the title of nonstatistical evidence to

qualitative evidence. The exceptions to

the general rule also use these modified

definitions, as discussed below.

1. Qualitative Evidence

The definition of ‘‘qualitative

evidence’’ provides a nonexhaustive list

of types of anecdotal and other evidence

that OFCCP considers before and relies

upon in issuing a PDN. Such evidence

is not the result of statistical analysis or

other quantitative comparisons, and

may be probative of a contractor’s

discriminatory or non-discriminatory

intent. In response to comments

received, and in order to provide greater

clarity, the definition in the final rule

has been revised to further clarify the

meaning of qualitative evidence, and to

provide additional explanation

regarding how OFCCP uses it during its

compliance evaluations.

Before issuing a PDN, OFCCP assesses

qualitative evidence obtained during the

course of its compliance evaluations. In

order to proceed under a disparate

treatment theory of liability, OFCCP

must generally provide qualitative

evidence that justifies a finding of

discriminatory intent, whether on its

own or in combination with quantitative

evidence. Qualitative evidence in such

cases may include factual testimony,

interview statements, written

communications, documentation,

internal company policies, or other

evidence that supports an inference of

intentional discrimination towards

members of a protected class,

particularly when made by a decision

maker involved in the action under

investigation, or evidence that weighs

against such an inference. Importantly,

OFCCP may proceed with issuing a PDN

where the qualitative evidence is

particularly strong, such as when the

agency encounters a facially

discriminatory policy or a contractor

has admitted to discriminatory conduct.

Examples of qualitative evidence from

previous OFCCP compliance reviews

help illustrate the meaning of the term.

For example, consider a company

president who sent an email to

managers stating his concern that

women were unable to lift heavy objects

and that, if women were hired for

stockroom positions, there would be a

higher risk of on-the-job injuries, which

would impact the company’s

profitability. If this rationale was used

to exclude women from stockroom

positions due to their sex, rather than

basing selection on applicants’ physical

ability to perform the required tasks, the

president’s email would be an example

of qualitative evidence supporting an

inference of discriminatory intent. Often

the evidence is less direct: In a hiring

case involving management trainee

positions for which prior sales and

customer service experience were stated

criteria, OFCCP gathered qualitative

evidence regarding individual rejected

applicants who had much stronger

experience in those areas than certain

hires.

Qualitative evidence may include

information obtained through testimony

or other documentation of individuals

who were denied information or who

were provided misleading or

contradictory information about the

contractor’s employment or

compensation practices in

circumstances that suggest

discriminatory treatment based on a

protected characteristic. OFCCP may

also consider interview statements or

other documentary evidence concerning

a contractor using broad discretion or

subjectivity in hiring, promotion, or

compensation decisions in conjunction

with evidence suggesting the discretion

or subjectivity has been used to

discriminate based on a protected

characteristic, although the final rule

clarifies that the mere fact broad

discretion or subjectivity exists does

not, in and of itself, demonstrate that an

employment action is discriminatory.

10

Testimony or interview statements that

OFCCP relies upon in issuing a PDN

may not consist wholly of mere

assumptions or purely speculative

reasoning about the contractor’s actions,

but must include some objective factual

basis from which to infer discriminatory

intent. For example, a witness’s

statement merely conveying his or her

subjective belief that the contractor

discriminated would not be sufficient.

However, a witness’s statement that a

particular manager discriminated

against him or her that was backed by

specific examples of problematic or

unequal treatment would be evidence of

discriminatory intent.

OFCCP may also use qualitative

evidence to rebut a contractor’s

explanation for statistical disparities or

its critique of OFCCP’s statistical

analysis. For example, in one recent

case a contractor argued that OFCCP

should have included in its statistical

analysis a variable to account for

applicants who held an asbestos

removal license, which was a

requirement for employment. OFCCP

presented qualitative evidence

consisting of a hiring official’s

testimony that he hired workers without

an asbestos removal license, testimony

from an individual who attended a

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See OFCCP v. WMS Solutions, Inc., 2015–OFC–

09, (Rec. Dec. & Order May 12, 2020).

12

To be clear, evidence demonstrating that the

challenged selection procedure is consistent with

business necessity does not need to be provided by

OFCCP, but rather by the contractor. Once

provided, however, such evidence may be relevant

when the agency is determining whether to issue

an NOV or SCN.

13

Watson v. Fort Worth Bank & Trust, 487 U.S.

977, 990–91 (1988) (‘‘If an employer’s undisciplined

system of subjective decision-making has precisely

the same effect as a system pervaded by

impermissible intentional discrimination, it is

difficult to see why Title VII’s proscription against

discriminatory actions should not apply in

both.... We conclude, accordingly, that

subjective or discretionary employment practices

may be analyzed under the disparate impact

approach. . . .’’).

14

OFCCP v. Bank of America, 1997–OFC–16, at

14 (Final Dec. & Order Apr. 21, 2016).

recruiting session where the contractor

stated that it provided a 4-day training

course for new hires on asbestos

removal, and testimony from the owner

who started the asbestos training school

onsite.

11

One comment requested that the final

rule require anecdotal evidence as a

condition of issuing a PDN, and that

anecdotal evidence should be defined

consistent with established authority as

evidence that leads to an inference of

disparate treatment. OFCCP has

amended the final rule to require

qualitative evidence, along with

sufficient quantitative evidence and

practical significance (as specified

below), for all PDNs issued under a

disparate treatment theory of liability,

with clearly delineated exceptions.

OFCCP has also revised the definition of

qualitative evidence as described in the

preceding paragraphs to clarify that

anecdotal evidence includes facts that

are relevant to determining a

contractor’s discriminatory or non-

discriminatory intent, the business

necessity (or lack thereof) of a

challenged policy or practice, or

whether the contractor has otherwise

complied with its non-discrimination

obligations.

12

Other comments on OFCCP’s

proposed definition of ‘‘nonstatistical

evidence’’ (now ‘‘qualitative evidence’’

in this final rule) sought to have

testimony on the extent of ‘‘subjectivity

involved in making employment

decisions’’ removed as an example, or to

provide further explanation as to how

and when subjectivity could be used to

support findings of discrimination.

OFCCP declines to remove this example

altogether because first-hand testimony

about the level of subjectivity involved

in a decision may, in certain cases,

bolster other evidence of disparity.

13

For example, in one case,

14

OFCCP

gathered qualitative evidence to

investigate a hiring issue where African-

American applicants were

disproportionately screened out based

on two disposition codes, one of which

related to a subjectively applied credit

check. In that case, OFCCP gathered

statements from rejected applicants in

the disfavored group who met all

qualification requirements but,

according to the contractor’s disposition

codes, were rejected because of a ‘‘bad’’

credit check without being given the

opportunity to address the results.

Additionally, OFCCP determined based

on evidence obtained from the recruiters

who evaluated the credit checks that the

recruiters were unable to provide any

objective standards that were used to

screen out applicants. Such evidence

demonstrating the level of subjectivity

involved in employment decisions, in

connection with other evidence, may be

helpful to OFCCP in making a

preliminary finding that the contractor

then has an opportunity to rebut.

However, as stated above, the

Department agrees that the mere fact

that a contractor has supervisory

discretion in its employment decisions

is not by itself probative of

discriminatory intent. OFCCP has

qualified the appropriate use of such

evidence in the final rule, explaining in

the regulatory text that documents about

the extent of discretion or subjectivity

involved in making employment

decisions may be used as qualitative

evidence, but only in conjunction with

evidence suggesting the discretion or

subjectivity has been used to

discriminate based on a protected

characteristic.

The Department notes that qualitative

evidence may also weigh against a

finding of discrimination, depending on

the surrounding facts and

circumstances. Although mere

compliance with basic legal obligations

will not be considered by the agency as

dispositive evidence weighing against a

finding of discrimination, OFCCP may

consider testimony and other

documentation that includes indicia

that a contractor has made good faith

efforts to comply with its equal

employment opportunity obligations.

For instance, a contractor may provide

evidence that it has taken specific

actions to advance equal employment

opportunity as evidence that it did not

discriminate intentionally. A contractor

may also show evidence of actions taken

to correct discrimination issues that a

contractor may have identified during

annual reviews of its selection and

compensation systems. For disparate

treatment cases, OFCCP will consider

such evidence in conjunction with other

qualitative and quantitative evidence to

inform a decision on whether to issue a

PDN alleging a pattern and practice of

intentional discrimination.

2. Quantitative Evidence

As discussed above, the final rule

uses a definition of quantitative

evidence rather than statistical evidence

as in the proposed rule. The most

important difference is that the

definition of quantitative evidence is

broader than statistical evidence.

OFCCP uses a number of quantitative

measures to determine whether a

particular disparity in employment

selection or compensation is sufficiently

robust to support a finding of

discrimination. The final rule thus

clarifies that quantitative comparisons,

such as ‘‘cohort analyses,’’ and

summary data that reflect a contractor’s

differential selections and/or

compensation between similarly

situated individuals are included within

the definition of ‘‘quantitative

evidence.’’ OFCCP did not receive any

comments suggesting that OFCCP

reclassify this type of evidence, likely

because the proposed definition of

statistical evidence was specific to

hypothesis-testing techniques. However,

OFCCP believes the more exacting

distinction in the final rule between

quantitatively driven evidence and

anecdotal evidence provides greater

clarity to stakeholders. Comparative

analyses, such as cohort analysis, while

quantitative in nature, are distinct from

hypothesis-based statistical measures. In

some cases, statistical regression

analysis cannot be reliably performed

due to small sample sizes or the lack of

meaningful, quantifiable variables by

which to conduct the analysis. OFCCP

may use numerical cohort analysis or

small group assessment techniques in

possible combination with a global test

for these cases. The relevant employee

group used for the small group analyses

will generally align with how the

contractor establishes specific positions

and job groups, provided the job

functions and responsibilities of

particular positions are similar. In other

circumstances, a general comparison of

outcomes shown through simple

numeric ratios may demonstrate

disparities between the number of

individuals hired in comparison to the

available pool of qualified applicants in

a protected membership class. For

example, OFCCP can generally infer

hiring discrimination when a

contractor’s workforce for a particular

position is comprised of 95% from one

racial group and 5% from all other

racial groups combined, yet qualified

applicants for that position comprised

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Some examples of the statistical measures that

OFCCP may use are the Chi square, Fisher’s exact,

Z-test, and regression analyses that measure

disparities in terms of standard deviations. As

discussed further below, OFCCP considers

statistical evidence in combination with qualitative

evidence and the practical significance of a

disparity as part of a comprehensive approach to

decision-making about the issuance of pre-

enforcement notices.

16

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 Sch. 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’’).

17

To be more precise, the null hypothesis for the

statistical regression analyses that OFCCP conducts

during its compliance reviews comprises the

following three assumptions: (1) The contractor’s

decisions were made using non-biased criteria, (2)

the skills and competencies evaluated by the

contractor’s non-biased criteria are normally

distributed throughout the relevant employee or

applicant population without regard to race or

gender, and (3) the agency’s statistical modeling is

able to accurately capture the non-biased criteria

used by the contractor in its selection and/or

compensation decisions.

18

See David H. Kaye & David A. Freedman,

‘‘Reference Guide on Statistics,’’ National Academy

of Sciences (2011), www.fjc.gov/sites/default/files/

2012/SciMan3D07.pdf, at 250–51.

19

OFCCP need not account for every conceivable

variable, See, e.g., Bazemore v. Friday, 478 U.S.

385, 400 (1986) (‘‘[I]t is clear that a regression

analysis that includes less than ‘all measurable

variables’ may serve to prove a plaintiff’s case.’’);

McClain v. Lufkin Indus., Inc., 519 F.3d 264, 280

(5th Cir. 2008) (‘‘However, in selecting an

appropriate pool and performing regression analysis

in Title VII cases, the Supreme Court has taught that

a plaintiff’s regression analysis need not include ‘all

measurable variables.’’’) (citing Bazemore, 478 U.S.

at 400); Mozee v. Am. Commercial Marine Serv. Co.,

940 F.2d 1036, 1045 (7th Cir. 1991) (same).

50% for the first racial group and 50%

for the other racial groups.

OFCCP also uses statistical

measures.

15

As described in the NPRM,

the most familiar statistical measure is

the standard deviation, which

represents a standardized measure of

the difference between selection rates or

compensation between groups. The U.S.

Supreme Court has described a disparity

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.

16

In general,

the null hypothesis employed by

OFCCP for purposes of its regression

analyses assumes that the contractor’s

employment decisions are non-

discriminatory and that there are no

relevant differences between racial

groups or genders in the relevant

employee or applicant population after

the agency controls for the major,

measurable variables used by the

contractor in its decision-making.

17

The

greater the number of standard

deviations, the less likely such a

statistical disparity would be produced

by chance were the null hypothesis

correct, and the more likely the null

hypothesis may reasonably be

rejected.

18

To estimate the probability of

selection and compensation disparities

occurring by chance, OFCCP has

historically conducted regression

analyses of selection and compensation

outcomes, which seek to control for the

major, measurable variables used by the

contractor in its decision-making. The

final rule provides, as did the NPRM,

that a disparity in employment selection

rates or rates of compensation 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.

OFCCP requests information from the

contractor regarding the qualifications it

seeks in hiring after identifying an

initial disparity in selections. Likewise

it requests additional information from

contractors regarding pay variables after

identifying initial indicators. OFCCP

uses the information provided by the

contractor to perform its regression

analyses in an effort to tailor the

analyses to each contractor’s specific

compensation or personnel practices

pertaining to groupings of similarly

situated individuals. In circumstances

where the contractor does not provide

such variables, OFCCP will utilize

measurable variables generally used by

employers in selection and

compensation decisions in conducting

the regression analysis.

OFCCP may exclude a variable as

tainted only when OFCCP determines

that the variable reflects underlying

discrimination or is being used as

pretext. For example, if a contractor’s

compensation system depends heavily

on the amount of revenue an employee

brings in, but there is evidence that the

contractor directs more lucrative sales

prospects to men because they are men,

it may be appropriate to exclude a

revenue-generation variable in the

regression analysis to that extent.

Another example may be where there is

evidence that a contractor does not

apply the variable in a uniform fashion,

such as considering or weighing the

variable differently for individuals

belonging to different demographic

groups. OFCCP will disclose any

exclusions to the contractor at the time

it provides its quantitative analysis and

provide the contractor with an

opportunity to rebut exclusion of the

variable at issue.

For OFCCP to consider the major,

measurable parameters and variables

that the contractor uses in its selection

or compensation practices, the

contractor must provide the preferred

qualifications that it uses along with

sufficient data for OFCCP to include

such variables in its regression analysis.

OFCCP will assess all of the variables

that a contractor provides, including

preferred qualifications. If OFCCP

concludes that a variable should not be

included in its analysis, it will explain

why and allow the contractor an

opportunity to rebut, as provided in the

previous paragraph.

The Department received a few

comments specific to the proposed

definition of ‘‘statistical evidence’’ (now

‘‘quantitative evidence’’ in the final

rule). The comments suggest that

OFCCP should ensure that the

definition accounts for all factors

impacting an employment or

compensation decision, allows OFCCP

to tailor models to contractor practices,

and groups only similarly situated

employees. OFCCP’s definition of

quantitative evidence provides a list of

parameters and variables generally used

by employers that OFCCP will use in its

hypothesis testing. It does not list every

conceivable variable, nor is that

necessary.

19

With that said, the list

included in the definition is not

exhaustive, and OFCCP has left the final

definition flexible enough to include

variables used by contractors in their

employment practices. The definition

will allow OFCCP to tailor statistical

models based on contractor practices

and form groups that meet the relevant

‘‘similarly situated’’ standard in the

context of a potential systemic

discrimination case.

Another commenter requested

clarification as to whether OFCCP’s

treatment of statistical evidence applies

to only claims of disparate treatment, or

also to disparate impact claims. OFCCP

applies quantitative evidence, as

defined in the final rule, in the same

manner for disparate treatment and

disparate impact class claims, as both

claims require evidence of a disparity

between favored and disfavored groups.

In addition, for disparate treatment

claims, quantitative evidence may

support an inference of intentional

discrimination, while for disparate

impact claims, quantitative evidence

may support an inference that a specific

policy or practice is causing a disparate

impact.

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20

See supra note 8.

21

Directive 2018–05, ‘‘Analysis of Contractor

Compensation Practices During a Compliance

Evaluation’’ (Aug. 24, 2018).

22

See Practical Significance in EEO Analysis

Frequently Asked Questions, Question #5,

www.dol.gov/agencies/ofccp/faqs/practical-

significance.

23

For an overview of the most common measures

of practical significance, see Frederick Oswald, Eric

Dunleavy & Amy Shaw, ‘‘Measuring Practical

Significance in Adverse Impact Analysis’’ in

Adverse Impact Analysis: Understanding Data,

Statistics, and Risk, Scott B. Morris & Eric Dunleavy

(Eds.) (2017), www.researchgate.net/publication/

314245607_Measuring_practical_significance_in_

adverse_impact_analysis; and Joseph Gastwirth,

‘‘Some Recurrent Problems in Interpreting

Statistical Evidence in Equal Employment Cases,’’

Law, Probability & Risk (2017).

24

OFCCP v. TNT Crust, 2004–OFC–3, at 21

(Order on Liability Sept. 10, 2007) (‘‘Generally, it

is inappropriate to require validity evidence or to

take enforcement action where the number of

persons and the difference in selection rates are so

small that the selection of one different person for

one job would shift the result from adverse impact

against one group to a situation in which that group

has a higher selection rate than the other group.’’).

25

41 CFR 60–3.4(D).

26

But see Kaye & Freedman, supra note 18 at 235

(observing that ‘‘[a]lthough the odds ratio has

desirable mathematical properties, its meaning may

be less clear than that of the selection ratio or the

simple difference’’).

27

See 41 CFR 60–3.4(D).

The Department is aware that its

statistical methods have been criticized,

including by commenters in this

rulemaking.

20

OFCCP uses established

statistical methods in its analyses, but

nonetheless the Department is

considering whether to further examine,

either in a rulemaking or in

subregulatory guidance, the agency’s

methodologies, including issues such as

variables used, as it did in a 2018

directive on analyzing compensation.

21

However, such a project is outside the

scope of this rulemaking.

3. Practical Significance

Practical significance within the

framework of equal employment

opportunity enforcement refers to

whether an observed disparity in

employment opportunities or outcomes

reflects meaningful harm to the

disfavored group.

22

The concept focuses

on the contextual impact or importance

of the disparity, rather than its

likelihood of occurring by chance as in

measures of statistical significance.

OFCCP uses measures of practical

significance as a tool of enforcement

discretion to ensure it is targeting the

strongest cases in its compliance

reviews with the most compelling

evidence, as well as a safeguard against

the limitations of statistical modeling

when attempting to explain complex

human phenomena. Modeling need not

and cannot capture every facet of

human interaction in the workplace, or

of contractors’ evaluations of employees

and applicants; but when outcomes

among what appear to be similarly

situated individuals differ greatly,

OFCCP can be more confident that

discrimination at work. Given OFCCP’s

limited resources, considering practical

significance helps the agency ensure

that it is directing its efforts effectively.

Weighing practical significance as one

of the thresholds for issuing pre-

enforcement notices is thus an

important part of OFCCP’s

comprehensive approach to compliance

evaluations.

Five comments addressed the issue of

‘‘practical significance’’ in OFCCP’s

compliance reviews. One comment

recommended against such a definition

due to variance among the measures of

practical significance used in different

employment scenarios, while another

comment recommended against

requiring practical significance prior to

issuing a PDN as it would create an

unnecessary barrier to investigating

discrimination. Three commenters

asked the Department to add a

definition to the final rule. Two

commenters sought clarity and greater

certainty so that contractors would

know how the term, as used in the

regulation, would be applied. One

comment added that a significant

shortcoming of the proposed regulation

was that it did not require an

assessment of practical significance

before issuing adverse findings. Another

comment specifically requested a

definition with express standards that

OFCCP would apply in assessing

practical significance so that OFCCP’s

use of practical significance could be

part of negotiations with the contractor.

The Department declines to add a

specific definition for the term in the

final rule because there is not a settled

definition in the relevant academic

literature and a variety of measures may

be appropriate to use in any given case.

The Department will continue to

evaluate that position and propose a

new rulemaking if it determines that

such thresholds should be codified.

However, in order to provide more

clarity for contractors, the Department

describes below common types of

practical-significance measures and

explains the metrics that OFCCP will

customarily use moving forward. The

Department believes that providing

these guidelines for both its compliance

officers and contractors will help make

OFCCP’s compliance reviews more

transparent and efficient. These

guidelines are particularly useful given

that the final rule generally requires that

OFCCP find any disparity that forms the

basis for an allegation of discrimination

to be practically significant before

issuing a PDN or NOV.

There is no single, specific

measurement of practical significance

appropriate to all compensation, hiring,

promotion, and termination decisions.

There are several common measures of

practical significance discussed in

scholarly literature from the labor

economics field.

23

Some of the

measures of practical significance that

have been used by OFCCP include size-

of-selection shortfall; ‘‘four-fifths rule’’

(or ‘‘80 percent rule’’); odds ratio;

percentage of pay disparity; and the

Type II squared semi-partial correlation

coefficient. For example, with regard to

using the size of shortfall, one practical

significance threshold is a shortfall of at

least two

24

in a hiring analysis where,

based on the number of applicants and

hires, the expectation would be for a

contractor to have hired at least two

additional members of the disfavored

group in a neutral selection process. The

‘‘four-fifths rule’’ or ‘‘80 percent rule’’ is

a measure of practical significance that

relies on the ‘‘impact ratio’’—if the

selection rate for a disfavored group is

less than 80 percent of the selection rate

for the favored group, it is generally

considered evidence of adverse

impact.

25

Odds ratios can also be used,

which refer to the ratio of the odds of

one group being selected compared to

the odds of another group. Odds ratio

takes into account both the selection

and rejection rates of the disfavored

group and can bolster the statistically

significant findings.

26

In the employment selection context,

OFCCP will ordinarily use the impact

ratio as its measure of practical

significance, which is the ratio of

employee selection rates between the

disfavored and favored group. The

impact ratio is a common measurement

of practical significance that has been

used since the 1970s.

27

This statistical

measure has the advantages of

simplicity and clarity.

OFCCP utilizes a sliding scale to

assess whether the impact ratio in a

particular matter indicates that a

disparity is practically significant.

OFCCP’s determination to issue a pre-

enforcement notice depends on the

strength of the relevant qualitative and

quantitative evidence, as well as

whether the disparity is practically

significant. OFCCP uses the following

thresholds to assess practical

significance in the selection context to

determine whether to issue pre-

enforcement notices:

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28

See 41 CFR 60–3.4; Uniform Guidelines on

Employee Selection Procedures Section 4D (‘‘A

selection rate for any race, sex, or ethnic group

which is less than four-fifths (

4

⁄

5

) (or eighty percent)

of the rate for the group with the highest rate will

generally be regarded by the Federal enforcement

agencies as evidence of adverse impact, while a

greater than four-fifths rate will generally not be

regarded by Federal enforcement agencies as

evidence of adverse impact.’’).

29

For example, if the selection rate of a favored

group is 10%, OFCCP will generally not find

practical significance unless the selection rate for

the disfavored group is 7% or less, even though the

impact ratio would be 0.7 (or less). See, e.g.,

Oswald, Dunleavy, & Shaw, ‘‘Measuring Practical

Significance in Adverse Impact Analysis,’’ supra

note 23, at 104 (‘‘The spirit of the [4/5ths] rule [i.e.

that a selection disparity is not practically

significant unless the impact ratio is less than 0.8]

can . . . be violated when very small disparities do

not satisfy the 4/5ths rule [and thus would be found

practically significant]. For example, hiring 3.5% of

disadvantaged applicants versus 5% of advantaged

applicants is a mere 1.5% difference in selection

rates, but is an impact ratio of [0.7] . . . .’’).

30

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 rule. For complaint resolution procedures,

see FCCM Chapter 6 and 41 CFR 60–1.24, 60–

300.61, and 60–741.61. The FCCM is available at

www.dol.gov/agencies/ofccp/manual/fccm.

31

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. The FY 2020 scheduling list is comprised

of 2,250 establishments. A description of OFCCP’s

current scheduling methodology for supply and

service contractors is available on the agency’s

website at www.dol.gov/sites/dolgov/files/ofccp/

scheduling/files/SL20R1_SupplyService_

Methodology_FinalFEDQA508c.pdf. The 2020

scheduling list for construction consists of 200

establishments. A description of OFCCP’s current

scheduling methodology for construction

contractors is available at www.dol.gov/sites/

dolgov/files/ofccp/scheduling/files/SL20R1_

Construction_Methodology_FinalFEDQA508c.pdf.

32

See 41 CFR 60–1.20(a), 60–300.60(a), and 60–

741.60(a). The resolution procedures described in

this rule do not apply to compliance checks.

Impact Ratio of Selection Rates

> 0.9 Very Unlikely

0.8–0.9 Unlikely

0.7–0.8 Likely

< 0.7 Very Likely

An impact ratio of 0.8 is a frequently

cited benchmark in the equal

employment opportunity literature for

determining whether the impact ratio of

a selection disparity is practically

significant, as described above, which is

why OFCCP adopts it as the hinge point

between a likely and unlikely finding of

practical significance for selection

decisions.

28

For impact ratios below 0.9,

OFCCP will apply its discretion in

determining whether to issue a pre-

enforcement notice according to the

strength or weakness of the evidence in

particular cases, but the agency will

require strong additional supporting

evidence when the impact ratio is

between 0.8 and 0.9. In addition,

because the impact ratio is a less

effective statistical measure when

selection rates are very small, OFCCP

utilizes a 3% disparity between the

selection rates of disfavored and favored

groups as a general minimum threshold

for a finding of practical significance,

although there may be situations with

very low selection rates, such as a 4%

selection rate for the favored group and

a 1% selection rate for the disfavored

group, where the odds ratio and other

evidence would still support a finding

of practical significance.

29

In the compensation context, OFCCP’s

standard measure of practical

significance will be the percentage

difference in compensation, which

refers to the percentage difference

between the mean compensation of

employees within the disfavored group

in proportion to the mean compensation

of employees within the favored group.

As with selection rates, OFCCP’s

determination of whether to issue a pre-

enforcement notice depends on the

practical significance of the

compensation disparity in combination

with the strength of the relevant

qualitative and quantitative evidence.

OFCCP will use the following

thresholds to assess practical

significance in the compensation

context:

Size of Compensation Disparity

< 1% Very Unlikely

1–2% Unlikely

2–5% Likely

> 5% Very Likely

OFCCP has used a 1% compensation

disparity as a threshold in some

previous interactions with contractors,

such that the agency did not proceed

with issuing pre-enforcement notices if

compensation disparities were below

that level. This guidance formalizes that

threshold as a clear benchmark for the

issuance of pre-enforcement notices. For

compensation disparities above 1%, the

agency has discretion in determining

whether to issue a pre-enforcement

notice according to the facts and

circumstances of individual cases, but

OFCCP will be unlikely to determine

that a compensation disparity below 2%

is practically significant unless there is

additional strong supporting evidence.

When compensation disparities are

greater than 5%, OFCCP will nearly

always find that a compensation

disparity is practically significant if the

agency also determines that its

statistical model is sound. In rare cases,

OFCCP may also apply more rigorous

practical significance tests to measure

the import of compensation disparities,

such as the standardized difference

between disfavored and favored groups

or the Type II squared semi-partial

correlation, which help ensure the

agency is applying its practical

significance standard relatively

uniformly across administrative cases.

OFCCP will use the measures above to

make an informed decision on the

potential strength of the case and

whether, in light of the quantitative and

qualitative evidence, the size of an

observed disparity justifies moving

forward with enforcement procedures.

B. Resolution Procedures

This final rule codifies many of

OFCCP’s currently used procedures

with adjustments to provide greater

clarity, certainty, and transparency to

contractors, to ensure that OFCCP

appropriately allocates its resources by

proceeding with cases that have solid

evidentiary support and meaningful

impact, to establish guidelines and

guardrails on the agency’s issuance of

pre-enforcement notices, and to

encourage appropriate early resolution

with contractors.

OFCCP’s Existing Compliance

Evaluation and Resolution Procedures

OFCCP determines whether a Federal

contractor has met the legal obligations

of E.O. 11246, section 503, VEVRAA,

and their implementing regulations

during a compliance evaluation.

30

The

agency uses a neutral selection process

to schedule contractors for compliance

evaluations.

31

A compliance evaluation

consists of one or any combination of

the following investigative procedures,

as set forth in OFCCP’s implementing

regulations: A compliance review, an

offsite review of records, a compliance

check, or a focused review.

32

With the

exception of the compliance check, the

purpose of which is to determine

whether the contractor maintains

required records and to provide related

compliance assistance, the other types

of compliance evaluations that OFCCP

undertakes may result in the agency

making a preliminary determination,

through its collection and analysis of

information provided by the contractor,

that the information reviewed indicates

the contractor has discriminated against

members of a protected class in hiring,

promotion, termination, compensation,

or other employment practices. Because

OFCCP evaluates all of a contractor

establishment’s employment processes,

the agency has focused on identifying

and resolving systemic discrimination.

Findings often are supported by

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OFCCP prioritizes the early and efficient

resolution of potential discrimination. See Directive

2019–02, ‘‘Early Resolution Procedures’’ (Nov. 30,

2018), www.dol.gov/agencies/ofccp/directives/

2019–02. The rule does not codify OFCCP’s early

resolution procedures themselves. It does, however,

provide a framework for OFCCP and contractors to

explore expedited conciliation options, such as the

early resolution procedures set forth in Directive

2019–02.

34

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. Directive 2018–01 is

available at www.dol.gov/agencies/ofccp/directives/

2018–01. Prior to the directive, use of PDNs was

discretionary and reserved for systemic

discrimination findings. See FCCM, Chapter 8

(detailing the procedures that OFCCP follows for

issuing PDNs).

35

See FCCM, Chapter 8; see also FCCM, Key

Terms and Phrases.

36

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). OFCCP strongly disfavors

this route.

37

See Directive 2020–02, ‘‘Efficiency in

Compliance Evaluations’’ (Apr. 17, 2020),

www.dol.gov/agencies/ofccp/directives/2020-02;

Directive 2020–03, ‘‘Pre-Referral Mediation

Program’’ (Apr. 17, 2020), www.dol.gov/agencies/

ofccp/directives/2020-03.

38

FCCM, Chapter 8F00; FCCM, Chapter 8H00.

For example, OFCCP may issue an NOV and enter

into a conciliation agreement for failure to maintain

records in accordance with 41 CFR 60–1.12, 60–

300.80, and 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.

39

See FCCM, Chapter 8D01 (explaining that

OFCCP issues the SCN without first issuing an 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).

40

See Directive 2019–02, ‘‘Early Resolution

Procedures’’ (Nov. 30, 2018), www.dol.gov/ofccp/

regs/compliance/directives/dirindex.htm.

statistical evidence, particularly in

compliance reviews.

Preliminary findings of

discrimination in a compliance

evaluation trigger OFCCP’s resolution

procedures. At the beginning of this

process, the agency discusses its

preliminary findings with the

contractor. This discussion also serves

to familiarize the contractor with

OFCCP’s resolution procedures,

including the agency’s current options

for early resolution.

33

If the preliminary

findings are not resolved at that stage,

OFCCP formalizes the preliminary

findings in a PDN, a letter that is sent

to the contractor following review and

approval by the Director or acting

agency head.

34

To determine whether

the evidence of discrimination is

sufficient to warrant a PDN, OFCCP

considers whether a disparity identified

during the compliance evaluation is

practically significant and whether

quantitative evidence and qualitative

evidence supports the preliminary

finding. OFCCP will always seek out

qualitative evidence during compliance

evaluations, regardless of the strength of

the quantitative evidence. As discussed

more fully below, there may be factors

applicable in a particular case that

explain why OFCCP could not obtain

either quantitative or qualitative

evidence during its evaluation.

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 following approval by the Director

or acting agency head to notify the

contractor that the agency found

discrimination violations of one or more

of the laws it enforces. Under this final

rule, the PDN will explain the basis for

the agency’s preliminary findings, i.e.,

by identifying the statistically

significant disparity or other

quantitative evidence, describing the

practical significance of that disparity,

and describing how the relevant

qualitative evidence supports the

particular theory of discrimination.

Upon request, OFCCP will also provide

contractors with information sufficient

to recreate the agency’s quantitative

findings and in some cases may be able

to do so even before the PDN has been

issued. Contractors are invited to

respond to the PDN, and the agency

must consider the response in

determining whether to issue an NOV.

The NOV lists the corrective actions

that are required to resolve those

violations, and invites conciliation.

OFCCP responds in the NOV (or in a

simultaneously provided reply) to any

new arguments or information raised by

the contractor in its PDN response.

35

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.

36

A conciliation

agreement is a binding written

agreement between a contractor and

OFCCP that details specific contractor

commitments, actions, or both that it

will undertake in order to resolve the

violations set forth in the agreement.

Conciliation agreements were codified

in OFCCP’s regulations in 1979. OFCCP

is committed to active engagement with

the contractor to conciliate a matter, and

has issued directives detailing how the

agency will prioritize the efficient

resolution of violations it finds in its

compliance evaluations.

37

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.

Material violations that are not

discriminatory in nature also trigger

OFCCP’s resolution procedures for

compliance evaluations. Rather than

initiating resolution with a PDN for

violations that do not involve

discrimination, OFCCP generally begins

the process with an NOV before

proceeding to a conciliation

agreement,

38

or the SCN as a last resort.

For cases in which the contractor either

denies access or otherwise fails to

submit information requested in

OFCCP’s OMB-approved scheduling

letters, OFCCP issues the SCN without

first issuing an NOV for material

violations that are non-discriminatory in

nature; as discussed more fully later in

this preamble, this practice will

continue under this final rule.

39

Recently, OFCCP has promoted the

efficient resolution of material

violations for multi-establishment

Federal contractors with early

resolution procedures laid out in an

agency directive.

40

These procedures

allow OFCCP and contractors to work

together to resolve violations or

indications of violations without

resorting to formal process, including

litigation before an administrative law

judge.

In addition, OFCCP has recently

prioritized alternative dispute

resolution to help resolve cases at the

conciliation or pre-litigation phase,

which ensures prompt remedies and

avoids the delay, expense, and

uncertainty of litigation. OFCCP has

established an Ombuds Service that can

help facilitate settlement discussions at

the conciliation stage, as well as a Pre-

Referral Mediation Program that

provides for a full pre-litigation

administrative mediation following an

SCN and prior to referral to the Solicitor

of Labor. Although the rule text does not

directly address the Ombuds Service or

Pre-Referral Mediation Program, these

programs are compatible and consistent

with the goals and procedures

established by the rule, and the agency

intends to continue providing both

programs in conjunction with these

procedures.

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The Department did not propose to codify

OFCCP’s early resolution procedures per se. Rather,

the NPRM acknowledged the early resolution

option, which is governed by agency directives.

42

Here and elsewhere in this final rule, references

to evidence sufficient to support a preliminary

finding or finding of disparate treatment or

disparate impact refer to the amount of evidence

OFCCP requires to continue forward with its

review. Whether the evidence is sufficient to pursue

formal enforcement proceedings is a separate and

later determination made by the Solicitor of Labor.

43

One commenter recommended that OFCCP

make PDNs mandatory rather than discretionary in

cases involving discrimination. OFCCP made this

policy change in 2018 with Directive 2018–01, the

stated purpose of which is to ‘‘establish the

consistent use of PDNs for discrimination cases,

both individual and systemic.’’ Directive 2018–01,

‘‘Use of Predetermination Notices (PDN)’’ (Feb. 27,

2018), www.dol.gov/agencies/ofccp/directives/2018-

01. Since then, the change has been embedded in

the FCCM and now this final rule.

44

See supra note 16. It is important to remember

that a rejection of the null hypothesis due to the

magnitude of a statistical disparity does not by itself

mean that an alternative hypothesis—for example,

that a contractor discriminated against its

applicants or employees—is true. Instead, other

assumptions underlying the null hypothesis (see

supra note 17) could be flawed, and/or there may

be alternative hypotheses that explain the data. See,

e.g., Kaye & Freedman, supra note 18, at 257; see

also Coleman v. Quaker Oats Co., 232 F.3d 1271,

1283 (9th Cir. 2000) (finding a disparity with a p-

value of ‘‘3 in 100 billion’’ did not demonstrate age

discrimination because the defendant ‘‘never

contend[ed] that the disparity occurred by chance,

just that it did not occur for discriminatory reasons.

When other pertinent variables were factored in, the

statistical disparity diminished and finally

disappeared’’). Nevertheless, if there is a plausible

alternative explanation, the factual basis for such

explanation should be identified by the contractor

during its audit so that the alternative may be

included in OFCCP’s model.

45

Of course, in cases where there have been

findings of discrimination, quantitative evidence

may also demonstrate the harm suffered by the

affected class.

Resolution Procedures Provisions of the

Final Rule

The Department proposed in the

NPRM to codify many of OFCCP’s

resolution procedures in its E.O. 11246,

section 503, and VEVRAA regulations at

41 CFR parts 60–1, 60–300, and 60–741,

respectively. The proposed regulatory

text was the same in each part, except

that one subparagraph of the section 503

regulations, at 41 CFR 60–741.62(b),

retains an existing provision concerning

remedial benchmarks specific to the

section 503 regulatory scheme that is

not present in the other parts.

Specifically, the Department proposed

to codify the procedures that OFCCP

follows when determining whether to

issue a PDN or NOV for discrimination

and other material violations. As a

matter of enforcement discretion and

prioritization of resources, the

Department proposed issuing a PDN

only after considering statistical

evidence, practical significance, and

nonstatistical evidence. Additionally,

under the proposed rule, OFCCP would

have only issued a PDN without

nonstatistical evidence when OFCCP’s

statistical evidence indicates a

confidence level of 99% or higher,

which equates to three or more standard

deviations or a p value of 0.01 or less.

Furthermore, the Department proposed

to codify the availability of an expedited

conciliation option.

41

The Department has decided to

finalize the early conciliation option

and the codification of its PDN and

NOV procedures with changes from the

proposed rule, as noted above. To

repeat, the significant changes are that

the final rule clarifies that issuance of

NOVs is governed by the same

evidentiary standards as issuance of

PDNs; clarifies the standards OFCCP

uses when determining whether to issue

a pre-enforcement notice under a

disparate treatment and/or disparate

impact theory of discrimination;

requires OFCCP to provide qualitative

evidence supporting a finding of

discriminatory intent to proceed under

a disparate treatment theory, subject to

certain enumerated exceptions; requires

OFCCP to identify the policy or practice

of the contractor causing the adverse

impact with factual support

demonstrating why such policy or

practice has a discriminatory effect to

issue a PDN or NOV under a disparate

impact theory; explains that OFCCP

must explain in detail the basis for its

finding (including, if applicable and as

described further below, the reasons for

any lack of qualitative evidence) and

obtain the Director’s (or acting agency

head’s) approval to issue a PDN or NOV;

and provides that, upon the contractor’s

request, OFCCP will provide the model

and variables used in its statistical

analysis and an explanation for any

variable that was excluded from the

statistical analysis.

In the rest of this section, the

Department describes the final rule’s

resolution procedures, including the

changes from the NPRM, and responds

to relevant comments. The Department

refers to the section and paragraph

numbers in 41 CFR 60–1.33, which

concerns E.O. 11246. As described

below, the Department adopts the same

provisions in the regulations for

VEVRAA (41 CFR part 60–300) and

section 503 (41 CFR part 60–741).

1. Predetermination Notice

Section 60–1.33(a) of the final rule

allows OFCCP to issue a PDN if a

compliance evaluation indicates

evidence sufficient to support a

preliminary finding of disparate

treatment or disparate impact,

42

subject

to certain parameters, which are

discussed below.

43

Multiple

commenters sought clarity on what

thresholds OFCCP would use in

evaluating evidence supporting an

allegation of disparate impact

discrimination. The final rule provides

clarity by providing distinct provisions

for disparate treatment and disparate

impact claims. It also requires the

OFCCP Director or acting agency head

to approve issuance of a PDN.

(a) Disparate Treatment Theory of

Liability

Subject to certain exceptions

discussed below, paragraph (a)(1)

provides that OFCCP may issue a PDN

under a disparate treatment theory of

liability if the agency (i) provides

quantitative evidence; (ii) demonstrates

that the unexplained disparity is

practically significant; and (iii) provides

qualitative evidence that, in

combination with other evidence,

supports both a finding of

discriminatory intent by the contractor

and a finding that the contractor’s

discriminatory intent caused the

disparate treatment.

The NPRM would have required

nonstatistical evidence if OFCCP’s

statistical evidence indicated a disparity

of less than three standard deviations

and, conversely, would have allowed

claims to proceed without nonstatistical

evidence if OFCCP’s statistical evidence

indicated a disparity of three standard

deviations or greater. The Department

has decided to require qualitative

evidence in all disparate treatment cases

as the general default. Qualitative

evidence is very important to support a

preliminary finding of intentional

discrimination, which is a fundamental

element of disparate treatment claims.

Indeed, in some instances qualitative

evidence is direct, powerful, and on its

own can prove disparate treatment.

Quantitative evidence of statistical

significance alone, by contrast, can only

provide an inference of intent because at

base it is able to prove only that, if the

null hypothesis is correct, then the

observed outcome is highly unlikely to

have occurred by chance. It thus

remains possible that the observed

statistical disparities were the result of

something other than unlawful

discrimination.

44

Nevertheless,

statistical evidence can be important

evidence because it assesses actions

taken by the company over a course of

time and across multiple employees,

which may be indicative of

discriminatory intent.

45

The final rule

thus clarifies that there is no set

quantum of qualitative evidence; rather,

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See supra note 42. This is how individual

discrimination cases are traditionally proven. See

McDonnell Douglas Corp. v. Green, 411 U.S. 792,

802 (1973) (describing traditional burden-shifting

analysis under Title VII); see also Desert Palace Inc.

v. Costa, 539 U.S. 90 (2003) (describing the burden

of proof in mixed-motive cases under Title VII).

47

Cf. Int’l Bhd. of Teamsters v. United States, 431

U.S. 324, 342 n.23 (1977) (‘‘[The] fine tuning of the

statistics could not have obscured the glaring

absence of minority line drivers. As the Court of

Appeals remarked, the company’s inability to rebut

the inference of discrimination came not from a

misuse of statistics but from ‘the inexorable zero.’’’)

(citing United States v. T.I.M.E.-D.C. Inc., 517 F.2d

299, 315 (5th Cir. 1975)); Valentino v. U.S. Postal

Serv., 674 F.2d 56, 72–73 (D.C. Cir. 1982) (‘‘small

numbers are not per se useless, especially if the

disparity shown is egregious. The ‘inexorable zero’

can raise an inference of discrimination even if the

subgroup analyzed is relatively small.’’); cf. also

Hazelwood Sch. Dist., 433 U.S. at 307–08 (‘‘Where

gross statistical disparities can be shown, they alone

may in a proper case constitute prima facie proof

of a pattern or practice of discrimination.’’) (citing

Int’l Bhd. of Teamsters, 431 U.S. at 339)); Analogic

Corp., 2017–OFC–00001, at 39 (‘‘Courts have held

evidence of gross statistical disparity alone may be

sufficient to establish a pattern and practice case of

intentional discrimination.’’).

48

See T.I.M.E.-D.C., Inc., 517 F.2d at 315 n.29,

vacated on other grounds, 431 U.S. 324 (1977)

(vacating judgment with respect to individual relief

but otherwise upholding the 5th Circuit’s finding

regarding the ‘‘inexorable zero’’ standard).

49

Supra note 47.

50

See 41 CFR 60–1.12(e), 60–1.43, 60–3.15, 60–

300.80–81, and 60–741.80–81.

the required strength of the qualitative

evidence depends on the strength of the

quantitative evidence and the extent of

the practical significance.

As discussed above, the Department’s

definition of quantitative evidence

includes nonstatistical, but quantitative,

analysis such as cohort analyses.

Subject to the enumerated exceptions in

the final rule, qualitative evidence must

also be present for OFCCP to issue a pre-

enforcement notice in cases where

OFCCP is relying on nonstatistical

quantitative evidence for the same

reason that qualitative evidence is

required where OFCCP is relying on

statistical evidence. Nonstatistical

quantitative comparisons can also be

used by OFCCP to support other

statistical evidence that shows

statistically significant disparities;

however, OFCCP must also have

qualitative evidence to proceed with the

issuance of pre-enforcement notices in

such cases unless one of the final rule’s

enumerated exceptions applies.

Paragraph (a)(2) provides three

exceptions to paragraph (a)(1)’s general

criteria that OFCCP must satisfy when it

alleges findings or preliminary findings

of disparate treatment discrimination.

The three exceptions encompass

situations where the Department

believes it is a worthwhile use of

OFCCP’s resources to proceed with a

case despite not satisfying all three

requirements of paragraph (a)(1). For the

reasons stated above relating to the

importance of qualitative evidence, the

Department has not adopted the

NPRM’s proposal to allow PDNs to be

issued on the basis of statistical

evidence alone when the disparity

shown was three standard deviations or

more. However, as discussed more fully

below, one of the exceptions allows

OFCCP to proceed with a case if the

agency finds an extraordinarily

compelling disparity. In that situation,

the reasons for requiring qualitative

evidence have less force, and OFCCP

deems it appropriate to continue

without qualitative evidence.

Paragraph (a)(2)(i) ensures that

OFCCP can move forward with issuing

a PDN when the qualitative evidence by

itself is sufficient to support a

preliminary finding of disparate

treatment, regardless of quantitative

evidence.

46

For example, during a

compliance review or focused review

OFCCP could uncover direct evidence

that a contractor took adverse

employment action against a protected

group of employees, or circumstantial

evidence that, e.g., members of a

protected group with superior

qualifications were denied selections

that were awarded to similarly situated

members of another group with inferior

qualifications. If this evidence were

sufficiently strong, OFCCP should be

able to move forward with a PDN

without findings of statistical and

practical significance, and paragraph

(a)(2)(i) makes sure the agency has that

flexibility.

Paragraph (a)(2)(ii) is designed to

capture the ‘‘inexorable zero’’ concept

from Title VII case law and other rare

situations where the numerical

disparities are so overwhelming that, in

OFCCP’s judgment, additional evidence

of discriminatory intent is unnecessary

to support a preliminary finding.

47

In

the context of an OFCCP compliance

evaluation, this could occur, e.g., when

the disparity in selections for a given job

between a favored and disfavored group

is so extraordinarily compelling that by

itself the evidence strongly supports a

preliminary finding of disparate

treatment. For example, a court in a

famous Title VII case found the

‘‘inexorable zero’’ standard satisfied by

a trucking company that had hired 57

white truckers in Atlanta but no black

truckers—even though at the time

Atlanta was 22% African-American—

and in Los Angeles had hired 372 white

truckers but only two black truckers.

48

The Department believes this safety

valve for overwhelming quantitative

evidence is appropriate for OFCCP’s

enforcement strategy. Nevertheless, the

Department declines to lift the

requirement for qualitative evidence in

other cases. The Department

acknowledges that the requirement for

qualitative evidence in all other cases is

neither compelled nor prohibited by

Title VII case law. This is by design and

central to the purpose of this rule. The

Department is sensitive to past

criticisms that OFCCP over-relied on

statistical modeling or used models that

did not properly account for contractors’

legitimate, nondiscriminatory

employment practices. The Department

also wants to direct OFCCP’s resources

to the most compelling cases and those

most likely to have a practical impact.

Requiring qualitative evidence responds

to those criticisms and better directs

OFCCP’s efforts. This requirement helps

ensure that OFCCP’s cases are well-

grounded in fact, that its presentations

are likely to be persuasive in resolution

efforts, that its referrals for litigation are

credible, and that it is using its

resources effectively. This is also

consistent with the view of commenters

who argued that solely relying on

statistical evidence is rarely appropriate

in disparate treatment cases (where

discriminatory intent must be

established as the cause of the disparate

treatment), and thus should be reserved

for only egregious cases.

49

As stated

previously, OFCCP will seek to develop

supporting qualitative evidence in all of

its cases, including those with gross

numerical or statistical disparities. In

those rare circumstances where OFCCP

issues a PDN based on evidence of

extraordinary numerical or statistical

disparities and no supporting

qualitative evidence, OFCCP will

provide an explanation for the lack of

qualitative evidence and justification for

the agency’s decision to proceed with

resolution procedures in the PDN,

allowing the contractor an opportunity

to respond.

Finally, paragraph (a)(2)(iii) is an

exception clarifying that OFCCP may

issue a PDN in the absence of qualitative

evidence if the contractor has prevented

OFCCP from compiling qualitative

evidence. For example, OFCCP may

proceed without qualitative evidence if

the contractor has prevented OFCCP

from interviewing employees who may

have knowledge of facts relevant to a

preliminary indicator of discrimination

during compliance evaluations, or has

destroyed or failed to produce personnel

or employment records that similarly

may have contained information

relevant to a preliminary indicator of

discrimination.

50

The Department

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42 U.S.C. 2000e(k)(1). See generally Ricci v.

DeStefano, 557 U.S. 557, 577–78 (2009).

52

Consistent with note42, supra, the final rule

does not require OFCCP, at the PDN stage, to

provide evidence that would rebut the contractor’s

burden of demonstrating that the selection

procedure in question has been properly validated.

This is in part because, under OFCCP’s regulations,

a contractor is not required to validate selection

procedures until it is aware of an adverse impact,

see 41 CFR 60–3.4(C), which it may not be until

OFCCP issues the PDN.

53

Texas Dep’t of Hous. & Cmty. Affairs v.

Inclusive Communities Project, Inc., 576 U.S. 519,

543 (2015) (quoting Griggs v. Duke Power Co., 401

U.S. 424, 431 (1971)); see also id. at 542 (‘‘[A]

disparate-impact claim that relies on a statistical

disparity must fail if the plaintiff cannot point to

a defendant’s policy or policies causing that

disparity. A robust causality requirement ensures

that ‘[r]acial imbalance . . . does not, without more,

establish a prima facie case of disparate impact’ and

thus protects defendants from being held liable for

racial disparities they did not create.’’) (quoting

Wards Cove Packing Co. v. Atonio, 490 U.S. 642,

653 (1989)). Although Inclusive Communities

involved a disparate impact claim under the federal

Fair Housing Act, courts have applied the case in

the Title VII context as well. See, e.g., Davis v.

District of Columbia, 925 F.3d 1240, 1251 (D.C. Cir.

2019); Gagliano v. Mabus, No. 15–cv–2299, 2019

WL 3306293, at *2 (S.D. Cal. July 23, 2019); see also

Inclusive Communities, 576 U.S. at 539–40

(describing the analysis required under the FHA as

analogous to the disparate impact standard under

Title VII).

54

Of course, quantitative evidence also

demonstrates that a disparity exists.

55

41 CFR 60–3.3A; see also Analogic Corp.,

2017–OFC–00001, at 31 (‘‘In order to establish a

disparate impact violation, OFCCP must

demonstrate Analogic ‘uses a particular

employment practice that causes a disparate impact

on the basis of [a protected characteristic.]’’) (citing

42 U.S.C. 2000e–2(k)(1)(A)(i); Wal-Mart Stores Inc.

v. Dukes, 564 U.S. 338 (2011); Wards Cove

Packaging Co., 490 U.S. at 657; Connecticut v. Teal,

457 U.S. 440, 446 (1982); Robinson v. Metro-North

Commuter R.R. Co., 267 F.3d 147, 160 (2d Cir.

2001)); see also Griggs, 401 U.S. at 431 (‘‘[Title VII]

proscribes not only overt discrimination but also

practices that are fair in form, but discriminatory in

operation. The touchstone is business necessity. If

an employment practice which operates to exclude

[African Americans] cannot be shown to be related

to job performance, the practice is prohibited.’’); see

also TNT Crust, 2004–OFC–3, at 35 (finding

employer discriminated against Hispanic applicants

by requiring that laborers possess basic English

skills, which resulted in an adverse impact and was

not demonstrably related to legitimate business

necessities) (citing Griggs, 401 U.S. at 431–32)).

56

42 U.S.C. 2000e–(k)(1)(B)(i); see also Analogic

Corp., 2017–OFC–00001, at 33 (‘‘Courts have

determined the Title VII exception to the general

rule requiring a plaintiff to identify a specific

employment practice caused the disparity is

applicable only when the plaintiff has

demonstrated the elements of the decision-making

process cannot be separated for analysis.’’) (citing

Davis v. Cintas Corp., 717 F.3d 476, 496 (6th Cir.

2013); Bennett v. Nucor Corp., 656 F.3d 892, 817–

18 (8th Cir. 2011)); Lufkin Indus., Inc., 519 F.3d at

278 (collecting cases in which courts found

employment practices were ‘‘not capable of

separation for analysis’’).

57

Chapter 8E01 of the FCCM states, ‘‘[The PDN]

description will include identification of the

discrimination victim(s), e.g., the affected class or

individual(s); the employment action(s) giving rise

to the preliminary findings; and the basis for the

liability determination (e.g., disparate treatment in

the selection of minority technicians). The PDN

should also include facts and the results of analyses

that support the preliminary determination and

recommended remedies. Typically, the PDN

includes the magnitude of the impact in terms of

shortfalls or pay disparities and the measure of

statistical certainty (e.g., standard deviation).’’ See

also FCCM, Letter L–35. OFCCP also provides

guidance on what to communicate to contractors in

Directive 2018–08, ‘‘Transparency in OFCCP

Compliance Activities’’ (Sept. 2018), www.dol.gov/

agencies/ofccp/directives/2018-08, and Directive

2018–05, see supra note 21.

believes this exception is necessary to

avoid creating an incentive for

contractors not to comply with OFCCP

compliance evaluations.

(b) Disparate Impact Theory of Liability

Paragraph (a)(3) sets out OFCCP’s

evidentiary standard for findings or

preliminary findings of discrimination

premised on a disparate impact theory.

Title VII’s statutory text, as well as

interpretive case law, requires not only

that the plaintiff must demonstrate the

existence of an adverse impact on a

protected group, but that it must

identify the particular employment

practice causing that impact, unless the

elements of the employer’s decision-

making process cannot be separated for

analysis.

51

For findings of

discrimination premised on a disparate

impact theory, paragraph (a)(3) therefore

requires OFCCP to first demonstrate that

a disparity has both sufficient

quantitative evidence and is practically

significant (paragraphs (a)(3)(i) and (ii)),

and second to identify the policy or

practice of the contractor causing the

disparate impact (paragraph

(a)(3)(iii)).

52

As the Supreme Court has

said, disparate-impact liability is

concerned not with statistical

imbalances alone but on the eradication

of policies that form ‘‘artificial,

arbitrary, and unnecessary barriers’’ to

disfavored groups.

53

OFCCP received a few comments

seeking clarity on whether the

evidentiary thresholds for issuance of a

PDN apply to disparate impact findings

or just disparate treatment findings and

stating that statistical evidence is only

relevant to disparate treatment because

the NPRM suggested that statistical

evidence can support an inference of

discriminatory intent. The quantitative

evidence and practical significance

requirements apply to findings and

preliminary findings of disparate

impact. The Department here requires

the same level of quantitative evidence

as it does for disparate treatment

claims—in both kinds of cases, typically

a two-standard-deviation showing of

disparate results after accounting for

relevant variables to establish a

statistically significant disparity. OFCCP

also requires practical significance for

the same reasons it requires it for

disparate treatment claims: to prioritize

agency resources, to be especially

confident in its statistical findings, and

to ensure it is bringing compelling

cases.

54

For disparate impact cases, the PDN

must also specifically identify the

policy or practice that is causing an

adverse impact,

55

and provide factual

support to explain how the particular

policy or practice is causing the

discriminatory effect. This is typically

accomplished using statistical evidence

to demonstrate that the identified policy

or practice specifically is causing the

disparity. However, consistent with the

Title VII statute and relevant case law,

if the elements of the decision-making

process cannot be separated for analysis,

OFCCP may issue the PDN without

identifying the exact step causing

disparate impact.

56

This could include,

for instance, if a contractor has

destroyed or failed to maintain records

of its employment policies or processes

preventing OFCCP from analyzing

specific steps of the process. OFCCP

expects to invoke this exception rarely.

(c) Disclosure to Contractors

Multiple comments asked OFCCP to

provide more descriptive detail on the

evidence that supports preliminary

findings in the PDN, to include the type

of employment action resulting in a

preliminary finding, and to provide

enough information so the contractor

can investigate the preliminary findings

and respond. The agency has taken

significant steps in recent years to be

more transparent and believes that the

level of specificity that contractors seek

is already required by the FCCM and

recent directives.

57

To provide greater

certainty, the agency recommits

specifically to be transparent in

disclosing the quantitative evidence, the

determination of potential significance,

and a summary of the relevant

qualitative evidence OFCCP has

accumulated, where applicable.

Paragraph (a)(4) requires that the PDN

disclose the quantitative and qualitative

evidence relied upon by OFCCP in

sufficient detail to allow contractors to

investigate allegations and meaningfully

respond. The PDN also must contain an

explanation for the agency’s finding of

practical significance. However, OFCCP

may withhold personal identifying

information from the description of the

qualitative evidence if the information

is protected from disclosure under

recognized governmental privileges, or

if providing that information would

otherwise violate confidentiality or

privacy protections afforded by law. As

stated previously, when the exception

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FCCM, Chapter 8F00; FCCM, Chapter 8H00.

For example, OFCCP may issue an NOV and enter

into a conciliation agreement for failure to maintain

records in accordance with 41 CFR 60–1.12, 60–

300.80, and 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.

59

In some instances, OFCCP issues the SCN

without first issuing an NOV for material violations

that are non-discriminatory in nature. See FCCM,

Chapter 8D01 (explaining that OFCCP issues the

SCN without first issuing an 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).

60

See note 42, supra.

61

41 CFR 60–1.28, 60–300.64, and 60–741.64.

in paragraph (a)(2)(ii) applies, OFCCP

will disclose why, in the absence of

qualitative evidence, the agency is

issuing the PDN based on evidence of an

extraordinarily compelling disparity

alone. In addition, upon the contractor’s

request, OFCCP must also provide the

model and variables used in its

statistical analysis and an explanation

for why any variable proposed by the

contractor was excluded from the

statistical analysis.

One commenter sought clarity on how

OFCCP weighs evidence provided by

the contractor to rebut preliminary

findings. However, further guidance on

the weighing of that kind of evidence is

not well-suited to regulatory text, as

how OFCCP evaluates a contractor’s

response depends on the particular facts

under review in each case. That same

commenter expressed concern regarding

the amount of qualitative evidence

required before issuing a PDN and asked

OFCCP to include language in the final

rule to quantify how much

nonstatistical evidence is needed for

OFCCP to make a preliminary finding.

As discussed previously, the amount of

evidence available—as well as its

quality, credibility, and content, which

may range from innocuous to very

concerning—will depend on the facts of

each compliance evaluation, and it is

impracticable for OFCCP to prescribe a

set volume or specific characteristics of

qualitative evidence that would be

sufficient in every conceivable

evaluation. The evidence OFCCP

examines and chooses to reject or rely

upon will be based on the overall facts

and circumstances of each particular

case. The PDN will provide sufficient

information to contractors to be able to

understand OFCCP’s finding and to

meaningfully respond.

Similarly, the Department received

comments seeking a definition for

‘‘material’’ violation and clarity on what

the agency considers ‘‘preliminary

findings.’’ The Department did not

propose these definitions in the NPRM

and declines to add definitions for these

terms to the final rule. Definitions for

the terms are not needed. The final rule

provides significant clarity regarding,

and guardrails for issuing, pre-

enforcement notices. To the extent

commenters were concerned with

material but non-discriminatory

violations, (e.g., recordkeeping, failure

to implement audit and reporting

systems), those also trigger OFCCP’s

resolution procedures for compliance

evaluations.

58

Rather than sending a

PDN for potential violations that do not

involve discrimination, OFCCP

generally sends an NOV before

proceeding to a conciliation agreement,

or the SCN as a last resort.

59

This final

rule codifies use of the NOV for all

material violations, with the exception

of cases in which the contractor either

denies access or otherwise fails to

submit information requested in

OFCCP’s OMB-approved scheduling

letters. For those cases, OFCCP will

continue its current practice of

proceeding directly to issuing an SCN to

expedite resolution of those issues.

(d) Response Deadline

In response to several comments,

paragraph (a)(5) of the final rule

increases the time for contractors to

respond to a PDN from 15 to 30 days

with the possibility of an extension.

OFCCP believes that with all of the

information being provided to a

contractor in the PDN, including the

summary of evidence, and the option to

request additional information about the

statistical analysis, that a contractor will

likely need 30 days to respond, with the

possibility of an extension for good

cause shown.

2. Notice of Violation

Section 60–1.33(b) of the final rule

governs NOVs. The Department did not

receive any comments solely concerning

the NOV, with some commenters

generally addressing both the PDN and

NOV thresholds. Nevertheless, the

Department has decided to revise § 60–

1.33(b) to make it clear that NOVs

alleging discrimination findings are

subject to the same requirements as

PDNs, and that OFCCP will fully

consider the arguments raised and

information provided by contractors in

response to PDNs.

Section 60–1.33(b)(1) explains that

OFCCP may issue an NOV if, following

OFCCP’s review of any response by the

contractor pursuant to paragraph (a)(5),

the agency has evidence sufficient to

support a finding of disparate treatment

and/or disparate impact

discrimination,

60

or that the contractor

has committed other material violations

of the equal opportunity clause. The

NOV informs the contractor that

corrective action is required and invites

conciliation through a written

agreement. This section also requires

the OFCCP Director or acting agency

head to approve an NOV before it is

issued.

Paragraph (b)(1) codifies use of the

NOV for all material violations. An NOV

is the first formal notification a

contractor receives for a material

violation that does not involve

discrimination. However, consistent

with current OFCCP policy and

practice, the final rule allows OFCCP to

proceed straight to a SCN if the asserted

violation is that the contractor has

denied OFCCP access to individuals or

documents or otherwise failed to submit

information requested in OFCCP’s

OMB-approved scheduling letters.

These types of violations require

expedited treatment because they

directly inhibit OFCCP’s compliance

evaluations and cause delays in

resolution of those evaluations. The

Department did not intend for the

NPRM to require an NOV for these types

of violations and makes the exception

explicit in the final rule.

Paragraphs (b)(2) through (4) govern

specifically NOVs that allege a finding

of discrimination. Paragraph (b)(2)

provides that OFCCP will only issue an

NOV alleging a finding of

discrimination if the contractor has not

sufficiently rebutted the preliminary

findings identified in the PDN or if the

contractor failed to respond. Paragraph

(b)(3) clarifies that the requirements for

issuing a PDN also apply to an NOV

alleging a discrimination violation.

Finally, paragraph (b)(4) clarifies that

OFCCP must reasonably address all

concerns and defenses raised by the

contractor in response to the PDN.

3. Show Cause Notice

SCNs are governed by existing

sections in the Code of Federal

Regulations.

61

The Department did not

propose to revise those sections and

does not now adopt any revisions.

OFCCP may issue SCNs when the

OFCCP Director has reasonable cause to

believe that a contractor has violated an

equal opportunity clause. As noted

above, the final rule retains OFCCP’s

ability, consistent with current practice,

to proceed directly to issuing a SCN for

cases in which the contractor either

denies access or otherwise fails to

submit information requested in

OFCCP’s OMB-approved scheduling

letters. In discrimination cases, SCNs

generally follow issuance of an NOV

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The Department added a comma between

‘‘complaint investigation’’ and ‘‘or other review’’ in

the first sentence of this provision.

63

See supra note 40.

64

Chapter 2O00 of the FCCM states, ‘‘After

advising the contractor of its compliance evaluation

findings, the [compliance officer] must provide

formal notification through a PDN . . . when there

are preliminary indicators of discrimination.’’

and the contractor’s rejection of

OFCCP’s offer to conciliate or a failure

of conciliation. Notwithstanding a

rejection or failure of conciliation, pre-

referral mediation remains a viable

option for contractors who have

received a SCN. If a contractor raises

new or different information or

arguments in response to an NOV, the

agency’s policy is to address those

issues before or coincident with issuing

a SCN. The Department notes the

evidentiary standards that must be met

in order to issue PDNs and NOVs in

discrimination cases must also be met in

order to issue a SCN in such cases; this

is the most reasonable reading of the

regulation’s current requirement that the

Director must have ‘‘reasonable cause’’

to believe a violation has occurred in

order to issue a SCN, so no change to

the regulatory text is needed. The

Department also notes that meeting the

evidentiary standards for issuing PDNs

and NOVs does not necessarily mean

that a case is legally sufficient to initiate

litigation. The Solicitor of Labor retains

authority to pursue formal enforcement

proceedings and will do so only after

determining that the required legal

elements of a disparate treatment and/

or disparate impact claim, as relevant,

are satisfied.

4. Conciliation Agreements

Before this rule, § 60–1.33 provided

for conciliation agreements. The

Department has retained this provision

without substantive change as § 60–

1.33(c) of the final rule.

62

5. Expedited Conciliation Option

This rule clarifies in § 60–1.33(d) that

Federal contractors have 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 promote the efficient resolution of

material violations for multi-

establishment Federal contractors with

early resolution procedures.

63

The final

rule furthers the agency’s efforts to

improve efficiency and prioritize early

resolution of cases by codifying an

expedited option for resolution that

would apply to compliance reviews in

their early stages.

The Department received six

comments relevant to the expedited

conciliation option. One contractor

organization specifically asked OFCCP

to endorse use of the Early Resolution

Procedures (ERP) and Early Resolution

Conciliation Agreements (ERCAs) in its

final rule and codify the process. While

the Department fully endorses use of

ERP and ERCAs as an expedited

conciliation option, and the agency

intends to continue using this option

where a contractor is interested, it

declines to codify the procedures at this

time. OFCCP only recently began using

ERP and ERCAs to promote corporate-

wide compliance, and the procedures

are still evolving as the program

matures. Under the current procedures,

OFCCP may alert contractors of their

option to conciliate even before the

agency issues a PDN, and the contractor

has the option to initiate the resolution

procedures. If material violations exist,

the contractor may agree to participate

in ERP, ultimately resulting in an ERCA.

The agency will continue to provide

subregulatory guidance on these

procedures as the program develops.

One commenter requested

establishment of a pre-PDN conference

between the contractor and the agency

to discuss the issues that OFCCP

intends to identify in the PDN. OFCCP’s

current practice is to engage in the

equivalent of a pre-PDN conference

through regular contact with the

contractor, and the agency is committed

to continuing to do so.

64

Likewise, the

ERP process requires a pre-PDN

conference to discuss the potential

ERCA if a contractor expresses interest

in pursuing one. However, the

Department believes it is premature to

require a pre-PDN conference in all

matters. Between the PDN, NOV, and

SCN, there already are three mandatory

notices that provide the contractor

information about OFCCP’s findings (or

preliminary findings) of discrimination,

as well as opportunities for the

contractor to respond to each one,

before a matter is referred for

enforcement. Adding another step

would likely add unnecessary delay.

Moreover, OFCCP already offers early

conciliation as well as its Ombuds

Service for assistance with complaints

about the agency’s conduct. The agency

will continue to evaluate whether a

mandatory formal pre-PDN conference

would be helpful, but declines to adopt

that procedure at this time.

Other comments expressed concern

that the early resolution option would

coerce contractors into conciliation by

combining data from multiple

establishments and that OFCCP would

use the early resolution option as a way,

in the words of one commenter, ‘‘to

circumvent legal standards by OFCCP

personnel through initiation of

discussions about resolution of merely

‘potential’ employment discrimination

that does not meet legal standards.’’

OFCCP does not and will not use early

resolution procedures to coerce

contractors or to circumvent legal

standards, and the Department has

revised § 60–1.33(d) to make it clear that

contractors’ participation must be

voluntary. This language should not be

interpreted to be coercive. It is intended

to be permissive. One commenter

further suggested that the Department

should not allow OFCCP staff to initiate

discussions about expedited

conciliation options. While the

Department appreciates the

commenter’s concern, the Department

believes that allowing OFCCP staff to

inform contractors that expedited

conciliation is an available option is

important to ensure that contractors are

aware of that option. However, the final

rule clarifies that OFCCP staff may not

require or insist that the contractor avail

itself of the expedited conciliation

option. OFCCP’s headquarters office

also provides oversight of early

resolution conciliations to ensure a

degree of consistency in their content.

Finally, OFCCP declines to change the

label of this section, as suggested by one

comment.

6. Severability

The Department has decided to

include a severability provision as part

of this final rule. To the extent that any

provision of this final rule is declared

invalid by a court of competent

jurisdiction, the Department intends for

all other provisions that are capable of

operating in the absence of the specific

provision that has been invalidated to

remain in effect.

C. Miscellaneous Comments

A number of comments are not

addressed above because they are not

directly germane to the provisions of the

final rule. Eight comments were not

posted to Regulations.gov either because

of lack of relevance to the proposed rule

or because they were exact duplicates of

an already posted comment. One

comment was withdrawn after posting

because the submitter subsequently

provided a revised version that was

posted instead.

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See Directive 2018–01, ‘‘Use of

Predetermination Notices (PDN)’’ (Feb. 27, 2018),

www.dol.gov/agencies/ofccp/directives/2018-01.

OFCCP issued this directive to ensure that PDNs be

used in all compliance evaluations with

preliminary discrimination findings, both

individual and systemic. Prior to the directive, use

of PDNs was discretionary and reserved for

systemic discrimination findings. See FCCM,

Chapter 8 (detailing the procedures that OFCCP

follows for issuing PDNs).

66

Id.

67

5 U.S.C. 553(c). Thirty-day public comment

periods are broadly viewed as permissible under

the APA, particularly where, as here, the proposal

is fairly straightforward and is not detailed or

highly technical in nature. See, e.g., Conn. Light &

Power Co. v. Nuclear Regulatory Comm’n., 673 F.2d

525, 534 (D.C. Cir. 1982) (upholding a thirty-day

comment period even though the ‘‘technical

complexity’’ of the regulation was ‘‘such that a

somewhat longer comment period might have been

helpful’’); Conference of State Bank Supervisors v.

Office of Thrift Supervision, 792 F. Supp. 837, 844

(D.D.C. 1992) (upholding the sufficiency of a thirty-

day comment period).

68

See 41 CFR 60–300.2(h) and 60–741.2(f); see

also 78 FR 58613 (Sept. 24, 2013); 78 FR 58681

(Sept. 24, 2013).

One commenter noted that age

discrimination is not mentioned in the

proposed rule. That is because none of

the laws that OFCCP enforces protect

applicants or employees from

discrimination on the basis of age. The

Age Discrimination in Employment Act,

the primary Federal law prohibiting age

discrimination in employment, is

enforced and administered by the Equal

Employment Opportunity Commission.

Three comments pertained to

previously issued OFCCP guidance

about how the agency analyzes

compensation discrimination.

65

The

comments asked for clarification

regarding how OFCCP groups

employees for pay analysis and which

neutrality tests OFCCP uses to

determine whether pay variables are

neutral. One of the comments suggested

that the Department should rescind the

OFCCP policy directive that provides

guidance on how the agency analyzes

compensation to determine whether

discrimination may be present.

66

The

Department declines at this time to

expand the scope of this rule to include

further guidance concerning pay

analysis groupings specifically or to

rescind its compensation directive. The

Department appreciates the input

received and is considering addressing

its methods of compensation analysis in

a future rulemaking or in new guidance

documents.

Finally, five comments specifically

requested that the comment period be

extended. After considering those

requests, the Department determined

that the original 30-day comment period

provided adequate time for the public to

comment on the proposed rule. Notably,

the Administrative Procedure Act (APA)

does not set forth a mandatory

minimum time for public comments,

but rather more generally requires an

‘‘opportunity to participate in the rule

making through submission of written

data, views, or arguments.’’

67

OFCCP

posted its declination letter on

Regulations.gov as a supplement to the

proposed rule on January 27, 2020.

D. Changes in 41 CFR Parts 60–300 and

60–741

OFCCP has separate regulations

concerning E.O. 11246, VEVRAA, and

section 503. No commenter suggested

that OFCCP’s resolution procedures or

the proposed definitions should be

applied differently depending on the

law the agency is enforcing. The

Department thus adopts the same

definitions and provisions on resolution

procedures in 41 CFR part 60–300

(VEVRAA) and 41 CFR part 60–741

(section 503) that are described above

for 41 CFR part 60–1 (E.O. 11246).

E. Agency Head Title

The final rule replaces outdated

references to the official title of OFCCP’s

agency head in E.O. 11246 regulations,

from ‘‘Deputy Assistant Secretary’’ to

‘‘Director,’’ throughout the entirety of 41

CFR parts 60–1 and 60–2. The

Department made the same change to

the regulations implementing VEVRAA

and section 503 through final rules in

2013.

68

The Department made the

change after the Department of Labor

abolished the Employment Standards

Administration in November 2009. 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. The Department received no

comments on this change and adopts it

in the final rule.

Executive Order 12866 (Regulatory

Planning and Review) and Executive

Order 13563 (Improving Regulation

and Regulatory Review)

Under E.O. 12866, OMB’s Office of

Information and Regulatory Affairs

(OIRA) determines whether a regulatory

action is significant and, therefore,

subject to the requirements of E.O.

12866 and OMB review. Section 3(f) of

E.O. 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 E.O. 12866.

OMB has determined that this rule is a

significant regulatory action under E.O.

12866 and has reviewed the final rule.

Pursuant to the Congressional Review

Act (5 U.S.C. 801 et seq.), OIRA

designated that this rule is not a ‘‘major

rule,’’ as defined by 5 U.S.C. 804(2).

E.O. 13563 directs agencies to 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.

E.O. 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.

A. Need for Rulemaking

The final rule addresses stakeholder

concerns by codifying the use of PDNs,

NOVs, and an early conciliation option

that already exist in the FCCM and

agency guidance, such as directives. The

FCCM and agency directives are not

legally binding and have not gone

through formal notice and public

comment. They thus do not provide the

same level of clarity, transparency, and

certainty that this final rule does. The

final rule also modifies those

procedures to improve clarity and

transparency, establish guardrails on the

agency’s issuance of pre-enforcement

notices, and further the strategic

allocation of limited agency resources.

B. Discussion of Impacts

In this section, the Department

presents a summary of the costs

associated with the codified procedures

and modifications in this rulemaking. In

the NPRM, the Department utilized the

General Services Administration’s

System for Award Management (SAM)

database to identify the number of

contractors who may be impacted by the

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U.S. General Services Administration, System

for Award Management, data released in monthly

files, www.sam.gov. In the NPRM, OFCCP used

August 2019 data and identified 420,000

contractors that may be impacted by the proposed

rule.

70

OFCCP obtained the total number of

contractors from the most recent EEO–1 Report data

available, which is from FY 2018.

71

BLS, Occupational Employment Statistics,

Occupational Employment and Wages, May 2019,

www.bls.gov/oes/current/oes_nat.htm.

72

BLS, Employer Costs for Employee

Compensation, 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.

73

Cody Rice, U.S. Environmental Protection

Agency, ‘‘Wage Rates for Economic Analyses of the

Toxics Release Inventory Program,’’ (June 10, 2002),

www.regulations.gov/document?D=EPA-HQ-OPPT-

2014-0650-0005.

rule.

69

Those 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. In the

NPRM, the Department acknowledged

that the SAM number likely resulted in

an overestimation because 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.

The Department received no

comments on using the SAM database to

determine the affected contractor

universe in the NPRM. However, in the

final rule, the Department reevaluated

the contractors likely to be affected and

decided to utilize the Employment

Information Report (EEO–1) data, which

identifies the number of contractors that

could be scheduled for a compliance

evaluation. By using the EEO–1 Report

data, the Department mitigates the

problems identified with the SAM data

that resulted in the overestimation of

the contractor universe. The EEO–1

Report must be filed by covered Federal

contractors who: (1) Have 50 or more

employees; (2) are prime contractors or

first-tier subcontractors; and (3) have a

contract, subcontract, or purchase order

amounting to $50,000 or more. OFCCP

schedules only contractors who meet

those thresholds for compliance

evaluations. While the Department

acknowledges that all Federal

contractors may learn their EEO

requirements in order to comply with

the laws that OFCCP enforces, only

those contractors scheduled for a

compliance evaluation are likely to have

a need to learn the resolution

procedures because only those

contractors may need to interact with

OFCCP through these new resolution

procedures. Further, because this rule

stipulates procedures OFCCP must

follow if it desires to issue a PDN or

NOV, unless and until a contractor is

scheduled for a compliance evaluation,

the contractor need not familiarize itself

with these changes. This change

significantly alters the number of

contractors possibly impacted by the

final rule, reducing the number to

26,514.

70

The Department believes the

updated number of contractors is a more

accurate estimation of those entities

possibly impacted by the final rule and

still likely overstates the number of

entities that will take time to familiarize

themselves.

1. Cost of Rule Familiarization

OFCCP acknowledges that 5 CFR

1320.3(b)(1)(i) requires agencies to

include in the burden analysis 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.

In line with recent assessments in

other rulemakings, the agency has

determined that either a Human

Resources Manager (SOC 11–3121) or a

Lawyer (SOC 23–1011) would review

the rule. OFCCP estimates that 50

percent of the reviewers would be

human resources managers and 50

percent would be in-house counsel.

Thus, the mean hourly wage rate reflects

a 50/50 split between human resources

managers and lawyers. The mean hourly

wage of a human resources manager is

$62.29 and the mean hourly wage of a

lawyer is $69.86.

71

Therefore, the

average hourly wage rate is $66.08

(($62.29 + $69.86)/2). OFCCP 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 agency used a fringe benefits rate of

46 percent

72

and an overhead rate of 17

percent,

73

resulting in a fully loaded

hourly compensation rate of $107.71

($66.08 + ($66.08 × 46 percent) +

($66.08 × 17 percent)). The estimated

labor cost to contractors is reflected in

Table 1, below.

T

ABLE

1—L

ABOR

C

OST

Major occupational groups Average

hourly wage

rate

Fringe benefit

rate Overhead rate Fully loaded

hourly

compensation

Human Resources Managers and Lawyers .................................................... $66.08 46% 17% $107.71

The agency estimates that it will take

a minimum of 30 minutes (

1

⁄

2

hour) for

a human resources manager or lawyer at

each contractor firm to either read the

rule or read the compliance assistance

materials provided by OFCCP to learn

more about the codified procedures.

One commenter, a contractor

organization, asserted that the agency

underestimated the time needed to

become familiar with the proposed rule.

The commenter provided an alternate

estimate of two to three hours. OFCCP

acknowledges that the precise amount

of time each company will take to

become familiar with understanding the

new regulations is difficult to estimate.

The elements that the agency uses in its

calculation take into account the length

and complexity of the rule. Thus,

OFCCP has decided to retain its initial

estimate of one-half hour for rule

familiarization. The one-half hour

estimate is an average across all

contractors and accounts for the time

needed to read the rule or read the

compliance assistance materials

provided by OFCCP to learn more about

the codified procedures.

Another contractor organization

asserted that the agency’s calculations

did not account for the use of outside

third parties that are used by Federal

contractors and subcontractors to fully

understand a contractor’s obligations

under the proposed regulations. The

commenter surveyed its constituents

and provided an estimate between

$1,000 and $5,000 for outside

assistance. The commenter did not

provide specific data on the

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To comply with E.O. 13771 accounting, the

Department multiplied the rule familiarization cost

for Year 1 ($1,427,911) by the GDP deflator (0.9582)

to convert the cost to 2016 dollars ($1,368,224). The

Department used this result to determine the

perpetual annualized cost ($106,456) at a discount

rate of 7 percent in 2016 dollars. Assuming the rule

takes effect in 2020, the Department divided

$106,456 by 1.07

4

, which equals $81,215.

characteristics of the contractors

surveyed. The Department notes that

some companies may decide to

outsource familiarization with the new

procedures, just as some companies may

wait until OFCCP initiates an

investigation before familiarizing

themselves with the new procedures,

but OFCCP does not anticipate that

companies will incur both in-house and

third party familiarization costs. The

Department thus declines to add these

third-party costs to its estimate in

addition to the costs already calculated.

Consequently, the estimated burden

for rule familiarization is 13,257 hours

(26,514 contractor firms ×

1

⁄

2

hour). The

Department calculates the total

estimated cost of rule familiarization as

$1,427,911 (13,257 hours × $107.71/

hour) in the first year, which amounts

to a 10-year annualized cost of $162,519

at a discount rate of 3 percent (which is

$6.13 per contractor firm) or $190,002 at

a discount rate of 7 percent (which is

$7.17 per contractor firm). Table 2,

below, reflects the estimated regulatory

familiarization costs for the final rule.

T

ABLE

2—R

EGULATORY

F

AMILIARIZATION

C

OST

Total number of contractors 26,514

Time to review rule ............... 30 minutes

Human Resources Managers

fully loaded hourly com-

pensation ........................... $107.71

Regulatory familiarization

cost in the first year .......... $1,427,911

Annualized cost with 3 per-

cent discounting ................ $162,519

Annualized cost per con-

tractor with 3 percent dis-

counting ............................. $6.13

Annualized cost with 7 per-

cent discounting ................ $190,002

Annualized cost per con-

tractor with 7 percent dis-

counting ............................. $7.17

The rule does not include any

additional costs because it adds no new

requirements or burdens on contractors.

When the Department uses a perpetual

time horizon to allow for cost

comparisons under E.O. 13771, the

perpetual annualized cost is $81,215 at

a 7 percent discount rate in 2016

dollars.

74

2. Cost Savings

OFCCP 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 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, the rule may

reduce costs associated with resolving

preliminary findings and violations

through conciliation by making it

clearer to both sides at the outset what

is required by the regulation.

3. Benefits

E.O. 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 E.O. 13563. The rule is designed to

achieve these benefits by:

•Supporting more effective

enforcement of prohibitions against

certain types of employment

discrimination;

•Increasing fairness for contractors

by providing more transparency and

certainty on the agency’s resolution

procedures;

•Establishing guardrails on the

agency’s issuance of pre-enforcement

notices;

•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;

•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; and

•Furthering the strategic allocation

of limited agency resources.

C. Alternatives

In addition to the approach proposed

in the rule, the Department considered

alternative approaches. The Department

considered leaving OFCCP’s 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 to OFCCP’s

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 will have a stronger impact

and promote more efficient enforcement

of E.O. 11246, section 503, and

VEVRAA than the status quo

alternative.

The Department also considered

different types of evidentiary standards

for OFCCP to issue PDNs and NOVs. For

example, the Department considered

mandating a higher threshold for

statistical significance, such as the

three-standard-deviation threshold

proposed in the NPRM, and not

mandating qualitative evidence. The

Department ultimately determined that

requiring statistical evidence with two

standard deviations or other

quantitative evidence, a finding of

practical significance, and appropriate

qualitative evidence best balances all

the equities involved and promotes

efficient and effective allocation of

resources.

Regulatory Flexibility Act and

Executive Order 13272 (Consideration

of Small Entities)

The agency did not receive any public

comments on the Regulatory Flexibility

Analysis.

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 regulation on a wide range

of small entities including small

businesses, not-for-profit organizations,

and small governmental jurisdictions.

Agencies must review whether a 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

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75

Id.

described in the RFA.

75

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 does not believe that

this rule will have a significant

economic impact on a substantial

number of small entities. The final rule

will most likely affect small firms in the

construction industry (NAICS Sector 23)

and small firms in the management of

companies and enterprises industry

(NAICS Sector 55). The annualized cost

for both industries at a discount rate of

7 percent for rule familiarization is

$7.17 per entity ($50.33 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 final rule

(0.01% for construction and 0.02% for

management of companies and

enterprises). Accordingly, the

Department certifies that the final rule

will not have a significant economic

impact on a substantial number of small

entities. That is consistent with the

Department’s analysis in the NPRM.

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).

The Department has determined that

there is no new requirement for

information collection associated with

this rule. The information collection

contained in the existing E.O. 11246,

section 503, and VEVRAA regulations

are currently approved under OMB

Control Number 1250–0001

(Construction Recordkeeping and

Reporting Requirements), OMB Control

Number 1250–0003 (Recordkeeping and

Reporting Requirements—Supply and

Service), OMB Control Number 1250–

0004 (Office of Federal Contract

Compliance Programs Recordkeeping

and Reporting Requirements Under the

Vietnam Era Veterans’ Readjustment

Assistance Act of 1974, as Amended),

and OMB Control Number 1250–0005

(Office of Federal Contract Compliance

Programs Recordkeeping and Reporting

Requirements Under Rehabilitation Act

of 1973, as Amended Section 503).

Consequently, this rule does not require

review by the OMB under the authority

of the Paperwork Reduction Act.

Executive Order 13132 (Federalism)

The Department has reviewed the rule

in accordance with E.O. 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)

The rule does not have tribal

implications under E.O. 13175 that

requires a tribal summary impact

statement. The 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,

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 amends 41 CFR

parts 60–1, 60–2, 60–300, and 60–741 as

follows:

PART 60–1—OBLIGATIONS OF

CONTRACTORS AND

SUBCONTRACTORS

■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.

■2. In part 60–1, except for § 60–1.3,

revise all references to ‘‘Deputy

Assistant Secretary’’ to read ‘‘Director’’.

■3. Amend § 60–1.3 by removing the

definition for ‘‘Deputy Assistant

Secretary’’ and adding definitions for

‘‘Director’’, ‘‘Qualitative evidence’’, and

‘‘Quantitative evidence’’ in alphabetical

order to read as follows:

§ 60–1.3 Definitions.

* * * * *

Director means the Director, Office of

Federal Contract Compliance Programs

(OFCCP) of the United States

Department of Labor, or his or her

designee.

* * * * *

Qualitative evidence includes but is

not limited to testimony, interview

statements, and documents about biased

statements, remarks, attitudes, or acts

based upon membership in a protected

class, particularly when made by a

decision maker involved in the action

under investigation; testimony,

interview statements, and documents

about individuals denied or given

misleading or contradictory information

about employment or compensation

practices, in circumstances suggesting

discriminatory treatment based on a

protected characteristic; testimony,

interview statements, and documents

about the extent of discretion or

subjectivity involved in making

employment decisions, in conjunction

with evidence suggesting the discretion

or subjectivity has been used to

discriminate based on a protected

characteristic; or other anecdotal

evidence relevant to determining a

contractor’s discriminatory or non-

discriminatory intent, the business

necessity (or lack thereof) of a

challenged policy or practice, or

whether the contractor has otherwise

complied with its non-discrimination

obligations. Qualitative evidence may

not be based solely on subjective

inferences or the mere fact of

supervisory discretion in employment

decisions. The Office of Federal

Contract Compliance Programs (OFCCP)

may also consider qualitative evidence

in the form of a contractor’s efforts to

advance equal employment opportunity

beyond mere compliance with legal

obligations in determining whether

intentional discrimination has occurred.

Quantitative evidence includes

hypothesis testing, controlling for the

major, measurable parameters, and

variables used by the contractor

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(including, as appropriate, preferred

qualifications, 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 disparity

in employment selection rates or rates of

compensation 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. It also includes numerical analysis

of similarly situated individuals, small

groups, or other characteristics,

demographics or outcomes where

hypothesis-testing techniques are not

used.

* * * * *

■4. Revise § 60–1.33 to read as follows:

§ 60–1.33 Resolution procedures.

(a) Predetermination Notice. If a

compliance review or other review by

OFCCP indicates evidence sufficient to

support a preliminary finding of

disparate treatment and/or disparate

impact discrimination, OFCCP may

issue a Predetermination Notice, subject

to the following parameters and the

approval of the Director or acting agency

head:

(1) For allegations included in a

Predetermination Notice involving a

disparate treatment theory of liability,

OFCCP must:

(i) Provide quantitative evidence as

defined in this part;

(ii) Demonstrate that the unexplained

disparity is practically significant; and

(iii) Provide qualitative evidence as

defined in this part that, in combination

with other evidence, supports both a

finding of discriminatory intent by the

contractor and a finding that the

contractor’s discriminatory intent

caused the disparate treatment.

(2) OFCCP may issue a

Predetermination Notice under a

disparate treatment theory of liability

without satisfying all three components

listed in paragraph (a)(1) of this section

only if:

(i) The qualitative evidence by itself is

sufficient to support a preliminary

finding of disparate treatment;

(ii) The evidence of disparity between

a favored and disfavored group is so

extraordinarily compelling that by itself

it is sufficient to support a preliminary

finding of disparate treatment; or

(iii) Paragraphs (a)(1)(i) and (ii) of this

section are satisfied and the contractor

denied OFCCP access to sources of

evidence that may be relevant to a

preliminary finding of discriminatory

intent. This may include denying access

to its employees during a compliance

evaluation or destroying or failing to

produce records the contractor is legally

required to create and maintain.

(3) For allegations included in a

Predetermination Notice involving a

disparate impact theory of liability,

OFCCP must:

(i) Provide quantitative evidence as

defined in this part;

(ii) Demonstrate the unexplained

disparity is practically significant; and

(iii) Identify the specific policy or

practice of the contractor causing the

adverse impact, unless OFCCP can

demonstrate that the elements of the

contractor’s selection procedures are

incapable of separation for analysis.

(4) The Predetermination Notice must

disclose the quantitative and qualitative

evidence relied on by OFCCP in

sufficient detail to allow contractors to

investigate allegations and meaningfully

respond. OFCCP will seek to obtain

qualitative evidence in all cases in

which it issues a Predetermination

Notice; however, if the exception in

paragraph (a)(2)(ii) of this section

applies, OFCCP will disclose why, in

the absence of qualitative evidence, the

agency is issuing the Predetermination

Notice based on evidence of an

extraordinarily compelling disparity

alone. In addition, upon the contractor’s

request, OFCCP must also provide the

model and variables used in any

statistical analysis and an explanation

for why any variable proposed by the

contractor was excluded from that

analysis. However, OFCCP may

withhold personal identifying

information from the description of the

qualitative evidence if the information

is protected from disclosure under

recognized governmental privileges, or

otherwise if providing that information

would violate confidentiality or privacy

protections afforded by law.

(5) Any response to a

Predetermination Notice must be

submitted by the contractor within 30

calendar days of receipt of the Notice,

which deadline OFCCP may extend for

good cause.

(b) Notice of Violation. (1) If,

following OFCCP’s review of any

response by the contractor pursuant to

paragraph (a)(5) of this section, the

agency has evidence sufficient to

support a finding of disparate treatment

and/or disparate impact discrimination,

as established in the parameters and

exceptions in paragraph (a) of this

section, or that the contractor has

committed other material violations of

the equal opportunity clause (with the

exception of violations for denying

access or failing to submit records in

response to OFCCP’s Office of

Management and Budget (OMB)-

approved Scheduling Letters, for which

OFCCP may proceed directly to issuing

a Show Cause Notice), OFCCP may

issue a Notice of Violation to the

contractor requiring corrective action

and inviting conciliation through a

written agreement, subject to approval

by the Director or acting agency head.

(2) OFCCP may issue a Notice of

Violation alleging a finding of

discrimination following issuance of a

Predetermination Notice if the

contractor does not respond or provide

a sufficient response within 30 calendar

days of receipt of the Predetermination

Notice, subject to approval by the

Director or acting agency head, unless

OFCCP has extended the

Predetermination Notice response time

for good cause shown.

(3) The Notice of Violation must

disclose the quantitative and qualitative

evidence relied on by OFCCP in

sufficient detail to allow contractors to

investigate allegations and meaningfully

respond. OFCCP will seek to obtain

qualitative evidence in all cases in

which it issues a Notice of Violation,

however, if the exception in paragraph

(a)(2)(ii) of this section applies, OFCCP

will disclose why, in the absence of

qualitative evidence, the agency is

issuing the Notice of Violation based on

evidence of an extraordinarily

compelling disparity alone. In addition,

upon the contractor’s request, OFCCP

must also provide the model and

variables used in any statistical analysis

and an explanation why any variable

proposed by the contractor was

excluded from that analysis. However,

OFCCP may withhold personal

identifying information from the

description of the qualitative evidence if

the information is protected from

disclosure under recognized

governmental privileges, or otherwise if

providing that information would

violate confidentiality or privacy

protections afforded by law.

(4) The Notice of Violation must

address all relevant concerns and

defenses raised by the contractor in

response to the Predetermination

Notice.

(c) Conciliation agreement. If a

compliance review, complaint

investigation, or other review by OFCCP

or its representative indicates a material

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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 voluntarily waive the

procedures set forth in paragraphs (a)

and/or (b) of this section to enter

directly into a conciliation agreement.

OFCCP may inform the contractor of

this expedited conciliation option, but

may not require or insist that the

contractor avail itself of the expedited

conciliation option.

(e) Severability. Should a court of

competent jurisdiction hold any

provision(s) of this section to be invalid,

such action will not affect any other

provision of this section.

PART 60–2—AFFIRMATIVE ACTION

PROGRAMS

■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.

§ 60–2.1, 60–2.2, and 60–2.31 [Amended]

■6. In §§ 60–2.1, 60–2.2, and 60–2.31,

remove ‘‘Deputy Assistant Secretary’’

everywhere it appears and add

‘‘Director’’ in its place.

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

■7. 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).

■8. Amend § 60–300.2 by redesignating

paragraphs (t) through (cc) as

paragraphs (v) through (ee) and adding

new paragraphs (t) and (u) to read as

follows:

§ 60–300.2 Definitions.

* * * * *

(t) Qualitative evidence includes but

is not limited to testimony, interview

statements, and documents about biased

statements, remarks, attitudes, or acts

based upon membership in a protected

class, particularly when made by a

decision maker involved in the action

under investigation; testimony,

interview statements, and documents

about individuals denied or given

misleading or contradictory information

about employment or compensation

practices, in circumstances suggesting

discriminatory treatment based on a

protected characteristic; testimony,

interview statements, and documents

about the extent of discretion or

subjectivity involved in making

employment decisions, in conjunction

with evidence suggesting the discretion

or subjectivity has been used to

discriminate based on a protected

characteristic; or other anecdotal

evidence relevant to determining a

contractor’s discriminatory or non-

discriminatory intent, the business

necessity (or lack thereof) of a

challenged policy or practice, or

whether the contractor has otherwise

complied with its non-discrimination

obligations. Qualitative evidence may

not be based solely on subjective

inferences or the mere fact of

supervisory discretion in employment

decisions. The Office of Federal

Contract Compliance Programs (OFCCP)

may also consider qualitative evidence

in the form of a contractor’s efforts to

advance equal employment opportunity

beyond mere compliance with legal

obligations in determining whether

intentional discrimination has occurred.

(u) Quantitative evidence includes

hypothesis testing, controlling for the

major, measurable parameters, and

variables used by the contractor

(including, as appropriate, preferred

qualifications, 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 disparity

in employment selection rates or rates of

compensation 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. It also includes numerical analysis

of similarly situated individuals, small

groups, or other characteristics,

demographics or outcomes where

hypothesis-testing techniques are not

used.

* * * * *

■9. Revise § 60–300.62 to read as

follows:

§ 60–300.62 Resolution procedures.

(a) Predetermination Notice. If a

compliance review or other review by

OFCCP indicates evidence sufficient to

support a preliminary finding of

disparate treatment and/or disparate

impact discrimination, OFCCP may

issue a Predetermination Notice, subject

to the following parameters and the

approval of the Director or acting agency

head:

(1) For allegations included in a

Predetermination Notice involving a

disparate treatment theory of liability,

OFCCP must:

(i) Provide quantitative evidence as

defined in this part;

(ii) Demonstrate that the unexplained

disparity is practically significant; and

(iii) Provide qualitative evidence as

defined in this part that, in combination

with other evidence, supports both a

finding of discriminatory intent by the

contractor and a finding that the

contractor’s discriminatory intent

caused the disparate treatment.

(2) OFCCP may issue a

Predetermination Notice under a

disparate treatment theory of liability

without satisfying all three components

listed in paragraph (a)(1) of this section

only if:

(i) The qualitative evidence by itself is

sufficient to support a preliminary

finding of disparate treatment;

(ii) The evidence of disparity between

a favored and disfavored group is so

extraordinarily compelling that by itself

it is sufficient to support a preliminary

finding of disparate treatment; or

(iii) Paragraphs (a)(1)(i) and (ii) of this

section are satisfied and the contractor

denied OFCCP access to sources of

evidence that may be relevant to a

preliminary finding of discriminatory

intent. This may include denying access

to its employees during a compliance

evaluation or destroying or failing to

produce records the contractor is legally

required to create and maintain.

(3) For allegations included in a

Predetermination Notice involving a

disparate impact theory of liability,

OFCCP must:

(i) Provide quantitative evidence as

defined in this part;

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(ii) Demonstrate the unexplained

disparity is practically significant; and

(iii) Identify the specific policy or

practice of the contractor causing the

adverse impact, unless OFCCP can

demonstrate that the elements of the

contractor’s selection procedures are

incapable of separation for analysis.

(4) The Predetermination Notice must

disclose the quantitative and qualitative

evidence relied on by OFCCP in

sufficient detail to allow contractors to

investigate allegations and meaningfully

respond. OFCCP will seek to obtain

qualitative evidence in all cases in

which it issues a Predetermination

Notice; however, if the exception in

paragraph (a)(2)(ii) of this section

applies, OFCCP will disclose why, in

the absence of qualitative evidence, the

agency is issuing the Predetermination

Notice based on evidence of an

extraordinarily compelling disparity

alone. In addition, upon the contractor’s

request, OFCCP must also provide the

model and variables used in any

statistical analysis and an explanation

for why any variable proposed by the

contractor was excluded from that

analysis. However, OFCCP may

withhold personal identifying

information from the description of the

qualitative evidence if the information

is protected from disclosure under

recognized governmental privileges, or

otherwise if providing that information

would violate confidentiality or privacy

protections afforded by law.

(5) Any response to a

Predetermination Notice must be

submitted by the contractor within 30

calendar days of receipt of the Notice,

which deadline OFCCP may extend for

good cause.

(b) Notice of Violation. (1) If,

following OFCCP’s review of any

response by the contractor pursuant to

paragraph (a)(5) of this section, the

agency has evidence sufficient to

support a finding of disparate treatment

and/or disparate impact discrimination,

as established in the parameters and

exceptions in paragraph (a) of this

section, or that the contractor has

committed other material violations of

the equal opportunity clause (with the

exception of violations for denying

access or failing to submit records in

response to OFCCP’s Office of

Management and Budget (OMB)-

approved Scheduling Letters, for which

OFCCP may proceed directly to issuing

a Show Cause Notice), OFCCP may

issue a Notice of Violation to the

contractor requiring corrective action

and inviting conciliation through a

written agreement, subject to approval

by the Director or acting agency head.

(2) OFCCP may issue a Notice of

Violation alleging a finding of

discrimination following issuance of a

Predetermination Notice if the

contractor does not respond or provide

a sufficient response within 30 calendar

days of receipt of the Predetermination

Notice, subject to approval by the

Director or acting agency head, unless

OFCCP has extended the

Predetermination Notice response time

for good cause shown.

(3) The Notice of Violation must

disclose the quantitative and qualitative

evidence relied on by OFCCP in

sufficient detail to allow contractors to

investigate allegations and meaningfully

respond. OFCCP will seek to obtain

qualitative evidence in all cases in

which it issues a Notice of Violation,

however, if the exception in paragraph

(a)(2)(ii) of this section applies, OFCCP

will disclose why, in the absence of

qualitative evidence, the agency is

issuing the Notice of Violation based on

evidence of an extraordinarily

compelling disparity alone. In addition,

upon the contractor’s request, OFCCP

must also provide the model and

variables used in any statistical analysis

and an explanation why any variable

proposed by the contractor was

excluded from that analysis. However,

OFCCP may withhold personal

identifying information from the

description of the qualitative evidence if

the information is protected from

disclosure under recognized

governmental privileges, or otherwise if

providing that information would

violate confidentiality or privacy

protections afforded by law.

(4) The Notice of Violation must

address all relevant concerns and

defenses raised by the contractor in

response to the Predetermination

Notice.

(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 voluntarily waive the

procedures set forth in paragraphs (a)

and/or (b) of this section to enter

directly into a conciliation agreement.

OFCCP may inform the contractor of

this expedited conciliation option, but

may not require or insist that the

contractor avail itself of the expedited

conciliation option.

(e) Severability. Should a court of

competent jurisdiction hold any

provision(s) of this section to be invalid,

such action will not affect any other

provision of this section.

PART 60–741—AFFIRMATIVE ACTION

AND NONDISCRIMINATION

OBLIGATIONS OF FEDERAL

CONTRACTORS AND

SUBCONTRACTORS REGARDING

INDIVIDUALS WITH DISABILITIES

■10. 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).

■11. Amend § 60–741.2 by

redesignating paragraphs (s) through

(bb) as paragraphs (u) through (dd) and

adding new paragraphs (s) and (t) to

read as follows:

§ 60–741.2 Definitions.

* * * * *

(s) Qualitative evidence includes but

is not limited to testimony, interview

statements, and documents about biased

statements, remarks, attitudes, or acts

based upon membership in a protected

class, particularly when made by a

decision maker involved in the action

under investigation; testimony,

interview statements, and documents

about individuals denied or given

misleading or contradictory information

about employment or compensation

practices, in circumstances suggesting

discriminatory treatment based on a

protected characteristic; testimony,

interview statements, and documents

about the extent of discretion or

subjectivity involved in making

employment decisions, in conjunction

with evidence suggesting the discretion

or subjectivity has been used to

discriminate based on a protected

characteristic; or other anecdotal

evidence relevant to determining a

contractor’s discriminatory or non-

discriminatory intent, the business

necessity (or lack thereof) of a

challenged policy or practice, or

whether the contractor has otherwise

complied with its non-discrimination

obligations. Qualitative evidence may

not be based solely on subjective

inferences or the mere fact of

supervisory discretion in employment

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decisions. The Office of Federal

Contract Compliance Programs (OFCCP)

may also consider qualitative evidence

in the form of a contractor’s efforts to

advance equal employment opportunity

beyond mere compliance with legal

obligations in determining whether

intentional discrimination has occurred.

(t) Quantitative evidence includes

hypothesis testing, controlling for the

major, measurable parameters, and

variables used by the contractor

(including, as appropriate, preferred

qualifications, 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 disparity

in employment selection rates or rates of

compensation 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. It also includes numerical analysis

of similarly situated individuals, small

groups, or other characteristics,

demographics or outcomes where

hypothesis-testing techniques are not

used.

* * * * *

■12. Revise § 60–741.62 to read as

follows:

§ 60–741.62 Resolution procedures.

(a) Predetermination Notice. If a

compliance review or other review by

OFCCP indicates evidence sufficient to

support a preliminary finding of

disparate treatment and/or disparate

impact discrimination, OFCCP may

issue a Predetermination Notice, subject

to the following parameters and the

approval of the Director or acting agency

head:

(1) For allegations included in a

Predetermination Notice involving a

disparate treatment theory of liability,

OFCCP must:

(i) Provide quantitative evidence as

defined in this part;

(ii) Demonstrate that the unexplained

disparity is practically significant; and

(iii) Provide qualitative evidence as

defined in this part that, in combination

with other evidence, supports both a

finding of discriminatory intent by the

contractor and a finding that the

contractor’s discriminatory intent

caused the disparate treatment.

(2) OFCCP may issue a

Predetermination Notice under a

disparate treatment theory of liability

without satisfying all three components

listed in paragraph (a)(1) of this section

only if:

(i) The qualitative evidence by itself is

sufficient to support a preliminary

finding of disparate treatment;

(ii) The evidence of disparity between

a favored and disfavored group is so

extraordinarily compelling that by itself

it is sufficient to support a preliminary

finding of disparate treatment; or

(iii) Paragraphs (a)(1)(i) and (ii) of this

section are satisfied and the contractor

denied OFCCP access to sources of

evidence that may be relevant to a

preliminary finding of discriminatory

intent. This may include denying access

to its employees during a compliance

evaluation or destroying or failing to

produce records the contractor is legally

required to create and maintain.

(3) For allegations included in a

Predetermination Notice involving a

disparate impact theory of liability,

OFCCP must:

(i) Provide quantitative evidence as

defined in this part;

(ii) Demonstrate the unexplained

disparity is practically significant; and

(iii) Identify the specific policy or

practice of the contractor causing the

adverse impact, unless OFCCP can

demonstrate that the elements of the

contractor’s selection procedures are

incapable of separation for analysis.

(4) The Predetermination Notice must

disclose the quantitative and qualitative

evidence relied on by OFCCP in

sufficient detail to allow contractors to

investigate allegations and meaningfully

respond. OFCCP will seek to obtain

qualitative evidence in all cases in

which it issues a Predetermination

Notice; however, if the exception in

paragraph (a)(2)(ii) of this section

applies, OFCCP will disclose why, in

the absence of qualitative evidence, the

agency is issuing the Predetermination

Notice based on evidence of an

extraordinarily compelling disparity

alone. In addition, upon the contractor’s

request, OFCCP must also provide the

model and variables used in any

statistical analysis and an explanation

for why any variable proposed by the

contractor was excluded from that

analysis. However, OFCCP may

withhold personal identifying

information from the description of the

qualitative evidence if the information

is protected from disclosure under

recognized governmental privileges, or

otherwise if providing that information

would violate confidentiality or privacy

protections afforded by law.

(5) Any response to a

Predetermination Notice must be

submitted by the contractor within 30

calendar days of receipt of the Notice,

which deadline OFCCP may extend for

good cause.

(b) Notice of Violation. (1) If,

following OFCCP’s review of any

response by the contractor pursuant to

paragraph (a)(5) of this section, the

agency has evidence sufficient to

support a finding of disparate treatment

and/or disparate impact discrimination,

as established in the parameters and

exceptions in paragraph (a) of this

section, or that the contractor has

committed other material violations of

the equal opportunity clause (with the

exception of violations for denying

access or failing to submit records in

response to OFCCP’s Office of

Management and Budget (OMB)-

approved Scheduling Letters, for which

OFCCP may proceed directly to issuing

a Show Cause Notice), OFCCP may

issue a Notice of Violation to the

contractor requiring corrective action

and inviting conciliation through a

written agreement, subject to approval

by the Director or acting agency head.

(2) OFCCP may issue a Notice of

Violation alleging a finding of

discrimination following issuance of a

Predetermination Notice if the

contractor does not respond or provide

a sufficient response within 30 calendar

days of receipt of the Predetermination

Notice, subject to approval by the

Director or acting agency head, unless

OFCCP has extended the

Predetermination Notice response time

for good cause shown.

(3) The Notice of Violation must

disclose the quantitative and qualitative

evidence relied on by OFCCP in

sufficient detail to allow contractors to

investigate allegations and meaningfully

respond. OFCCP will seek to obtain

qualitative evidence in all cases in

which it issues a Notice of Violation,

however, if the exception in paragraph

(a)(2)(ii) of this section applies, OFCCP

will disclose why, in the absence of

qualitative evidence, the agency is

issuing the Notice of Violation based on

evidence of an extraordinarily

compelling disparity alone. In addition,

upon the contractor’s request, OFCCP

must also provide the model and

variables used in any statistical analysis

and an explanation why any variable

proposed by the contractor was

excluded from that analysis. However,

OFCCP may withhold personal

identifying information from the

description of the qualitative evidence if

the information is protected from

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Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

disclosure under recognized

governmental privileges, or otherwise if

providing that information would

violate confidentiality or privacy

protections afforded by law.

(4) The Notice of Violation must

address all relevant concerns and

defenses raised by the contractor in

response to the Predetermination

Notice.

(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 voluntarily waive the

procedures set forth in paragraphs (a)

and/or (b) of this section to enter

directly into a conciliation agreement.

OFCCP may inform the contractor of

this expedited conciliation option, but

may not require or insist that the

contractor avail itself of the expedited

conciliation option.

(f) Severability. Should a court of

competent jurisdiction hold any

provision(s) of this section to be invalid,

such action will not affect any other

provision of this section.

[FR Doc. 2020–24858 Filed 11–9–20; 8:45 am]

BILLING CODE 4510–CM–P

DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric

Administration

50 CFR Part 648

[Docket No. 201103–0287]

RIN 0648–BI15

Magnuson-Stevens Fishery

Conservation and Management Act

Provisions; Fisheries of the

Northeastern United States

AGENCY

: National Marine Fisheries

Service (NMFS), National Oceanic and

Atmospheric Administration (NOAA),

Commerce.

ACTION

: Final rule.

SUMMARY

: This rule announces the

approval of, and regulations to

implement, an action to require

commercially permitted vessels in both

the New England and Mid-Atlantic

Fishery Management Council regions to

submit vessel trip reports electronically

within 48 hours of the end of a trip.

This action will also require for-hire

vessels with permits for species

managed by the New England Fishery

Management Council to submit vessel

trip reports electronically within 48

hours of the end of a trip. Document

retention requirements will be removed

with this action. This action is intended

to increase data quality and timeliness

of vessel trip reports.

DATES

: This rule is effective November

10, 2021.

ADDRESSES

: Copies of the Joint Omnibus

Electronic Vessel Trip Reporting

Framework Adjustment prepared by the

Mid-Atlantic and New England Fishery

Management Council in support of this

action are available from Dr.

Christopher Moore, Executive Director,

Mid-Atlantic Fishery Management

Council, 800 North Street, Suite 201,

Dover, DE 19901. The supporting

documents are also accessible via the

internet at: https://www.mafmc.org/

actions/commercial-evtr-framework,

https://www.nefmc.org/library/omnibus-

commercial-evtr-framework, or http://

www.regulations.gov.

FOR FURTHER INFORMATION CONTACT

:

Moira Kelly, Senior Fishery Program

Specialist, phone: 978–281–9218; email:

Moira.Kelly@noaa.gov.

SUPPLEMENTARY INFORMATION

: Currently,

commercial vessels are required to

submit vessel trip reports (VTR) either

on paper or electronically following

each trip. Several fishery management

plans require weekly submission of

commercial vessel trip reports; others

require monthly submission. Vessels

issued a for-hire permit for a Mid-

Atlantic Council fishery are required to

submit vessel trip reports electronically

within 48 hours of the end of a fishing

trip (September 11, 2017; 82 FR 42610).

Vessels issued a for-hire permit for a

New England Council fishery are subject

to the same requirements as that FMP’s

commercial permit.

A detailed summary of the

development of this action can be found

in the supporting documentation (see

ADDRESSES

) and the proposed rule (July

17, 2020; 85 FR 43528).

Approved Measures

With this action, vessels issued a

commercial or for-hire permit for all

Mid-Atlantic and New England Council-

managed fisheries will be required to

submit vessel trip reports electronically

within 48 hours of the end of a fishing

trip. This action is applicable to all

commercial and for-hire permits issued

pursuant to the following Fishery

Management Plans: Atlantic Herring;

Atlantic Mackerel, Squid, Butterfish;

Northeast Multispecies; Surfclam and

Ocean Quahog; Atlantic Bluefish;

Atlantic Deep-Sea Red Crab; Atlantic

Sea Scallop; Summer Flounder, Scup,

Black Sea Bass; Monkfish; Northeast

Skate Complex; Spiny Dogfish; and

Tilefish. This requirement does not

apply to vessels issued only a Federal

lobster permit or to federally permitted

private recreational tilefish vessels (July

16, 2020; 85 FR 43149).

In addition to the method and

submission timeframe changes,

document retention requirements that

are no longer necessary with electronic

reporting will be removed. Specifically,

the requirement to retain copies of the

previously submitted vessel trip reports

on board the vessel will no longer be

applicable. Owners will have access to

trip reports submitted electronically on

the device from which they were

submitted and on the Fish Online

website.

There are no other changes to the

vessel trip reporting requirements,

including the requirement that vessel

operators are obligated to fill out the

vessel trip report with all information

ascertainable prior to entering port.

Implementation

Electronic Vessel Trip Reporting

Systems

There are several applications

available to vessel owners for electronic

vessel trip reporting. Information about

approved application platforms are

available on our website (https://

www.fisheries.noaa.gov/new-england-

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Published date	10 November 2020
Citation	85 FR 71553
Record Number	2020-24858
Section	Rules and Regulations
Court	Federal Contract Compliance Programs Office

RIN 1250-AA10

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