On September 8, 2023, the Office of Federal Contract Compliance Programs (OFCCP) released a list of 1,000 establishments for supply and service federal contractors selected to receive advance audit notices known as Corporate Scheduling Announcement Letters (CSALs). This CSAL list is double the number of contractor establishments selected in OFCCP's last supply and service CSAL list released on January 20, 2023.

Contractors on the CSAL list can find answers to some frequently asked questions below, including specific action items to take now. Contractors with establishments on the CSAL list should promptly start reviewing their OFCCP audit preparation and defense strategies at those establishments, particularly in light of OFCCP's new scheduling letter that (as we reported) significantly increases burden and potential risks for contractors.

What Are CSALs?

CSALs are courtesy letters that OFCCP sends to federal contractors to alert them that one or more of their establishments will likely be scheduled for an OFCCP audit in the coming months. Receipt of a CSAL, however, does not mean that the contractor has been scheduled for an OFCCP audit. OFCCP audits do not begin until a contractor receives the Office of Management and Budget (OMB) approved scheduling letter from OFCCP. Contractors on the CSAL list are typically scheduled for audits, so contractors that receive CSALs should check their OFCCP audit preparation and defense strategies to ensure they are prepared for an audit.

How Did OFCCP Select Contractors for This CSAL List?

The September 2023 CSAL list includes a total of 1,000 contractor establishments selected for the following types of potential OFCCP audits:

  • 30 corporate management compliance evaluations (CMCE) reviews;
  • 922 traditional establishment-based compliance evaluations;
  • 36 functional affirmative action plans compliance evaluations; and
  • 12 university compliance evaluations.

According to OFCCP's methodology, OFCCP used the following criteria to select contractors for this CSAL list:

  • For establishment-based reviews (other than financial institutions, universities, and colleges), OFCCP selected contractors engaged in "low-wage industries," utilizing the Bureau of Labor Statistics Quarterly Census of Employment and Wages data for Q4 2022 and non-construction contractors that received "the highest frequency of contracts awarded through the Bipartisan Infrastructure Bill" Using these "two parameters," OFCCP then selected contractors engaged in the "following NAICS sectors were selected: Agriculture, Forestry, Fishing and Hunting; Manufacturing; Retail Trade; Professional, Scientific, and Technical Services; Administrative and Support and Waste Management and Remediation Services; Accommodation and Food Services; and Other Services (except Public Administration)."
  • OFCCP started with a list of federal contracts valued at $50,000 or more from the USAspending database and refined the pool by removing certain types of contracts, such as TRICARE, and retaining contractor establishments with the highest employee counts in each OFCCP district office.
  • OFCCP matched company names and addresses against the 2021 EEO-1 filings to obtain employee counts. For each parent company with at least one contract of $50,000 anywhere in the organization, all establishments that meet the scheduling list's criteria were included in the eligible pool of contractors. If a parent company had two or more establishments on the CSAL list, OFCCP assigned these audits to a single OFCCP region so that it could review these in a "coordinated manner."
  • OFCCP created the pool of eligible financial institutions by downloading Federal Deposit Insurance Corporation (FDIC)-insured banks, addresses, and employee counts from the FDIC online data tools.
  • OFCCP said that it removed the following establishments from the CSAL list, including establishments: (1) currently under review; (2) currently in a monitoring period pursuant to a conciliation agreement; (3) currently within the exemption period following a closed review; (4) currently pending scheduling for review from a prior scheduling list; or (5) have an active separate facilities waiver.

When Should Contractors on the CSAL List Expect to Receive a Scheduling Letter?

Contractors on the CSAL list will not be subject to an OFCCP audit until they receive a scheduling letter from OFCCP. Historically, OFCCP sent CSALs to service and supply contractors as a courtesy to let them know that one or more of their establishments may be scheduled for an OFCCP audit and gave them at least 45 days' advance notice to prepare for the compliance review. Las year, OFCCP changed its policies to allow contractors to be scheduled for an audit immediately after the CSAL list has been published.

OFCCP's new scheduling letter also allows OFCCP to issue the scheduling letter via email with a read receipt requested, so contractors should make sure that the appropriate personnel at the establishments that may be selected for audit monitor their email inboxes.

Can Contractors Get Extensions of Time to Respond to OFCCP Scheduling Letters?

Contractors should not anticipate receiving an extension to respond to the scheduling letter except in very limited circumstances. Contractors have 30 days from the date they receive the scheduling letter (whether electronically via email or by physical copy) to provide the information requested in OFCCP's current scheduling letter. Under the current administration, OFCCP will only grant extensions for submitting responses to the scheduling letter and itemized listing under "extraordinary circumstances," such as extended medical or military leave absences of key personnel responsible for OFCCP compliance, localized or company-specific disaster affecting records retrieval (e.g., flood, fire, computer virus), or unexpected turnover or departure of key affirmative action personnel.

Despite OFCCP significantly expanding the number of items in the scheduling letter contractors will be required to provide at the outset of audits, OFCCP has not changed its position on granting extensions to the 30-day timeline. Instead, OFCCP's new scheduling letter states that OFCCP may initiate enforcement proceedings if the requested information is not provided within 30 calendar days of the contractor's receipt of the letter.

What Should Contractors Do If They Believe Their Establishment Is on the CSAL List in Error?

OFCCP collects contract data from USAspending.gov and establishment-level data from the EEO-1 filings. Sometimes the information OFCCP uses to select contractor establishments for the CSAL list is outdated. Contractors may find that one of their establishments has been closed or is relocated in the CSAL list or the establishment name may not reflect the company name due to corporate changes, such as a merger or acquisition.

Contractors that believe OFCCP should not have selected an establishment identified on the CSAL list should consider working with their counsel to determine if there is a basis to ask OFCCP to remove them from the CSAL list.

What Should Contractors Do Now If They Are on the CSAL List?

Contractors on the CSAL list should promptly begin preparing for a potential audit. Below are some proactive steps to consider.

  • Notify Relevant Staff to Watch for CSALs or Scheduling Letter: CSALs and scheduling letters are typically sent to the HR Director (or designated point of contact) at the establishment on OFCCP's audit list. As these individuals are not always responsible for the contractor's affirmative action compliance (or even aware of the contractor's affirmative action obligations), contractors should notify HR personnel and other designated points of contact at their establishments to keep a lookout for those notices in the coming weeks.
  • Prepare for a Potential Audit Now: Contractors on the audit list should take advantage of the advance notice by immediately reviewing their affirmative action practices in preparation for a potential audit. OFCCP has recently made several significant changes, showing that it intends to conduct more aggressive and less transparent audits. OFCCP has also recently issued a new scheduling letter and itemized listing, significantly expanding the documents and data contractors will be required to submit at the outset of the audit. The new scheduling letter not only increases the time and burdens associated with responding to the scheduling letter, but it also increases risk of OFCCP finding potential areas of noncompliance or indicators of discrimination, which could prolong the audit or result in adverse findings. Investing ample time up front to have a good initial submission can potentially save significant costs in defending an audit and avoid unnecessary adverse findings.

    The review should generally begin with determining which type of compliance review will be conducted (i.e., establishment review, corporate management compliance evaluation, or functional affirmative action plan review) and then using OFCCP's new scheduling letter and itemized listing as a guide for preparing the initial submission. It is critical to closely review any materials and data that will be submitted to OFCCP to ensure they are accurate, consistent, and compliant.
  • Pay Close Attention to Areas Showing Adverse Impact, Especially Hiring and Compensation: OFCCP has been effective at pursuing and settling systemic discrimination cases in the last few years. In many instances, the best defense to these claims is having a good offense. If a contractor has potential indicators of discrimination for hiring, promotions, terminations, or compensation, it should immediately analyze those areas, under the attorney-client privilege, to ensure that the data and similarly situated employee groupings (SSEGs) underlying those indicators are accurate or that the contractor has legitimate explanations for those indicators.
  • Collect and Closely Review Compensation Factors and Policies: Under OFCCP's new scheduling letter, contractors must now provide OFCCP with the following information for each employee at the establishment under audit: (1) "relevant data on the factors used to determine employee compensation"; and (2) "documentation and policies related to the contractor's compensation practices, including those that explain the factors and reasoning used to determine compensation (e.g., policies, guidance, or trainings regarding initial compensation decisions, compensation adjustments, the use of salary history in setting pay, job architecture, salary calibration, salary benchmarking, compensation review and approval, etc.)." If contractors "do not maintain any of these items," they will have to inform OFCCP of that fact in the initial submission. Not only do these new requirements increase the burden on contractors to collect, quality check, and assess their compensation practices, but it also provides OFCCP a greater opportunity to identify issues for investigation during audits and increases the likelihood of OFCCP alleging pay discrimination findings.
  • Ensure You Can Document Privilege for Pay Equity Studies: OFCCP issued a directive last year and updated its scheduling letter to require contractors to provide copies of their regulatory required pay studies. The new scheduling letter requires contractors to provide documentation demonstrating at least the following for their regulatory required pay analysis:
    • When the compensation analysis was completed;
    • The number of employees the compensation analysis included and the number and categories of employees the compensation analysis excluded;
    • Which forms of compensation were analyzed and, where applicable, how the different forms of compensation were separated or combined for analysis (g., base pay alone, base pay combined with bonuses, etc.); and
    • That compensation was analyzed by gender, race, and ethnicity.

Since this documentation will be required at the beginning of audits, contractors should start considering now what type of analysis they will perform to meet the 41 C.F.R. Section 60-2.17(b)(3) requirement and the type of documentation they will have available to prove to OFCCP that analysis was conducted if they plan to withhold that analysis on attorney-client privilege grounds.

  • Collect and Review Technology and Artificial Intelligence (AI) Based Selection Tools: Under OFCCP's new scheduling letter, contractors will have to identify and provide documentation to OFCCP about their "policies, practices, or systems used to recruit, screen, and hire, including the use of artificial intelligence, algorithms, automated systems or other technology-based selection procedures." Accordingly, contractors should start tracking and evaluating their use of such tools to understand how they are being used. Contractors should assess those tools (under attorney-client privilege) to determine if they have any potential adverse impact based on protected characteristics.
  • Reminder to Certify that Affirmative Action Plans (AAPs) Have Been Completed: All contractors subject to OFCCP's AAP obligations are now required to certify to OFCCP that they have created and maintained a current AAP in compliance with the laws enforced by OFCCP. The certification must be done annually. Last year, contractors were required to provide this certification on or before June 29, 2023, using OFCCP's contractor portal. OFCCP has not yet announced the deadline for when contractors must make the certification for 2024, but we anticipate that the deadline will be around that same time. Contractors who have not certified should consider doing so as soon as possible since OFCCP has prioritized selecting contractors for audit when they have failed to certify compliance with this requirement.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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