What is I-O?

Industrial-organizational (I-O) psychology is the scientific study of the workplace. Rigor and methods of psychology are applied to issues of critical relevance to business, including talent management, coaching, assessment, selection, training, organizational development, performance, and work-life balance.

The Center for Corporate Equality Releases a Review of OFCCP Settlements From Fiscal Year 2007

David B. Cohen
Senior Vice President, Center for Corporate Equality

Eric M. Dunleavy
Senior Consultant, Center for Corporate Equality

On March 11, 2009, The Center for Corporate Equality (CCE)¹ released a report analyzing enforcement results compiled by the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) on their equal employment and affirmative action requirements. The report, entitled A Review of OFCCP Enforcement Statistics: A Call for Transparency in OFCCP Reporting, offers a detailed analysis of the agency’s enforcement activity that resulted in $51,680,950 in back pay and annualized salary and benefits for 22,251 American workers who had been subjected to unlawful employment discrimination. These results are likely of interest to I-O psychologists working in federal contractor and subcontractor organizations, as well as to I-O psychologists working in consulting organizations that develop personnel practices for federal contractors and subcontractors.    

¹ CCE is a national nonprofit employer association based in Washington, DC dedicated to creating workplaces free from bias and unlawful discrimination by harnessing the synergies between human resource functions and promoting affirmative action and equal employment regulatory compliance. CCE members are the senior corporate leaders representing the compliance, compensation, and staffing functions from some of the largest global corporations in the world.

Report coauthor David Cohen, CCE senior vice president, added “Our goal in analyzing this data was not to judge how OFCCP should conduct its enforcement operations, and this report contains no judgments. We simply wanted to analyze the conciliation agreements and consent decrees that made up OFCCP’s fiscal year 2007 enforcement results and report on what we found,” he said. “This report provides useful baseline data so enforcement trends can be tracked in future years.” Eric Dunleavy PhD, senior consultant and report coauthor, said one of the key findings is “that systemic discrimination is an important OFCCP enforcement initiative. The data confirm what OFCCP has been telling us all along—that systemic discrimination is an important enforcement initiative, and it’s clear they have expended considerable resources into that area.” 

Background

In recent years the OFCCP has released “record breaking” results of their enforcement efforts to ensure employers doing business with the federal government comply with the equal employment opportunity (EEO) and affirmative action provisions of their contracts. For fiscal years 2005 through 2008, OFCCP reported that it had conducted a total of nearly 16,000 audits of federal contractors’ affirmative action programs and collected about $215.8 million in financial remedies for approximately 76,800 workers through settlements with these contractors. Despite these impressive statistics, however, OFCCP has publicly disclosed very few details about what kinds of discriminatory practices they found during their compliance evaluations of federal contractors and what kinds of employees and/or applicants were impacted by them. As a result, the public does not have access to important information it needs to fully evaluate how the OFCCP enforces its equal employment and affirmative action programs. Moreover, federal contractors do not have access to important information about these settlements that would help them improve their EEO and affirmative action compliance programs. To address this enforcement data gap, CCE decided to take its own close look at the underlying information that OFCCP uses to develop its enforcement reports and to share the results with stakeholders. To our knowledge, this is the only publicly released report containing an in-depth analysis of OFCCP’s fiscal year 2007 enforcement results, the most recent year in which data was available.

Several important details are not available in OFCCP’s annual enforcement reports, and these details are important for stakeholders to understand. For example:

• What types of industries did the reported $215.8 million in financial remedies come from?
• How were financial remedies calculated when OFCCP alleged systemic discrimination? 
• Did covered individuals hold lower or higher level jobs? 
• On what basis did contractors discriminate against covered individuals, and what types of personnel practices were involved? 
• How long does it take OFCCP to resolve a compliance evaluation that results in a settlement with financial remedies—1 year, 2 years, or even longer? 
• Does OFCCP enforce its programs uniformly across its various regional offices that serve as the front-line enforcers for the agency?

In addition, given the public outcry over the gender–wage gap and OFCCP’s systemic compensation discrimination guidelines (2006), it would be useful to know whether, in fact, OFCCP uncovered systemic compensation discrimination against women in their pay, to what extent, and what personnel practices led to pay discrimination. In the 16,000 compliance evaluations conducted by OFCCP during the past 4 fiscal years, what did the OFCCP find contractors doing well, and in what areas could employers improve? These are all examples of important data that would benefit the public and would help contractors make any necessary improvements and adjustments in their EEO and affirmative action compliance programs. The detailed data would also provide valuable baseline trends to evaluate OFCCP’s progress in subsequent enforcement reports. Without detailed enforcement data, the public is unable to fully understand how the OFCCP carries out its mission and what impact their operations have on various constituencies. Even the U.S. Government Accountability Office (GAO), which conducted a review last year of OFCCP’s compensation discrimination enforcement,² concluded there was insufficient record keeping at the agency.

² “Federal Agencies Should Better Monitor Their Performance in Enforcing Anti-Discrimination Laws,” Report to Congressional Requesters, GAO-08-799, U.S. Government Accountability Office, August 2008, http://www.gao.gov/new.items/d08799.pdf.

OFCCP FY 2007 Settlements

CCE obtained all settlements from OFCCP’s six regional offices for fiscal year 2007.  Some settlements included financial remedies related to allegations of systemic discrimination, whereas others included only technical violations that did not require financial remedies. CCE decided to analyze only those settlements that resulted in financial remedies stemming from allegations of systemic discrimination. In total, CCE analyzed 58 conciliation agreements and three consent decrees from FY 2007 that resulted in financial remedies. Here is a summary of the key findings.

• Systemic discrimination: The OFCCP has moved to a “systemic” paradigm of enforcement where compliance evaluations target employment practices that can discriminate against a large group of potential victims.
• Hiring discrimination: Hiring discrimination was the major focus in FY 2007 enforcement, making up almost 95% of settlements. The other settlements focused on compensation discrimination. 
• Promotions and terminations: There were no settlements that focused on promotion or termination in FY 2007. 
• Lower level jobs and industries: Certain lower level jobs (e.g., laborers and operative positions) were the focus in about 75% of settlements. Certain industries (e.g., food service and manufacturing industries) were the focus in more than 50% of settlements. 
• Women and minorities: Women and minorities were the protected groups in about the same number of settlements. 
• Non-Hispanics (including Whites): Non-Hispanics (including Whites) were the protected group in three settlements. 
• Statistical significance tests: Statistical significance tests (e.g., the Z test in large sample cases and Fisher’s exact test in small sample cases) were the clear method of adverse impact analysis. 
• 80% Rule: The 80% rule was not found in a single settlement. 
• Data aggregation: The OFCCP aggregated data (across job, year, etc.) in the majority of settlements. 
• Length of audits: Audits took an average of 2.5 years to conciliate. 
• FAAPs and CMCEs: There were no findings of systemic discrimination in either the Functional Affirmative Action Plan (FAAP) or Corporate Management Compliance Evaluations (CMCE) reviews. 
• Interest on financial remedies: The vast majority of financial remedy calculations included interest for the full period of the audit. 
• Differences between OFCCP regional offices: There were important differences by OFCCP region, including differences in the: 
  • number of settlements, 
  • federal contractor industries involved in settlement, 
  • protected groups that were alleged victims of discrimination, 
  • methods used to calculate financial remedies, 
  • length of conciliation to settlement.

Settlements That Focused on Employee Selection Procedures

Twelve settlements provided specific details concerning the employment practices evaluated in the OFCCP audit and why those practices were alleged to be discriminatory. These settlements are perhaps most relevant to I-O psychologists because they exemplify hiring practices that presumably did not fare well under OFCCP scrutiny.  Six of the twelve settlements included allegations of discriminatory applicant screening tools (e.g., resumé review, training, experience and education survey, scored application blank, etc.), four included allegations of a discriminatory “paper-and-pencil” test, two included allegations of a discriminatory employment interview, and one included general allegations of a discriminatory selection process that was subjective in nature. Key points from these settlements include the following:  

• The subjectivity of employment decisions was a major theme across many of these settlements; unstructured and subjective processes are “easy” challenges from a legal defensibility perspective.
• In some cases, the selection procedure under review was no longer in use; practices that were used in the past but are no longer in use can still be challenged by OFCCP. 
• In some situations, a selection procedure was developed for one job and then used to make hiring decisions for another. 
• The Uniform Guidelines on Employee Selection Procedures (UGESP) were the only technical authority used to assess whether the validity evidence associated with an employment practice was adequate. 
• Various settlements confirmed the notion that the absence of a validation study equates to a discriminatory employment practice when adverse impact exists. 
• One settlement focused on the cut score used to determine who passes and who fails a test, reiterating the notion that the cut score is a critical component to the legal defensibility of employment decisions. 
• In multiple settlements a selection procedure was used to make hiring decisions, yet a few test takers that failed the procedure were hired anyway. As expected, these decisions are not legally defensible under most circumstances.

Interpretation of Results and Next Steps

It is important to note that some of the results found in the FY 2007 settlement data may not reliably predict OFCCP’s future enforcement strategies. Given the temporal lag of EEO enforcement, the effects of changes in OFCCP enforcement strategy may not be evident until years later. Many FY 2007 settlements stem from OFCCP compliance evaluations that were initiated in 2003 and 2004, and before new enforcement initiatives were implemented. For example:

• The OFCCP’s Federal Contractor Selection System (FCSS), which determines the vast majority of federal contractor locations that will be audited in a fiscal year, was implemented in 2004. As such, settlements from audits that started after FCSS implementation may be different in terms of content from those initiated prior to the FCSS.
• The effects of OFCCP’s Active Case Management system, in which the agency uses centralized scheduling and statistical software to better target its resources towards contractor facilities engaged in systemic discrimination, were not fully realized until 2005. Thus, given the time lag in EEO enforcement, settlements from fiscal year 2008 and later may have different audit content than FY 2007 settlements. 
• OFCCP hired some key technical staff in recent years, particularly in the areas of statistical analysis and employment testing. This group is in part responsible for developing and implementing new policies and procedures related to these areas in recent years. Thus, settlements from audits starting after new policies and procedures have been implemented may be different than those considered in this review. 
• OFCCP released their compensation standards in 2006, and this temporal lag might explain the surprisingly small number of FY 2007 settlements that focused on systemic compensation discrimination, as well as how OFCCP managed these audits technically. It is likely that OFCCP enforcement results for fiscal years after 2007 would include substantially more systemic compensation discrimination cases, particularly in light of new administration support for pay equity measures, such as the recently enacted Ledbetter Fair Pay Act.

The full report is publicly available at www.cceq.org. CCE intends to conduct similar analyses annually and to eventually track OFCCP enforcement trends over time. The “record breaking” enforcement results that OFCCP has reported for the last 4 fiscal years are impressive. However, unless OFCCP begins to provide in-depth data in the future that explains their enforcement results, the public will continue to be denied information that it needs to understand the agency’s operations and decisions. We recognize the public has diverse interests and perspectives about how the agency should enforce its equal employment opportunity and affirmative action mission. Transparency in OFCCP’s enforcement reporting is one area where all stakeholders should find common ground.