The Fox OFCCP Report

November 2012

What the Obama Re-Election Means For OFCCP
"You're going to need a bigger boat"

It does not mean "more of the same". The President won a narrow, but nonetheless decisive, victory. But, he has little or no "mandate" and had very short "coattails", as pundits say in the Nation's Capital. While the states will continue to tally ballots for several more weeks and refine the election results, it appears the morning after the election that President Obama won the popular vote by only about 2.8 percentage points. The House of Representatives remains firmly in Republican control with a healthy margin, although the President's coattails did apparently shrink the margin by adding two more Democratic House members in a chamber in which all 435 seats were up for re-election (a gain of .0045 of the total seats). The Senate stayed in Democratic control and is now more firmly controlled by Democrats (up from 51 to 53 Democrats), although it is still often "iffy" for the President because of the pressure of numerous conservative Southern "Blue Dog" Democrats and the presence of two "Independents" who caucus with the Democrats. And, the President lost over 50 Electoral College votes from his 2008 landslide victory over John McCain. Significantly, too, Governor Romney attracted more votes than successful President Bush did in 2004. And while 120 million people voted in this election, 93 million registered voters (over 40%) decided to sit it out and not vote.

It is not just the Congress which is at loggerheads: the country is divided almost right down the middle. The first President Bush could not win re-election. His son's re-election was the closest Presidential race in history. And now, we have another very close conclusion to a bitterly fought election. We remain a nation divided.
  1. The Wild Card: Much of OFCCP's direction in the second Obama term depends on the Administration's people. Will Secretary of Labor Solis stay? (She is certainly welcome to stay having helped to deliver 72% of the Hispanic vote to the President. The inside-the-beltway wager is that the Secretary will stay on at Labor.)

    Will OFCCP Director Pat Shiu stay? OFCCP, unlike the EEOC, is run by a de facto "CEO". There is one Director who essentially runs a $100 million dollar company called the OFCCP. The OFCCP Director's job is terribly important and the Director can and does immediately affect the agency's policy, regulatory, and audit direction. Every OFCCP Director tries to "get out" of OFCCP in the second term if s/he can. The OFCCP Director's job is a terribly demanding job running a very controversial agency, with 750 employees flung wide and far over 70+ offices and with technical compliance and challenging regulatory initiatives abounding. Being an EEOC Commissioner with nothing but personal staff and almost no responsibility, or being a Civil Rights Commission member with little responsibility (and no clout), is a part-time job for an OFCCP Director. It's hard work to be the OFCCP Director, as it is for any CEO responsible to run a large organization. And the job exhausts most people who have sat in the Director's chair. Shirley Wilcher and Charles James got stuck in their jobs at OFCCP. Pat Shiu will look, but will she find an opening elsewhere in the Administration or in the private sector to her liking? She is really dedicated to public service.

    But, even if there are jobs elsewhere available within the Administration, there are no applicant flow logs kept on who was considered and "the reason for rejection". This is all political decision-making, often influenced by luck, timing, and serendipity. (I was called to The White House soon after a White House dinner at which the Secretary of the Cabinet happened to ask two of my clients, about an hour apart, who should be the next EEOC General Counsel? When I went for the interview, I told the Secretary I was not interested. In the process, the Secretary told me, though, that the Secretary of Labor had just offered the OFCCP Director job to one of my clients. I called her that night to congratulate her on her appointment. She said was declining the job in the morning. I urged her to reconsider. Over the next few days she agreed to take the job, but on one condition: that I become her Deputy. Can you be an "Applicant" without having first expressed interest?)

    OFCCP Director Shiu is a substantive person and lawyer and I do not see her taking "a lateral" or a demotion to the EEOC or the Civil Rights Commission. The Justice Department would be very hard work and the head of the Civil Rights Division is always a difficult position to secure and fraught with much political in-fighting. If Director Shiu leaves OFCCP, I see her going to the White House as a liaison to women and families, perhaps.

    If Pat does leave OFCCP, her replacement could take the agency in an entirely different direction, either good or bad for contractors, and could do so within months of arrival. There is so much work started, but left undone at this point; though, my sense is that Director Shiu will stay put and try to finish what she has started.

  2. Regulatory Agenda: OFCCP's ambitious regulatory agenda will now be delayed and OFCCP will have to "trim sail" on all of its controversial proposals the numerous regulatory proposals currently include. However, OFCCP should be able to get all its proposals to final, in some modified form, in the next four years. Why not pass into final form OFCCP's Section 503 proposals conforming them to the ADA Amendments Act? OFCCP did a very good and faithful job there to implement the instructions of the Congress. The Affirmative Action-side Section 503 proposals are a different issue, entirely, but my point is that one could bifurcate the proposals and pass now the portions which are not controversial.

    Only an expensive and concerted contractor campaign on Capitol Hill will stop OFCCP's regulatory agenda dead-in-its-tracks. The coming regulatory fights (plural: this will be a running gun-battle) also weigh heavily on whether Pat Shiu will want to stay at OFCCP. This is not going to be any fun. It is clear the President is going to try to bull his agenda through as though he had the massive mandate he had in the first term when he won in a landslide and carried Democrats into power in both Houses of Congress on the strength of his (then) very long coattails. At the same time, Congressman Kline is not going anywhere, and he has Secretary Solis and Director Shiu radar locked. I don't envy either side of that scrimmage, but do recommend helmets, full pads, and much valium. There is going to be constant and bruising scrimmaging ahead on OFCCP regulatory reform.

  3. OFCCP Audit Procedures: The election results do not change OFCCP's audit procedures, however, one iota. Rather, audit processes and procedures are beyond the micro-management of the Congress. Accordingly, the OFCCP Director will continue to do whatever she wishes to do within the boundaries of the law. As a result, OFCCP audits will continue to be costly, frustrating, adversarial, and have a long running time from start to finish. Corporate HR and legal departments need to budget more expense for the coming year. I also see an interesting trend beginning: in-house representatives and HR consulting firms are choosing to bow out of OFCCP audits with increasing frequency and earlier in the process than has historically been the case. The head-knocking and bruising which trial lawyers take for granted is not well suited for the more cooperative, pleasant, and accommodating HR professionals.

  4. Policy Development: The election results do not change OFCCP's policy development, however, one iota. Rather, the OFCCP Director will continue to pronounce policy changes at OFCCP when and as she pleases. Whether outreach is important or not important or whether audits should be by industry or by some other algorithm, among many others, are policy issues the OFCCP Director will make as though the election never occurred.

  5. OFCCP's Compensation Discrimination Audits: The election results do not change one iota OFCCP's exorbitantly costly - what it likes to call - investigations of "widespread systemic compensation" discrimination among federal contractors. Nor will the election change OFCCP's relentless hunt to find the claimed "widespread systemic compensation" discrimination. Rather, the election results confirm the White House's primary political calculus that the President could get political mileage out of championing women's issues. To win, the White House long ago knew that the President had to win a "significant margin" of female voters to win re-election. And he did: post-election polling confirms the President differentially won the women's vote by 11%. Signing the Lilly Ledbetter Act into law as his very first major action as President was not an accident of what piece of paper he first found on his desk as he entered the Oval Office as President for the first time. Signing the LLA first was a political act conceived 4 years ago to pay dividends on November 6, 2012. Having Lilly Ledbetter deliver a keynote prime-time TV speech at the recent Democratic convention also was not a scheduling accident. There is (and was) a long range Democratic Party strategy and plan here, folks.

    1. Contractors must understand that the compensation issue at OFCCP is not a test, as OFCCP would have you believe, to determine whether there is in fact "widespread compensation discrimination" in America. Rather, federal contractors are a convenient political football the President can toss around to move his troops down the field. It is very important to the White House that there be a compensation SNARK hunt to keep the political conversation going so as to hold the attention of women, many of whom still think there could be some truth to the rumor that there is widespread compensation discrimination in America. (If you are not familiar with SNARK hunts, please refer to Lewis Carroll's famous poem regarding the impossible voyage of an improbable crew to find an inconceivable creature.) It is the discussion and focus on the compensation issue which gets the White House the political mileage it wants. The objective is not necessarily to prove that compensation discrimination exists, although the White House would view that as "gravy".

    2. The White House/Democratic Party agenda for the next four years is to keep the compensation SNARK hunt conversation alive by sending out the improbable crew and talking A LOT about compensation discrimination and the Obama Administration's hunt for it. The one thing the White House cannot tolerate from OFCCP, however, is a report of no SNARK sightings. So, the OFCCP will continue to be under GREAT pressure from the White House to periodically report victory, in audits, however small and inconsequential. Said another way, OFCCP needs another $250,000 AstraZeneca compensation settlement from time to time to keep the sense alive among women voters, both that there is a problem and that the Obama Administration and Democrats are there to save them.

      • TAKEAWAY: OFCCP will shift the White House's pressure to occasional federal contractors which will find themselves under great pressure in audits to "knuckle under" to outrageous, relative to the true facts, settlements of trumped-up and pressured compensation claims.

        The compensation discussion at OFCCP, said another way, will not care that an occasional federal contractor is trampled and victimized in the course of the SNARK hunt. And federal contractors generally must understand this issue is just a political expedient offering a discussion platform during the next four years. The compensation issue is not going away despite the damning statistics to date. The Obama OFCCP has now convincingly demonstrated that there is no widespread unlawful compensation discrimination in America affecting women adversely because of their sex. (OFCCP is harvesting only about $500,000 per Fiscal Year in compensation settlements from the almost 10,000 audits OFCCP has undertaken since June 6, 2010 when it went to full "employee-level" compensation audits. OFCCP harvested, it reports, only 27 Conciliation Agreements, nationwide, recovering back pay for compensation discrimination in FY 2011 (the last full year for which reporting data are available.) That is .006 of the 4300 reported OFCCP audits in FY 2011. (Yes, there are 3 places after that wee-little hard-to-see decimal point). At the same time, contractors are now spending a reported $30,000-$50,000 per audit to defend to OFCCP each and every compensation decision they have made as to each and every employee. (That is well over $100 million per year.) A Martian landing on our planet and seeing this situation would surely wonder if we had all lost our senses. Terrible regulatory policy, but GREAT politics!

      • SECOND TAKEAWAY: Contractors need to "dig in" for a rough journey ahead for the next four years as compensation audits will continue to be "the flavor of the day" and will continue to be costly, frustrating, and bruising affairs. And, as I wrote in my February 2012 column, there are two reasons why federal contractors cannot just willy-nilly "write-the-check" to settle OFCCP's non-meritorious, yet hard-pressed, compensation claims the way contractors have done for decades as to failure-to-hire cases. And, if you do get tagged for a (statistically rare) OFCCP audit (OFCCP audits only about 2-3% of the federal contractor establishments available for audit each year), get more budget. Much more budget. I am reminded as I write this about the famous scene in the movie Jaws as the hapless Chief of Police Martin Brody (Roy Schneider) first sees his attacker at sea from the stern of Captain Quint's boat (the shark hunter - not Snark hunter) and deadpans those now immortal words : "You're going to need a bigger boat":
FINALE: I am also reminded of the Chinese proverb, which many consider a curse: "May you live in interesting times". 2013 is going to be an "interesting year". And that reminds me finally of an oft forgotten Chinese proverb, which is actually the second (of three total) of escalating curses which start with the "interesting times" proverb. The second is: "May you come to the attention of those in authority", often translated as "May the government be aware of you". And that reminds me, in turn, of what my son said election night as it became clear that the President was going to be re-elected and my OFCCP practice would continue its head-knocking journey of hand-to-hand combat in difficult OFCCP audits: "Dad, do you want us to get you a flak jacket for Christmas?" My wants-to-be a Marine daughter then offered to give me hers off her back. But, in fact, I am privately hoping for an IronMan suit from Santa - so you can fight, and then fly away, to fight another day… And that leads us to the third Chinese proverb in the series: "Be careful what you wish for"!

The will not publish in December, so this is my last column for 2012. Enjoy the Holidays! May 2013 be less interesting for federal contractors!