Under Trump Budget, OFCCP’s Focus Remains on Tech and Finance Contractors

July 5, 2017Alerts Labor & Employment Alert

Information technology and financial services companies with federal contracts will continue to be a focus of the Office of Federal Contract Compliance Programs (OFCCP) under the Trump Administration, according to the agency’s fiscal year 2018 proposal. By developing best practices, tech and finance firms can prepare for, and/or mitigate the impact of, a resource-intensive and costly OFCCP audit or enforcement action.

The OFCCP is tasked with ensuring that federal contractors are in compliance with their equal employment opportunity and affirmative action obligations. Under Executive Order 11246, as amended, federal contractors and subcontractors are prohibited from engaging in discrimination on the basis of race, religion, sex, sexual orientation, gender identity, or national origin. Section 503 of the Rehabilitation Act of 1973, as amended, prohibits employment discrimination against individuals with disabilities. Finally, the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, as amended, makes unlawful employment discrimination against protected veterans. 

Recently, legislators and policymakers have paid a significant deal of attention to closing the gender pay gap, particularly in highly compensated industries such as information technology and financial services – sectors that compose a significant component of the American economic engine. This attention is also reflected in the OFCCP’s fiscal year 2018 budget proposal. In that proposal, the Trump Administration announced that the OFCCP will establish two “Skilled Regional Centers” to be located in the respective information technology and financial services capitals of the country, San Francisco (Pacific) and New York (Northeast). The Pacific and Northeast Skilled Regional Centers will have, “highly skilled and specialized compliance officers capable of handling various large, complex compliance evaluations in specific industries, such as financial services or information technology.” Like the previous administration, the OFCCP has also declared that it intends on “combating pay discrimination through intensive contractor compliance assistance aimed at educating contractors about their contractual obligations, supporting their voluntary compliance with those obligations, and conducting high quality compliance evaluations.” 

This industry focus is a continuation of the OFCCP enforcement priorities seen in the final years of the Obama administration. By way of illustration, the OFCCP brought suit against a number of technology and financial services giants in President Obama’s final month in office, including a complaint against a multinational banking and financial services company for sex discrimination in compensation, a complaint seeking the disclosure from a global Internet-related technology firm of compensation data as part of a nearly two-year long audit into pay equity practices at the corporation, and a complaint against a computer engineering and database software company asserting “systemic compensation discrimination against women and Asians and African Americans,” among other allegations at its global headquarters.  Recently, in December 2016, the OFCCP settled a claim of pay discrimination with a financial planning company on behalf of 20 black employees in the amount of $128,000 in back wages and interest. In April 2017, the OFCCP and a computer software and services company settled charges of systemic discrimination in the hiring and selection process for engineering positions brought on behalf of a class of Asian applicants in consideration for $1,659,434 in back wages and other monetary relief, including stock options, as well as the extension of job offers to eight eligible class members. In June 2017, the OFCCP settled a claim of hiring discrimination claim for $420,000 in back wages, interest, and benefits brought on behalf of 60 Asian applicants denied associate auditor positions at a global accounting firm.

Despite the climate of deregulation under Trump and the reduction of the OFCCP budget in fiscal year 2018, federal contractors in the information technology and financial services sectors should remain prepared for potential audits and enforcement activity focused on their industries.  To this end, federal contractors should ensure that:

  • compensation is tied to a transparent, merit-based system;
  • discretionary bonuses are heavily scrutinized to prevent a disparate impact on protected classes; and
  • audits assessing hiring and compensation practices are conducted regularly in conjunction with outside counsel.

For more information about this alert or any other issue involving OFCCP compliance matters, please contact Kenneth A. Rosenberg at 973.994.7510 or [email protected], Asad Rizvi at 973.994.7817 or [email protected], or any member of Fox Rothschild’s Labor & Employment Department.