August 10, 2023Client Alert

OFCCP Releases New Predetermination Notice Rule

On August 4, 2023, the Department of Labor Office of Federal Contract Compliance Programs (OFCCP) published its new Pre-enforcement Notice and Conciliation Procedures Final Rule (the “PDN Rule”), which will go into effect September 5, 2023. PDNs notify contractors of the OFCCP’s preliminary finding that a contractor engaged in discrimination.

OFCCP Acting Director Michele Hodge announced the release of the new PDN Rule in an OFCCP blog, in which she touts the new rule as: “restor[ing] flexibility to OFCCP’s pre-enforcement and conciliation procedures, promot[ing] efficiency in resolving cases, strengthen[ing] enforcement and promot[ing] alignment of the standards of Title VII of the Civil Rights Act of 1964.” 

Absent a few minor clarifications, the Final PDN Rule is identical to the rule originally proposed by the OFCCP in March 2022. The Final Rule modifies the December 2020 Rule, which was issued at the end of the Trump administration and had been welcomed by many contractors.

Ultimately, the new PDN Rule removes procedural safeguards and makes the PDN and Notice of Violation (“NOV”) process less transparent for contractors. Key changes to the procedures in the new rule include:

  1. Removing the evidentiary requirements for PDNs and NOVs that are issued when the OFCCP identifies discrimination during a compliance review.

Under the 2020 rule, the OFCCP had to show both qualitative (testimony and documentation) and quantitative (data analysis) evidentiary support for its preliminary findings. The OFCCP was required to show that any disparity in the data analysis was “practically significant.” These safeguards are being eliminated with the new rule.  Now the PDN requires only that the OFCCP “describe[] the preliminary findings and provide[] the contractor an opportunity to respond.”

Without these procedural safeguards and data analysis, it will be an uphill struggle for contractors to defend PDNs and NOVs.   Namely, the OFCCP can be much less transparent with respect to evidence supporting the asserted violation.  With less information, it will be more challenging for contractors to explain and/or justify their practices. Further, with requiring less transparency and less support from the OFCCP, there is the serious concern that this new rule will result in increased OFCCP violations.

  1. Eliminating the requirement that PDNs must be approved by the OFCCP Director before issuance.

The 2020 rule required that all PDNs be approved by the OFCCP Director. The purpose of this was to ensure consistency. The new PDN Rule removes this requirement, which raises concerns for inconsistent PDNs.  

  1. Reducing contractors’ time for responding to PDNs.

Under the current rule, contractors have 30 days to respond to a PDN. The new rule cuts that time in half.  Contractors will only have 15 days to respond to a PDN. Extensions may only be granted for good cause. Given that PDNs are often issued with little or no notice and may include multiple allegations of discrimination that take time and energy to consider and respond to, this is a very short turnaround time.

  1. Permitting the OFCCP to issue NOVs for violations not included in PDNs.

The current rule required that a NOV could not include a discrimination finding that was absent from the PDN.  This provided a contractor the opportunity to fully respond to allegations in a PDN before getting to (and potentially avoiding) a NOV.  it arguably afforded the OFCCP to review the merits of a matter more thoroughly before making any final determination.  The new PDN Rule removes this requirement. This means that in some circumstances, contractors may first learn of a violation in a NOV (as opposed to in an PDN).

Additionally, the new rule also permits the OFCCP to issue a Show Cause Notice without first issuing a PDN or NOV, where the contractor has “failed to provide access to its premises for an on-site review or refused to provide access to witnesses, records, or other information.”

  1. Aligning the OFCCP’s conciliation standards with Title VII.

The new PDN Rule also now aligns the OFCCP’s conciliation standards with the standards set forth in Title VII. Namely, the new rule clarifies the “reasonable standard” that the OFCCP must satisfy when attempting to secure compliance through conciliation follows the same definitions as under Title VII.

FAQs on the PDN Rule can be found here.

This new rule will likely lead to more aggressive and less transparent audits, POVs, and NOVs by the OFCCP. It is increasingly important for contractors to be prepared for audits. Please reach out to your Michael Best attorney for assistance.

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