November 27, 2013

The Equal Employment Opportunity Commission (EEOC) and Office of Federal Contract Compliance Programs (OFCCP) have taken a number of steps over the last several months that indicate the agencies are preparing to shift their investigative and litigation focus to targeting systemic, or company-wide, discrimination by employers. As described below, employers need to understand and respond to these changes in order to avoid becoming the object of unwanted scrutiny.

The most obvious of the recent developments came in an EEOC task force report issued in March 2006. The task force concluded that while the EEOC had successfully litigated a number of systemic discrimination cases, it had not focused sufficiently on "consistently and proactively identifying systemic discrimination." The report concluded that the EEOC should begin to take a much more proactive and coordinated approach to ferreting out systemic discrimination as part of its investigatory processes.

Even before the March 2006 task force report, both the EEOC and OFCCP were engaged in rule-making and other activities designed to aid them in tackling systemic discrimination by employers. In March of 2004, both agencies proposed the adoption of new "guidance" concerning internet applicants for employment. Although the EEOC still has public comments on its proposed guidance under consideration, the OFCCP adopted new rules relating to the treatment of internet applicants effective February 6, 2006. These rules, together with the interpretive guidance yet to be issued, will provide significant new tools to the enforcement agencies in detecting and addressing systemic discrimination in the hiring process. The new guidelines, which require employers to collect, and make available to the agency, demographic information concerning the so-called "internet applicants," have a much broader scope than many employers might suspect. Ultimately, they will allow the OFCCP to analyze the adverse impact of the searches employers use to cull qualified applicants from large computer databases of resumes. With some variation, the OFCCP rules apply to both an employer's internal databases and to the use of internet job boards such as Monster.com.

On April 19 of this year, the EEOC published a new section of its Compliance Manual dealing with "Race and Color Discrimination." The section deals extensively with selection procedures used for hiring and promotion, and stresses the requirement that hiring standards having an adverse impact must be "job-related and consistent with business necessity." The EEOC evaluates compliance with this requirement through application of the Uniform Guidelines on Employee Selection Procedures, which govern how an employer may demonstrate the validity of its selection processes. With its new (or renewed) focus on systemic discrimination, the EEOC may be poised to engage in much greater scrutiny of employers' selection processes, and to stop overlooking the use of unvalidated procedures such as the informal, unstructured interviews that are the most commonly used hiring process in the U.S.

Finally, in June 2006, the OFCCP announced final rules governing its use of a statistical technique, known as "multiple regression analysis," to analyze employers' compensation structures for systemic discrimination. Although the EEOC has utilized similar techniques for quite some time (and includes in its Compliance Manual a detailed description of its methods for detecting "statistically significant differences" in pay), the OFCCP has abandoned a previous focus on employer-established pay ranges in favor of an analysis of "similarly situated" groups of employees, much like the EEOC applies. In announcing and summarizing its new rules, the OFCCP also stated that it intends to begin looking much more frequently, and intentionally, at compensation discrimination issues on a systemic basis. The OFCCP also issued "voluntary guidelines" for employers who wish to engage in their own self-analysis using the same statistical techniques and standards. And while the OFCCP is encouraging contractor-employers to not only self-analyze, but also to share the results of this self-analysis with the agency, employers must think long and hard about the potential ramifications of doing so, particularly if they wind up receiving a Notice of Violation from the agency later.

The bottom line for employers is this: Federal enforcement agencies have announced, and begun to implement, their intention to focus their efforts and resources on identifying and stamping out systemic discrimination in hiring and compensation. Now is the time for employers to focus their own attention on finding and addressing their own systemic vulnerabilities before the gaze of the EEOC or OFCCP falls upon them.