Pre-enforcement Notice and Conciliation Procedures, 51717-51737 [2023-16098]

Download as PDF Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations * * * * * [FR Doc. 2023–16600 Filed 8–3–23; 8:45 am] BILLING CODE 6560–50–P DEPARTMENT OF LABOR Office of Federal Contract Compliance Programs 41 CFR Parts 60–1, 60–2, 60–4, 60–20, 60–30, 60–40, 60–50, 60–300, and 60– 741 RIN 1250–AA14 Pre-enforcement Notice and Conciliation Procedures Office of Federal Contract Compliance Programs, Labor. ACTION: Final rule. AGENCY: The U.S. Department of Labor publishes this final rule to modify procedures and standards the Office of Federal Contract Compliance Programs (‘‘OFCCP’’ or ‘‘the agency’’) uses when issuing pre-enforcement notices and securing compliance through conciliation. This final rule strengthens OFCCP’s enforcement by rescinding the evidentiary standards and definitions codified in 2020 (‘‘the 2020 rule’’), which hindered the agency’s ability to pursue meritorious cases. OFCCP is instituting a streamlined, effective, and flexible pre-enforcement and conciliation process that promotes greater consistency with Title VII of the Civil Rights Act of 1964 (‘‘Title VII’’). DATES: These regulations are effective September 5, 2023. FOR FURTHER INFORMATION CONTACT: Tina Williams, Director, Division of Policy and Program Development, Office of Federal Contract Compliance Programs, 200 Constitution Avenue NW, Room C– 3325, Washington, DC 20210. Telephone: (202) 693–0103 or toll free at 1–800–397–6251. If you are deaf, hard of hearing, or have a speech disability, please dial 7–1–1 to access telecommunications relay services. SUPPLEMENTARY INFORMATION: SUMMARY: TKELLEY on DSK125TN23PROD with RULES1 I. Legal Authority OFCCP administers and enforces Executive Order 11246, as amended (‘‘E.O. 11246’’); Section 503 of the Rehabilitation Act of 1973, as amended, 29 U.S.C. 793 (‘‘Section 503’’); and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, as amended, 38 U.S.C. 4212 (‘‘VEVRAA’’), as well as their implementing regulations. Issued in 1965, and amended several times in the intervening years, E.O. 11246 has two principal purposes. First, it VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 prohibits covered Federal contractors and subcontractors 1 from discriminating against employees and applicants because of race, color, religion, sex, sexual orientation, gender identity, national origin, or because they inquire about, discuss, or disclose their compensation or that of others, subject to certain limitations.2 Second, it requires covered contractors to take affirmative action to ensure equal employment opportunity. The requirements in E.O. 11246 generally apply to any business or organization that (1) holds a single Federal contract, subcontract, or federally assisted construction contract in excess of $10,000; (2) has Federal contracts or subcontracts that, when combined, total in excess of $10,000 in any 12-month period; or (3) holds Government bills of lading, serves as a depository of Federal funds, or is an issuing and paying agency for U.S. savings bonds and notes in any amount. Supply and service contractors with 50 or more employees and a single Federal contract or subcontract of $50,000 or more also must develop and maintain an affirmative action program that complies with 41 CFR part 60–2. Construction contractors have different affirmative action requirements under E.O. 11246, codified at 41 CFR part 60– 4. Enacted in 1973 and amended since, the purpose of Section 503 is twofold. First, Section 503 prohibits employment discrimination on the basis of disability by Federal contractors. Second, it requires each covered Federal contractor to take affirmative action to employ and advance in employment qualified individuals with disabilities. The requirements in Section 503 generally apply to any business or organization that holds a single Federal contract or subcontract in excess of $15,000.3 1 Hereinafter, the terms ‘‘contractor’’ or ‘‘Federal contractor’’ are used to refer collectively to Federal contractors and subcontractors that fall under OFCCP’s authority, unless otherwise expressly stated. This approach is consistent with OFCCP’s regulations, which define ‘‘contract’’ to include subcontracts and ‘‘contractor’’ to include subcontractors. 2 The nondiscrimination protections and standards under E.O. 11246 are interpreted consistently with those under Title VII of the Civil Rights Act of 1964 (‘‘Title VII’’). See OFCCP v. Greenwood Mills, Inc., Nos. 00–044, 01–089, 2002 WL 31932547, at *4 (ARB Final Decision & Order Dec. 20, 2002) (‘‘The legal standards developed under Title VII of the Civil Rights Act of 1964 apply to cases brought under [E.O. 11246].’’). 3 Effective October 1, 2010, the coverage threshold under Section 503 increased from $10,000 to $15,000, in accordance with the inflationary adjustment requirements in 41 U.S.C. 1908. See Federal Acquisition Regulation; Inflation Adjustment of Acquisition-Related Thresholds, 75 FR 53129 (Aug. 30, 2010). PO 00000 Frm 00023 Fmt 4700 Sfmt 4700 51717 Pursuant to Section 503, contractors with 50 or more employees and a single Federal contract or subcontract of $50,000 or more also must develop and maintain an affirmative action program that complies with 41 CFR part 60–741, subpart C. Enacted in 1974 and amended in the intervening years, VEVRAA prohibits Federal contractors from discriminating against employees and applicants because of their status as protected veterans (defined by the statute to include disabled veterans, recently separated veterans, Armed Forces Service Medal Veterans, and active duty wartime or campaign badge veterans). It also requires each covered contractor to take affirmative action to employ and advance in employment these veterans. The requirements in VEVRAA generally apply to any business or organization that holds a single Federal contract or subcontract in excess of $150,000.4 Pursuant to VEVRAA, contractors with 50 or more employees and a single Federal contract or subcontract of $150,000 or more also must develop and maintain an affirmative action program that complies with 41 CFR part 60–300, subpart C. Pursuant to these authorities, receiving a Federal contract comes with a number of responsibilities. Contractors are required to comply with all provisions of these authorities as well as the rules, regulations, and relevant orders of the Secretary of Labor. Where OFCCP finds noncompliance under any of the three authorities or their implementing regulations, it utilizes established procedures to either facilitate resolution or proceed to administrative enforcement as necessary to secure compliance. A contractor found in violation that fails to correct violations of OFCCP’s regulations may, after the opportunity for a hearing, have its contracts canceled, terminated, or suspended and/or may be subject to debarment. II. Summary of Relevant Background This final rule, like the 2020 rule it modifies, focuses almost entirely on OFCCP’s pre-enforcement resolution procedures. This includes the processes by which the agency notifies Federal contractors of the agency’s findings during the compliance evaluations it conducts, and how the agency seeks to conciliate matters in which it finds a 4 Effective October 1, 2015, the coverage threshold under VEVRAA increased from $100,000 to $150,000, in accordance with the inflationary adjustment requirements in 41 U.S.C. 1908. See Federal Acquisition Regulation; Inflation Adjustment of Acquisition-Related Thresholds, 80 FR 38293 (July 2, 2015). E:\FR\FM\04AUR1.SGM 04AUR1 51718 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations violation of its regulations prior to referring a matter to the Office of the Solicitor for possible enforcement. To provide background and context for this final rule, we first summarize how OFCCP had traditionally accomplished this prior to the 2020 rule, the changes that the 2020 rule made to this approach, and how the agency proposed to modify this approach in the 2022 Notice of Proposed Rulemaking (NPRM). A. OFCCP’s Use of Pre-Enforcement Notices Prior to the 2020 Rule TKELLEY on DSK125TN23PROD with RULES1 For decades prior to the promulgation of the 2020 rule, the regulations most relevant to OFCCP’s pre-enforcement resolution procedures remained unchanged.5 OFCCP’s general regulations on compliance evaluations provided that, when OFCCP finds deficiencies in contractors’ compliance with its regulatory obligations, it will make ‘‘reasonable efforts . . . to secure compliance through conciliation and persuasion. . . .’’ 6 If the compliance evaluation found a material violation of the legal authorities administered by the agency, the contractor was willing to correct the violations, and OFCCP determined that settlement was appropriate, the parties would enter into a written conciliation agreement.7 If the agency had reasonable cause to believe that the contractor violated OFCCP’s authorities and the contractor would not correct the violation, the agency could issue a notice requiring the contractor to show cause (‘‘Show Cause Notice’’), within 30 days, why enforcement proceedings or other appropriate actions should not be instituted.8 For decades, OFCCP evaluated and conciliated with contractors under this regulatory framework. In addition to these regulatory provisions, OFCCP, as a matter of agency policy, long provided contractors with additional notice of its findings and an opportunity to respond during the course of its compliance evaluations and prior to any referral for 5 These regulations were not substantively revised by the 2020 rule, and this final rule makes only minor clarifying revisions to one of the provisions, as discussed in more detail below. 6 41 CFR 60–1.20(b); 60–300.60(b); 60–741.60(b). 7 41 CFR 60–1.33; 60–300.62; 60–741.62 (2019). While the 2020 rule added additional provisions to these sections of the regulations, the language on conciliation agreements remained substantively the same. 8 41 CFR 60–1.28; 60–300.64; 60–741.64 (2019); Compliance Responsibility for Equal Employment Opportunity, 43 FR 49240, 49247 (Oct. 20, 1978); Revision of Chapter, 33 FR 7804, 7810 (May 28, 1968). These regulations were not modified by the 2020 rule. VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 enforcement.9 Specifically, whenever discrimination or other violations were found during the course of a compliance review, prior to the issuance of a Show Cause Notice, OFCCP would issue to the contractor a Notice of Violation.10 The Notice of Violation would notify the contractor that the agency found violations of the legal authorities it administers, and would specify the corrective actions the contractor would have to take in order to resolve the violations.11 OFCCP required that the Notice of Violation indicate the reasons for each finding and, if appropriate, note the contractor’s failure to adequately justify its actions.12 Contractors were provided an opportunity to respond to the Notice of Violation and to attempt to conciliate the violations prior to issuance of a Show Cause Notice.13 Additionally, prior to the issuance of a Notice of Violation, OFCCP would in certain circumstances issue a Predetermination Notice. The 2020 rule traced the agency’s use of the Predetermination Notice back to 1988.14 Since that time, the agency has used the Predetermination Notice in a variety of circumstances. In those situations in which it was used, the purpose of this pre-enforcement notice has been to convey to the contractor an analysis of concerns OFCCP identified during its review indicating potential discrimination, whether referred to as ‘‘preliminary findings’’ or ‘‘preliminary indicators.’’ Historically, issuance of a Predetermination Notice was not required. In 2018, however, OFCCP issued a Directive on the use of Predetermination Notices, requiring that OFCCP issue them ‘‘for preliminary individual and systemic discrimination findings identified during the course of compliance evaluations,’’ and providing contractors with an opportunity to respond prior to OFCCP deciding to issue a Notice of Violation.15 This Directive remains in effect. 9 See generally Federal Contract Compliance Manual (FCCM), Chapter 8, Resolution of Noncompliance, available at https://www.dol.gov/ agencies/ofccp/manual/fccm/chapter-8-resolutionnoncompliance (last accessed Dec. 1, 2022). 10 Id. at Chapter 8F, Notice of Violation, available at https://www.dol.gov/agencies/ofccp/manual/ fccm/chapter-8-resolution-noncompliance/8fnotice-violation (last accessed Dec. 1, 2022). 11 Id. 12 Id. 13 Id. 14 ‘‘Nondiscrimination Obligations of Federal Contractors and Subcontractors: Procedures to Resolve Potential Employment Discrimination,’’ 85 FR 71553, 71561 (Nov. 10, 2020). 15 Directive 2018–01, Use of Predetermination Notices, (Feb. 27, 2018), available at https:// www.dol.gov/agencies/ofccp/directives/2018-01 (last accessed Dec. 1, 2022). PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 B. The 2020 Rule In November 2020, OFCCP published a final rule amending its regulations regarding the agency’s pre-enforcement resolution procedures.16 The 2020 rule changed the obligations placed on the agency in several respects. First, the 2020 rule codified 17 that OFCCP would issue a Predetermination Notice and Notice of Violation in any compliance evaluation 18 in which the agency found potential discrimination or other material violations of its legal authorities.19 Accordingly, in combination with the Show Cause Notice already required by the regulations, the 2020 rule required OFCCP to provide the contractor with three separate pre-enforcement notices during the course of its compliance evaluation, and an opportunity for contractors to respond to each,20 prior to a decision to refer a case to the Office of the Solicitor for possible enforcement. In addition, the 2020 rule established specific evidentiary requirements that OFCCP would need to meet in order to issue pre-enforcement notices. These requirements applied equally to the Predetermination Notice and the Notice of Violation. First, the rule required OFCCP to identify and disclose to contractors in the Predetermination Notice and Notice of Violation the theory of discrimination—disparate treatment and/or disparate impact— under which it was proceeding. Second, depending on the theory of discrimination, the 2020 rule required OFCCP to meet specific evidentiary thresholds in order to issue any preenforcement notice. For matters 16 85 FR 71553. noted above, Directive 2018–01 required that OFCCP issue Predetermination Notices for preliminary individual and systemic discrimination findings identified during the course of compliance evaluations. The 2020 rule codified this practice. See 85 FR 71561. 18 The regulation stated that OFCCP ‘‘may’’ issue these notices, see 41 CFR 60–1.33(a) and (b) (2021), but this language was to account for OFCCP’s inherent enforcement discretion not to pursue enforcement in certain cases if it so chose. See generally Heckler v. Chaney, 470 U.S. 821 (1985). For any matters that OFCCP wished to pursue with potential discrimination or other material violations, the 2020 rule required the issuance of the Predetermination Notice and Notice of Violation. 19 85 FR 71553. The final rule, which took effect on December 10, 2020, was published after OFCCP considered comments it received on a notice of proposed rulemaking, Nondiscrimination Obligations of Federal Contractors and Subcontractors: Procedures To Resolve Potential Employment Discrimination, 84 FR 71875 (Dec. 30, 2019). 20 See 41 CFR 60–1.33; 41 CFR 60–300.62; 41 CFR 60–741.62 (providing the contractor an opportunity to respond to the Predetermination Notice, Notice of Violation, and Show Cause Notice). 17 As E:\FR\FM\04AUR1.SGM 04AUR1 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations TKELLEY on DSK125TN23PROD with RULES1 proceeding under a disparate treatment theory, the 2020 rule required OFCCP to set forth: (1) sufficient ‘‘quantitative evidence’’; (2) sufficient ‘‘qualitative evidence’’ that, in combination with other evidence, supported a finding that the contractor’s discriminatory intent caused disparate treatment; and (3) a demonstration that any observed disparities were also ‘‘practically significant.’’ 21 For matters proceeding under a disparate impact theory, the 2020 rule required the same findings of sufficient ‘‘quantitative evidence’’ and ‘‘practical significance’’ prior to issuing a pre-enforcement notice, as well as a requirement that OFCCP identify the specific policy or practice of the contractor causing the adverse impact. For purposes of further describing the evidentiary obligations OFCCP must meet to issue these pre-enforcement notices, the 2020 rule also included lengthy definitions of ‘‘quantitative evidence’’ and ‘‘qualitative evidence’’ detailing specific types and amounts of evidence that would satisfy the definition. Additionally, the 2020 rule required OFCCP to disclose the quantitative and qualitative evidence it had accumulated in ‘‘sufficient detail’’ to allow contractors to investigate and respond. It also required OFCCP to disclose ‘‘the model and variables used in any statistical analysis and an explanation for why any variable proposed by the contractor was excluded from that analysis.’’ Once OFCCP issued the Predetermination Notice, the 2020 rule provided contractors with 30 days to respond. As an alternative, the 2020 rule also codified a provision stating that contractors could waive the procedures for issuing a Predetermination Notice and/or Notice of Violation and enter directly into a conciliation agreement if they so chose. Finally, the 2020 rule included severability clauses that applied only to these new preenforcement obligations. The stated rationale for these revisions in the 2020 rule was ‘‘to increase clarity and transparency for Federal contractors, establish clear parameters for OFCCP resolution 21 The 2020 rule included some narrow exceptions where OFCCP would not be required to satisfy all three of these prongs in order to issue a Predetermination Notice, such as when qualitative evidence alone could satisfy a disparate treatment finding, or if the quantitative evidence was ‘‘so extraordinarily compelling that by itself it is sufficient’’ to support a disparate treatment finding. 41 CFR 60–1.33(a)(2). As discussed in the NPRM and herein, however, Title VII does not require meeting such rigid requirements in order to satisfy a prima facie case; rather, case law provides that the standards of proof in such cases are flexible and fact-specific. VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 procedures, and enhance the efficient enforcement of equal employment opportunity laws.’’ 22 The 2020 rule preamble further asserted that the rule would ‘‘provide[ ] contractors with more certainty as to OFCCP’s operative standards for compliance evaluations, and provide[ ] guardrails on the agency’s issuance of pre-enforcement notices.’’ 23 As a result, OFCCP concluded that the 2020 rule would ‘‘help [the agency] to increase the number of contractors that the agency evaluates and focus on resolving stronger cases through the strategic allocation of limited agency resources.’’ 24 The 2020 rule further clarified that the Department was issuing the rule ‘‘as an exercise of its enforcement discretion,’’ and that the approach codified in the rule was ‘‘neither compelled nor prohibited by Title VII and OFCCP case law.’’ 25 C. The 2022 NPRM On March 22, 2022, OFCCP published a NPRM that proposed to rescind most, though not all, provisions in the 2020 rule.26 OFCCP proposed to retain the requirement that it would issue Predetermination Notices and Notices of Violation to contractors in matters in which OFCCP found preliminary indicators of discrimination. OFCCP also proposed to retain the regulatory language regarding early resolution, which provides that contractors may waive the pre-enforcement notice procedures if they enter directly into a conciliation agreement. OFCCP proposed to remove or modify the other provisions in the 2020 rule. OFCCP proposed to eliminate the specific evidentiary requirements of 41 CFR 60–1.33(a) and (b) that the agency needed to meet to issue a Predetermination Notice or Notice of Violation. This included the requirement to identify the theory of discrimination at the pre-enforcement notice stage, the requirement to provide specific and different forms of ‘‘quantitative’’ and ‘‘qualitative’’ evidence as defined by the 2020 rule, the definitions of ‘‘quantitative’’ and ‘‘qualitative’’ evidence, and the requirement to demonstrate that any disparities identified were also ‘‘practically significant.’’ 22 85 FR 71553. 23 Id. 51719 The NPRM provided multiple reasons for these proposed modifications.27 First and foremost, the NPRM explained that many of the key stated objectives of the 2020 rule—to promote more effective enforcement, increase the number of contractors that the agency evaluates, and promote greater certainty and clarity regarding the agency’s resolution procedures—had not been met. Rather than creating clear standards and more effective enforcement, the NPRM noted that the 2020 rule instead resulted in time-consuming disputes with contractors over the application of the new requirements. The NPRM also described how the 2020 rule placed certain obligations on OFCCP that went beyond, or were even in some cases inconsistent with, Title VII principles and case law. For instance, the 2020 rule required OFCCP to demonstrate practical significance, a concept that is not found in the Title VII statute and that multiple circuit courts have held is not necessary in order to satisfy a prima facie case of employment discrimination. The 2020 rule also included rigid evidentiary thresholds for issuing pre-enforcement notices, such as requiring specific types and amounts of ‘‘quantitative evidence’’ and ‘‘qualitative evidence’’ as defined by the rule with only narrow exceptions, which the NPRM explained were inconsistent with the general principle that the Title VII evidentiary standard is a flexible one dependent on the unique facts at issue in each case. The NPRM further emphasized that, beyond the rigid evidentiary requirements themselves, the 2020 rule’s requirement that OFCCP meet them prior to issuing pre-enforcement notices, while the investigation is still underway, had also proven problematic. Not only did this require OFCCP to meet a heightened evidentiary threshold before issuing even a preliminary notice of findings to contractors, but the same standard applied to both the Predetermination Notice and the Notice of Violation, rendering the two notices—which were originally intended to serve separate purposes—duplicative. Accordingly, the NPRM proposed to restore the function of the Predetermination Notice to convey preliminary findings of potential discrimination, providing contractors early notice when OFCCP had found potential issues and fostering more efficient exchanges of information that may focus the scope of review. 24 Id. 25 Id. As noted above, the nondiscrimination protections and standards under E.O. 11246 are interpreted consistently with those under Title VII. 26 See Pre-Enforcement Notice and Conciliation Procedures, 87 FR 16138 (Mar. 22, 2022). PO 00000 Frm 00025 Fmt 4700 Sfmt 4700 27 The reasons summarized here are some of the key points raised in the NPRM but is not an exhaustive list. For further detail and explanation, we refer readers to the NPRM itself, as well as the response to public comments in Section IV, infra. E:\FR\FM\04AUR1.SGM 04AUR1 51720 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations OFCCP also proposed to modify the period of time for contractors to respond to pre-enforcement notices from 30 to 15 days, noting that the latter was the timeframe for response that the agency had set forth in its 2018 Directive on Predetermination Notices and that it would continue its practice of providing extensions to contractors for good cause when needed.28 Additionally, OFCCP proposed to modify the severability clause included in the 2020 rule, expanding it so that it applied to all parts of OFCCP’s regulations, not just the specific section pertaining to OFCCP’s resolution procedures. Finally, OFCCP proposed two additional clarifications to the regulations related to, but not addressed by, the 2020 rule. First, OFCCP proposed language clarifying the ‘‘reasonable efforts’’ standard, which applies to the actions the agency must take ‘‘to secure compliance through conciliation and persuasion.’’ The NPRM proposed language clarifying that the standard should be interpreted consistently with Title VII and its requirement that the Equal Employment Opportunity Commission (EEOC) ‘‘endeavor to eliminate any such alleged employment practice by informal methods of conference, conciliation, and persuasion’’ prior to bringing an enforcement action, to ensure that OFCCP has the same flexibility in the administration of its laws as that recognized under Title VII by Congress and by the U.S. Supreme Court. Second, the NPRM clarified that, if OFCCP identified additional violations after issuing a Predetermination Notice, it could include those violations in a subsequent Notice of Violation or Show Cause Notice without amending and reissuing the Predetermination Notice. The NPRM explicitly stated that OFCCP would continue to provide contractors with an opportunity to respond to and conciliate any such violations prior to referring a case for enforcement. TKELLEY on DSK125TN23PROD with RULES1 D. Public Comments OFCCP received 11 public comments in response to the NPRM. The commenters included individuals, employer associations, law firms, a women’s rights legal advocacy organization, a labor rights organization, and a civil and human rights advocacy organization. Some commenters, such as the women’s rights legal advocacy organization, labor rights organization, and civil and human rights advocacy 28 See Directive 2018–01, Use of Predetermination Notices, (Feb. 27, 2018), available at https:// www.dol.gov/agencies/ofccp/directives/2018-01 (last accessed Dec. 1, 2022). VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 organization, generally supported the proposed rule, asserting that the 2020 rule imposed unnecessary, burdensome, and confusing enforcement standards that did not align with the requirements of Title VII and conflated the first two stages of OFCCP’s pre-enforcement process, thereby causing delay and wasting resources. These commenters believed that modifying the 2020 rule would restore consistency between OFCCP practice and Title VII and would reestablish the distinct roles of the Predetermination Notice and the Notice of Violation. Other commenters, such as employer associations and law firms, generally opposed the proposal, expressing concerns that the modification would remove transparency from the enforcement process, did not align with Title VII, and would afford contractors less due process. These commenters also asserted that OFCCP has not demonstrated a need for the rulemaking and believed that 15 calendar days was an inadequate amount of time to provide a response to a Predetermination Notice. In addition, one commenter raised concerns that the proposed use of the term ‘‘indicator of discrimination’’ signaled that OFCCP intended to issue Predetermination Notices based solely on the results of the agency’s initial analyses. These comments are explained in more detail and addressed by the agency in Section IV, below. III. Summary of the Final Rule After consideration of all significant issues raised in the public comments, this final rule adopts most of the revisions outlined in the NPRM, with some minor adjustments. As set forth in more detail below, the changes adopted in this final rule stem from OFCCP’s experience implementing the 2020 rule as well as its reconsidered policy judgment as to how OFCCP can strengthen enforcement of its requirements and promote consistency with Title VII principles. In sum, this final rule largely returns to the processes and standards under which OFCCP and contractors operated for many years prior to the effective date of the 2020 rule, while also providing additional certainty and notice to contractors. As proposed in the NPRM, this final rule does retain some provisions from the 2020 rule that will provide additional certainty and efficiency for contractors during the course of compliance evaluations. First, the final rule retains the requirement that OFCCP will issue a Predetermination Notice and Notice of Violation to contractors in PO 00000 Frm 00026 Fmt 4700 Sfmt 4700 all matters in which the agency has made preliminary findings of potential discrimination and findings of discrimination, respectively. Second, the final rule retains the early resolution provisions allowing OFCCP and the contractor to resolve identified issues without the need for OFCCP to issue a Predetermination Notice and Notice of Violation if the contractor so chooses. The final rule does include a few additional changes from what was proposed. First, the final rule replaces the term ‘‘indicators of discrimination’’ with ‘‘preliminary findings of potential discrimination’’ to describe what is necessary in order to issue a Predetermination Notice. Further detail regarding this change is set forth in Section IV, infra. Second, consistent with OFCCP’s longstanding practice and the 2020 rule, the final rule includes a clarification that the agency may issue a Show Cause Notice without first issuing a Predetermination Notice or Notice of Violation when the contractor has failed to provide access to its premises for an on-site review, or refuses to provide access to witnesses, records, or other information. Finally, the proposed language in the regulation on Predetermination Notices stated that if there was insufficient rebuttal evidence to the Predetermination Notice, the agency would ‘‘proceed with its review.’’ The final rule makes two minor clarifications. It first adds language to clarify that OFCCP’s determination on whether there was sufficient rebuttal evidence would be determined by the contractor’s response and any additional investigation undertaken by the agency, to clarify that the agency may conduct an additional investigation after issuing the Predetermination Notice and as a result of the contractor’s response to the Predetermination Notice. It also amends this provision to clarify that it will proceed ‘‘to issue a Notice of Violation,’’ which is the intended, more specific meaning. The final rule otherwise adopts the NPRM as proposed. A more detailed discussion of the public comments that OFCCP received follows in the next section. IV. Response to Public Comments A. Public Comments on Modifications to the E.O. 11246 Regulations 1. Evidentiary Standards a. Qualitative and Quantitative Evidence As described above, the NPRM proposed to amend § 60–1.3 by removing the 2020 rule’s definitions for ‘‘qualitative evidence’’ and E:\FR\FM\04AUR1.SGM 04AUR1 TKELLEY on DSK125TN23PROD with RULES1 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations ‘‘quantitative evidence.’’ OFCCP also proposed rescinding the requirement for the agency to provide both ‘‘qualitative’’ and ‘‘quantitative’’ evidence under a specific theory of proof before issuing a Predetermination Notice or Notice of Violation. OFCCP received eight comments on this topic from employer associations, law firms, and labor rights and advocacy organizations. A women’s rights legal advocacy organization agreed with removing the definitions. It stated that the definitions were confusing and further disagreed with the 2020 rule’s requirement that OFCCP provide both quantitative and qualitative evidence before issuing Predetermination Notices or Notices of Violation. It asserted that removing this requirement will ensure that OFCCP can conduct investigations efficiently, ‘‘without being forced to develop its full slate of evidence at a preliminary stage.’’ A labor rights organization and a civil and human rights advocacy organization made similar comments, describing how the definitions and requirements for showing qualitative and quantitative evidence departed from Title VII principles and hindered OFCCP’s ability to issue pre-enforcement notices based on the specific facts and circumstances uncovered through the compliance evaluation. One law firm stated that it understood why OFCCP would want to remove the qualitative and quantitative evidence definitions, as OFCCP should be able to evolve with Title VII’s interpretation.29 Some employer associations and law firms opposed removing the definitions and evidentiary requirements, asserting that the 2020 rule’s definitions were broad enough to allow OFCCP to effectively pursue cases and stating that OFCCP was not required to provide examples of every type of quantitative or qualitative evidence included in the definitions. OFCCP considered these comments and maintains that, on balance, the inclusion of the definitions created more problems than benefits. First and foremost, as set forth in the NPRM and expanded upon here, OFCCP found that these definitions created confusion and increased disputes regarding the evidence required to issue preenforcement notices. Specifically, since the 2020 rule went into effect, some contractors have asserted that OFCCP must present evidence in its preliminary pre-enforcement notices of the highly specific examples included in the definitions in order for the agency to 29 This firm disagreed with removing other aspects of the evidentiary requirements, which OFCCP addresses below. VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 satisfy the requirements of the 2020 rule. In one instance, rather than providing a substantive response to the agency’s preliminary determination notice, the contractor cited the 2020 rule, claiming that OFCCP failed to identify sufficient qualitative evidence of intentional discrimination. The contractor disputed the type of qualitative evidence OFCCP was permitted to use under the 2020 rule, asserting that information OFCCP obtained from interviews was not evidence, but instead speculative statements insufficient to infer discriminatory intent. These disputes are directly at odds with the 2020 rule’s stated intention of increasing clarity and enhancing the efficient enforcement of equal employment opportunity laws. In addition to these inefficiencies, OFCCP, upon further reconsideration, found that the codification of evidentiary definitions was confusing, overly particularized, and inconsistent with the general principle that the Title VII evidentiary standard is a flexible one dependent on the unique facts at issue. As otherwise discussed in the NPRM, the definitions in the 2020 rule included many examples of evidence demonstrating overt bias, including ‘‘biased statements, remarks, attitudes, or acts based upon membership in a protected class, particularly when made by a decision maker involved in the action under investigation.’’ 30 This type of highly specific evidence of discrimination is rare and not required by Title VII standards in order for a plaintiff to prevail.31 Yet, the inclusion of this language engendered contractor disputes over whether the evidence OFCCP presented met this definition. In addition, the definition did not encompass the full range of relevant evidence and ran counter to the flexibility needed to demonstrate discrimination based on the facts of each case. Further, although the ‘‘qualitative evidence’’ definition also applied to disparate impact matters, the definition was overly focused on evidence of discriminatory intent in disparate treatment cases. Although the definition included one example related to disparate impact cases—evidence related to ‘‘the business necessity (or lack thereof) of a challenged policy or practice’’ 32—that example was problematic because it was: (1) a 30 85 FR 71553, 71570–71574. Thomas v. Eastman Kodak Co., 183 F. 3d 38, 58 n.12 (1st Cir. 1999) (citing Hodgens v. Gen. Dynamics Corp., 144 F.3d 151, 171 n. 13 (1st Cir. 1998)) (noting that direct evidence, while probative of discrimination, is ‘‘rarely found in today’s sophisticated employment world’’). 32 85 FR 71557. 31 See PO 00000 Frm 00027 Fmt 4700 Sfmt 4700 51721 category of evidence that is the employer’s burden to demonstrate, after the agency establishes a prima facie case; 33 and (2) not the only sort of ‘‘qualitative’’ evidence that plaintiffs typically introduce or rely upon in the course of a disparate impact case.34 Another problem with the definition is that it included ‘‘whether the contractor has otherwise complied with its nondiscrimination obligations’’ as a type of permissible qualitative evidence. Upon reconsideration, OFCCP determined that this provision could easily be misinterpreted to mean that when a contractor complies with some of its nondiscrimination obligations, it somehow lessens the weight of evidence of noncompliance with other nondiscrimination obligations. Some commenters, including law firms and employer associations, also asserted that the requirement to show quantitative and qualitative evidence helped contractors better understand the preliminary indicators and helped them provide a meaningful response to the Predetermination Notice. One employer association expressed the importance of the 2020 rule’s requirement that OFCCP identify its theory of proof (i.e., disparate treatment or disparate impact) and the benefit of the clear parameters the 2020 rule provided for each theory. In response to these comments, OFCCP notes that the agency will continue to provide a Predetermination Notice describing its preliminary findings of potential discrimination and any other potential violations. This information enables the parties to clarify the issues, respond to each other’s positions, and work toward an efficient resolution. For proof at trial, the agency will marshal all relevant evidence to prove that discrimination has occurred, which will typically include interviews with a more expansive number of employees 33 42 U.S.C. 2000e–2(k)(1)(A)(i); see also Ricci v. DeStefano, 557 U.S. 557, 578 (2009) (‘‘An employer may defend against liability [for disparate impact discrimination] by demonstrating that the practice is ‘job related for the position in question and consistent with business necessity.’’ (quoting 42 U.S.C. 2000e–2(k)(1)(A)(i))); Wards Cove Packing Co., 490 U.S. at 659 (‘‘[T]he employer carries the burden of producing evidence of a business justification for his employment practice.’’). 34 By way of example, because a plaintiff in disparate impact cases must, where possible, identify the particular employment practice that is causing the adverse impact, see 42 U.S.C. 2000e– 2(k)(1)(B)(i), it is commonplace for a plaintiff to introduce testimony or interview statements from expert witnesses or company officials regarding its selection or compensation system that would provide necessary context and help to identify the particular employment practice at issue. Similarly, evidence regarding less discriminatory alternative employment practices is a common feature in disparate impact cases. 42 U.S.C. 2000e– 2(k)(1)(A)(ii). E:\FR\FM\04AUR1.SGM 04AUR1 51722 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations TKELLEY on DSK125TN23PROD with RULES1 and other witnesses and documents, data, and other information obtained through the investigative and discovery process. However, the agency need not provide the specific theory of proof or satisfy rigid evidentiary standards to provide preliminary notice of findings of discrimination.35 Furthermore, Title VII case law demonstrates that there are multiple ways to establish a prima facie case of discrimination as long as the plaintiff ultimately satisfies its burden of proof. As the U.S. Supreme Court and lower courts have long recognized, Title VII requires a case-by-case evaluation of the facts and circumstances.36 Additionally, prior to discovery in litigation, OFCCP may not have access to the full evidentiary record necessary to evaluate the precise theories of proof and would need to conduct depositions of witnesses and obtain relevant data and information for each stage of the employment process at issue before making this determination. Despite this, the 2020 rule required OFCCP to satisfy bright line statistical thresholds and proffer specific types of evidence to issue even preliminary notices of findings to contractors. Additionally, OFCCP agrees with the law firm comment that the removal of the qualitative and quantitative evidence definitions will enable the agency’s enforcement to evolve with developments in the interpretation of Title VII. Based upon further consideration of its position, the effect of the final rule, and the comments received, OFCCP has determined the 2020 rule’s rigid requirements were unnecessary, fostered confusion, and limited 35 Longstanding case law provides that OFCCP need not make an election between alternative theories of proof during litigation, let alone in the preliminary notice stage of a compliance review. OFCCP v. Honeywell, 77–OFC–3, 1993 WL 1506966, at *11 (Sec’y of Labor June 2, 1993) (‘‘no procedural election between alternative legal theories is required of a claimant at either pre-trial, or appellate stages’’) (citing Wright v. Nat’l Archives & Records Serv., 609 F.2d 702, 711 (4th Cir. 1979)); see also Teamsters v. United States, 431 U.S. 324, 336 n.15 (1977). 36 See Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 995 n.3 (1988) (noting that the Supreme Court has ‘‘not suggested that any particular number of ‘standard deviations’ can determine whether a plaintiff has made out a prima facie case in the complex area of employment discrimination’’); Gay v. Waiters’ & Dairy Lunchmen’s Union, Local No. 30, 694 F.2d 531, 551 (9th Cir. 1982) (‘‘It would be improper to posit a quantitative threshold above which statistical evidence of disparate racial impact is sufficient as a matter of law to infer discriminatory intent, and below which it is insufficient as a matter of law.’’); see also Alvarez v. Royal Atlantic Developers, Inc., 610 F.3d 1253, 1264 (11th Cir. 2010) (also noting, in an individual case without statistical evidence, that ‘‘[t]he methods of presenting a prima facie case are flexible and depend on the particular situation.’’). VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 OFCCP’s ability to pursue potentially meritorious cases. As noted above, the 2020 rule’s evidentiary standards placed certain obligations on OFCCP that went beyond, or were even in some cases inconsistent with, Title VII principles and case law. Accordingly, OFCCP is removing the definitions for qualitative evidence and quantitative evidence and is rescinding the requirement for OFCCP to provide both quantitative and qualitative evidence under a specific theory of discrimination in order to issue a Predetermination Notice or Notice of Violation. The NPRM also proposed removing the 2020 rule requirement that OFCCP disclose the quantitative and qualitative evidence the agency relied upon in the Predetermination Notice ‘‘in sufficient detail to allow contractors to investigate allegations and meaningfully respond.’’ 37 The requirement for OFCCP to provide ‘‘sufficient detail’’ for a contractor to ‘‘meaningfully respond’’ is inherently subjective. Some contractors argued that the anecdotal evidence that OFCCP shared to support its issuance of pre-enforcement notices failed to meet the qualitative evidence definition included in the 2020 rule. Contractors have also argued that the qualitative evidence that OFCCP provided was insufficient because the agency failed to disclose the identity of the interviewees who provided relevant statements at the Predetermination Notice stage. Additionally, commenters, including a women’s rights legal advocacy organization, a labor rights organization, and a civil and human rights advocacy organization, shared OFCCP’s concern articulated in the proposed rule that the requirement to disclose anecdotal evidence at this preliminary stage may have a chilling effect on the willingness of victims and witnesses to participate in OFCCP’s investigation due to concerns that an employer may uncover their identities, which could lead to retaliation. One commenter disagreed, citing OFCCP’s ability to protect a witness’ identity while still providing the required evidence. However, as described above, some contractors have nevertheless asserted that, under the 2020 rule, OFCCP must reveal the identity of relevant witnesses at the preliminary stage in order to meet the 2020 rule’s requirements. OFCCP believes this interpretation of the regulation is incorrect, as the government informer’s privilege generally protects the agency’s right to withhold the identity of confidential witnesses. 37 87 PO 00000 FR 16138, 16143. Frm 00028 Fmt 4700 Sfmt 4700 Nevertheless, it remains that the 2020 rule’s required disclosure of anecdotal evidence has led to extensive disputes about what information is sufficient under the rule, and OFCCP’s authority to protect witness’ confidentiality at the preliminary stages of investigations. These disputes over inherently subjective thresholds regarding what information needed to be proffered in preliminary notices of findings have limited OFCCP’s ability to pursue cases that would be actionable under Title VII standards. Accordingly, in the final rule, OFCCP is rescinding the requirement to disclose the quantitative and qualitative evidence relied upon in the Predetermination Notice.38 To promote consistency and notice to contractors, the final rule does require the use of the Predetermination Notice where the agency has made preliminary findings of potential discrimination. Further, the final rule specifies that in the Predetermination Notice, OFCCP will continue to describe the preliminary findings of potential discrimination and any other potential violations to enable the contractor to understand OFCCP’s position and provide a substantive response. b. Statistical Model and Variables While most comments opposing the rule focused on evidentiary standards as a whole, one law firm specifically requested that OFCCP retain the 2020 rule’s requirement that, upon the contractor’s request, OFCCP must provide the model and variables used in any statistical analysis and an explanation for why any variable proposed by the contractor was excluded from that analysis. The law firm asserted that sharing this information promoted transparency and helped contractors understand OFCCP’s analysis and allowed the contractor to more easily make a business decision to resolve the matter. In response, OFCCP declines to retain this requirement because imposing a regulation requiring the production of the model and variables used in any statistical analysis the agency performs and an explanation for why any variable proposed by the contractor was excluded from that analysis creates inefficiencies. The agency already has guidance that promotes sufficient transparency through the sharing of information by OFCCP, including information on the agency’s econometric methods and the provision 38 OFCCP retains discretion to disclose some or all of the quantitative and qualitative evidence supporting the Predetermination Notice, where appropriate. E:\FR\FM\04AUR1.SGM 04AUR1 TKELLEY on DSK125TN23PROD with RULES1 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations of replication data.39 OFCCP will continue to explain its statistical analysis in sufficient detail for the contractor to replicate the analysis and assess the merits of the agency’s findings. OFCCP will also continue to explain its rationale for excluding otherwise reasonable variables from its analysis. However, OFCCP has determined that imposing a regulatory requirement to provide the model and variables used in any statistical analysis, particularly at preliminary stages of the review, limits the agency’s effective enforcement of the law. First, the 2020 rule’s requirement for OFCCP to share its ‘‘model’’ is vague and subject to dispute, as the types of analyses and statistical techniques can vary widely from case to case, and the agency needs to exercise discretion over the aspects of its modeling that would be appropriate to share based on the stage of the investigation, the nature of the concerns identified, and a consideration of aspects of the analysis, tools, and techniques subject to deliberative process privilege. The regulatory requirement to explain ‘‘any’’ variables suggested by the contractor raises similar concerns by limiting OFCCP’s ability to exercise its enforcement discretion and promote efficiency in its investigation. Not all variables suggested by a contractor merit explanation and response. For example, variables that are highly correlated with other variables, those that do not impact selections or pay in the direction or magnitude claimed by the contractor, and those that are differentially distributed by gender or race but do not legitimately influence selection or pay may not warrant an explanation depending on the fact and circumstances of the matter. While OFCCP will address certain variables in appropriate circumstances, the categorical requirement that OFCCP address all proposed variables is inefficient. In sum, rather than expend resources responding to unproductive requests for further information, OFCCP has determined that to promote effective enforcement, the agency needs to have discretion to ascertain where providing further details about its modeling is likely to be productive. Removing the regulatory requirements that OFCCP produce its models and variables and address all variables suggested by a contractor will allow OFCCP to utilize its discretion to provide information on 39 See Directive 2018–05, Analysis of Contractor Compensation Practices During a Compliance Evaluation, issued Aug. 24, 2018, available at https://www.dol.gov/agencies/ofccp/directives/ 2018-05 (last accessed Dec. 5, 2022). VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 its modeling and variables to promote contractors’ understanding of concerns OFCCP has identified and to facilitate a prompt and successful resolution of compliance evaluations. c. Practical Significance In the NPRM, OFCCP proposed removing the regulatory requirement to demonstrate practical significance before issuing a Predetermination Notice.40 The agency received five comments on the proposal to remove this regulatory requirement from employer associations, a law firm, a women’s rights legal advocacy organization, and a civil and human rights advocacy organization. Two commenters supported removing the requirement, stating that whether Title VII requires a showing of practical significance is unsettled as a matter of law. One employer association commented that practical significance is a necessary consideration in scientific research and therefore cannot be ignored by the agency. The same commenter also believed that the use of practical significance allowed OFCCP to prioritize compliance evaluations with the strongest evidence and strategically allocate resources. Another employer association argued that removing the requirement to demonstrate practical significance before issuing a Predetermination Notice was generally inconsistent with Title VII principles and would effectively set a dual standard upon which contractors would be evaluated. A law firm commented that removing this requirement would be counterproductive as doing so would cause delays and reduce settlements. In response, OFCCP notes that it did not propose adopting a blanket policy to disregard practical significance. As part of its enforcement, dating back before the publication of the 2020 rule, OFCCP has utilized practical significance measures where appropriate in compliance evaluations, based on the specific facts of the case. There is no professional consensus among statisticians and labor economists regarding an appropriate or actionable practical significance threshold for all cases of employment discrimination.41 Further, the text of Title VII contains no 40 Practical significance refers to whether an observed disparity in employment opportunities or outcomes reflects meaningful harm to the disfavored group, focusing on the contextual impact or importance of the disparity rather than its likelihood of occurring by chance. 41 See Joseph L Gastwirth et al, On the Interplay Between Practical and Statistical Significance in Equal Employment Cases, 20 Law, Probability and Risk, 69, 69–87 (2022), available at https://doi.org/ 10.1093/lpr/mgac002 (last accessed June 22, 2022). PO 00000 Frm 00029 Fmt 4700 Sfmt 4700 51723 reference to practical significance,42 and the case law is unsettled as to whether Title VII specifically requires a finding of practical significance, and, if so, what level of practical significance is sufficient and appropriate.43 Therefore, the final rule removes the regulatory requirement to demonstrate practical significance prior to issuing a Predetermination Notice or Notice of Violation. OFCCP will continue to utilize the concept of practical significance where appropriate, along with statistical significance, and all other evidence gathered in the review, as part of a holistic approach that applies the case law and statistical techniques as they evolve to the compliance evaluations it investigates, conciliates, and refers for enforcement. d. General Comments Regarding the Evidentiary Standards OFCCP also received general comments in favor of and against removing the evidentiary standards that the 2020 rule imposed on OFCCP’s use of the Predetermination Notice and Notice of Violation. Commenters’ concerns about removing the evidentiary standards for the Predetermination Notice generally aligned with their concerns regarding the Notice of Violation. Labor rights and advocacy organizations agreed with removing the evidentiary standards, asserting that these heightened evidentiary standards were not aligned with Title VII and impeded OFCCP’s ability to enforce its legal authorities. Employer associations and law firms generally disagreed with removing the evidentiary standards. An employer association stated that the 2020 rule’s 42 See Elliot Ko, Big Enough to Matter: Whether Statistical Significance or Practical Significance Should Be the Test for Title VII Disparate Impact Claims, 101 Minn. L.R. 869, 889 (2016) (‘‘Title VII does not require plaintiffs to prove that an employment practice had a ‘large’ impact on a protected class. Title VII just requires plaintiffs to prove that ‘a particular employment practice’ had a disparate impact on a protected class. . . . Title VII only requires proof of a ‘disparate impact,’ not proof of a ‘very’ disparate impact that is large enough to warrant societal or moral condemnation.’’). 43 Several circuit courts have held that a finding of practical significance is not required in order to satisfy a prima facie case of discrimination. See, e.g., Jones v. City of Boston, 752 F.3d 38 (1st Cir. 2014); Apsley v. Boeing Co., 691 F.3d 1184 (10th Cir. 2012); Stagi v. Nat’l R.R. Passenger Corp., 2010 WL 3273173 (3d Cir. Aug. 16, 2010). Other circuit courts have considered measures of practical significance to varying degrees. See, e.g., Brown v. Nucor Corp., 785 F.3d 895, 908, 935 (4th Cir. 2015); Isabel v. City of Memphis, 404 F.3d 404, 412, 418 (6th Cir. 2005); Ensley Branch of NAACP v. Seibels, 31 F.3d 1548, 1555 (11th Cir. 1994); Waisome v. Port Auth. of N.Y. & N.J., 948 F.2d 1370, 1376 (2d Cir. 1991); Clady v. County of Los Angeles, 770 F.2d 1421, 1428–29 (9th Cir. 1985); Fisher v. Procter & Gamble Mfg. Co., 613 F.2d 527, 545 (5th Cir. 1980). E:\FR\FM\04AUR1.SGM 04AUR1 51724 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations TKELLEY on DSK125TN23PROD with RULES1 evidentiary standards were beneficial because contractors could use the standards to replicate OFCCP’s approach during their self-audits. OFCCP has concluded that the 2020 rule’s rigid evidentiary standards are not necessary for contractors to conduct self-audits. The agency provides extensive guidance and resources to assist contractors in conducting meaningful self-audits of their employment systems, including two recent public directives,44 the FCCM, compliance assistance materials, technical assistance guides, online contractor courses, and webinars. Through these materials, OFCCP provides transparency on how the agency will conduct compliance evaluations and promote a proactive approach to compliance. Additionally, as discussed thoroughly in the NPRM and elsewhere in this final rule, the evidentiary standards that the 2020 rule required the agency to meet exceeded those required by Title VII in certain respects, and thus are particularly inappropriate to require in order to issue preliminary notices of potential discrimination issued while the agency’s investigation is still ongoing. Employer associations and law firms also expressed concerns that removing the evidentiary standards would infringe on contractors’ due process by depriving them of the ability to evaluate alleged indicators of discrimination and impede their ability to meaningfully respond or correct problem areas. These commenters also stated that removing the evidentiary standards would lead to less transparency, resulting in lengthy disputes, fewer settlements, and increased litigation against the agency. Commenters also expressed concerns that removing the 2020 rule’s evidentiary standards would remove important ‘‘guardrails’’ against OFCCP’s enforcement where the agency does not have to meet any standards for issuing a Predetermination Notice or Notice of Violation and contractors would be subjected to a ‘‘vague, arbitrary, moving target.’’ In response, OFCCP notes that there are significant legal guardrails retained in this final rule that address concerns raised by commenters with regard to due process. This final rule will require the agency to issue to contractors three 44 See Directive 2022–02, Effective Compliance Evaluations and Enforcement (Mar. 31, 2022), available at https://www.dol.gov/agencies/ofccp/ directives/2022-02 (last accessed June 13, 2022); Directive 2022–01 Revision 1, Advancing Pay Equity Through Compensation Analysis (Aug. 18, 2022), available at https://www.dol.gov/agencies/ ofccp/directives/2022-01-Revision1 (last accessed Aug. 25, 2022). VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 separate notices regarding any preliminary findings or findings the agency makes related to discrimination before the agency makes a final determination about whether to refer the matter to the Office of the Solicitor for enforcement. Each of these notices requires OFCCP to describe its findings to date and invite the contractor to respond. Prior to issuing a Predetermination Notice, OFCCP’s field offices conduct thorough discussions of the preliminary findings of potential discrimination with senior leadership and consult with the Office of the Solicitor.45 These offices also confer with the agency’s Branch of Expert Services to discuss statistical analyses related to the preliminary findings of potential discrimination. Prior to issuing a Notice of Violation and a Show Cause Notice, the agency assesses the information provided by the contractor in response to a Predetermination Notice and Notice of Violation, respectively, and conducts further investigation as a result of the contractor’s response as necessary. After OFCCP issues a Show Cause Notice, it refers the matter to the Office of the Solicitor, which conducts its own independent review of OFCCP’s investigative findings to determine if it will file an administrative complaint. Beyond these significant legal guardrails, OFCCP notes that the preenforcement notice process provides an opportunity for contractors to provide relevant information to inform OFCCP’s understanding of the issues before the matter may proceed to a judicial forum, which provides notice and the opportunity to be heard before an impartial tribunal. Additionally, given the agency’s finite resources, OFCCP is strongly disincentivized to spend significant time pursuing cases that are unlikely to ultimately prove successful in court. Accordingly, OFCCP disagrees with the assertions that contractors are not afforded due process or that there are ‘‘no standards’’ that the agency needs to meet. Rather, the agency is largely returning to its long-standing pre-enforcement resolution practices in effect for decades prior to the 2020 rule, which have long provided a functional framework in which OFCCP and contractors have successfully conciliated hundreds of matters. Further, this final rule provides consistency in the formal notification and conciliation process. While this 45 See FCCM at 8B02 (last updated Jan. 7, 2021), available at https://www.dol.gov/agencies/ofccp/ manual/fccm (last accessed June 13, 2022) (discussing consultation with senior leadership and the Office of the Solicitor). PO 00000 Frm 00030 Fmt 4700 Sfmt 4700 final rule removes the overly formulaic standards in the 2020 rule that have hindered early discussion of issues and effective enforcement, the agency finds it beneficial to codify the formal notices it uses to communicate with the contractor community about potential violations throughout the stages of a review. Accordingly, this final rule retains the required use of the Predetermination Notice and Notice of Violation while rescinding the evidentiary standards for issuance of the Predetermination Notice and Notice of Violation. 2. Predetermination Notice Provisions a. Retaining the Use of the Predetermination Notice In the NPRM, OFCCP proposed retaining the required use of the Predetermination Notice in the regulations to convey ‘‘preliminary indicators of discrimination’’ to the contractor. OFCCP received three comments from employer associations and a law firm supporting OFCCP’s proposal to retain the Predetermination Notice in the regulations because it provides contractors an opportunity to understand the potential discrimination identified by OFCCP and potentially resolve matters at an earlier stage. The agency agrees with these comments, and the final rule retains the required use of the Predetermination Notice. However, as discussed elsewhere in this final rule, OFCCP has replaced the term ‘‘preliminary indicators of discrimination’’ with ‘‘preliminary findings of potential discrimination,’’ to provide additional clarity in response to one of the public comments. By continuing to require the use of the Predetermination Notice, OFCCP furthers its commitment to transparency and fosters the exchange of information to promote an efficient resolution. b. Issuing the Predetermination Notice In the NPRM, OFCCP proposed distinguishing the Predetermination Notice from the Notice of Violation and streamlining the compliance evaluation process by issuing the Predetermination Notice earlier than the 2020 rule allowed, where appropriate, to give the contractor an understanding of where the agency is seeing possible problems and focusing its investigative efforts. OFCCP will issue a Predetermination Notice to a contractor when it has preliminary findings of potential discrimination. OFCCP remains committed to providing notice of potential discrimination to contractors and as such has retained the required use of the Predetermination Notice in E:\FR\FM\04AUR1.SGM 04AUR1 TKELLEY on DSK125TN23PROD with RULES1 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations the final rule as discussed earlier in this preamble. In some instances, depending on the facts and circumstances of the particular compliance evaluation, OFCCP may provide this notice after the agency completes the desk audit. In many instances, however, it may be at a later stage of the investigation, such as after the conclusion of the on-site review or after OFCCP has completed its off-site analysis of the information obtained during the on-site review. Providing contractors notice of preliminary findings of potential discrimination through the Predetermination Notice facilitates understanding and efficient resolution. This provides contractors the opportunity to share additional information about their compliance in response to the concerns raised by OFCCP before the agency, if appropriate, issues a Notice of Violation. Three comments addressed whether OFCCP should issue the Predetermination Notice based on preliminary indicators of discrimination. The commenters included a civil and human rights advocacy organization and two law firms. The civil and human rights advocacy organization expressed support, stating there is no requirement in applicable federal law that forces OFCCP to wait until it can prove a case of discrimination before engaging with a contractor to discuss preliminary indicators of discrimination. The two law firms did not support the change. One law firm believed that proceeding with a Predetermination Notice at a preliminary stage on the basis of ‘‘mere ‘indicators of discrimination’ ’’ marks a ‘‘radical shift’’ in OFCCP policy. This commenter expressed concern that OFCCP intended to issue Predetermination Notices based solely on the results of the initial desk audit analyses that typically serve as the basis for follow-up requests for information. OFCCP disagrees with this view that the proposal represents a ‘‘radical shift.’’ As explained earlier, this final rule largely returns to the procedures that existed for years prior to December 2020. To the extent this final rule is different than that prior process, it provides more certainty for contractors in that the rule codifies the requirement that the agency issue a Predetermination Notice in all matters involving potential discrimination. Further, the commenter may have misinterpreted the use of the term ‘‘indicators of discrimination’’ in the proposed regulatory text. To provide clarity, OFCCP has modified this portion of the final rule to remove the reference to ‘‘preliminary indicators of VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 discrimination’’ and instead state that if a compliance evaluation indicates ‘‘preliminary findings of potential discrimination,’’ OFCCP will issue a Predetermination Notice describing those preliminary findings. As explained earlier in this preamble, this change in terminology is intended to convey that OFCCP will issue a Predetermination Notice only after OFCCP has reviewed the available evidence related to any disparity or other indicators and concluded that the record available suggests potentially unlawful discrimination. In the Predetermination Notice, OFCCP provides the contractor with information concerning the agency’s preliminary findings of potential discrimination and requests that the contractor provide any additional information or documentation the contractor believes OFCCP should consider before making a final determination of compliance. This final rule allows OFCCP to tailor the issuance of the Predetermination Notice to the facts and circumstances of each compliance evaluation. By rescinding the rigid evidentiary standards, which functionally required that a predetermination notice could not be issued until the completion of the compliance evaluation, the final rule allows OFCCP to provide contractors with earlier written notice of preliminary findings of potential discrimination. This focuses the contractor’s attention on specific issues as early as possible, allowing a more streamlined and efficient transfer of information. In the NPRM, in discussing when OFCCP will issue a Predetermination Notice after it has identified concerns indicating potential discrimination, OFCCP proposed changing the reference to ‘‘preliminary findings’’ to the term ‘‘preliminary indicators’’ to highlight the difference in purpose between the Predetermination Notice and the Notice of Violation.46 The Predetermination Notice conveys OFCCP’s analysis of preliminary findings of potential discrimination, provides the contractor a formal opportunity to respond with additional information, and is issued prior to the agency’s final determination of compliance. The Notice of Violation provides OFCCP’s findings of violation(s) and their corresponding required corrective action(s) and invites the contractor to voluntarily enter into a conciliation agreement. The contractor may also provide additional information regarding its compliance after receipt of the Notice of Violation, or after receipt 46 87 PO 00000 FR 16138, 16152–16154. Frm 00031 Fmt 4700 Sfmt 4700 51725 of a Show Cause Notice, although earlier responses promote a more efficient and effective process for both the contractor and OFCCP. As discussed above, to avoid confusion about the term ‘‘indicators of discrimination,’’ the final rule adopts the term ‘‘preliminary findings of potential discrimination.’’ Another law firm expressed concern that OFCCP could issue a Predetermination Notice after the desk audit and prior to the completion of the on-site phase of the compliance evaluation, noting that this could result in OFCCP issuing a Predetermination Notice prior to the contractor having any meaningful dialogue with the agency. The law firm believed issuing the Predetermination Notice prior to the completion of the on-site review would cause compliance officers to conduct an incomplete investigation and possibly make them vested in a particular outcome rather than conducting a full and neutral evaluation of the facts and circumstances of the particular compliance evaluation. As an initial matter, OFCCP does not agree with this assessment, which seems based in conjecture that, simply by issuing a Predetermination Notice earlier in the process to provide contractors with advance notice to understand and respond, compliance officers will conduct an inadequate investigation and become invested in a particular outcome. In addition, OFCCP will issue a Predetermination Notice to a contractor after OFCCP has reviewed the available facts and data and has reached a preliminary finding of potential discrimination.47 The appropriate time to issue this notice will depend upon the facts and circumstances of each matter. The agency will continue to conduct an onsite review before issuing a Predetermination Notice where it determines that further information is beneficial to assess whether preliminary findings of potential discrimination exist. Furthermore, OFCCP will offer training to its compliance officers regarding the provisions of this final rule, and under what conditions a Predetermination Notice may be issued to promote consistency across regions. The law firm further recommended that OFCCP require compliance officers to seek the contractor’s explanation for any identified selection or compensation disparity prior to issuing the Predetermination Notice, and then include an evaluation of the contractor’s position in the Predetermination Notice. 47 FCCM, Chapter 8E03, Signature Authority, available at https://www.dol.gov/agencies/ofccp/ manual/fccm/8e-predetermination-notice/8e03signature-authority (last accessed Dec. 1, 2022). E:\FR\FM\04AUR1.SGM 04AUR1 51726 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations TKELLEY on DSK125TN23PROD with RULES1 OFCCP declines to adopt this suggestion. The resolution process set forth in the final rule related to Predetermination Notices remains the same as it always has been: the agency presents its preliminary findings, and then the contractor has an opportunity to respond. Building in an additional mandatory step to seek a response prior to issuing the Predetermination Notice would therefore be duplicative, which would run counter to the objective of this rule to increase efficiency. The Predetermination Notice is the first of three written notices in a multi-stage notification process that OFCCP uses to communicate preliminary findings of potential discrimination identified during a compliance evaluation. When OFCCP identifies preliminary findings of potential discrimination, it notifies the contractor and provides an opportunity for the contractor to respond. If after providing this opportunity, OFCCP finds a violation of an equal opportunity clause, the agency issues a Notice of Violation to the contractor requiring corrective action and inviting conciliation through a written agreement.48 If necessary, OFCCP thereafter will issue a Show Cause Notice. Each of these notice steps already provides the contractor an opportunity to respond.49 Further, the Predetermination Notice is far from the contractor’s first communication with OFCCP during a compliance evaluation. OFCCP’s communication with the contractor begins even before the contractor’s deadline to submit its response to the Scheduling Letter notifying the contractor that OFCCP has selected the contractor for a compliance evaluation and requesting its affirmative action programs and itemized listing information. Within 15 calendar days of sending the Scheduling Letter, OFCCP contacts the contractor, or the contractor’s representative, or both. At that time, OFCCP answers any questions the contractor may have, provides technical assistance on the contractor’s obligations and the compliance evaluation process, and provides an overview of what to expect during the evaluation.50 OFCCP remains committed to regular and open communication by all parties at each 48 This process is discussed more fully in the Overview section above. 49 See 41 CFR 60–1.33; 41 CFR 60–300.62; 41 CFR 60–741.62 (providing the contractor an opportunity to respond to the Predetermination Notice, Notice of Violation, and Show Cause Notice). 50 See FCCM Chapter 1B04 Follow-Up Contact with Contractor and Jurisdiction Challenges, available at https://www.dol.gov/agencies/ofccp/ manual/fccm/1b-pre-desk-audit-actions/1b04follow-contact-contractor-and-jurisdiction (last accessed Nov. 15, 2022). VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 stage of the compliance evaluation, further supporting OFCCP’s overarching goal of providing notice of its findings throughout the process, allowing OFCCP and the contractor to resolve the matter efficiently. This final rule adopts the proposal to retain agency-wide use of the Predetermination Notice when OFCCP has preliminary findings of potential discrimination, to advance OFCCP’s commitment to transparency and clarity while ensuring consistency throughout its regions. The final rule also maintains the flexibility needed for OFCCP to provide notice to contractors of preliminary findings of potential discrimination by issuing the Predetermination Notice earlier in the compliance evaluation, where appropriate. This flexibility ensures that OFCCP can provide the contractor notice of potential discrimination concerns to facilitate understanding and efficient resolution. This benefits contractors by providing notice of preliminary findings earlier in the resolution process than the 2020 rule allowed with a full opportunity to respond. c. Adding Violations Without Amending a Predetermination Notice In the NPRM, OFCCP also proposed adding a provision to § 60–1.33(a) that would allow OFCCP to add violations in a subsequent Notice of Violation without amending the Predetermination Notice. The agency received two comments on this proposed modification, both from employer associations. One commenter stated that this proposal deprived contractors of the opportunity to defend themselves against incorrect conclusions drawn by OFCCP. Another commenter expressed concern that this change would eliminate the purpose of the Predetermination Notice as the contractor would not be able to engage in meaningful discussions regarding all possible violations. After careful consideration of these comments, OFCCP has decided to move forward with this change, as proposed. The proposal provides sufficient opportunity for contractors to respond, as the Predetermination Notice is the first written notice in a notification and information exchange process with multiple stages. Following the Predetermination Notice, if the preliminary findings of potential discrimination are not adequately rebutted, the contractor has sufficient opportunities to respond following the Notice of Violation and Show Cause Notice, if issued. Throughout the process, contractors continue to have an PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 opportunity to discuss any additional violations, confer with OFCCP, and provide relevant information for OFCCP’s review and consideration. The Predetermination Notice is simply the first notice in this multi-stage process. Further, at the point OFCCP issues the Predetermination Notice, the agency may not have a full evidentiary record. Although the Predetermination Notice contains information on the preliminary findings of potential discrimination OFCCP has identified at that point in the investigation, OFCCP may make additional findings during this investigation, such as when it obtains additional information from the contractor or witnesses after the issuance of the Predetermination Notice. Issuing a new Predetermination Notice in these situations would be inefficient and would postpone remedies for victims, as the agency would have to wait until all allegations went through the pre-enforcement stages before it could refer the case to enforcement. Issuing a new Predetermination Notice is also unnecessary, as the Notice of Violation and Show Cause Notice provide sufficient opportunity for the contractor to respond.51 d. Response Period for a Predetermination Notice To promote greater efficiency in resolving potential discrimination, OFCCP also proposed to modify the 2020 rule’s provision that required a contractor to provide a response within 30 calendar days of receiving a Predetermination Notice. The proposal would have returned the Predetermination Notice response period to the 15-calendar day period in effect prior to the 2020 rule, which OFCCP could extend for good cause. In the proposal, OFCCP also clarified this provision to state that any response must be received by OFCCP within 15 calendar days, absent an extension. OFCCP received eight comments regarding the Predetermination Notice response period. The commenters included employer associations, law firms, a women’s rights legal advocacy organization, a labor rights organization, and a civil and human rights advocacy organization. Three of the commenters, including the labor rights and advocacy organizations, supported OFCCP’s proposal to return to a 15-calendar day period. These commenters noted that the Predetermination Notice is a 51 See 41 CFR 60–1.33; 41 CFR 60–300.62; 41 CFR 60–741.62 (providing the contractor an opportunity to respond to the Predetermination Notice, Notice of Violation, and Show Cause Notice). E:\FR\FM\04AUR1.SGM 04AUR1 TKELLEY on DSK125TN23PROD with RULES1 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations preliminary notification that engages employers in a dialogue with the agency and that a longer response period potentially prolongs discrimination and delays securing a remedy for victims of discrimination. Five commenters, including employer associations and law firms, opposed returning to a 15-calendar day response period. The commenters expressed concern that 15 calendar days is an insufficient amount of time to review, evaluate, and respond to the Predetermination Notice because it may be the first notice the contractor receives after a complex investigation. Also, in some situations, the contractors may choose to retain experts to understand the information provided which may require more than 15 calendar days. They also expressed concerns that OFCCP would not use its discretion to grant extensions for good cause. Three commenters proposed a response period of at least 60 days. One of the commenters recommended a two-phase response in which a contractor first has 30 days to review and reply with any questions and then, after the contractor’s questions have been answered, a second 60-day period in which to provide a substantive response. After careful consideration of these comments, OFCCP has decided to keep the 15-calendar day response period.52 In so doing, OFCCP notes that this is consistent with the time originally permitted for responses in its 2018 Predetermination Notice Directive.53 Prior to the 2020 rule, contractors were generally providing responses within this 15-day timeframe or receiving extensions for good cause. With this modification, OFCCP will continue to provide extensions to contractors where OFCCP determines the request is supported by good cause. Further, while the Predetermination Notice is the first formal notice that the agency provides, OFCCP communicates with the contractor about the preliminary findings before a Predetermination Notice is even issued. OFCCP declines to adopt a multi-stage response period to the Predetermination Notice. OFCCP determined that a twophase response period in which a contractor first has 30 days to review and reply with any questions and then, after the contractor’s questions have been answered, a second 60-day period in which to provide a substantive 52 The final rule clarifies that OFCCP must receive the contractor’s response within 15 calendar days. 53 See Directive 2018–01, Use of Predetermination Notices, (Feb. 27, 2018), available at https:// www.dol.gov/agencies/ofccp/directives/2018-01 (last accessed Dec. 1, 2022). VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 response would introduce confusion about when a contractor needs to respond to the preliminary findings of potential discrimination and would prolong the pre-enforcement process. This 15-day response period will allow OFCCP to move compliance evaluations along expeditiously, while providing contractors with a reasonable period to review and respond to the Predetermination Notice and the opportunity to obtain an extension if needed. e. Responding to Evidence Provided by a Contractor in Advance of Issuing a Notice of Violation A law firm requested that the regulations state specifically that OFCCP must address the employer’s evidence provided in response to the Predetermination Notice prior to issuing a Notice of Violation. OFCCP did not propose this additional requirement in the NPRM. OFCCP declines to include this requirement in the final rule. Should the agency decide to issue a Notice of Violation, it will incorporate relevant information that the contractor provides in response to the Predetermination Notice. Requiring another pre-enforcement notice or response letter would be duplicative, and a regulation requiring that OFCCP address the employer’s evidence is likely to generate dispute over the application and meaning of such a requirement. As part of its investigations, OFCCP carefully reviews and considers the evidence provided, and the agency determines what information is relevant and how best to respond to contractors’ concerns. In making this determination, OFCCP will continue to engage with the contractor throughout the compliance evaluation process to promote a mutual understanding of the issues. 3. Notice of Violation Provisions In § 60–1.33(b), OFCCP proposed adding a provision that will allow the agency to include additional violations in a subsequent Show Cause Notice without amending the Notice of Violation. The reasons for allowing this are the same as the reasons discussed above for allowing OFCCP to include new findings in a Notice of Violation that were made after a Predetermination Notice had already been issued. An employer association expressed concern that adding a violation in a subsequent Show Cause Notice without amending the Notice of Violation would limit a contractor’s ability to respond to and rebut OFCCP’s findings. However, in the proposal, OFCCP addressed this concern by explicitly stating in the PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 51727 regulations that the agency will provide contractors an opportunity to conciliate additional violations identified in the Show Cause Notice. If OFCCP’s investigation identifies additional violations at a later stage, requiring OFCCP to restart the three-stage notice process from the beginning creates yet more inefficiency, as the agency would have to wait until all allegations went through the pre-enforcement stages before it could refer the case to enforcement. This negatively impacts workers by prolonging the resolution of discrimination findings and constraining OFCCP’s ability to effectively enforce its protections. 4. Conciliation Agreements In the NPRM, OFCCP proposed minor changes to the existing provisions at § 60–1.33(c). The proposed changes included clarifying that the written agreement required to resolve a material violation of the equal opportunity clause is a ‘‘written conciliation agreement’’ that identifies the violations and/or deficiencies. The proposal also clarified the remedial actions which may be necessary to correct the identified violations and/or deficiencies. OFCCP received no comments on these proposed changes. Accordingly, OFCCP adopts these changes in the final rule as proposed. 5. Clarifications to the Show Cause Notice Provisions In § 60–1.33(d) of the NPRM, OFCCP proposed to clarify its use of the Show Cause Notice including when a contractor denies access to its premises, to witnesses, or to records. The proposed changes also clarify that the Show Cause Notice will include each violation that OFCCP has identified at the time of issuance and, where OFCCP identifies additional violations after issuing a Show Cause Notice, OFCCP will modify or amend the Show Cause Notice. OFCCP received no comments regarding the proposed provision. Accordingly, OFCCP adopts the proposed provision without any changes in the final rule. For clarity, OFCCP also proposed relocating the ‘‘Show Cause Notices’’ provisions to § 60–1.33 with the other pre-enforcement notices in part 60–1 and removing and reserving § 60–1.28. OFCCP did not receive any comments on this change and adopts it into the final rule as proposed. 6. Expedited Conciliation In the NPRM, OFCCP proposed retaining the expedited conciliation option and made general edits to improve procedural efficacy and clarify E:\FR\FM\04AUR1.SGM 04AUR1 51728 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations OFCCP’s role in the expedited conciliation process. The agency received four comments addressing expedited conciliation. Commenters included employer associations, a women’s rights legal advocacy organization, and a civil and human rights advocacy organization. All commenters supported retaining the expedited conciliation option in the regulations, noting that this option improves efficiency and promotes expeditious resolutions. OFCCP did not receive any comments regarding the proposed clarifying edits to the expedited conciliation provisions. Accordingly, the final rule adopts the changes as proposed. TKELLEY on DSK125TN23PROD with RULES1 7. Reasonable Efforts Standard In the NPRM, OFCCP proposed to modify § 60–1.20(b) to clarify that the ‘‘reasonable efforts’’ standard that OFCCP must satisfy when attempting to secure compliance with its authorities through conciliation and persuasion should be interpreted consistent with Title VII language requiring EEOC to ‘‘endeavor to’’ remedy discrimination through conciliation, persuasion, and conference.54 OFCCP proposed two modifications to § 60–1.20(b), first adding a clause stating OFCCP will make reasonable efforts to secure compliance through conciliation and persuasion pursuant to § 60–1.33. Second, OFCCP proposed that its regulatory ‘‘reasonable efforts’’ standard must be interpreted consistently with EEOC’s ‘‘endeavor’’ standard.55 OFCCP received one comment from a law firm regarding these modifications. The commenter opposed the modifications, stating that reliance on the Supreme Court’s interpretation of Title VII’s conciliation provisions in Mach Mining v. EEOC, 575 U.S. 480, 486 (2015), is misplaced because the Court analyzed the specific Title VII conciliation provision, which does not contain the ‘‘reasonable efforts’’ requirement found in E.O. 11246. In response to this comment, OFCCP notes that it is well established that the legal standards developed under Title VII apply to cases brought under E.O. 11246.56 That principle should apply here because OFCCP’s regulation is functionally similar in purpose and meaning to the section of Title VII that the Supreme 54 42 U.S.C. 2000e–5(b). NPRM included an extended discussion of the EEOC’s conciliation procedures, including a law passed by Congress that disapproved and annulled a rule which codified rigid requirements the EEOC had to meet during conciliation, which we include here by reference. 56 See Greenwood Mills, Inc., 2002 WL 31932547, at *4. 55 The VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 Court analyzed in Mach Mining. Where OFCCP finds deficiencies in a compliance evaluation, OFCCP’s regulation requires it to make ‘‘reasonable efforts . . . to secure compliance through conciliation and persuasion.’’ 57 Similarly, where EEOC believes a charge of discrimination is true, it must ‘‘endeavor to eliminate any . . . alleged unlawful employment practice by informal methods of conference, conciliation, and persuasion.’’ 58 A plain reading of the text in both provisions indicates a similar purpose and meaning: to attempt to resolve discrimination through conciliation and informal means like persuasion and communication. Given that OFCCP traditionally applies Title VII principles to the interpretation and application of E.O. 11246, and given the similarity between the two provisions, OFCCP determined that the text of its regulations on securing compliance to remedy discrimination through conciliation should be interpreted to be consistent with the Title VII provision on endeavoring to eliminate unlawful discrimination by conciliation. This interpretation would be consistent with a stated policy goal of this final rule to align the regulations with Title VII standards, to ensure that OFCCP has the same flexibility as EEOC in the administration of its authorities. For these reasons, OFCCP adopts this modification as proposed. 8. Severability Clauses In the NPRM, OFCCP proposed deleting the severability clause that applied just to certain sections of OFCCP’s regulations and replace it with severability clauses covering the entirety of each part of OFCCP’s regulatory scheme. OFCCP received no comments on this issue and adopts this change into the final rule, as proposed.59 9. Reasonable Reliance Interests OFCCP received a comment from a law firm stating that the NPRM did not address contractors’ reasonable reliance interests during pending compliance evaluations. Although the commenter did not cite any specific reliance interests, it did state its belief that preenforcement notices already issued should be held to conform to the 57 See 41 CFR 60–1.20(b). U.S.C. 2000e–5(b). 59 Beyond these severability clauses, OFCCP did not consider nor propose making any additional changes to the existing regulations at 41 CFR parts 60–2, 60–3, 60–4, 60–20, 60–30, 60–40, and 60–50, and any comments regarding those parts were not considered and responded to as they were beyond the scope of the proposed rule. 58 42 PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 regulatory standards in existence at the time the notice was issued and asserted that OFCCP’s proposal did not address this issue. A women’s rights legal advocacy organization stated that OFCCP’s need to fulfill its mission and mitigate the harm of discrimination outweighs any reliance interests by contractors. It noted that the Title VII framework has long applied to OFCCP’s compliance process and noted that the agency already publicly stated its intention to modify the 2020 rule in 2021. Reliance interests are one factor among many that agencies must consider during rulemaking.60 While ‘‘[a]gencies are not compelled to explore ‘every alternative device . . . [they are] required to assess whether there were reliance interests, determine whether they were significant, and weigh any such interests against competing policy concerns.’’ 61 The 2020 rule took effect on December 10, 2020, approximately 16 months before OFCCP issued the NPRM proposing to modify the 2020 rule; prior to the 2020 rule, OFCCP relied on well-established Title VII principles in its pre-enforcement and notice and conciliation procedures. Considering the short period of time the 2020 rule was in place, OFCCP determined that restoring flexibility to its pre-enforcement process by relying on well-established Title VII standards in an effort to more efficiently resolve findings of discrimination outweighs any possible reliance interest the 2020 rule may have created among the regulated community. For clarification, this final rule would apply to any pre-enforcement notices and actions issued on or after the effective date of this rulemaking, 30 days after publication in the Federal Register. For example, OFCCP may have issued a Predetermination Notice to a contractor under the standards in the 2020 rule, but if it then proceeds to issue a Notice of Violation or Show Cause Notice after the effective date of this final rule, the standards in this final rule would apply to those notices. OFCCP believes that through the notice and comment process, the agency has adequately provided contractors with notice of the changes. OFCCP will also continue to support contractors in understanding this final rule through compliance assistance materials. 60 See Dep’t of Homeland Sec. v. Regents of the Univ. of California, 140 S. Ct. 1891, 1914 (2020). 61 Id. at 1916 (internal citations omitted). E:\FR\FM\04AUR1.SGM 04AUR1 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations TKELLEY on DSK125TN23PROD with RULES1 10. Comments Regarding the Need for the Rulemaking OFCCP received four comments that emphasized the need for modifying the 2020 rule. The commenters included a women’s rights legal advocacy organization, a civil and human rights advocacy organization, a labor rights organization, and an individual. These commenters described the prevalence of employment discrimination against workers and asserted that the 2020 rule’s onerous requirements prevented OFCCP from effectively enforcing its nondiscrimination authorities. They believed that modifying the 2020 rule would restore the flexibility the agency needs to carry out its important mission of protecting workers. OFCCP received five comments from employer associations and law firms that believed that the agency failed to show how the 2020 rule constrained its enforcement efforts. For example, one of these commenters stated that the Administrative Procedure Act (APA) requires that revisions to existing regulations be firmly based on a substantial factual record, and that OFCCP failed to meet this requirement.62 This commenter asserted that the NPRM proposed ‘‘sweeping changes’’ without any factual basis, and compared this with the 2020 rule, which the commenter asserted had provided ‘‘extensive’’ factual justification. Despite this assertion, the comment did not identify with any specificity any facts underlying the 2020 rule, let alone what comprised an ‘‘extensive’’ factual justification. At the outset, we note the regulations at issue here are distinguishable from those analyzed in the cases the commenter cites, which created or rescinded standards applicable to regulated entities and thus affected the burdens of compliance for those regulated entities. In contrast, the 2020 rule, and this rule, deal entirely with the internal standards to which the agency will hold itself during the conduct of compliance evaluations prior to enforcement. The 2020 rule explicitly noted that it was undertaken as ‘‘an exercise of enforcement discretion’’ that was not ‘‘compelled . . . by Title VII or OFCCP case law,’’ and further ‘‘add[ed] 62 This comment also stated that the NPRM failed to meet the basic requirements of the APA because the agency failed to consider ‘‘less disruptive’’ alternatives to the proposed rule. OFCCP disagrees with this comment. As detailed in the ‘‘Alternatives’’ discussion in the Regulatory Procedures section below, OFCCP carefully considered alternatives when proceeding with this rulemaking and determined that proceeding with the rulemaking as proposed would enable the agency to best meet its mission and ensure equal employment opportunity. VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 no new requirements or burdens on contractors.’’ 63 Nevertheless, as explained in the NPRM, and again here, OFCCP has identified a factual basis to conclude the 2020 rule has not met the objectives it asserted. When promulgating the 2020 rule, OFCCP stated that it believed the rule would ‘‘increase clarity and transparency for Federal contractors, establish clear parameters for OFCCP enforcement proceedings, and enhance the efficient enforcement of the law.’’ 64 Further, two stated objectives of the 2020 rule were to increase the number of contractors the agency evaluates and focus on resolving stronger cases through the strategic allocation of limited agency resources.65 However, the 2020 rule has not met these objectives. While the 2020 rule acknowledges that the heightened evidentiary standards are not compelled by Title VII,66 some contractors have nonetheless asserted that OFCCP must meet the heightened evidentiary standards to prove discrimination in cases. The NPRM described specific examples of this problem based on OFCCP’s experience enforcing the 2020 rule, including: • Contractors asserting that the evidence that OFCCP shared to support its case failed to meet the ‘‘qualitative evidence’’ definition included in the 2020 rule.67 • Contractors asserting that the qualitative evidence that OFCCP provided was insufficient because the agency failed to disclose the identity of the interviewees who provided relevant statements at the Predetermination Notice stage; 68 and • Contractors disputing whether OFCCP met the required threshold for practical significance under the 2020 rule, arguing that the agency has failed to meet the threshold or even disagreeing with the 2020 rule’s standard altogether.69 As these examples illustrate, the 2020 rule has not met its stated objectives to increase clarity and promote efficiency. Rather, the evidentiary mandates have spawned collateral disputes that hinder OFCCP’s ability to pursue cases that would otherwise be actionable under Title VII’s more flexible standards. By rescinding the 2020 rule’s heightened evidentiary standards, OFCCP can restore its enforcement discretion as to 63 85 64 85 FR 71554; 87 FR 16151. FR 71554. 65 Id. 66 87 67 87 FR 16138. FR 16138, 16145. the cases it decides to pursue and return to its long-standing practice of applying Title VII principles to the facts and circumstances of each compliance evaluation, a process which applies established evidentiary standards under Title VII. The commenter also noted the agency’s rationale for rescinding the requirement to provide qualitative evidence when issuing a Predetermination Notice is based on ‘‘pure speculation’’ that the disclosure of such evidence may have a chilling effect. While the agency maintains that the 2020 rule’s requirement to disclose anecdotal evidence creates a risk of chilling workers from coming forward, we note that the NPRM, and in turn this final rule, in fact relied on multiple rationales for rescinding the requirement to provide qualitative evidence. For example, requiring proof of qualitative evidence before issuing a Predetermination Notice is not only inconsistent with Title VII standards and interpretive case law, but such evidence may not yet be available to the agency at such a preliminary investigative stage.70 Ultimately, OFCCP has found that the 2020 rule’s inflexible evidentiary requirements, which apply while the matter is still under investigation and OFCCP is making preliminary findings, have hindered the agency’s ability to pursue potentially actionable cases. The commenter also asserted that the NPRM failed to explain its rationale as to how mandating the same evidentiary requirements for the Predetermination Notice as the Notice of Violation creates inefficiency. To the contrary, in the NPRM and in this final rule, OFCCP has discussed the distinct purposes that the Predetermination Notice and the Notice of Violation are intended to serve. Specifically, the Predetermination Notice is intended to provide the contractor with early notice of the agency’s preliminary findings of potential discrimination, allowing the contractor to focus on specific, discrete areas of concern prior to a finding of violation, thereby facilitating an early exchange of information and shared understanding that in turn could lead to faster resolutions. By contrast, the 2020 rule’s heightened evidentiary requirements functionally required the agency to complete its entire investigation and have litigation-ready evidence at hand before it could issue a preliminary notice to the contractor regarding its investigation. Imposing these same heightened evidentiary standards to both the Predetermination 68 Id. 69 Id. PO 00000 Frm 00035 70 Id. Fmt 4700 Sfmt 4700 51729 E:\FR\FM\04AUR1.SGM at 16143–45. 04AUR1 51730 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations Notice and the Notice of Violation created duplication in the use of these notices. By removing these barriers, OFCCP is able to utilize the Predetermination Notice to provide notice of preliminary findings of potential discrimination at an earlier stage before the agency has made findings to support a Notice of Violation.71 As illustrated by the case examples above, OFCCP has found that the stated intentions in the 2020 rule are not being fulfilled, and indeed in some situations have hindered OFCCP’s ability to efficiently resolve preliminary findings of potential discrimination. Accordingly, OFCCP has provided a reasoned explanation for modifying the 2020 rule—the agency has demonstrated benefits to both the agency and contractors by modifying the 2020 rule, including alignment with wellestablished standards under Title VII and strengthening OFCCP’s ability to bring meritorious cases. The agency has also shown it believes these modifications to be better than the requirements set forth in the 2020 rule to effectuate efficient enforcement.72 Some commenters also stated that the rule has not been in effect for enough time to warrant revisions. These groups generally expressed favorable opinions of the 2020 rule, with some asserting that it promoted certainty, efficiency, and transparency in OFCCP’s enforcement. OFCCP disagrees with these comments. As described in the NPRM and repeated herein, soon after implementation, OFCCP saw that the 2020 rule’s heightened evidentiary standards spawned collateral disputes about the interpretation of these evidentiary standards and hampered OFCCP’s ability to provide contractors with notification of preliminary findings of potential discrimination. TKELLEY on DSK125TN23PROD with RULES1 71 Id. 72 F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009) (stating that an agency ‘‘need not demonstrate . . . that the reasons for the new policy are better than the reasons for the old one’’); id. at 537 (stating that when changing or modifying policy, an agency may act arbitrarily and capriciously if it ignores or countermands its earlier factual findings without reasoned explanation for doing so) (Kennedy, J. concurring in part and concurring in judgment); see also Bernhardt, 472 F. Supp. 3d at 591 (explaining that the standard of review for assessing whether an agency action is arbitrary and capricious is ‘‘ ‘highly deferential, presuming the agency action to be valid and affirming the agency action if a reasonable basis exists for its decision’ ’’) (citing Nw. Ecosystem All. v. United States Fish & Wildlife Serv., 475 F. 3d 1136, 1140 (9th Cir. 2007) (quoting Indep. Acceptance Co. v. California, 204 F.3d 1247, 1251 (9th Cir. 2000))). VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 B. Modifications to 41 CFR Parts 60–300 and 60–741 OFCCP has separate regulations for E.O. 11246, VEVRAA, and Section 503. In the Section 503 and VEVRAA regulations, OFCCP proposed parallel changes to the definitions, evidentiary requirements, and pre-enforcement and resolution procedures as those described above for E.O. 11246. No commenter suggested that these changes should apply differently depending on the authority the agency is enforcing. For the reasons discussed above, OFCCP thus adopts the same modifications and provisions in 41 CFR part 60–300 (VEVRAA) and 41 CFR part 60–741 (Section 503) that are described above for the E.O. 11246 regulations. C. Other Comments OFCCP received two comments that are not addressed above because they lacked relevance to the proposed rule. V. Regulatory Procedures A. Executive Order 12866 (Regulatory Planning and Review) and Executive Order 13563 (Improving Regulation and Regulatory Review) Under Executive Order 12866 (E.O. 12866), the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs (OIRA) determines whether a regulatory action is significant and, therefore, subject to the requirements of E.O. 12866 and OMB review. Section 3(f) of E.O. 12866 defines a ‘‘significant regulatory action’’ as an action that is likely to result in a rule that: (1) has an annual effect on the economy of $100 million or more, or adversely affects in a material way a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) creates serious inconsistency or otherwise interferes with an action taken or planned by another agency; (3) materially alters the budgetary impacts of entitlement grants, user fees, or loan programs, or the rights and obligations of recipients thereof; or (4) raises novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles set forth in E.O 12866. This final rule has been designated a ‘‘significant regulatory action,’’ although not significant within the scope of section 3(f)(1) of E.O. 12866. OMB has reviewed the final rule. Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), OIRA designated the rule as not a ‘‘major rule,’’ as defined by 5 U.S.C. 804(2). Executive Order 13563 (E.O. 13563) directs agencies to adopt a regulation PO 00000 Frm 00036 Fmt 4700 Sfmt 4700 only upon a reasoned determination that its benefits justify its costs; tailor the regulation to impose the least burden on society, consistent with obtaining the regulatory objectives; and in choosing among alternative regulatory approaches, select those approaches that maximize net benefits. E.O. 13563 recognizes that some benefits are difficult to quantify and provides that, where appropriate and permitted by law, agencies may consider and discuss qualitatively values that are difficult or impossible to quantify, including equity, human dignity, fairness, and distributive impacts. 1. Need for Rulemaking As discussed in the preamble, OFCCP received comments both supporting and opposing the proposal. Those that supported the proposal agree that the 2020 rule imposed onerous evidentiary standards that are inconsistent with the preliminary nature of the preenforcement notices, required OFCCP to share unnecessarily detailed evidence with contractors during the investigatory stage, and made it more difficult for the agency to protect workers from discrimination. These commenters remarked that the heightened requirements conflict with Title VII and OFCCP precedent, and had no basis in law and imposed unnecessary, burdensome, and confusing enforcement standards onto OFCCP’s pre-enforcement processes that serve to hamper the ability of OFCCP to engage with Federal contractors at the earliest stages to remedy potential discrimination. Commenters in opposition generally stated the 2020 rule provided transparency, efficiency, and clarity to contractors and argued OFCCP did not provide enough evidence in the proposal to modify the 2020 rule. For example, one commenter asserted that rescinding the 2020 rule would prevent both OFCCP compliance officers and contractors from focusing resources on true problem areas, leading to longer, less efficient reviews. After considering the comments received, OFCCP concluded the 2020 rule created rigid constraints, many of which are not required by Title VII and are particularly inappropriate to apply to preliminary notices long before the agency has committed to bring an enforcement action. OFCCP determined that the 2020 rule narrowed the scope of the agency’s authority to protect workers and impeded the agency’s effective enforcement of E.O. 11246, Section 503, and VEVRAA. The 2020 rule prescribed that OFCCP could only E:\FR\FM\04AUR1.SGM 04AUR1 TKELLEY on DSK125TN23PROD with RULES1 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations issue a Predetermination Notice if it provided certain quantitative evidence and qualitative evidence, with only limited exceptions. Under the 2020 rule, if after providing the contractor an opportunity to respond to the Predetermination Notice, OFCCP found a violation of an equal opportunity clause, OFCCP issued a Notice of Violation, which imposed the same rigid parameters that it imposed on the Predetermination Notice. The purpose of a Predetermination Notice is to provide the contractor with prompt written notice of preliminary findings of potential discrimination and to provide the contractor an opportunity to respond with additional information. As illustrated by the case examples discussed above, requiring the agency to meet heightened and formulaic standards of proof before it can proceed with notifying the contractor of preliminary findings of potential discrimination has limited the agency’s ability to efficiently conduct a compliance review tailored to the facts and evidence presented. In addition, the 2020 rule has resulted in collateral disputes at the Predetermination Notice stage over the implementation of the rule’s regulatory standards—diverting limited agency and contractor resources away from resolving concerns of discrimination. As discussed above, this diversion of resources has hindered OFCCP’s ability to pursue meritorious cases. This final rule aims to create a streamlined, efficient, and flexible process to ensure OFCCP utilizes its limited resources as strategically as possible to advance the agency’s mission. In a return to agency policy prior to the 2020 rule, in place since 1988, OFCCP will require a case-by-case evaluation of the facts and circumstances of each compliance evaluation, including during the preenforcement notice and conciliation stages. Doing so will remove unnecessary constraints that impede effective enforcement and delay resolutions. Removing the blanket regulatory requirements applied to early, pre-enforcement procedural notices will also allow OFCCP to pursue enforcement in the full scope of cases that would be actionable under Title VII rather than the more limited scope of fact patterns that conform to the evidentiary requirements set forth under the 2020 rule. OFCCP remains committed to providing contractors with VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 an explanation of the basis for the agency’s preliminary findings of potential discrimination during a compliance evaluation. Such notice is mutually beneficial for OFCCP and the contractor under review because it provides the contractor with an earlier opportunity to respond to potential issues before OFCCP makes a determination on violations. Providing earlier notice to contractors can result in the prompt and mutually satisfactory resolution of compliance evaluations, which minimizes unnecessary burdens on contractors and agency staff. Going forward, OFCCP will provide updated training to its compliance officers on the pre-enforcement procedures. This training will reflect current case law and provide consistency across the agency, while providing OFCCP needed flexibility to adapt to the legal standards and statistical techniques as they evolve. 2. Discussion of Impacts In this section, OFCCP presents a summary of the costs associated with the final rule. OFCCP utilizes the Employment Information Report (EEO– 1) data, which identifies the number of supply and service contractors that could be scheduled for a compliance evaluation and thus impacted by the rule. The EEO–1 Report must be filed by covered Federal contractors that: (1) have 50 or more employees; (2) are prime contractors or first-tier subcontractors; and (3) have a contract, subcontract, or purchase order amounting to $50,000 or more. OFCCP schedules only contractors that meet those thresholds for compliance evaluations. The number of supply and service contractors possibly impacted by the rule is 19,586.73 OFCCP also utilizes USASpending data, which identifies the number of construction contractors that could be scheduled for a compliance evaluation and thus impacted by the rule. The USASpending data accounts for all construction contractors with contracts greater than $10,000 that meet the thresholds for compliance evaluations. The number of construction contractors possibly impacted by the proposed modification is 11,557.74 73 OFCCP obtained the total number of supply and service contractors from the most recent EEO– 1 Report data available, which is from fiscal year (FY) 2020. 74 OFCCP obtained the total number of construction contractor establishments from the FY PO 00000 Frm 00037 Fmt 4700 Sfmt 4700 51731 The total number of contractors eligible to be scheduled that are possibly impacted by the rule is 31,143.75 While OFCCP acknowledges that all Federal contractors that could be scheduled for a compliance evaluation may learn the requirements to comply with the laws that OFCCP enforces, only those contractors who are actually scheduled are likely to have a need to know the pre-enforcement procedures and will be directly impacted by the rule. For this reason, the total number of contractors impacted by the final rule is likely an overestimation because not all of the eligible contractors will be scheduled for a compliance evaluation. OFCCP has determined that either a Human Resources Manager (SOC 11– 3121) or a Lawyer (SOC 23–1011) would review the rule. OFCCP estimates that 50 percent of the reviewers would be human resources managers and 50 percent would be in-house counsel. Thus, the mean hourly wage rate reflects a 50⁄50 split between human resources managers and lawyers. The mean hourly wage of a human resources manager is $65.67, and the mean hourly wage of a lawyer is $71.17.76 Therefore, the average hourly wage rate is $68.42 (($65.67 + $71.17)/2). OFCCP adjusted this wage rate to reflect fringe benefits such as health insurance and retirement benefits, as well as overhead costs such as rent, utilities, and office equipment. OFCCP uses a fringe benefits rate of 45 percent 77 and an overhead rate of 17 percent,78 resulting in a fully loaded hourly compensation rate of $110.84 ($68.42 + ($68.42 × 45 percent) + ($68.42 × 17 percent)). The estimated labor cost to contractors is reflected in Table 1, below. 2021 USASpending data, available at https:// www.usaspending.gov/#/download_center/award_ data_archive (last accessed August 15, 2022). 75 19,586 supply and service contractors + 11,557 construction contractors = 31,143 contractors. 76 BLS, Occupational Employment Statistics, Occupational Employment and Wages, May 2021, available at https://www.bls.gov/oes/current/oes_ nat.htm (last accessed June 9, 2022). 77 BLS, Employer Costs for Employee Compensation, available at https://www.bls.gov/ ncs/data.htm (last accessed August 15, 2022). Wages and salaries averaged $28.16 per hour worked in March 2022, while benefit costs averaged $12.74, which is a benefits rate of 45 percent. 78 Cody Rice, U.S. Environmental Protection Agency, ‘‘Wage Rates for Economic Analyses of the Toxics Release Inventory Program,’’ (June 10, 2002), available at www.regulations.gov/ document?D=EPA-HQ-OPPT-2014-0650-0005 (last accessed June 9, 2022). E:\FR\FM\04AUR1.SGM 04AUR1 51732 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations TABLE 1—LABOR COST Major occupational groups Average hourly wage rate Fringe benefit rate (%) Overhead rate (%) Fully loaded hourly compensation (%) Human Resources Managers and Lawyers .................................................... $68.42 45 17 $110.84 a. Cost of Rule Familiarization OFCCP acknowledges that 5 CFR 1320.3(b)(1)(i) requires agencies to include in the burden analysis for a rule the estimated time it takes for contractors to review and understand the instructions for compliance. To minimize the burden, OFCCP will publish compliance assistance materials regarding the final rule. OFCCP received one comment opposing the burden estimate of 30 minutes for rule familiarization. The commenter stated, ‘‘While reading time for the NPRM per se may be 30 minutes for the fastest of readers, it will be impossible to understand the background, history, and practical implications of the new rule.’’ OFCCP considered the comment and declines to make any changes in the final rule. Both the NPRM and this final rule state that the 30-minute estimate for rule familiarization is the average amount of time it will take someone to familiarize themselves with the new regulations by reading the regulatory text. OFCCP emphasizes that the 30minute estimate is an average across all contractors and acknowledges that the precise amount of time each company will take is difficult to estimate. OFCCP believes that a human resources manager or lawyer will take a minimum of 30 minutes (.5 hours) to read the regulatory text. Consequently, the estimated burden for rule familiarization is 15,572 hours (31,143 contractor firms × .5 hours). OFCCP calculates the total estimated cost of rule familiarization as $1,726,000 (15,572 hours × $110.84/hour) in the first year, which amounts to a 10-year annualized cost of $196,446 at a discount rate of 3 percent (which is $6.31 per contractor firm) or $229,667 at a discount rate of 7 percent (which is $7.37 per contractor firm). Table 2, below, reflects the estimated rule familiarization costs. TABLE 2—RULE FAMILIARIZATION COST Total number of contractors .................................................................................................................................................................. Time for rule familiarization ................................................................................................................................................................... Human Resources Managers fully loaded hourly compensation ......................................................................................................... Rule familiarization cost in the first year ............................................................................................................................................... Annualized cost with 3 percent discounting ......................................................................................................................................... Annualized cost per contractor with 3 percent discounting .................................................................................................................. Annualized cost with 7 percent discounting ......................................................................................................................................... Annualized cost per contractor with 7 percent discounting .................................................................................................................. TKELLEY on DSK125TN23PROD with RULES1 b. Benefits E.O. 13563 recognizes that some rules have benefits that are difficult to quantify or monetize but are nevertheless important and states that agencies may consider such benefits. This rule has several benefits, including equity and fairness benefits, which are explicitly recognized in E.O. 13563. Key benefits include: • Supporting more effective enforcement of OFCCP’s equal opportunity laws by eliminating procedural inefficiencies and heightened evidentiary standards created by the 2020 rule; • Facilitating earlier and more efficient resolutions; • Ensuring greater certainty and consistency in case resolutions by maintaining adherence to Title VII and OFCCP case law standards; • Promoting transparency by codifying the required use of the Predetermination Notice when the agency identifies preliminary findings of potential discrimination; • Allowing OFCCP to tailor the preenforcement process to the specific facts VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 and circumstances of each case, consistent with judicial interpretations of the applicable legal authorities as they evolve, which will in turn allow OFCCP to more effectively redress unlawful discrimination; • Advancing a policy of promoting consistency between Title VII and E.O. 11246 and removing unnecessary constraints on the agency’s ability to pursue meritorious cases. This approach will help OFCCP advance the overriding policy goal of promoting nondiscrimination by strengthening the enforcement of federal protections under E.O. 11246; • Reducing time-consuming disputes over unnecessary standards that are inherently fact-specific; and • Furthering the strategic allocation of agency resources. 3. Alternatives In response to the NPRM, OFCCP received one comment stating the agency’s proposed modifications did not meet the APA requirement of considering less disruptive alternatives. However, OFCCP clearly addressed the PO 00000 Frm 00038 Fmt 4700 Sfmt 4700 31,143. 30 minutes. $110.84. $1,726,000. $196,446. $6.31. $229,667. $7.37. alternatives in the NPRM and describes in detail the alternative approaches that were considered prior to finalizing the rule below.79 Specifically, OFCCP considered maintaining the current regulations established in the 2020 rule. However, as discussed earlier in this preamble, OFCCP determined that creating rigid regulatory standards to govern its preenforcement compliance evaluation notice and conciliation procedures is incompatible with the flexibility needed for effective enforcement. Moreover, the 2020 rule places certain obligations on OFCCP at this preliminary stage before its review can proceed that go beyond the substantive legal requirements that E.O. 11246, Title VII, and interpretive case law require to state a claim and prove discrimination at a much later stage, upon a full evidentiary record. OFCCP has determined that imposing such rigid and heightened standards early in its pre-enforcement proceedings unduly constrains its ability to pursue 79 See 87 FR 16138, 16151 (describing alternative approaches OFCCP considered). E:\FR\FM\04AUR1.SGM 04AUR1 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations TKELLEY on DSK125TN23PROD with RULES1 the full range of discrimination under its authority. The 2020 rule also created an inefficient process where OFCCP’s Predetermination Notice (intended to notify the contractor of potential discrimination and to invite the contractor to provide additional information on its compliance before OFCCP makes its determination) and the Notice of Violation (intended to inform the contractor of violations that require corrective action and to invite conciliation through a written agreement) were largely duplicative. Further, mandating regulatory requirements to make inherently factspecific determinations invites timeconsuming disputes over the application of the rule’s requirements, as OFCCP has already experienced in compliance evaluations since the 2020 rule took effect. Modifying the 2020 rule helps restore the enforcement discretion and flexibility OFCCP needs to facilitate compliance through conciliation by providing pre-enforcement notice of preliminary findings of potential discrimination and findings of discrimination and applying Title VII to the facts and circumstances of each compliance evaluation. OFCCP is modifying the regulatory text to create a more streamlined and effective process for the agency to communicate preliminary findings of potential discrimination to contractors, provide contractors an opportunity to respond, notify contractors of violations, and ultimately facilitate greater understanding to obtain resolution through conciliation. OFCCP also considered modifying the 2020 rule to rescind the entirety of the rule except the correction to OFCCP’s agency head title or modifying the 2020 rule by eliminating the Predetermination Notice entirely since it currently functions as a procedural redundancy. However, OFCCP determined that retaining both preenforcement notices in the regulatory text while rescinding the inflexible evidentiary requirements for the Predetermination Notice and Notice of Violation allows the contractor and OFCCP to engage in earlier discussions that can lead to more efficient resolutions. B. Regulatory Flexibility Act and Executive Order 13272 (Consideration of Small Entities) The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq., establishes ‘‘as a principle of regulatory issuance that agencies shall endeavor, consistent with the objectives of the rule and applicable statutes, to fit regulatory and informational requirements to the scale VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 of the businesses, organizations, and governmental jurisdictions subject to regulation.’’ Public Law 96–354, section 2(b). The RFA requires agencies to consider the impact of a regulatory action on a wide range of small entities, including small businesses, nonprofit organizations, and small governmental jurisdictions. Agencies must review whether a regulatory action would have a significant economic impact on a substantial number of small entities. See 5 U.S.C. 603. If the regulatory action would, then the agency must prepare a regulatory flexibility analysis as described in the RFA. See id. However, if the agency determines that the regulatory action would not be expected to have a significant economic impact on a substantial number of small entities, then the head of the agency may so certify and the RFA does not require a regulatory flexibility analysis. See 5 U.S.C. 605. The certification must provide the factual basis for this determination. The final rule will not have a significant economic impact on a substantial number of small entities. The first-year cost for small entities at a discount rate of 7 percent for rule familiarization is $51.80 per entity which is far less than 1 percent of the annual revenue of the smallest of the small entities affected by the rule. Accordingly, OFCCP certifies that the final rule will not have a significant economic impact on a substantial number of small entities. C. Paperwork Reduction Act The Paperwork Reduction Act of 1995 requires that OFCCP consider the impact of paperwork and other information collection burdens imposed on the public. See 44 U.S.C. 3507(d). An agency may not collect or sponsor the collection of information or impose an information collection requirement unless the information collection instrument displays a currently valid OMB control number. See 5 CFR 1320.5(b)(1). OFCCP has determined that there would be no new requirement for information collection associated with this final rule. The information collections contained in the existing Executive Order 11246, Section 503, and VEVRAA regulations are currently approved under OMB Control Number 1250–0001 (Construction Recordkeeping and Reporting Requirements), OMB Control Number 1250–0003 (Supply and Service Program), OMB Control Number 1250–0004 (Recordkeeping and Reporting Requirements Under the Vietnam Era Veterans’ Readjustment PO 00000 Frm 00039 Fmt 4700 Sfmt 4700 51733 Assistance Act of 1974, as Amended), and OMB Control Number 1250–0005 (Recordkeeping and Reporting Requirements Under Rehabilitation Act of 1973, as Amended Section 503). Consequently, this final rule does not require review by OMB under the authority of the Paperwork Reduction Act. D. Unfunded Mandates Reform Act of 1995 For purposes of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1532, this final rule would not include any federal mandate that may result in excess of $100 million in expenditures by state, local, and tribal governments in the aggregate or by the private sector. E. Executive Order 13132 (Federalism) OFCCP has reviewed this final rule in accordance with Executive Order 13132 regarding federalism and has determined that it does not have ‘‘federalism implications.’’ The final rule will not ‘‘have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.’’ F. Executive Order 13175 (Consultation and Coordination With Indian Tribal Governments) This final rule does not have tribal implications under Executive Order 13175 that would require a tribal summary impact statement. The final rule does not ‘‘have substantial direct effects on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.’’ List of Subjects 41 CFR Part 60–1 Administrative practice and procedure, Civil rights, Employment, Equal employment opportunity, Government contracts, Government procurement, Investigations, Labor, Reporting and recordkeeping requirements. 41 CFR Part 60–2 Equal employment opportunity, Government procurement, Reporting and recordkeeping requirements. 41 CFR Part 60–4 Construction industry, Equal employment opportunity, Government procurement, Reporting and recordkeeping requirements. E:\FR\FM\04AUR1.SGM 04AUR1 51734 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations 41 CFR Part 60–20 Civil rights, Equal employment opportunity, Government procurement, Labor, Sex discrimination, Women. 41 CFR Part 60–30 Administrative practice and procedure, Civil rights, Equal employment opportunity, Government contracts, Government procurement, Government property management, Individuals with Disabilities, Reporting and recordkeeping requirements, Veterans. 41 CFR Part 60–40 Freedom of information, Reporting and recordkeeping requirements. 41 CFR Part 60–50 Equal employment opportunity, Government procurement, Religious discrimination, Reporting and recordkeeping requirements. 41 CFR Parts 60–300 and 60–741 Administrative practice and procedure, Civil rights, Employment, Equal employment opportunity, Government contracts, Government procurement, Individuals with disabilities, Investigations, Labor, Reporting and recordkeeping requirements, Veterans. § 60–1.28 ■ ■ For the reasons stated in the preamble, OFCCP revises 41 CFR parts 60–1, 60–2, 60–4, 60–20, 60–30, 60–40, 60–50, 60–300, and 60–741 as follows: PART 60–1—OBLIGATIONS OF CONTRACTORS AND SUBCONTRACTORS 1. The authority citation for part 60– 1 continues to read as follows: ■ Authority: Sec. 201, E.O. 11246, 30 FR 12319, 3 CFR, 1964–1965 Comp., p. 339, as amended by E.O. 11375, 32 FR 14303, 3 CFR, 1966–1970 Comp., p. 684, E.O. 12086, 43 FR 46501, 3 CFR, 1978 Comp., p. 230, E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258 and E.O. 13672, 79 FR 42971. 2. Amend § 60–1.3 by removing the definitions for ‘‘Qualitative evidence’’ and ‘‘Quantitative evidence.’’ ■ 3. Revise § 60–1.20(b) to read as follows: * * * * * (b) Where deficiencies are found to exist, OFCCP will make reasonable efforts to secure compliance through conciliation and persuasion, pursuant to § 60–1.33. The ‘‘reasonable efforts’’ standard shall be interpreted TKELLEY on DSK125TN23PROD with RULES1 VerDate Sep<11>2014 16:30 Aug 03, 2023 Jkt 259001 [Removed and reserved] 4. Remove and reserve § 60–1.28. 5. Revise § 60–1.33 to read as follows: § 60–1.33 Pre-enforcement notice and conciliation procedures. Michele Hodge, Acting Director, Office of Federal Contract Compliance Programs. ■ consistently with title VII of the Civil Rights Act of 1964 and its requirement that the Equal Employment Opportunity Commission endeavor to remove any such alleged unlawful employment practice by informal methods of conference, conciliation, and persuasion. Before the contractor can be found to be in compliance with the order, it must make a specific commitment, in writing, to correct any such deficiencies. The commitment must include the precise action to be taken and dates for completion. The time period allotted shall be no longer than the minimum period necessary to effect such changes. Upon approval of the commitment, the contractor may be considered in compliance, on condition that the commitments are faithfully kept. The contractor shall be notified that making such commitments does not preclude future determinations of noncompliance based on a finding that the commitments are not sufficient to achieve compliance. * * * * * (a) Predetermination Notice. If a compliance evaluation by OFCCP indicates preliminary findings of potential discrimination, OFCCP will issue a Predetermination Notice that describes the preliminary findings and provides the contractor an opportunity to respond. The Predetermination Notice may also include preliminary findings of other potential violations that OFCCP has identified at that stage of the review. After OFCCP issues the Predetermination Notice, the agency may identify additional violations and include them in a subsequent Notice of Violation or Show Cause Notice without amending the Predetermination Notice. OFCCP will provide the contractor an opportunity to conciliate additional violations identified in the Notice of Violation or Show Cause Notice. Any response to a Predetermination Notice must be received by OFCCP within 15 calendar days of receipt of the Notice, which deadline OFCCP may extend for good cause. If the contractor does not respond or OFCCP determines that the contractor’s response and any additional investigation undertaken by the agency did not resolve the preliminary findings of potential discrimination or other violations identified in the Predetermination Notice, OFCCP will proceed to issue a Notice of Violation. PO 00000 Frm 00040 Fmt 4700 Sfmt 4700 (b) Notice of Violation. If a compliance evaluation by OFCCP indicates a violation of the equal opportunity clause, OFCCP will issue a Notice of Violation to the contractor requiring corrective action. The Notice of Violation will identify the violations found and describe the recommended corrective actions. The Notice of Violation will invite the contractor to conciliate the matter and resolve the findings through a written conciliation agreement. After the Notice of Violation is issued, OFCCP may include additional violations in a subsequent Show Cause Notice without amendment to the Notice of Violation. OFCCP will provide the contractor an opportunity to conciliate additional violations identified in the Show Cause Notice. (c) Conciliation agreement. If a compliance review, complaint investigation, or other review by OFCCP or its representative indicates a material violation of the equal opportunity clause, and: (1) If the contractor, subcontractor, or bidder is willing to correct the violations and/or deficiencies; and (2) If OFCCP or its representative determines that settlement (rather than referral for consideration of formal enforcement) is appropriate, a written conciliation agreement shall be required. The agreement shall provide for such remedial action as may be necessary to correct the violations and/ or deficiencies identified, including, where appropriate (but not limited to), remedies such as back pay, salary adjustments, and retroactive seniority. (d) Show Cause Notice. When the Director has reasonable cause to believe that a contractor has violated the equal opportunity clause the Director may issue a notice requiring the contractor to show cause, within 30 days, why monitoring, enforcement proceedings, or other appropriate action to ensure compliance should not be instituted. OFCCP may issue a Show Cause Notice without first issuing a Predetermination Notice or Notice of Violation when 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. The Show Cause Notice will include each violation that OFCCP has identified at the time of issuance. Where OFCCP identifies additional violations after issuing a Show Cause Notice, OFCCP will modify or amend the Show Cause Notice. (e) Expedited conciliation option. OFCCP may agree to waive the procedures set forth in paragraphs (a) and/or (b) of this section to enter directly into a conciliation agreement with a contractor. OFCCP may offer the E:\FR\FM\04AUR1.SGM 04AUR1 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations contractor this expedited conciliation option but may not require or insist that the contractor avail itself of the expedited conciliation option. ■ 6. Add § 60–1.48 to subpart C to read as follows: § 60–1.48 Severability. Should a court of competent jurisdiction hold any provision(s) of this part to be invalid, such action will not affect any other provision of this part. 13. The authority citation for part 60– 30 continues to read as follows: ■ Authority: Executive Order 11246, as amended, 30 FR 12319, 32 FR 14303, as amended by E.O. 12086; 29 U.S.C. 793, as amended, and 38 U.S.C. 4212, as amended. ■ 14. Add § 60–30.38 to read as follows: § 60–30.38 PART 60–2—AFFIRMATIVE ACTION PROGRAMS Severability. Should a court of competent jurisdiction hold any provision(s) of this part to be invalid, such action will not affect any other provision of this part. 7. The authority citation for part 60– 2 continues to read as follows: ■ Authority: Sec. 201, E.O. 11246, 30 FR 12319, E.O. 11375, 32 FR 14303, as amended by E.O. 12086, 43 FR 46501, and E.O. 13672, 79 FR 42971. PART 60–40—EXAMINATION AND COPYING OF OFCCP DOCUMENTS ■ 15. The authority citation for part 60– 40 continues to read as follows: § 60–2.36 Authority: E.O. 11246, as amended by E.O. 11375, and as amended by E.O. 12086; 5 U.S.C. 552. 8. Add § 60–2.36 to subpart C to read as follows: Severability. Should a court of competent jurisdiction hold any provision(s) of this part to be invalid, such action will not affect any other provision of this part. PART 60–4—CONSTRUCTION CONTRACTORS—AFFIRMATIVE ACTION REQUIREMENTS 9. The authority citation for part 60– 4 continues to read as follows: ■ Authority: Secs. 201, 202, 205, 211, 301, 302, and 303 of E.O. 11246, as amended, 30 FR 12319; 32 FR 14303, as amended by E.O. 12086; and E.O. 13672, 79 FR 42971. ■ 10. Add § 60–4.10 to read as follows: § 60–4.10 Severability. Should a court of competent jurisdiction hold any provision(s) of this part to be invalid, such action will not affect any other provision of this part. PART 60–20—DISCRIMINATION ON THE BASIS OF SEX 11. The authority citation for part 60– 20 continues to read as follows: ■ Authority: Sec. 201, E.O. 11246, 30 FR 12319, 3 CFR, 1964–1965 Comp., p. 339 as amended by E.O. 11375, 32 FR 14303, 3 CFR 1966–1970 Comp., p. 684; E.O. 12086, 43 FR 46501, 3 CFR 1978 Comp., p. 230; E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258; and E.O. 13672, 79 FR 42971. TKELLEY on DSK125TN23PROD with RULES1 PART 60–30—RULES OF PRACTICE FOR ADMINISTRATIVE PROCEEDINGS TO ENFORCE EQUAL OPPORTUNITY UNDER EXECUTIVE ORDER 11246 ■ 12. Add § 60–20.9 to read as follows: § 60–20.9 Severability. 15:58 Aug 03, 2023 ■ 16. Add § 60–40.9 to read as follows: § 60–40.9 Severability. Should a court of competent jurisdiction hold any provision(s) of this part to be invalid, such action will not affect any other provision of this part or chapter. PART 60–50—GUIDELINES ON DISCRIMINATION BECAUSE OF RELIGION OR NATIONAL ORIGIN 17. The authority citation for part 60– 50 continues to read as follows: ■ Authority: Sec. 201 of E.O. 11246, as amended, 30 FR 12319; 32 FR 14303, as amended by E.O. 12086; and E.O. 13672, 79 FR 42971. ■ 18. Add § 60–50.6 to read as follows: § 60–50.6 Severability. Should a court of competent jurisdiction hold any provision(s) of this part to be invalid, such action will not affect any other provision of this part. PART 60–300—AFFIRMATIVE ACTION AND NONDISCRIMINATION OBLIGATIONS OF FEDERAL CONTRACTORS AND SUBCONTRACTORS REGARDING DISABLED VETERANS, RECENTLY SEPARATED VETERANS, ACTIVE DUTY WARTIME OR CAMPAIGN BADGE VETERANS, AND ARMED FORCES SERVICE MEDAL VETERANS 19. The authority citation for part 60– 300 continues to read as follows: ■ Should a court of competent jurisdiction hold any provision(s) of this part to be invalid, such action will not affect any other provision of this part. VerDate Sep<11>2014 ■ Jkt 259001 Authority: 29 U.S.C. 793; 38 U.S.C. 4211 and 4212; E.O. 11758 (3 CFR, 1971–1975 Comp., p. 841). PO 00000 Frm 00041 Fmt 4700 Sfmt 4700 § 60–300.2 51735 [Amended] 20. Amend § 60–300.2 by removing the definitions for ‘‘Qualitative evidence’’ and ‘‘Quantitative evidence.’’ ■ 21. Revise § 60–300.60(b) to read as follows: ■ § 60–300.60 Compliance evaluations. * * * * * (b) Where deficiencies are found to exist, OFCCP will make reasonable efforts to secure compliance through conciliation and persuasion, pursuant to § 60–300.62. The ‘‘reasonable efforts’’ standard shall be interpreted consistently with title VII of the Civil Rights Act of 1964 and its requirement that the Equal Employment Opportunity Commission endeavor to remove any such alleged unlawful employment practice by informal methods of conference, conciliation, and persuasion. * * * * * ■ 22. Revise § 60–300.62 to read as follows: § 60–300.62 Pre-enforcement notice and conciliation procedures. (a) Predetermination Notice. If a compliance evaluation by OFCCP indicates preliminary findings of potential discrimination, OFCCP will issue a Predetermination Notice that describes the preliminary findings and provides the contractor an opportunity to respond. The Predetermination Notice may also include preliminary findings of other potential violations that OFCCP has identified at that stage of the review. After OFCCP issues the Predetermination Notice, the agency may identify additional violations and include them in a subsequent Notice of Violation or Show Cause Notice without amending the Predetermination Notice. OFCCP will provide the contractor an opportunity to conciliate additional violations identified in the Notice of Violation or Show Cause Notice. Any response to a Predetermination Notice must be received by OFCCP within 15 calendar days of receipt of the Notice, which deadline OFCCP may extend for good cause. If the contractor does not respond or OFCCP determines that the contractor’s response and any additional investigation undertaken by the agency did not resolve the preliminary findings of potential discrimination or other violations identified in the Predetermination Notice, OFCCP will proceed to issue a Notice of Violation. (b) Notice of Violation. If a compliance evaluation by OFCCP indicates a violation of the equal opportunity clause, OFCCP will issue a Notice of Violation to the contractor E:\FR\FM\04AUR1.SGM 04AUR1 TKELLEY on DSK125TN23PROD with RULES1 51736 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations requiring corrective action. The Notice of Violation will identify the violations found and describe the recommended corrective actions. The Notice of Violation will invite the contractor to conciliate the matter and resolve the findings through a written conciliation agreement. After the Notice of Violation is issued, OFCCP may include additional violations in a subsequent Show Cause Notice without amendment to the Notice of Violation. OFCCP will provide the contractor an opportunity to conciliate additional violations identified in the Show Cause Notice. (c) Conciliation agreement. If a compliance review, complaint investigation, or other review by OFCCP or its representative indicates a material violation of the equal opportunity clause, and: (1) If the contractor, subcontractor, or bidder is willing to correct the violations and/or deficiencies; and (2) If OFCCP or its representative determines that settlement (rather than referral for consideration of formal enforcement) is appropriate, a written conciliation agreement shall be required. The agreement shall provide for such remedial action as may be necessary to correct the violations and/ or deficiencies identified, including, where appropriate (but not limited to), remedies such as back pay, salary adjustments, and retroactive seniority. (d) Show Cause Notice. When the Director has reasonable cause to believe that a contractor has violated the equal opportunity clause the Director may issue a notice requiring the contractor to show cause, within 30 days, why monitoring, enforcement proceedings, or other appropriate action to ensure compliance should not be instituted. OFCCP may issue a Show Cause Notice without first issuing a Predetermination Notice or Notice of Violation when 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. The Show Cause Notice will include each violation that OFCCP has identified at the time of issuance. Where OFCCP identifies additional violations after issuing a Show Cause Notice, OFCCP will modify or amend the Show Cause Notice. (e) Expedited conciliation option. OFCCP may agree to waive the procedures set forth in paragraphs (a) and/or (b) of this section to enter directly into a conciliation agreement with a contractor. OFCCP may offer the contractor this expedited conciliation option, but may not require or insist that the contractor avail itself of the expedited conciliation option. VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 § 60–300.64 [Removed and Reserved] 23. Remove and reserve § 60–300.64. ■ 24. Add § 60–300.85 to subpart D to read as follows: ■ § 60–300.85 Severability. Should a court of competent jurisdiction hold any provision(s) of this part to be invalid, such action will not affect any other provision of this part. PART 60–741—AFFIRMATIVE ACTION AND NONDISCRIMINATION OBLIGATIONS OF FEDERAL CONTRACTORS AND SUBCONTRACTORS REGARDING INDIVIDUALS WITH DISABILITIES 25. The authority citation for part 60– 741 continues to read as follows: ■ Authority: 29 U.S.C. 705 and 793; E.O. 11758 (3 CFR, 1971–1975 Comp., p. 841). 26. Amend § 60–741.2 by removing the definitions for ‘‘Qualitative evidence’’ and ‘‘Quantitative evidence.’’ ■ 27. Revise § 60–741.60(b) to read as follows: ■ § 60–741.60 Compliance evaluations. * * * * * (b) Where deficiencies are found to exist, OFCCP will make reasonable efforts to secure compliance through conciliation and persuasion, pursuant to § 60–741.62. The ‘‘reasonable efforts’’ standard shall be interpreted consistently with title VII of the Civil Rights Act of 1964 and its requirement that the Equal Employment Opportunity Commission endeavor to remove any such alleged unlawful employment practice by informal methods of conference, conciliation, and persuasion. * * * * * ■ 28. Revise § 60–741.62 to read as follows: § 60–741.62 Pre-enforcement notice and conciliation procedures. (a) Predetermination Notice. If a compliance evaluation by OFCCP indicates preliminary findings of potential discrimination, OFCCP will issue a Predetermination Notice that describes the preliminary findings and provides the contractor an opportunity to respond. The Predetermination Notice may also include preliminary findings of other potential violations that OFCCP has identified at that stage of the review. After OFCCP issues the Predetermination Notice, the agency may identify additional violations and include them in a subsequent Notice of Violation or Show Cause Notice without amending the Predetermination Notice. OFCCP will provide the contractor an PO 00000 Frm 00042 Fmt 4700 Sfmt 4700 opportunity to conciliate additional violations identified in the Notice of Violation or Show Cause Notice. Any response to a Predetermination Notice must be received by OFCCP within 15 calendar days of receipt of the Notice, which deadline OFCCP may extend for good cause. If the contractor does not respond or OFCCP determines that the contractor’s response and any additional investigation undertaken by the agency did not resolve the preliminary findings of potential discrimination or other violations identified in the Predetermination Notice, OFCCP will proceed to issue a Notice of Violation. (b) Notice of Violation. If a compliance evaluation by OFCCP indicates a violation of the equal opportunity clause, OFCCP will issue a Notice of Violation to the contractor requiring corrective action. The Notice of Violation will identify the violations found and describe the recommended corrective actions. The Notice of Violation will invite the contractor to conciliate the matter and resolve the findings through a written conciliation agreement. After the Notice of Violation is issued, OFCCP may include additional violations in a subsequent Show Cause Notice without amendment to the Notice of Violation. OFCCP will provide the contractor an opportunity to conciliate additional violations identified in the Show Cause Notice. (c) Conciliation agreement. If a compliance review, complaint investigation, or other review by OFCCP or its representative indicates a material violation of the equal opportunity clause, and: (1) If the contractor, subcontractor, or bidder is willing to correct the violations and/or deficiencies; and (2) If OFCCP or its representative determines that settlement (rather than referral for consideration of formal enforcement) is appropriate, a written conciliation agreement shall be required. The agreement shall provide for such remedial action as may be necessary to correct the violations and/ or deficiencies identified, including, where appropriate (but not limited to), remedies such as back pay, salary adjustments, and retroactive seniority. (d) Remedial benchmarks. The remedial action referenced in paragraph (c) of this section may include the establishment of benchmarks for the contractor’s outreach, recruitment, hiring, or other employment activities. The purpose of such benchmarks is to create a quantifiable method by which the contractor’s progress in correcting identified violations and/or deficiencies can be measured. E:\FR\FM\04AUR1.SGM 04AUR1 Federal Register / Vol. 88, No. 149 / Friday, August 4, 2023 / Rules and Regulations (e) Show Cause Notice. When the Director has reasonable cause to believe that a contractor has violated the equal opportunity clause the Director may issue a notice requiring the contractor to show cause, within 30 days, why monitoring, enforcement proceedings, or other appropriate action to ensure compliance should not be instituted. OFCCP may issue a Show Cause Notice without first issuing a Predetermination Notice or Notice of Violation when 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. The Show Cause Notice will include each violation that OFCCP has identified at the time of issuance. Where OFCCP identifies additional violations after issuing a Show Cause Notice, OFCCP will modify or amend the Show Cause Notice. (f) Expedited conciliation option. OFCCP may agree to waive the procedures set forth in paragraphs (a) and/or (b) of this section to enter directly into a conciliation agreement with a contractor. OFCCP may offer the contractor this expedited conciliation option, but may not require or insist that the contractor avail itself of the expedited conciliation option. § 60–741.64 [Removed and Reserved] 29. Remove and reserve § 60–741.64. ■ 30. Add § 60–741.84 to read as follows: ■ § 60–741.84 Severability. Should a court of competent jurisdiction hold any provision(s) of this part to be invalid, such action will not affect any other provision of this part. [FR Doc. 2023–16098 Filed 8–3–23; 8:45 am] requirements for certain types of survival craft equipment. The final rule had a typographical error in one of the sections. This document corrects that error. DATES: Effective August 4, 2023. For information about this document call or email Ms. Stephanie Groleau, Lifesaving & Fire Safety Division (CG–ENG–4), Coast Guard; telephone 202–372–1381, email Stephanie.M.Groleau@uscg.mil. DEPARTMENT OF HOMELAND SECURITY On November 14, 2022, the Coast Guard published a final rule titled ‘‘Survival Craft Equipment-Update to Type Approval Requirements’’ at 87 FR 68270. The final rule updated type approval requirements for certain types of survival craft equipment, including hatchets. The final rule contained a spelling error in the regulatory text of 46 CFR 169.527(c)(4) where ‘‘Hatch’’ was used instead of ‘‘Hatchet’’. This document corrects that error and adopts the correct spelling for § 169.527(c)(4). We find good cause under provisions in 5 U.S.C. 553(d)(3) to make this correction effective upon publication because delaying the effective date is unnecessary and contrary to the public interest. Waiting 30 days after publication to correct the error within the final rule is unnecessary and contrary to the public’s interest in having access to accurate and current regulations. The November 14, 2022, final rule preamble discussion indicated the changes were intended for hatchets, but the spelling was inaccurate. SUPPLEMENTARY INFORMATION: List of Subjects in 46 CFR Part 169 For the reasons stated in the preamble, the Coast Guard is correcting 46 CFR part 169 with the following correcting amendment: Coast Guard 46 CFR Part 169 PART 169—SAILING SCHOOL VESSELS [Docket No. USCG–2020–0107] RIN 1625–AC51 1. The authority citation for part 169 continues to read as follows: ■ TKELLEY on DSK125TN23PROD with RULES1 Survival Craft Equipment-Update To Type Approval Requirements; Correction Authority: 33 U.S.C. 1321(j); 46 U.S.C. 3306, 6101; E.O. 11735, 38 FR 21243, 3 CFR, 1971–1975 Comp., p. 793; DHS Delegation 00170.1, Revision No. 01.2; § 169.117 also issued under the authority of 44 U.S.C. 3507. Coast Guard, DHS. Final rule; correcting amendment. AGENCY: ACTION: The Coast Guard is correcting a final rule published in the Federal Register on November 14, 2022. The final rule updated type approval SUMMARY: VerDate Sep<11>2014 15:58 Aug 03, 2023 Jkt 259001 Dated: August 1, 2023. Michael T. Cunningham, Chief, Office of Regulations and Administrative Law, U.S. Coast Guard. [FR Doc. 2023–16655 Filed 8–3–23; 8:45 am] BILLING CODE 9110–04–P FOR FURTHER INFORMATION CONTACT: Fire prevention, Incorporation by reference, Marine safety, Reporting and recordkeeping requirements, Schools, Vessels. BILLING CODE 4510–CM–P 51737 § 169.527 [Amended] 2. In § 169.527(c)(4), remove the text ‘‘Hatch’’ and add, in its place, the text ‘‘Hatchet’’. ■ PO 00000 Frm 00043 Fmt 4700 Sfmt 4700 DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 648 [Docket No. 221215–0272; RTID 0648– XD196] Fisheries of the Northeastern United States; Atlantic Bluefish Fishery; Quota Transfers From VA to NC and RI National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Notification of quota transfers. AGENCY: NMFS announces that the Commonwealth of Virginia is transferring a portion of its 2023 commercial bluefish quota to the States of North Carolina and Rhode Island. These adjustments to the 2023 fishing year quota are necessary to comply with the Atlantic Bluefish Fishery Management Plan quota transfer provisions. This announcement informs the public of the revised 2023 commercial bluefish quotas for Virginia, North Carolina, and Rhode Island. DATES: Effective August 3, 2023, through December 31, 2023. FOR FURTHER INFORMATION CONTACT: Laura Deighan, Fishery Management Specialist, (978) 281–9184. SUPPLEMENTARY INFORMATION: Regulations governing the Atlantic bluefish fishery are found in 50 CFR 648.160 through 648.167. These regulations require annual specification of a commercial quota that is apportioned among the coastal states from Maine through Florida. The process to set the annual commercial quota and the percent allocated to each state is described in § 648.162, and the final 2023 allocations were published on December 21, 2022 (87 FR 78011). The final rule implementing Amendment 1 to the Bluefish Fishery Management Plan (FMP), as published in the Federal Register on July 26, 2000 (65 FR 45844), provided a mechanism for transferring bluefish commercial quota from one state to another. Two or more states, under mutual agreement and with the concurrence of the NMFS Greater Atlantic Regional Administrator, SUMMARY: E:\FR\FM\04AUR1.SGM 04AUR1

Agencies

[Federal Register Volume 88, Number 149 (Friday, August 4, 2023)]
[Rules and Regulations]
[Pages 51717-51737]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16098]

=======================================================================
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DEPARTMENT OF LABOR

Office of Federal Contract Compliance Programs

41 CFR Parts 60-1, 60-2, 60-4, 60-20, 60-30, 60-40, 60-50, 60-300,
and 60-741

RIN 1250-AA14

Pre-enforcement Notice and Conciliation Procedures

AGENCY: Office of Federal Contract Compliance Programs, Labor.

ACTION: Final rule.

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SUMMARY: The U.S. Department of Labor publishes this final rule to
modify procedures and standards the Office of Federal Contract
Compliance Programs (``OFCCP'' or ``the agency'') uses when issuing
pre-enforcement notices and securing compliance through conciliation.
This final rule strengthens OFCCP's enforcement by rescinding the
evidentiary standards and definitions codified in 2020 (``the 2020
rule''), which hindered the agency's ability to pursue meritorious
cases. OFCCP is instituting a streamlined, effective, and flexible pre-
enforcement and conciliation process that promotes greater consistency
with Title VII of the Civil Rights Act of 1964 (``Title VII'').

DATES: These regulations are effective September 5, 2023.

FOR FURTHER INFORMATION CONTACT: Tina Williams, Director, Division of
Policy and Program Development, Office of Federal Contract Compliance
Programs, 200 Constitution Avenue NW, Room C-3325, Washington, DC
20210. Telephone: (202) 693-0103 or toll free at 1-800-397-6251. If you
are deaf, hard of hearing, or have a speech disability, please dial 7-
1-1 to access telecommunications relay services.

SUPPLEMENTARY INFORMATION:

I. Legal Authority

OFCCP administers and enforces Executive Order 11246, as amended
(``E.O. 11246''); Section 503 of the Rehabilitation Act of 1973, as
amended, 29 U.S.C. 793 (``Section 503''); and the Vietnam Era Veterans'
Readjustment Assistance Act of 1974, as amended, 38 U.S.C. 4212
(``VEVRAA''), as well as their implementing regulations. Issued in
1965, and amended several times in the intervening years, E.O. 11246
has two principal purposes. First, it prohibits covered Federal
contractors and subcontractors \1\ from discriminating against
employees and applicants because of race, color, religion, sex, sexual
orientation, gender identity, national origin, or because they inquire
about, discuss, or disclose their compensation or that of others,
subject to certain limitations.\2\ Second, it requires covered
contractors to take affirmative action to ensure equal employment
opportunity.
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\1\ Hereinafter, the terms ``contractor'' or ``Federal
contractor'' are used to refer collectively to Federal contractors
and subcontractors that fall under OFCCP's authority, unless
otherwise expressly stated. This approach is consistent with OFCCP's
regulations, which define ``contract'' to include subcontracts and
``contractor'' to include subcontractors.
\2\ The nondiscrimination protections and standards under E.O.
11246 are interpreted consistently with those under Title VII of the
Civil Rights Act of 1964 (``Title VII''). See OFCCP v. Greenwood
Mills, Inc., Nos. 00-044, 01-089, 2002 WL 31932547, at *4 (ARB Final
Decision & Order Dec. 20, 2002) (``The legal standards developed
under Title VII of the Civil Rights Act of 1964 apply to cases
brought under [E.O. 11246].'').
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The requirements in E.O. 11246 generally apply to any business or
organization that (1) holds a single Federal contract, subcontract, or
federally assisted construction contract in excess of $10,000; (2) has
Federal contracts or subcontracts that, when combined, total in excess
of $10,000 in any 12-month period; or (3) holds Government bills of
lading, serves as a depository of Federal funds, or is an issuing and
paying agency for U.S. savings bonds and notes in any amount. Supply
and service contractors with 50 or more employees and a single Federal
contract or subcontract of $50,000 or more also must develop and
maintain an affirmative action program that complies with 41 CFR part
60-2. Construction contractors have different affirmative action
requirements under E.O. 11246, codified at 41 CFR part 60-4.
Enacted in 1973 and amended since, the purpose of Section 503 is
twofold. First, Section 503 prohibits employment discrimination on the
basis of disability by Federal contractors. Second, it requires each
covered Federal contractor to take affirmative action to employ and
advance in employment qualified individuals with disabilities. The
requirements in Section 503 generally apply to any business or
organization that holds a single Federal contract or subcontract in
excess of $15,000.\3\ Pursuant to Section 503, contractors with 50 or
more employees and a single Federal contract or subcontract of $50,000
or more also must develop and maintain an affirmative action program
that complies with 41 CFR part 60-741, subpart C.
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\3\ Effective October 1, 2010, the coverage threshold under
Section 503 increased from $10,000 to $15,000, in accordance with
the inflationary adjustment requirements in 41 U.S.C. 1908. See
Federal Acquisition Regulation; Inflation Adjustment of Acquisition-
Related Thresholds, 75 FR 53129 (Aug. 30, 2010).
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Enacted in 1974 and amended in the intervening years, VEVRAA
prohibits Federal contractors from discriminating against employees and
applicants because of their status as protected veterans (defined by
the statute to include disabled veterans, recently separated veterans,
Armed Forces Service Medal Veterans, and active duty wartime or
campaign badge veterans). It also requires each covered contractor to
take affirmative action to employ and advance in employment these
veterans. The requirements in VEVRAA generally apply to any business or
organization that holds a single Federal contract or subcontract in
excess of $150,000.\4\ Pursuant to VEVRAA, contractors with 50 or more
employees and a single Federal contract or subcontract of $150,000 or
more also must develop and maintain an affirmative action program that
complies with 41 CFR part 60-300, subpart C.
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\4\ Effective October 1, 2015, the coverage threshold under
VEVRAA increased from $100,000 to $150,000, in accordance with the
inflationary adjustment requirements in 41 U.S.C. 1908. See Federal
Acquisition Regulation; Inflation Adjustment of Acquisition-Related
Thresholds, 80 FR 38293 (July 2, 2015).
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Pursuant to these authorities, receiving a Federal contract comes
with a number of responsibilities. Contractors are required to comply
with all provisions of these authorities as well as the rules,
regulations, and relevant orders of the Secretary of Labor. Where OFCCP
finds noncompliance under any of the three authorities or their
implementing regulations, it utilizes established procedures to either
facilitate resolution or proceed to administrative enforcement as
necessary to secure compliance. A contractor found in violation that
fails to correct violations of OFCCP's regulations may, after the
opportunity for a hearing, have its contracts canceled, terminated, or
suspended and/or may be subject to debarment.

II. Summary of Relevant Background

This final rule, like the 2020 rule it modifies, focuses almost
entirely on OFCCP's pre-enforcement resolution procedures. This
includes the processes by which the agency notifies Federal contractors
of the agency's findings during the compliance evaluations it conducts,
and how the agency seeks to conciliate matters in which it finds a

[[Page 51718]]

violation of its regulations prior to referring a matter to the Office
of the Solicitor for possible enforcement. To provide background and
context for this final rule, we first summarize how OFCCP had
traditionally accomplished this prior to the 2020 rule, the changes
that the 2020 rule made to this approach, and how the agency proposed
to modify this approach in the 2022 Notice of Proposed Rulemaking
(NPRM).

A. OFCCP's Use of Pre-Enforcement Notices Prior to the 2020 Rule

For decades prior to the promulgation of the 2020 rule, the
regulations most relevant to OFCCP's pre-enforcement resolution
procedures remained unchanged.\5\ OFCCP's general regulations on
compliance evaluations provided that, when OFCCP finds deficiencies in
contractors' compliance with its regulatory obligations, it will make
``reasonable efforts . . . to secure compliance through conciliation
and persuasion. . . .'' \6\ If the compliance evaluation found a
material violation of the legal authorities administered by the agency,
the contractor was willing to correct the violations, and OFCCP
determined that settlement was appropriate, the parties would enter
into a written conciliation agreement.\7\ If the agency had reasonable
cause to believe that the contractor violated OFCCP's authorities and
the contractor would not correct the violation, the agency could issue
a notice requiring the contractor to show cause (``Show Cause
Notice''), within 30 days, why enforcement proceedings or other
appropriate actions should not be instituted.\8\ For decades, OFCCP
evaluated and conciliated with contractors under this regulatory
framework.
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\5\ These regulations were not substantively revised by the 2020
rule, and this final rule makes only minor clarifying revisions to
one of the provisions, as discussed in more detail below.
\6\ 41 CFR 60-1.20(b); 60-300.60(b); 60-741.60(b).
\7\ 41 CFR 60-1.33; 60-300.62; 60-741.62 (2019). While the 2020
rule added additional provisions to these sections of the
regulations, the language on conciliation agreements remained
substantively the same.
\8\ 41 CFR 60-1.28; 60-300.64; 60-741.64 (2019); Compliance
Responsibility for Equal Employment Opportunity, 43 FR 49240, 49247
(Oct. 20, 1978); Revision of Chapter, 33 FR 7804, 7810 (May 28,
1968). These regulations were not modified by the 2020 rule.
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In addition to these regulatory provisions, OFCCP, as a matter of
agency policy, long provided contractors with additional notice of its
findings and an opportunity to respond during the course of its
compliance evaluations and prior to any referral for enforcement.\9\
Specifically, whenever discrimination or other violations were found
during the course of a compliance review, prior to the issuance of a
Show Cause Notice, OFCCP would issue to the contractor a Notice of
Violation.\10\ The Notice of Violation would notify the contractor that
the agency found violations of the legal authorities it administers,
and would specify the corrective actions the contractor would have to
take in order to resolve the violations.\11\ OFCCP required that the
Notice of Violation indicate the reasons for each finding and, if
appropriate, note the contractor's failure to adequately justify its
actions.\12\ Contractors were provided an opportunity to respond to the
Notice of Violation and to attempt to conciliate the violations prior
to issuance of a Show Cause Notice.\13\
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\9\ See generally Federal Contract Compliance Manual (FCCM),
Chapter 8, Resolution of Noncompliance, available at https://www.dol.gov/agencies/ofccp/manual/fccm/chapter-8-resolution-noncompliance (last accessed Dec. 1, 2022).
\10\ Id. at Chapter 8F, Notice of Violation, available at
https://www.dol.gov/agencies/ofccp/manual/fccm/chapter-8-resolution-noncompliance/8f-notice-violation (last accessed Dec. 1, 2022).
\11\ Id.
\12\ Id.
\13\ Id.
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Additionally, prior to the issuance of a Notice of Violation, OFCCP
would in certain circumstances issue a Predetermination Notice. The
2020 rule traced the agency's use of the Predetermination Notice back
to 1988.\14\ Since that time, the agency has used the Predetermination
Notice in a variety of circumstances. In those situations in which it
was used, the purpose of this pre-enforcement notice has been to convey
to the contractor an analysis of concerns OFCCP identified during its
review indicating potential discrimination, whether referred to as
``preliminary findings'' or ``preliminary indicators.'' Historically,
issuance of a Predetermination Notice was not required. In 2018,
however, OFCCP issued a Directive on the use of Predetermination
Notices, requiring that OFCCP issue them ``for preliminary individual
and systemic discrimination findings identified during the course of
compliance evaluations,'' and providing contractors with an opportunity
to respond prior to OFCCP deciding to issue a Notice of Violation.\15\
This Directive remains in effect.
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\14\ ``Nondiscrimination Obligations of Federal Contractors and
Subcontractors: Procedures to Resolve Potential Employment
Discrimination,'' 85 FR 71553, 71561 (Nov. 10, 2020).
\15\ Directive 2018-01, Use of Predetermination Notices, (Feb.
27, 2018), available at https://www.dol.gov/agencies/ofccp/directives/2018-01 (last accessed Dec. 1, 2022).
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B. The 2020 Rule

In November 2020, OFCCP published a final rule amending its
regulations regarding the agency's pre-enforcement resolution
procedures.\16\ The 2020 rule changed the obligations placed on the
agency in several respects. First, the 2020 rule codified \17\ that
OFCCP would issue a Predetermination Notice and Notice of Violation in
any compliance evaluation \18\ in which the agency found potential
discrimination or other material violations of its legal
authorities.\19\ Accordingly, in combination with the Show Cause Notice
already required by the regulations, the 2020 rule required OFCCP to
provide the contractor with three separate pre-enforcement notices
during the course of its compliance evaluation, and an opportunity for
contractors to respond to each,\20\ prior to a decision to refer a case
to the Office of the Solicitor for possible enforcement.
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\16\ 85 FR 71553.
\17\ As noted above, Directive 2018-01 required that OFCCP issue
Predetermination Notices for preliminary individual and systemic
discrimination findings identified during the course of compliance
evaluations. The 2020 rule codified this practice. See 85 FR 71561.
\18\ The regulation stated that OFCCP ``may'' issue these
notices, see 41 CFR 60-1.33(a) and (b) (2021), but this language was
to account for OFCCP's inherent enforcement discretion not to pursue
enforcement in certain cases if it so chose. See generally Heckler
v. Chaney, 470 U.S. 821 (1985). For any matters that OFCCP wished to
pursue with potential discrimination or other material violations,
the 2020 rule required the issuance of the Predetermination Notice
and Notice of Violation.
\19\ 85 FR 71553. The final rule, which took effect on December
10, 2020, was published after OFCCP considered comments it received
on a notice of proposed rulemaking, Nondiscrimination Obligations of
Federal Contractors and Subcontractors: Procedures To Resolve
Potential Employment Discrimination, 84 FR 71875 (Dec. 30, 2019).
\20\ See 41 CFR 60-1.33; 41 CFR 60-300.62; 41 CFR 60-741.62
(providing the contractor an opportunity to respond to the
Predetermination Notice, Notice of Violation, and Show Cause
Notice).
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In addition, the 2020 rule established specific evidentiary
requirements that OFCCP would need to meet in order to issue pre-
enforcement notices. These requirements applied equally to the
Predetermination Notice and the Notice of Violation. First, the rule
required OFCCP to identify and disclose to contractors in the
Predetermination Notice and Notice of Violation the theory of
discrimination--disparate treatment and/or disparate impact--under
which it was proceeding. Second, depending on the theory of
discrimination, the 2020 rule required OFCCP to meet specific
evidentiary thresholds in order to issue any pre-enforcement notice.
For matters

[[Page 51719]]

proceeding under a disparate treatment theory, the 2020 rule required
OFCCP to set forth: (1) sufficient ``quantitative evidence''; (2)
sufficient ``qualitative evidence'' that, in combination with other
evidence, supported a finding that the contractor's discriminatory
intent caused disparate treatment; and (3) a demonstration that any
observed disparities were also ``practically significant.'' \21\ For
matters proceeding under a disparate impact theory, the 2020 rule
required the same findings of sufficient ``quantitative evidence'' and
``practical significance'' prior to issuing a pre-enforcement notice,
as well as a requirement that OFCCP identify the specific policy or
practice of the contractor causing the adverse impact. For purposes of
further describing the evidentiary obligations OFCCP must meet to issue
these pre-enforcement notices, the 2020 rule also included lengthy
definitions of ``quantitative evidence'' and ``qualitative evidence''
detailing specific types and amounts of evidence that would satisfy the
definition.
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\21\ The 2020 rule included some narrow exceptions where OFCCP
would not be required to satisfy all three of these prongs in order
to issue a Predetermination Notice, such as when qualitative
evidence alone could satisfy a disparate treatment finding, or if
the quantitative evidence was ``so extraordinarily compelling that
by itself it is sufficient'' to support a disparate treatment
finding. 41 CFR 60-1.33(a)(2). As discussed in the NPRM and herein,
however, Title VII does not require meeting such rigid requirements
in order to satisfy a prima facie case; rather, case law provides
that the standards of proof in such cases are flexible and fact-
specific.
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Additionally, the 2020 rule required OFCCP to disclose the
quantitative and qualitative evidence it had accumulated in
``sufficient detail'' to allow contractors to investigate and respond.
It also required OFCCP to disclose ``the model and variables used in
any statistical analysis and an explanation for why any variable
proposed by the contractor was excluded from that analysis.'' Once
OFCCP issued the Predetermination Notice, the 2020 rule provided
contractors with 30 days to respond. As an alternative, the 2020 rule
also codified a provision stating that contractors could waive the
procedures for issuing a Predetermination Notice and/or Notice of
Violation and enter directly into a conciliation agreement if they so
chose. Finally, the 2020 rule included severability clauses that
applied only to these new pre-enforcement obligations.
The stated rationale for these revisions in the 2020 rule was ``to
increase clarity and transparency for Federal contractors, establish
clear parameters for OFCCP resolution procedures, and enhance the
efficient enforcement of equal employment opportunity laws.'' \22\ The
2020 rule preamble further asserted that the rule would ``provide[ ]
contractors with more certainty as to OFCCP's operative standards for
compliance evaluations, and provide[ ] guardrails on the agency's
issuance of pre-enforcement notices.'' \23\ As a result, OFCCP
concluded that the 2020 rule would ``help [the agency] to increase the
number of contractors that the agency evaluates and focus on resolving
stronger cases through the strategic allocation of limited agency
resources.'' \24\ The 2020 rule further clarified that the Department
was issuing the rule ``as an exercise of its enforcement discretion,''
and that the approach codified in the rule was ``neither compelled nor
prohibited by Title VII and OFCCP case law.'' \25\
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\22\ 85 FR 71553.
\23\ Id.
\24\ Id.
\25\ Id. As noted above, the nondiscrimination protections and
standards under E.O. 11246 are interpreted consistently with those
under Title VII.
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C. The 2022 NPRM

On March 22, 2022, OFCCP published a NPRM that proposed to rescind
most, though not all, provisions in the 2020 rule.\26\ OFCCP proposed
to retain the requirement that it would issue Predetermination Notices
and Notices of Violation to contractors in matters in which OFCCP found
preliminary indicators of discrimination. OFCCP also proposed to retain
the regulatory language regarding early resolution, which provides that
contractors may waive the pre-enforcement notice procedures if they
enter directly into a conciliation agreement.
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\26\ See Pre-Enforcement Notice and Conciliation Procedures, 87
FR 16138 (Mar. 22, 2022).
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OFCCP proposed to remove or modify the other provisions in the 2020
rule. OFCCP proposed to eliminate the specific evidentiary requirements
of 41 CFR 60-1.33(a) and (b) that the agency needed to meet to issue a
Predetermination Notice or Notice of Violation. This included the
requirement to identify the theory of discrimination at the pre-
enforcement notice stage, the requirement to provide specific and
different forms of ``quantitative'' and ``qualitative'' evidence as
defined by the 2020 rule, the definitions of ``quantitative'' and
``qualitative'' evidence, and the requirement to demonstrate that any
disparities identified were also ``practically significant.''
The NPRM provided multiple reasons for these proposed
modifications.\27\ First and foremost, the NPRM explained that many of
the key stated objectives of the 2020 rule--to promote more effective
enforcement, increase the number of contractors that the agency
evaluates, and promote greater certainty and clarity regarding the
agency's resolution procedures--had not been met. Rather than creating
clear standards and more effective enforcement, the NPRM noted that the
2020 rule instead resulted in time-consuming disputes with contractors
over the application of the new requirements. The NPRM also described
how the 2020 rule placed certain obligations on OFCCP that went beyond,
or were even in some cases inconsistent with, Title VII principles and
case law. For instance, the 2020 rule required OFCCP to demonstrate
practical significance, a concept that is not found in the Title VII
statute and that multiple circuit courts have held is not necessary in
order to satisfy a prima facie case of employment discrimination. The
2020 rule also included rigid evidentiary thresholds for issuing pre-
enforcement notices, such as requiring specific types and amounts of
``quantitative evidence'' and ``qualitative evidence'' as defined by
the rule with only narrow exceptions, which the NPRM explained were
inconsistent with the general principle that the Title VII evidentiary
standard is a flexible one dependent on the unique facts at issue in
each case. The NPRM further emphasized that, beyond the rigid
evidentiary requirements themselves, the 2020 rule's requirement that
OFCCP meet them prior to issuing pre-enforcement notices, while the
investigation is still underway, had also proven problematic. Not only
did this require OFCCP to meet a heightened evidentiary threshold
before issuing even a preliminary notice of findings to contractors,
but the same standard applied to both the Predetermination Notice and
the Notice of Violation, rendering the two notices--which were
originally intended to serve separate purposes--duplicative.
Accordingly, the NPRM proposed to restore the function of the
Predetermination Notice to convey preliminary findings of potential
discrimination, providing contractors early notice when OFCCP had found
potential issues and fostering more efficient exchanges of information
that may focus the scope of review.
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\27\ The reasons summarized here are some of the key points
raised in the NPRM but is not an exhaustive list. For further detail
and explanation, we refer readers to the NPRM itself, as well as the
response to public comments in Section IV, infra.

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[[Page 51720]]

OFCCP also proposed to modify the period of time for contractors to
respond to pre-enforcement notices from 30 to 15 days, noting that the
latter was the timeframe for response that the agency had set forth in
its 2018 Directive on Predetermination Notices and that it would
continue its practice of providing extensions to contractors for good
cause when needed.\28\ Additionally, OFCCP proposed to modify the
severability clause included in the 2020 rule, expanding it so that it
applied to all parts of OFCCP's regulations, not just the specific
section pertaining to OFCCP's resolution procedures.
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\28\ See Directive 2018-01, Use of Predetermination Notices,
(Feb. 27, 2018), available at https://www.dol.gov/agencies/ofccp/directives/2018-01 (last accessed Dec. 1, 2022).
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Finally, OFCCP proposed two additional clarifications to the
regulations related to, but not addressed by, the 2020 rule. First,
OFCCP proposed language clarifying the ``reasonable efforts'' standard,
which applies to the actions the agency must take ``to secure
compliance through conciliation and persuasion.'' The NPRM proposed
language clarifying that the standard should be interpreted
consistently with Title VII and its requirement that the Equal
Employment Opportunity Commission (EEOC) ``endeavor to eliminate any
such alleged employment practice by informal methods of conference,
conciliation, and persuasion'' prior to bringing an enforcement action,
to ensure that OFCCP has the same flexibility in the administration of
its laws as that recognized under Title VII by Congress and by the U.S.
Supreme Court. Second, the NPRM clarified that, if OFCCP identified
additional violations after issuing a Predetermination Notice, it could
include those violations in a subsequent Notice of Violation or Show
Cause Notice without amending and reissuing the Predetermination
Notice. The NPRM explicitly stated that OFCCP would continue to provide
contractors with an opportunity to respond to and conciliate any such
violations prior to referring a case for enforcement.

D. Public Comments

OFCCP received 11 public comments in response to the NPRM. The
commenters included individuals, employer associations, law firms, a
women's rights legal advocacy organization, a labor rights
organization, and a civil and human rights advocacy organization. Some
commenters, such as the women's rights legal advocacy organization,
labor rights organization, and civil and human rights advocacy
organization, generally supported the proposed rule, asserting that the
2020 rule imposed unnecessary, burdensome, and confusing enforcement
standards that did not align with the requirements of Title VII and
conflated the first two stages of OFCCP's pre-enforcement process,
thereby causing delay and wasting resources. These commenters believed
that modifying the 2020 rule would restore consistency between OFCCP
practice and Title VII and would reestablish the distinct roles of the
Predetermination Notice and the Notice of Violation. Other commenters,
such as employer associations and law firms, generally opposed the
proposal, expressing concerns that the modification would remove
transparency from the enforcement process, did not align with Title
VII, and would afford contractors less due process. These commenters
also asserted that OFCCP has not demonstrated a need for the rulemaking
and believed that 15 calendar days was an inadequate amount of time to
provide a response to a Predetermination Notice. In addition, one
commenter raised concerns that the proposed use of the term ``indicator
of discrimination'' signaled that OFCCP intended to issue
Predetermination Notices based solely on the results of the agency's
initial analyses. These comments are explained in more detail and
addressed by the agency in Section IV, below.

III. Summary of the Final Rule

After consideration of all significant issues raised in the public
comments, this final rule adopts most of the revisions outlined in the
NPRM, with some minor adjustments. As set forth in more detail below,
the changes adopted in this final rule stem from OFCCP's experience
implementing the 2020 rule as well as its reconsidered policy judgment
as to how OFCCP can strengthen enforcement of its requirements and
promote consistency with Title VII principles. In sum, this final rule
largely returns to the processes and standards under which OFCCP and
contractors operated for many years prior to the effective date of the
2020 rule, while also providing additional certainty and notice to
contractors.
As proposed in the NPRM, this final rule does retain some
provisions from the 2020 rule that will provide additional certainty
and efficiency for contractors during the course of compliance
evaluations. First, the final rule retains the requirement that OFCCP
will issue a Predetermination Notice and Notice of Violation to
contractors in all matters in which the agency has made preliminary
findings of potential discrimination and findings of discrimination,
respectively. Second, the final rule retains the early resolution
provisions allowing OFCCP and the contractor to resolve identified
issues without the need for OFCCP to issue a Predetermination Notice
and Notice of Violation if the contractor so chooses.
The final rule does include a few additional changes from what was
proposed. First, the final rule replaces the term ``indicators of
discrimination'' with ``preliminary findings of potential
discrimination'' to describe what is necessary in order to issue a
Predetermination Notice. Further detail regarding this change is set
forth in Section IV, infra. Second, consistent with OFCCP's
longstanding practice and the 2020 rule, the final rule includes a
clarification that the agency may issue a Show Cause Notice without
first issuing a Predetermination Notice or Notice of Violation when the
contractor has failed to provide access to its premises for an on-site
review, or refuses to provide access to witnesses, records, or other
information. Finally, the proposed language in the regulation on
Predetermination Notices stated that if there was insufficient rebuttal
evidence to the Predetermination Notice, the agency would ``proceed
with its review.'' The final rule makes two minor clarifications. It
first adds language to clarify that OFCCP's determination on whether
there was sufficient rebuttal evidence would be determined by the
contractor's response and any additional investigation undertaken by
the agency, to clarify that the agency may conduct an additional
investigation after issuing the Predetermination Notice and as a result
of the contractor's response to the Predetermination Notice. It also
amends this provision to clarify that it will proceed ``to issue a
Notice of Violation,'' which is the intended, more specific meaning.
The final rule otherwise adopts the NPRM as proposed. A more
detailed discussion of the public comments that OFCCP received follows
in the next section.

IV. Response to Public Comments

A. Public Comments on Modifications to the E.O. 11246 Regulations

1. Evidentiary Standards
a. Qualitative and Quantitative Evidence
As described above, the NPRM proposed to amend Sec. 60-1.3 by
removing the 2020 rule's definitions for ``qualitative evidence'' and

[[Page 51721]]

``quantitative evidence.'' OFCCP also proposed rescinding the
requirement for the agency to provide both ``qualitative'' and
``quantitative'' evidence under a specific theory of proof before
issuing a Predetermination Notice or Notice of Violation.
OFCCP received eight comments on this topic from employer
associations, law firms, and labor rights and advocacy organizations. A
women's rights legal advocacy organization agreed with removing the
definitions. It stated that the definitions were confusing and further
disagreed with the 2020 rule's requirement that OFCCP provide both
quantitative and qualitative evidence before issuing Predetermination
Notices or Notices of Violation. It asserted that removing this
requirement will ensure that OFCCP can conduct investigations
efficiently, ``without being forced to develop its full slate of
evidence at a preliminary stage.'' A labor rights organization and a
civil and human rights advocacy organization made similar comments,
describing how the definitions and requirements for showing qualitative
and quantitative evidence departed from Title VII principles and
hindered OFCCP's ability to issue pre-enforcement notices based on the
specific facts and circumstances uncovered through the compliance
evaluation. One law firm stated that it understood why OFCCP would want
to remove the qualitative and quantitative evidence definitions, as
OFCCP should be able to evolve with Title VII's interpretation.\29\
Some employer associations and law firms opposed removing the
definitions and evidentiary requirements, asserting that the 2020
rule's definitions were broad enough to allow OFCCP to effectively
pursue cases and stating that OFCCP was not required to provide
examples of every type of quantitative or qualitative evidence included
in the definitions.
---------------------------------------------------------------------------

\29\ This firm disagreed with removing other aspects of the
evidentiary requirements, which OFCCP addresses below.
---------------------------------------------------------------------------

OFCCP considered these comments and maintains that, on balance, the
inclusion of the definitions created more problems than benefits. First
and foremost, as set forth in the NPRM and expanded upon here, OFCCP
found that these definitions created confusion and increased disputes
regarding the evidence required to issue pre-enforcement notices.
Specifically, since the 2020 rule went into effect, some contractors
have asserted that OFCCP must present evidence in its preliminary pre-
enforcement notices of the highly specific examples included in the
definitions in order for the agency to satisfy the requirements of the
2020 rule. In one instance, rather than providing a substantive
response to the agency's preliminary determination notice, the
contractor cited the 2020 rule, claiming that OFCCP failed to identify
sufficient qualitative evidence of intentional discrimination. The
contractor disputed the type of qualitative evidence OFCCP was
permitted to use under the 2020 rule, asserting that information OFCCP
obtained from interviews was not evidence, but instead speculative
statements insufficient to infer discriminatory intent. These disputes
are directly at odds with the 2020 rule's stated intention of
increasing clarity and enhancing the efficient enforcement of equal
employment opportunity laws.
In addition to these inefficiencies, OFCCP, upon further
reconsideration, found that the codification of evidentiary definitions
was confusing, overly particularized, and inconsistent with the general
principle that the Title VII evidentiary standard is a flexible one
dependent on the unique facts at issue. As otherwise discussed in the
NPRM, the definitions in the 2020 rule included many examples of
evidence demonstrating overt bias, including ``biased statements,
remarks, attitudes, or acts based upon membership in a protected class,
particularly when made by a decision maker involved in the action under
investigation.'' \30\ This type of highly specific evidence of
discrimination is rare and not required by Title VII standards in order
for a plaintiff to prevail.\31\ Yet, the inclusion of this language
engendered contractor disputes over whether the evidence OFCCP
presented met this definition. In addition, the definition did not
encompass the full range of relevant evidence and ran counter to the
flexibility needed to demonstrate discrimination based on the facts of
each case. Further, although the ``qualitative evidence'' definition
also applied to disparate impact matters, the definition was overly
focused on evidence of discriminatory intent in disparate treatment
cases. Although the definition included one example related to
disparate impact cases--evidence related to ``the business necessity
(or lack thereof) of a challenged policy or practice'' \32\--that
example was problematic because it was: (1) a category of evidence that
is the employer's burden to demonstrate, after the agency establishes a
prima facie case; \33\ and (2) not the only sort of ``qualitative''
evidence that plaintiffs typically introduce or rely upon in the course
of a disparate impact case.\34\ Another problem with the definition is
that it included ``whether the contractor has otherwise complied with
its non-discrimination obligations'' as a type of permissible
qualitative evidence. Upon reconsideration, OFCCP determined that this
provision could easily be misinterpreted to mean that when a contractor
complies with some of its nondiscrimination obligations, it somehow
lessens the weight of evidence of noncompliance with other
nondiscrimination obligations.
---------------------------------------------------------------------------

\30\ 85 FR 71553, 71570-71574.
\31\ See Thomas v. Eastman Kodak Co., 183 F. 3d 38, 58 n.12 (1st
Cir. 1999) (citing Hodgens v. Gen. Dynamics Corp., 144 F.3d 151, 171
n. 13 (1st Cir. 1998)) (noting that direct evidence, while probative
of discrimination, is ``rarely found in today's sophisticated
employment world'').
\32\ 85 FR 71557.
\33\ 42 U.S.C. 2000e-2(k)(1)(A)(i); see also Ricci v. DeStefano,
557 U.S. 557, 578 (2009) (``An employer may defend against liability
[for disparate impact discrimination] by demonstrating that the
practice is `job related for the position in question and consistent
with business necessity.'' (quoting 42 U.S.C. 2000e-2(k)(1)(A)(i)));
Wards Cove Packing Co., 490 U.S. at 659 (``[T]he employer carries
the burden of producing evidence of a business justification for his
employment practice.'').
\34\ By way of example, because a plaintiff in disparate impact
cases must, where possible, identify the particular employment
practice that is causing the adverse impact, see 42 U.S.C. 2000e-
2(k)(1)(B)(i), it is commonplace for a plaintiff to introduce
testimony or interview statements from expert witnesses or company
officials regarding its selection or compensation system that would
provide necessary context and help to identify the particular
employment practice at issue. Similarly, evidence regarding less
discriminatory alternative employment practices is a common feature
in disparate impact cases. 42 U.S.C. 2000e-2(k)(1)(A)(ii).
---------------------------------------------------------------------------

Some commenters, including law firms and employer associations,
also asserted that the requirement to show quantitative and qualitative
evidence helped contractors better understand the preliminary
indicators and helped them provide a meaningful response to the
Predetermination Notice. One employer association expressed the
importance of the 2020 rule's requirement that OFCCP identify its
theory of proof (i.e., disparate treatment or disparate impact) and the
benefit of the clear parameters the 2020 rule provided for each theory.
In response to these comments, OFCCP notes that the agency will
continue to provide a Predetermination Notice describing its
preliminary findings of potential discrimination and any other
potential violations. This information enables the parties to clarify
the issues, respond to each other's positions, and work toward an
efficient resolution. For proof at trial, the agency will marshal all
relevant evidence to prove that discrimination has occurred, which will
typically include interviews with a more expansive number of employees

[[Page 51722]]

and other witnesses and documents, data, and other information obtained
through the investigative and discovery process. However, the agency
need not provide the specific theory of proof or satisfy rigid
evidentiary standards to provide preliminary notice of findings of
discrimination.\35\ Furthermore, Title VII case law demonstrates that
there are multiple ways to establish a prima facie case of
discrimination as long as the plaintiff ultimately satisfies its burden
of proof. As the U.S. Supreme Court and lower courts have long
recognized, Title VII requires a case-by-case evaluation of the facts
and circumstances.\36\ Additionally, prior to discovery in litigation,
OFCCP may not have access to the full evidentiary record necessary to
evaluate the precise theories of proof and would need to conduct
depositions of witnesses and obtain relevant data and information for
each stage of the employment process at issue before making this
determination. Despite this, the 2020 rule required OFCCP to satisfy
bright line statistical thresholds and proffer specific types of
evidence to issue even preliminary notices of findings to contractors.
Additionally, OFCCP agrees with the law firm comment that the removal
of the qualitative and quantitative evidence definitions will enable
the agency's enforcement to evolve with developments in the
interpretation of Title VII.
---------------------------------------------------------------------------

\35\ Longstanding case law provides that OFCCP need not make an
election between alternative theories of proof during litigation,
let alone in the preliminary notice stage of a compliance review.
OFCCP v. Honeywell, 77-OFC-3, 1993 WL 1506966, at *11 (Sec'y of
Labor June 2, 1993) (``no procedural election between alternative
legal theories is required of a claimant at either pre-trial, or
appellate stages'') (citing Wright v. Nat'l Archives & Records
Serv., 609 F.2d 702, 711 (4th Cir. 1979)); see also Teamsters v.
United States, 431 U.S. 324, 336 n.15 (1977).
\36\ See Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 995
n.3 (1988) (noting that the Supreme Court has ``not suggested that
any particular number of `standard deviations' can determine whether
a plaintiff has made out a prima facie case in the complex area of
employment discrimination''); Gay v. Waiters' & Dairy Lunchmen's
Union, Local No. 30, 694 F.2d 531, 551 (9th Cir. 1982) (``It would
be improper to posit a quantitative threshold above which
statistical evidence of disparate racial impact is sufficient as a
matter of law to infer discriminatory intent, and below which it is
insufficient as a matter of law.''); see also Alvarez v. Royal
Atlantic Developers, Inc., 610 F.3d 1253, 1264 (11th Cir. 2010)
(also noting, in an individual case without statistical evidence,
that ``[t]he methods of presenting a prima facie case are flexible
and depend on the particular situation.'').
---------------------------------------------------------------------------

Based upon further consideration of its position, the effect of the
final rule, and the comments received, OFCCP has determined the 2020
rule's rigid requirements were unnecessary, fostered confusion, and
limited OFCCP's ability to pursue potentially meritorious cases. As
noted above, the 2020 rule's evidentiary standards placed certain
obligations on OFCCP that went beyond, or were even in some cases
inconsistent with, Title VII principles and case law. Accordingly,
OFCCP is removing the definitions for qualitative evidence and
quantitative evidence and is rescinding the requirement for OFCCP to
provide both quantitative and qualitative evidence under a specific
theory of discrimination in order to issue a Predetermination Notice or
Notice of Violation.
The NPRM also proposed removing the 2020 rule requirement that
OFCCP disclose the quantitative and qualitative evidence the agency
relied upon in the Predetermination Notice ``in sufficient detail to
allow contractors to investigate allegations and meaningfully
respond.'' \37\ The requirement for OFCCP to provide ``sufficient
detail'' for a contractor to ``meaningfully respond'' is inherently
subjective. Some contractors argued that the anecdotal evidence that
OFCCP shared to support its issuance of pre-enforcement notices failed
to meet the qualitative evidence definition included in the 2020 rule.
Contractors have also argued that the qualitative evidence that OFCCP
provided was insufficient because the agency failed to disclose the
identity of the interviewees who provided relevant statements at the
Predetermination Notice stage.
---------------------------------------------------------------------------

\37\ 87 FR 16138, 16143.
---------------------------------------------------------------------------

Additionally, commenters, including a women's rights legal advocacy
organization, a labor rights organization, and a civil and human rights
advocacy organization, shared OFCCP's concern articulated in the
proposed rule that the requirement to disclose anecdotal evidence at
this preliminary stage may have a chilling effect on the willingness of
victims and witnesses to participate in OFCCP's investigation due to
concerns that an employer may uncover their identities, which could
lead to retaliation. One commenter disagreed, citing OFCCP's ability to
protect a witness' identity while still providing the required
evidence. However, as described above, some contractors have
nevertheless asserted that, under the 2020 rule, OFCCP must reveal the
identity of relevant witnesses at the preliminary stage in order to
meet the 2020 rule's requirements. OFCCP believes this interpretation
of the regulation is incorrect, as the government informer's privilege
generally protects the agency's right to withhold the identity of
confidential witnesses.
Nevertheless, it remains that the 2020 rule's required disclosure
of anecdotal evidence has led to extensive disputes about what
information is sufficient under the rule, and OFCCP's authority to
protect witness' confidentiality at the preliminary stages of
investigations. These disputes over inherently subjective thresholds
regarding what information needed to be proffered in preliminary
notices of findings have limited OFCCP's ability to pursue cases that
would be actionable under Title VII standards. Accordingly, in the
final rule, OFCCP is rescinding the requirement to disclose the
quantitative and qualitative evidence relied upon in the
Predetermination Notice.\38\ To promote consistency and notice to
contractors, the final rule does require the use of the
Predetermination Notice where the agency has made preliminary findings
of potential discrimination. Further, the final rule specifies that in
the Predetermination Notice, OFCCP will continue to describe the
preliminary findings of potential discrimination and any other
potential violations to enable the contractor to understand OFCCP's
position and provide a substantive response.
---------------------------------------------------------------------------

\38\ OFCCP retains discretion to disclose some or all of the
quantitative and qualitative evidence supporting the
Predetermination Notice, where appropriate.
---------------------------------------------------------------------------

b. Statistical Model and Variables
While most comments opposing the rule focused on evidentiary
standards as a whole, one law firm specifically requested that OFCCP
retain the 2020 rule's requirement that, upon the contractor's request,
OFCCP must provide the model and variables used in any statistical
analysis and an explanation for why any variable proposed by the
contractor was excluded from that analysis. The law firm asserted that
sharing this information promoted transparency and helped contractors
understand OFCCP's analysis and allowed the contractor to more easily
make a business decision to resolve the matter.
In response, OFCCP declines to retain this requirement because
imposing a regulation requiring the production of the model and
variables used in any statistical analysis the agency performs and an
explanation for why any variable proposed by the contractor was
excluded from that analysis creates inefficiencies. The agency already
has guidance that promotes sufficient transparency through the sharing
of information by OFCCP, including information on the agency's
econometric methods and the provision

[[Page 51723]]

of replication data.\39\ OFCCP will continue to explain its statistical
analysis in sufficient detail for the contractor to replicate the
analysis and assess the merits of the agency's findings. OFCCP will
also continue to explain its rationale for excluding otherwise
reasonable variables from its analysis.
---------------------------------------------------------------------------

\39\ See Directive 2018-05, Analysis of Contractor Compensation
Practices During a Compliance Evaluation, issued Aug. 24, 2018,
available at https://www.dol.gov/agencies/ofccp/directives/2018-05
(last accessed Dec. 5, 2022).
---------------------------------------------------------------------------

However, OFCCP has determined that imposing a regulatory
requirement to provide the model and variables used in any statistical
analysis, particularly at preliminary stages of the review, limits the
agency's effective enforcement of the law. First, the 2020 rule's
requirement for OFCCP to share its ``model'' is vague and subject to
dispute, as the types of analyses and statistical techniques can vary
widely from case to case, and the agency needs to exercise discretion
over the aspects of its modeling that would be appropriate to share
based on the stage of the investigation, the nature of the concerns
identified, and a consideration of aspects of the analysis, tools, and
techniques subject to deliberative process privilege.
The regulatory requirement to explain ``any'' variables suggested
by the contractor raises similar concerns by limiting OFCCP's ability
to exercise its enforcement discretion and promote efficiency in its
investigation. Not all variables suggested by a contractor merit
explanation and response. For example, variables that are highly
correlated with other variables, those that do not impact selections or
pay in the direction or magnitude claimed by the contractor, and those
that are differentially distributed by gender or race but do not
legitimately influence selection or pay may not warrant an explanation
depending on the fact and circumstances of the matter. While OFCCP will
address certain variables in appropriate circumstances, the categorical
requirement that OFCCP address all proposed variables is inefficient.
In sum, rather than expend resources responding to unproductive
requests for further information, OFCCP has determined that to promote
effective enforcement, the agency needs to have discretion to ascertain
where providing further details about its modeling is likely to be
productive. Removing the regulatory requirements that OFCCP produce its
models and variables and address all variables suggested by a
contractor will allow OFCCP to utilize its discretion to provide
information on its modeling and variables to promote contractors'
understanding of concerns OFCCP has identified and to facilitate a
prompt and successful resolution of compliance evaluations.
c. Practical Significance
In the NPRM, OFCCP proposed removing the regulatory requirement to
demonstrate practical significance before issuing a Predetermination
Notice.\40\ The agency received five comments on the proposal to remove
this regulatory requirement from employer associations, a law firm, a
women's rights legal advocacy organization, and a civil and human
rights advocacy organization. Two commenters supported removing the
requirement, stating that whether Title VII requires a showing of
practical significance is unsettled as a matter of law. One employer
association commented that practical significance is a necessary
consideration in scientific research and therefore cannot be ignored by
the agency. The same commenter also believed that the use of practical
significance allowed OFCCP to prioritize compliance evaluations with
the strongest evidence and strategically allocate resources. Another
employer association argued that removing the requirement to
demonstrate practical significance before issuing a Predetermination
Notice was generally inconsistent with Title VII principles and would
effectively set a dual standard upon which contractors would be
evaluated. A law firm commented that removing this requirement would be
counterproductive as doing so would cause delays and reduce
settlements.
---------------------------------------------------------------------------

\40\ Practical significance refers to whether an observed
disparity in employment opportunities or outcomes reflects
meaningful harm to the disfavored group, focusing on the contextual
impact or importance of the disparity rather than its likelihood of
occurring by chance.
---------------------------------------------------------------------------

In response, OFCCP notes that it did not propose adopting a blanket
policy to disregard practical significance. As part of its enforcement,
dating back before the publication of the 2020 rule, OFCCP has utilized
practical significance measures where appropriate in compliance
evaluations, based on the specific facts of the case. There is no
professional consensus among statisticians and labor economists
regarding an appropriate or actionable practical significance threshold
for all cases of employment discrimination.\41\ Further, the text of
Title VII contains no reference to practical significance,\42\ and the
case law is unsettled as to whether Title VII specifically requires a
finding of practical significance, and, if so, what level of practical
significance is sufficient and appropriate.\43\ Therefore, the final
rule removes the regulatory requirement to demonstrate practical
significance prior to issuing a Predetermination Notice or Notice of
Violation. OFCCP will continue to utilize the concept of practical
significance where appropriate, along with statistical significance,
and all other evidence gathered in the review, as part of a holistic
approach that applies the case law and statistical techniques as they
evolve to the compliance evaluations it investigates, conciliates, and
refers for enforcement.
---------------------------------------------------------------------------

\41\ See Joseph L Gastwirth et al, On the Interplay Between
Practical and Statistical Significance in Equal Employment Cases, 20
Law, Probability and Risk, 69, 69-87 (2022), available at https://doi.org/10.1093/lpr/mgac002 (last accessed June 22, 2022).
\42\ See Elliot Ko, Big Enough to Matter: Whether Statistical
Significance or Practical Significance Should Be the Test for Title
VII Disparate Impact Claims, 101 Minn. L.R. 869, 889 (2016) (``Title
VII does not require plaintiffs to prove that an employment practice
had a `large' impact on a protected class. Title VII just requires
plaintiffs to prove that `a particular employment practice' had a
disparate impact on a protected class. . . . Title VII only requires
proof of a `disparate impact,' not proof of a `very' disparate
impact that is large enough to warrant societal or moral
condemnation.'').
\43\ Several circuit courts have held that a finding of
practical significance is not required in order to satisfy a prima
facie case of discrimination. See, e.g., Jones v. City of Boston,
752 F.3d 38 (1st Cir. 2014); Apsley v. Boeing Co., 691 F.3d 1184
(10th Cir. 2012); Stagi v. Nat'l R.R. Passenger Corp., 2010 WL
3273173 (3d Cir. Aug. 16, 2010). Other circuit courts have
considered measures of practical significance to varying degrees.
See, e.g., Brown v. Nucor Corp., 785 F.3d 895, 908, 935 (4th Cir.
2015); Isabel v. City of Memphis, 404 F.3d 404, 412, 418 (6th Cir.
2005); Ensley Branch of NAACP v. Seibels, 31 F.3d 1548, 1555 (11th
Cir. 1994); Waisome v. Port Auth. of N.Y. & N.J., 948 F.2d 1370,
1376 (2d Cir. 1991); Clady v. County of Los Angeles, 770 F.2d 1421,
1428-29 (9th Cir. 1985); Fisher v. Procter & Gamble Mfg. Co., 613
F.2d 527, 545 (5th Cir. 1980).
---------------------------------------------------------------------------

d. General Comments Regarding the Evidentiary Standards
OFCCP also received general comments in favor of and against
removing the evidentiary standards that the 2020 rule imposed on
OFCCP's use of the Predetermination Notice and Notice of Violation.
Commenters' concerns about removing the evidentiary standards for the
Predetermination Notice generally aligned with their concerns regarding
the Notice of Violation. Labor rights and advocacy organizations agreed
with removing the evidentiary standards, asserting that these
heightened evidentiary standards were not aligned with Title VII and
impeded OFCCP's ability to enforce its legal authorities. Employer
associations and law firms generally disagreed with removing the
evidentiary standards. An employer association stated that the 2020
rule's

[[Page 51724]]

evidentiary standards were beneficial because contractors could use the
standards to replicate OFCCP's approach during their self-audits. OFCCP
has concluded that the 2020 rule's rigid evidentiary standards are not
necessary for contractors to conduct self-audits. The agency provides
extensive guidance and resources to assist contractors in conducting
meaningful self-audits of their employment systems, including two
recent public directives,\44\ the FCCM, compliance assistance
materials, technical assistance guides, online contractor courses, and
webinars. Through these materials, OFCCP provides transparency on how
the agency will conduct compliance evaluations and promote a proactive
approach to compliance. Additionally, as discussed thoroughly in the
NPRM and elsewhere in this final rule, the evidentiary standards that
the 2020 rule required the agency to meet exceeded those required by
Title VII in certain respects, and thus are particularly inappropriate
to require in order to issue preliminary notices of potential
discrimination issued while the agency's investigation is still
ongoing.
---------------------------------------------------------------------------

\44\ See Directive 2022-02, Effective Compliance Evaluations and
Enforcement (Mar. 31, 2022), available at https://www.dol.gov/agencies/ofccp/directives/2022-02 (last accessed June 13, 2022);
Directive 2022-01 Revision 1, Advancing Pay Equity Through
Compensation Analysis (Aug. 18, 2022), available at https://www.dol.gov/agencies/ofccp/directives/2022-01-Revision1 (last
accessed Aug. 25, 2022).
---------------------------------------------------------------------------

Employer associations and law firms also expressed concerns that
removing the evidentiary standards would infringe on contractors' due
process by depriving them of the ability to evaluate alleged indicators
of discrimination and impede their ability to meaningfully respond or
correct problem areas. These commenters also stated that removing the
evidentiary standards would lead to less transparency, resulting in
lengthy disputes, fewer settlements, and increased litigation against
the agency. Commenters also expressed concerns that removing the 2020
rule's evidentiary standards would remove important ``guardrails''
against OFCCP's enforcement where the agency does not have to meet any
standards for issuing a Predetermination Notice or Notice of Violation
and contractors would be subjected to a ``vague, arbitrary, moving
target.''
In response, OFCCP notes that there are significant legal
guardrails retained in this final rule that address concerns raised by
commenters with regard to due process. This final rule will require the
agency to issue to contractors three separate notices regarding any
preliminary findings or findings the agency makes related to
discrimination before the agency makes a final determination about
whether to refer the matter to the Office of the Solicitor for
enforcement. Each of these notices requires OFCCP to describe its
findings to date and invite the contractor to respond. Prior to issuing
a Predetermination Notice, OFCCP's field offices conduct thorough
discussions of the preliminary findings of potential discrimination
with senior leadership and consult with the Office of the
Solicitor.\45\ These offices also confer with the agency's Branch of
Expert Services to discuss statistical analyses related to the
preliminary findings of potential discrimination. Prior to issuing a
Notice of Violation and a Show Cause Notice, the agency assesses the
information provided by the contractor in response to a
Predetermination Notice and Notice of Violation, respectively, and
conducts further investigation as a result of the contractor's response
as necessary. After OFCCP issues a Show Cause Notice, it refers the
matter to the Office of the Solicitor, which conducts its own
independent review of OFCCP's investigative findings to determine if it
will file an administrative complaint. Beyond these significant legal
guardrails, OFCCP notes that the pre-enforcement notice process
provides an opportunity for contractors to provide relevant information
to inform OFCCP's understanding of the issues before the matter may
proceed to a judicial forum, which provides notice and the opportunity
to be heard before an impartial tribunal. Additionally, given the
agency's finite resources, OFCCP is strongly disincentivized to spend
significant time pursuing cases that are unlikely to ultimately prove
successful in court. Accordingly, OFCCP disagrees with the assertions
that contractors are not afforded due process or that there are ``no
standards'' that the agency needs to meet. Rather, the agency is
largely returning to its long-standing pre-enforcement resolution
practices in effect for decades prior to the 2020 rule, which have long
provided a functional framework in which OFCCP and contractors have
successfully conciliated hundreds of matters.
---------------------------------------------------------------------------

\45\ See FCCM at 8B02 (last updated Jan. 7, 2021), available at
https://www.dol.gov/agencies/ofccp/manual/fccm (last accessed June
13, 2022) (discussing consultation with senior leadership and the
Office of the Solicitor).
---------------------------------------------------------------------------

Further, this final rule provides consistency in the formal
notification and conciliation process. While this final rule removes
the overly formulaic standards in the 2020 rule that have hindered
early discussion of issues and effective enforcement, the agency finds
it beneficial to codify the formal notices it uses to communicate with
the contractor community about potential violations throughout the
stages of a review. Accordingly, this final rule retains the required
use of the Predetermination Notice and Notice of Violation while
rescinding the evidentiary standards for issuance of the
Predetermination Notice and Notice of Violation.
2. Predetermination Notice Provisions
a. Retaining the Use of the Predetermination Notice
In the NPRM, OFCCP proposed retaining the required use of the
Predetermination Notice in the regulations to convey ``preliminary
indicators of discrimination'' to the contractor. OFCCP received three
comments from employer associations and a law firm supporting OFCCP's
proposal to retain the Predetermination Notice in the regulations
because it provides contractors an opportunity to understand the
potential discrimination identified by OFCCP and potentially resolve
matters at an earlier stage. The agency agrees with these comments, and
the final rule retains the required use of the Predetermination Notice.
However, as discussed elsewhere in this final rule, OFCCP has replaced
the term ``preliminary indicators of discrimination'' with
``preliminary findings of potential discrimination,'' to provide
additional clarity in response to one of the public comments. By
continuing to require the use of the Predetermination Notice, OFCCP
furthers its commitment to transparency and fosters the exchange of
information to promote an efficient resolution.
b. Issuing the Predetermination Notice
In the NPRM, OFCCP proposed distinguishing the Predetermination
Notice from the Notice of Violation and streamlining the compliance
evaluation process by issuing the Predetermination Notice earlier than
the 2020 rule allowed, where appropriate, to give the contractor an
understanding of where the agency is seeing possible problems and
focusing its investigative efforts. OFCCP will issue a Predetermination
Notice to a contractor when it has preliminary findings of potential
discrimination. OFCCP remains committed to providing notice of
potential discrimination to contractors and as such has retained the
required use of the Predetermination Notice in

[[Page 51725]]

the final rule as discussed earlier in this preamble. In some
instances, depending on the facts and circumstances of the particular
compliance evaluation, OFCCP may provide this notice after the agency
completes the desk audit. In many instances, however, it may be at a
later stage of the investigation, such as after the conclusion of the
on-site review or after OFCCP has completed its off-site analysis of
the information obtained during the on-site review. Providing
contractors notice of preliminary findings of potential discrimination
through the Predetermination Notice facilitates understanding and
efficient resolution. This provides contractors the opportunity to
share additional information about their compliance in response to the
concerns raised by OFCCP before the agency, if appropriate, issues a
Notice of Violation.
Three comments addressed whether OFCCP should issue the
Predetermination Notice based on preliminary indicators of
discrimination. The commenters included a civil and human rights
advocacy organization and two law firms. The civil and human rights
advocacy organization expressed support, stating there is no
requirement in applicable federal law that forces OFCCP to wait until
it can prove a case of discrimination before engaging with a contractor
to discuss preliminary indicators of discrimination. The two law firms
did not support the change. One law firm believed that proceeding with
a Predetermination Notice at a preliminary stage on the basis of ``mere
`indicators of discrimination' '' marks a ``radical shift'' in OFCCP
policy. This commenter expressed concern that OFCCP intended to issue
Predetermination Notices based solely on the results of the initial
desk audit analyses that typically serve as the basis for follow-up
requests for information.
OFCCP disagrees with this view that the proposal represents a
``radical shift.'' As explained earlier, this final rule largely
returns to the procedures that existed for years prior to December
2020. To the extent this final rule is different than that prior
process, it provides more certainty for contractors in that the rule
codifies the requirement that the agency issue a Predetermination
Notice in all matters involving potential discrimination. Further, the
commenter may have misinterpreted the use of the term ``indicators of
discrimination'' in the proposed regulatory text. To provide clarity,
OFCCP has modified this portion of the final rule to remove the
reference to ``preliminary indicators of discrimination'' and instead
state that if a compliance evaluation indicates ``preliminary findings
of potential discrimination,'' OFCCP will issue a Predetermination
Notice describing those preliminary findings. As explained earlier in
this preamble, this change in terminology is intended to convey that
OFCCP will issue a Predetermination Notice only after OFCCP has
reviewed the available evidence related to any disparity or other
indicators and concluded that the record available suggests potentially
unlawful discrimination. In the Predetermination Notice, OFCCP provides
the contractor with information concerning the agency's preliminary
findings of potential discrimination and requests that the contractor
provide any additional information or documentation the contractor
believes OFCCP should consider before making a final determination of
compliance.
This final rule allows OFCCP to tailor the issuance of the
Predetermination Notice to the facts and circumstances of each
compliance evaluation. By rescinding the rigid evidentiary standards,
which functionally required that a predetermination notice could not be
issued until the completion of the compliance evaluation, the final
rule allows OFCCP to provide contractors with earlier written notice of
preliminary findings of potential discrimination. This focuses the
contractor's attention on specific issues as early as possible,
allowing a more streamlined and efficient transfer of information.
In the NPRM, in discussing when OFCCP will issue a Predetermination
Notice after it has identified concerns indicating potential
discrimination, OFCCP proposed changing the reference to ``preliminary
findings'' to the term ``preliminary indicators'' to highlight the
difference in purpose between the Predetermination Notice and the
Notice of Violation.\46\ The Predetermination Notice conveys OFCCP's
analysis of preliminary findings of potential discrimination, provides
the contractor a formal opportunity to respond with additional
information, and is issued prior to the agency's final determination of
compliance. The Notice of Violation provides OFCCP's findings of
violation(s) and their corresponding required corrective action(s) and
invites the contractor to voluntarily enter into a conciliation
agreement. The contractor may also provide additional information
regarding its compliance after receipt of the Notice of Violation, or
after receipt of a Show Cause Notice, although earlier responses
promote a more efficient and effective process for both the contractor
and OFCCP. As discussed above, to avoid confusion about the term
``indicators of discrimination,'' the final rule adopts the term
``preliminary findings of potential discrimination.''
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\46\ 87 FR 16138, 16152-16154.
---------------------------------------------------------------------------

Another law firm expressed concern that OFCCP could issue a
Predetermination Notice after the desk audit and prior to the
completion of the on-site phase of the compliance evaluation, noting
that this could result in OFCCP issuing a Predetermination Notice prior
to the contractor having any meaningful dialogue with the agency. The
law firm believed issuing the Predetermination Notice prior to the
completion of the on-site review would cause compliance officers to
conduct an incomplete investigation and possibly make them vested in a
particular outcome rather than conducting a full and neutral evaluation
of the facts and circumstances of the particular compliance evaluation.
As an initial matter, OFCCP does not agree with this assessment, which
seems based in conjecture that, simply by issuing a Predetermination
Notice earlier in the process to provide contractors with advance
notice to understand and respond, compliance officers will conduct an
inadequate investigation and become invested in a particular outcome.
In addition, OFCCP will issue a Predetermination Notice to a contractor
after OFCCP has reviewed the available facts and data and has reached a
preliminary finding of potential discrimination.\47\ The appropriate
time to issue this notice will depend upon the facts and circumstances
of each matter. The agency will continue to conduct an onsite review
before issuing a Predetermination Notice where it determines that
further information is beneficial to assess whether preliminary
findings of potential discrimination exist. Furthermore, OFCCP will
offer training to its compliance officers regarding the provisions of
this final rule, and under what conditions a Predetermination Notice
may be issued to promote consistency across regions.
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\47\ FCCM, Chapter 8E03, Signature Authority, available at
https://www.dol.gov/agencies/ofccp/manual/fccm/8e-predetermination-notice/8e03-signature-authority (last accessed Dec. 1, 2022).
---------------------------------------------------------------------------

The law firm further recommended that OFCCP require compliance
officers to seek the contractor's explanation for any identified
selection or compensation disparity prior to issuing the
Predetermination Notice, and then include an evaluation of the
contractor's position in the Predetermination Notice.

[[Page 51726]]

OFCCP declines to adopt this suggestion. The resolution process set
forth in the final rule related to Predetermination Notices remains the
same as it always has been: the agency presents its preliminary
findings, and then the contractor has an opportunity to respond.
Building in an additional mandatory step to seek a response prior to
issuing the Predetermination Notice would therefore be duplicative,
which would run counter to the objective of this rule to increase
efficiency. The Predetermination Notice is the first of three written
notices in a multi-stage notification process that OFCCP uses to
communicate preliminary findings of potential discrimination identified
during a compliance evaluation. When OFCCP identifies preliminary
findings of potential discrimination, it notifies the contractor and
provides an opportunity for the contractor to respond. If after
providing this opportunity, OFCCP finds a violation of an equal
opportunity clause, the agency issues a Notice of Violation to the
contractor requiring corrective action and inviting conciliation
through a written agreement.\48\ If necessary, OFCCP thereafter will
issue a Show Cause Notice. Each of these notice steps already provides
the contractor an opportunity to respond.\49\ Further, the
Predetermination Notice is far from the contractor's first
communication with OFCCP during a compliance evaluation. OFCCP's
communication with the contractor begins even before the contractor's
deadline to submit its response to the Scheduling Letter notifying the
contractor that OFCCP has selected the contractor for a compliance
evaluation and requesting its affirmative action programs and itemized
listing information. Within 15 calendar days of sending the Scheduling
Letter, OFCCP contacts the contractor, or the contractor's
representative, or both. At that time, OFCCP answers any questions the
contractor may have, provides technical assistance on the contractor's
obligations and the compliance evaluation process, and provides an
overview of what to expect during the evaluation.\50\ OFCCP remains
committed to regular and open communication by all parties at each
stage of the compliance evaluation, further supporting OFCCP's
overarching goal of providing notice of its findings throughout the
process, allowing OFCCP and the contractor to resolve the matter
efficiently.
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\48\ This process is discussed more fully in the Overview
section above.
\49\ See 41 CFR 60-1.33; 41 CFR 60-300.62; 41 CFR 60-741.62
(providing the contractor an opportunity to respond to the
Predetermination Notice, Notice of Violation, and Show Cause
Notice).
\50\ See FCCM Chapter 1B04 Follow-Up Contact with Contractor and
Jurisdiction Challenges, available at https://www.dol.gov/agencies/ofccp/manual/fccm/1b-pre-desk-audit-actions/1b04-follow-contact-contractor-and-jurisdiction (last accessed Nov. 15, 2022).
---------------------------------------------------------------------------

This final rule adopts the proposal to retain agency-wide use of
the Predetermination Notice when OFCCP has preliminary findings of
potential discrimination, to advance OFCCP's commitment to transparency
and clarity while ensuring consistency throughout its regions. The
final rule also maintains the flexibility needed for OFCCP to provide
notice to contractors of preliminary findings of potential
discrimination by issuing the Predetermination Notice earlier in the
compliance evaluation, where appropriate. This flexibility ensures that
OFCCP can provide the contractor notice of potential discrimination
concerns to facilitate understanding and efficient resolution. This
benefits contractors by providing notice of preliminary findings
earlier in the resolution process than the 2020 rule allowed with a
full opportunity to respond.
c. Adding Violations Without Amending a Predetermination Notice
In the NPRM, OFCCP also proposed adding a provision to Sec. 60-
1.33(a) that would allow OFCCP to add violations in a subsequent Notice
of Violation without amending the Predetermination Notice. The agency
received two comments on this proposed modification, both from employer
associations. One commenter stated that this proposal deprived
contractors of the opportunity to defend themselves against incorrect
conclusions drawn by OFCCP. Another commenter expressed concern that
this change would eliminate the purpose of the Predetermination Notice
as the contractor would not be able to engage in meaningful discussions
regarding all possible violations.
After careful consideration of these comments, OFCCP has decided to
move forward with this change, as proposed. The proposal provides
sufficient opportunity for contractors to respond, as the
Predetermination Notice is the first written notice in a notification
and information exchange process with multiple stages. Following the
Predetermination Notice, if the preliminary findings of potential
discrimination are not adequately rebutted, the contractor has
sufficient opportunities to respond following the Notice of Violation
and Show Cause Notice, if issued. Throughout the process, contractors
continue to have an opportunity to discuss any additional violations,
confer with OFCCP, and provide relevant information for OFCCP's review
and consideration. The Predetermination Notice is simply the first
notice in this multi-stage process. Further, at the point OFCCP issues
the Predetermination Notice, the agency may not have a full evidentiary
record. Although the Predetermination Notice contains information on
the preliminary findings of potential discrimination OFCCP has
identified at that point in the investigation, OFCCP may make
additional findings during this investigation, such as when it obtains
additional information from the contractor or witnesses after the
issuance of the Predetermination Notice. Issuing a new Predetermination
Notice in these situations would be inefficient and would postpone
remedies for victims, as the agency would have to wait until all
allegations went through the pre-enforcement stages before it could
refer the case to enforcement. Issuing a new Predetermination Notice is
also unnecessary, as the Notice of Violation and Show Cause Notice
provide sufficient opportunity for the contractor to respond.\51\
---------------------------------------------------------------------------

\51\ See 41 CFR 60-1.33; 41 CFR 60-300.62; 41 CFR 60-741.62
(providing the contractor an opportunity to respond to the
Predetermination Notice, Notice of Violation, and Show Cause
Notice).
---------------------------------------------------------------------------

d. Response Period for a Predetermination Notice
To promote greater efficiency in resolving potential
discrimination, OFCCP also proposed to modify the 2020 rule's provision
that required a contractor to provide a response within 30 calendar
days of receiving a Predetermination Notice. The proposal would have
returned the Predetermination Notice response period to the 15-calendar
day period in effect prior to the 2020 rule, which OFCCP could extend
for good cause. In the proposal, OFCCP also clarified this provision to
state that any response must be received by OFCCP within 15 calendar
days, absent an extension. OFCCP received eight comments regarding the
Predetermination Notice response period. The commenters included
employer associations, law firms, a women's rights legal advocacy
organization, a labor rights organization, and a civil and human rights
advocacy organization.
Three of the commenters, including the labor rights and advocacy
organizations, supported OFCCP's proposal to return to a 15-calendar
day period. These commenters noted that the Predetermination Notice is
a

[[Page 51727]]

preliminary notification that engages employers in a dialogue with the
agency and that a longer response period potentially prolongs
discrimination and delays securing a remedy for victims of
discrimination.
Five commenters, including employer associations and law firms,
opposed returning to a 15-calendar day response period. The commenters
expressed concern that 15 calendar days is an insufficient amount of
time to review, evaluate, and respond to the Predetermination Notice
because it may be the first notice the contractor receives after a
complex investigation. Also, in some situations, the contractors may
choose to retain experts to understand the information provided which
may require more than 15 calendar days. They also expressed concerns
that OFCCP would not use its discretion to grant extensions for good
cause. Three commenters proposed a response period of at least 60 days.
One of the commenters recommended a two-phase response in which a
contractor first has 30 days to review and reply with any questions and
then, after the contractor's questions have been answered, a second 60-
day period in which to provide a substantive response.
After careful consideration of these comments, OFCCP has decided to
keep the 15-calendar day response period.\52\ In so doing, OFCCP notes
that this is consistent with the time originally permitted for
responses in its 2018 Predetermination Notice Directive.\53\ Prior to
the 2020 rule, contractors were generally providing responses within
this 15-day timeframe or receiving extensions for good cause. With this
modification, OFCCP will continue to provide extensions to contractors
where OFCCP determines the request is supported by good cause. Further,
while the Predetermination Notice is the first formal notice that the
agency provides, OFCCP communicates with the contractor about the
preliminary findings before a Predetermination Notice is even issued.
---------------------------------------------------------------------------

\52\ The final rule clarifies that OFCCP must receive the
contractor's response within 15 calendar days.
\53\ See Directive 2018-01, Use of Predetermination Notices,
(Feb. 27, 2018), available at https://www.dol.gov/agencies/ofccp/directives/2018-01 (last accessed Dec. 1, 2022).
---------------------------------------------------------------------------

OFCCP declines to adopt a multi-stage response period to the
Predetermination Notice. OFCCP determined that a two-phase response
period in which a contractor first has 30 days to review and reply with
any questions and then, after the contractor's questions have been
answered, a second 60-day period in which to provide a substantive
response would introduce confusion about when a contractor needs to
respond to the preliminary findings of potential discrimination and
would prolong the pre-enforcement process. This 15-day response period
will allow OFCCP to move compliance evaluations along expeditiously,
while providing contractors with a reasonable period to review and
respond to the Predetermination Notice and the opportunity to obtain an
extension if needed.
e. Responding to Evidence Provided by a Contractor in Advance of
Issuing a Notice of Violation
A law firm requested that the regulations state specifically that
OFCCP must address the employer's evidence provided in response to the
Predetermination Notice prior to issuing a Notice of Violation. OFCCP
did not propose this additional requirement in the NPRM. OFCCP declines
to include this requirement in the final rule. Should the agency decide
to issue a Notice of Violation, it will incorporate relevant
information that the contractor provides in response to the
Predetermination Notice. Requiring another pre-enforcement notice or
response letter would be duplicative, and a regulation requiring that
OFCCP address the employer's evidence is likely to generate dispute
over the application and meaning of such a requirement. As part of its
investigations, OFCCP carefully reviews and considers the evidence
provided, and the agency determines what information is relevant and
how best to respond to contractors' concerns. In making this
determination, OFCCP will continue to engage with the contractor
throughout the compliance evaluation process to promote a mutual
understanding of the issues.
3. Notice of Violation Provisions
In Sec. 60-1.33(b), OFCCP proposed adding a provision that will
allow the agency to include additional violations in a subsequent Show
Cause Notice without amending the Notice of Violation. The reasons for
allowing this are the same as the reasons discussed above for allowing
OFCCP to include new findings in a Notice of Violation that were made
after a Predetermination Notice had already been issued. An employer
association expressed concern that adding a violation in a subsequent
Show Cause Notice without amending the Notice of Violation would limit
a contractor's ability to respond to and rebut OFCCP's findings.
However, in the proposal, OFCCP addressed this concern by explicitly
stating in the regulations that the agency will provide contractors an
opportunity to conciliate additional violations identified in the Show
Cause Notice. If OFCCP's investigation identifies additional violations
at a later stage, requiring OFCCP to restart the three-stage notice
process from the beginning creates yet more inefficiency, as the agency
would have to wait until all allegations went through the pre-
enforcement stages before it could refer the case to enforcement. This
negatively impacts workers by prolonging the resolution of
discrimination findings and constraining OFCCP's ability to effectively
enforce its protections.
4. Conciliation Agreements
In the NPRM, OFCCP proposed minor changes to the existing
provisions at Sec. 60-1.33(c). The proposed changes included
clarifying that the written agreement required to resolve a material
violation of the equal opportunity clause is a ``written conciliation
agreement'' that identifies the violations and/or deficiencies. The
proposal also clarified the remedial actions which may be necessary to
correct the identified violations and/or deficiencies. OFCCP received
no comments on these proposed changes. Accordingly, OFCCP adopts these
changes in the final rule as proposed.
5. Clarifications to the Show Cause Notice Provisions
In Sec. 60-1.33(d) of the NPRM, OFCCP proposed to clarify its use
of the Show Cause Notice including when a contractor denies access to
its premises, to witnesses, or to records. The proposed changes also
clarify that the Show Cause Notice will include each violation that
OFCCP has identified at the time of issuance and, where OFCCP
identifies additional violations after issuing a Show Cause Notice,
OFCCP will modify or amend the Show Cause Notice. OFCCP received no
comments regarding the proposed provision. Accordingly, OFCCP adopts
the proposed provision without any changes in the final rule.
For clarity, OFCCP also proposed relocating the ``Show Cause
Notices'' provisions to Sec. 60-1.33 with the other pre-enforcement
notices in part 60-1 and removing and reserving Sec. 60-1.28. OFCCP
did not receive any comments on this change and adopts it into the
final rule as proposed.
6. Expedited Conciliation
In the NPRM, OFCCP proposed retaining the expedited conciliation
option and made general edits to improve procedural efficacy and
clarify

[[Page 51728]]

OFCCP's role in the expedited conciliation process. The agency received
four comments addressing expedited conciliation. Commenters included
employer associations, a women's rights legal advocacy organization,
and a civil and human rights advocacy organization. All commenters
supported retaining the expedited conciliation option in the
regulations, noting that this option improves efficiency and promotes
expeditious resolutions. OFCCP did not receive any comments regarding
the proposed clarifying edits to the expedited conciliation provisions.
Accordingly, the final rule adopts the changes as proposed.
7. Reasonable Efforts Standard
In the NPRM, OFCCP proposed to modify Sec. 60-1.20(b) to clarify
that the ``reasonable efforts'' standard that OFCCP must satisfy when
attempting to secure compliance with its authorities through
conciliation and persuasion should be interpreted consistent with Title
VII language requiring EEOC to ``endeavor to'' remedy discrimination
through conciliation, persuasion, and conference.\54\ OFCCP proposed
two modifications to Sec. 60-1.20(b), first adding a clause stating
OFCCP will make reasonable efforts to secure compliance through
conciliation and persuasion pursuant to Sec. 60-1.33. Second, OFCCP
proposed that its regulatory ``reasonable efforts'' standard must be
interpreted consistently with EEOC's ``endeavor'' standard.\55\ OFCCP
received one comment from a law firm regarding these modifications. The
commenter opposed the modifications, stating that reliance on the
Supreme Court's interpretation of Title VII's conciliation provisions
in Mach Mining v. EEOC, 575 U.S. 480, 486 (2015), is misplaced because
the Court analyzed the specific Title VII conciliation provision, which
does not contain the ``reasonable efforts'' requirement found in E.O.
11246. In response to this comment, OFCCP notes that it is well
established that the legal standards developed under Title VII apply to
cases brought under E.O. 11246.\56\ That principle should apply here
because OFCCP's regulation is functionally similar in purpose and
meaning to the section of Title VII that the Supreme Court analyzed in
Mach Mining. Where OFCCP finds deficiencies in a compliance evaluation,
OFCCP's regulation requires it to make ``reasonable efforts . . . to
secure compliance through conciliation and persuasion.'' \57\
Similarly, where EEOC believes a charge of discrimination is true, it
must ``endeavor to eliminate any . . . alleged unlawful employment
practice by informal methods of conference, conciliation, and
persuasion.'' \58\ A plain reading of the text in both provisions
indicates a similar purpose and meaning: to attempt to resolve
discrimination through conciliation and informal means like persuasion
and communication. Given that OFCCP traditionally applies Title VII
principles to the interpretation and application of E.O. 11246, and
given the similarity between the two provisions, OFCCP determined that
the text of its regulations on securing compliance to remedy
discrimination through conciliation should be interpreted to be
consistent with the Title VII provision on endeavoring to eliminate
unlawful discrimination by conciliation. This interpretation would be
consistent with a stated policy goal of this final rule to align the
regulations with Title VII standards, to ensure that OFCCP has the same
flexibility as EEOC in the administration of its authorities. For these
reasons, OFCCP adopts this modification as proposed.
---------------------------------------------------------------------------

\54\ 42 U.S.C. 2000e-5(b).
\55\ The NPRM included an extended discussion of the EEOC's
conciliation procedures, including a law passed by Congress that
disapproved and annulled a rule which codified rigid requirements
the EEOC had to meet during conciliation, which we include here by
reference.
\56\ See Greenwood Mills, Inc., 2002 WL 31932547, at *4.
\57\ See 41 CFR 60-1.20(b).
\58\ 42 U.S.C. 2000e-5(b).
---------------------------------------------------------------------------

8. Severability Clauses
In the NPRM, OFCCP proposed deleting the severability clause that
applied just to certain sections of OFCCP's regulations and replace it
with severability clauses covering the entirety of each part of OFCCP's
regulatory scheme. OFCCP received no comments on this issue and adopts
this change into the final rule, as proposed.\59\
---------------------------------------------------------------------------

\59\ Beyond these severability clauses, OFCCP did not consider
nor propose making any additional changes to the existing
regulations at 41 CFR parts 60-2, 60-3, 60-4, 60-20, 60-30, 60-40,
and 60-50, and any comments regarding those parts were not
considered and responded to as they were beyond the scope of the
proposed rule.
---------------------------------------------------------------------------

9. Reasonable Reliance Interests
OFCCP received a comment from a law firm stating that the NPRM did
not address contractors' reasonable reliance interests during pending
compliance evaluations. Although the commenter did not cite any
specific reliance interests, it did state its belief that pre-
enforcement notices already issued should be held to conform to the
regulatory standards in existence at the time the notice was issued and
asserted that OFCCP's proposal did not address this issue. A women's
rights legal advocacy organization stated that OFCCP's need to fulfill
its mission and mitigate the harm of discrimination outweighs any
reliance interests by contractors. It noted that the Title VII
framework has long applied to OFCCP's compliance process and noted that
the agency already publicly stated its intention to modify the 2020
rule in 2021.
Reliance interests are one factor among many that agencies must
consider during rulemaking.\60\ While ``[a]gencies are not compelled to
explore `every alternative device . . . [they are] required to assess
whether there were reliance interests, determine whether they were
significant, and weigh any such interests against competing policy
concerns.'' \61\ The 2020 rule took effect on December 10, 2020,
approximately 16 months before OFCCP issued the NPRM proposing to
modify the 2020 rule; prior to the 2020 rule, OFCCP relied on well-
established Title VII principles in its pre-enforcement and notice and
conciliation procedures. Considering the short period of time the 2020
rule was in place, OFCCP determined that restoring flexibility to its
pre-enforcement process by relying on well-established Title VII
standards in an effort to more efficiently resolve findings of
discrimination outweighs any possible reliance interest the 2020 rule
may have created among the regulated community.
---------------------------------------------------------------------------

\60\ See Dep't of Homeland Sec. v. Regents of the Univ. of
California, 140 S. Ct. 1891, 1914 (2020).
\61\ Id. at 1916 (internal citations omitted).
---------------------------------------------------------------------------

For clarification, this final rule would apply to any pre-
enforcement notices and actions issued on or after the effective date
of this rulemaking, 30 days after publication in the Federal Register.
For example, OFCCP may have issued a Predetermination Notice to a
contractor under the standards in the 2020 rule, but if it then
proceeds to issue a Notice of Violation or Show Cause Notice after the
effective date of this final rule, the standards in this final rule
would apply to those notices. OFCCP believes that through the notice
and comment process, the agency has adequately provided contractors
with notice of the changes. OFCCP will also continue to support
contractors in understanding this final rule through compliance
assistance materials.

[[Page 51729]]

10. Comments Regarding the Need for the Rulemaking
OFCCP received four comments that emphasized the need for modifying
the 2020 rule. The commenters included a women's rights legal advocacy
organization, a civil and human rights advocacy organization, a labor
rights organization, and an individual. These commenters described the
prevalence of employment discrimination against workers and asserted
that the 2020 rule's onerous requirements prevented OFCCP from
effectively enforcing its nondiscrimination authorities. They believed
that modifying the 2020 rule would restore the flexibility the agency
needs to carry out its important mission of protecting workers.
OFCCP received five comments from employer associations and law
firms that believed that the agency failed to show how the 2020 rule
constrained its enforcement efforts. For example, one of these
commenters stated that the Administrative Procedure Act (APA) requires
that revisions to existing regulations be firmly based on a substantial
factual record, and that OFCCP failed to meet this requirement.\62\
This commenter asserted that the NPRM proposed ``sweeping changes''
without any factual basis, and compared this with the 2020 rule, which
the commenter asserted had provided ``extensive'' factual
justification. Despite this assertion, the comment did not identify
with any specificity any facts underlying the 2020 rule, let alone what
comprised an ``extensive'' factual justification.
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\62\ This comment also stated that the NPRM failed to meet the
basic requirements of the APA because the agency failed to consider
``less disruptive'' alternatives to the proposed rule. OFCCP
disagrees with this comment. As detailed in the ``Alternatives''
discussion in the Regulatory Procedures section below, OFCCP
carefully considered alternatives when proceeding with this
rulemaking and determined that proceeding with the rulemaking as
proposed would enable the agency to best meet its mission and ensure
equal employment opportunity.
---------------------------------------------------------------------------

At the outset, we note the regulations at issue here are
distinguishable from those analyzed in the cases the commenter cites,
which created or rescinded standards applicable to regulated entities
and thus affected the burdens of compliance for those regulated
entities. In contrast, the 2020 rule, and this rule, deal entirely with
the internal standards to which the agency will hold itself during the
conduct of compliance evaluations prior to enforcement. The 2020 rule
explicitly noted that it was undertaken as ``an exercise of enforcement
discretion'' that was not ``compelled . . . by Title VII or OFCCP case
law,'' and further ``add[ed] no new requirements or burdens on
contractors.'' \63\
---------------------------------------------------------------------------

\63\ 85 FR 71554; 87 FR 16151.
---------------------------------------------------------------------------

Nevertheless, as explained in the NPRM, and again here, OFCCP has
identified a factual basis to conclude the 2020 rule has not met the
objectives it asserted. When promulgating the 2020 rule, OFCCP stated
that it believed the rule would ``increase clarity and transparency for
Federal contractors, establish clear parameters for OFCCP enforcement
proceedings, and enhance the efficient enforcement of the law.'' \64\
Further, two stated objectives of the 2020 rule were to increase the
number of contractors the agency evaluates and focus on resolving
stronger cases through the strategic allocation of limited agency
resources.\65\ However, the 2020 rule has not met these objectives.
While the 2020 rule acknowledges that the heightened evidentiary
standards are not compelled by Title VII,\66\ some contractors have
nonetheless asserted that OFCCP must meet the heightened evidentiary
standards to prove discrimination in cases. The NPRM described specific
examples of this problem based on OFCCP's experience enforcing the 2020
rule, including:
---------------------------------------------------------------------------

\64\ 85 FR 71554.
\65\ Id.
\66\ 87 FR 16138.
---------------------------------------------------------------------------

Contractors asserting that the evidence that OFCCP shared
to support its case failed to meet the ``qualitative evidence''
definition included in the 2020 rule.\67\
---------------------------------------------------------------------------

\67\ 87 FR 16138, 16145.
---------------------------------------------------------------------------

Contractors asserting that the qualitative evidence that
OFCCP provided was insufficient because the agency failed to disclose
the identity of the interviewees who provided relevant statements at
the Predetermination Notice stage; \68\ and
---------------------------------------------------------------------------

\68\ Id.
---------------------------------------------------------------------------

Contractors disputing whether OFCCP met the required
threshold for practical significance under the 2020 rule, arguing that
the agency has failed to meet the threshold or even disagreeing with
the 2020 rule's standard altogether.\69\
---------------------------------------------------------------------------

\69\ Id.
---------------------------------------------------------------------------

As these examples illustrate, the 2020 rule has not met its stated
objectives to increase clarity and promote efficiency. Rather, the
evidentiary mandates have spawned collateral disputes that hinder
OFCCP's ability to pursue cases that would otherwise be actionable
under Title VII's more flexible standards. By rescinding the 2020
rule's heightened evidentiary standards, OFCCP can restore its
enforcement discretion as to the cases it decides to pursue and return
to its long-standing practice of applying Title VII principles to the
facts and circumstances of each compliance evaluation, a process which
applies established evidentiary standards under Title VII.
The commenter also noted the agency's rationale for rescinding the
requirement to provide qualitative evidence when issuing a
Predetermination Notice is based on ``pure speculation'' that the
disclosure of such evidence may have a chilling effect. While the
agency maintains that the 2020 rule's requirement to disclose anecdotal
evidence creates a risk of chilling workers from coming forward, we
note that the NPRM, and in turn this final rule, in fact relied on
multiple rationales for rescinding the requirement to provide
qualitative evidence. For example, requiring proof of qualitative
evidence before issuing a Predetermination Notice is not only
inconsistent with Title VII standards and interpretive case law, but
such evidence may not yet be available to the agency at such a
preliminary investigative stage.\70\ Ultimately, OFCCP has found that
the 2020 rule's inflexible evidentiary requirements, which apply while
the matter is still under investigation and OFCCP is making preliminary
findings, have hindered the agency's ability to pursue potentially
actionable cases.
---------------------------------------------------------------------------

\70\ Id. at 16143-45.
---------------------------------------------------------------------------

The commenter also asserted that the NPRM failed to explain its
rationale as to how mandating the same evidentiary requirements for the
Predetermination Notice as the Notice of Violation creates
inefficiency. To the contrary, in the NPRM and in this final rule,
OFCCP has discussed the distinct purposes that the Predetermination
Notice and the Notice of Violation are intended to serve. Specifically,
the Predetermination Notice is intended to provide the contractor with
early notice of the agency's preliminary findings of potential
discrimination, allowing the contractor to focus on specific, discrete
areas of concern prior to a finding of violation, thereby facilitating
an early exchange of information and shared understanding that in turn
could lead to faster resolutions. By contrast, the 2020 rule's
heightened evidentiary requirements functionally required the agency to
complete its entire investigation and have litigation-ready evidence at
hand before it could issue a preliminary notice to the contractor
regarding its investigation. Imposing these same heightened evidentiary
standards to both the Predetermination

[[Page 51730]]

Notice and the Notice of Violation created duplication in the use of
these notices. By removing these barriers, OFCCP is able to utilize the
Predetermination Notice to provide notice of preliminary findings of
potential discrimination at an earlier stage before the agency has made
findings to support a Notice of Violation.\71\
---------------------------------------------------------------------------

\71\ Id.
---------------------------------------------------------------------------

As illustrated by the case examples above, OFCCP has found that the
stated intentions in the 2020 rule are not being fulfilled, and indeed
in some situations have hindered OFCCP's ability to efficiently resolve
preliminary findings of potential discrimination. Accordingly, OFCCP
has provided a reasoned explanation for modifying the 2020 rule--the
agency has demonstrated benefits to both the agency and contractors by
modifying the 2020 rule, including alignment with well-established
standards under Title VII and strengthening OFCCP's ability to bring
meritorious cases. The agency has also shown it believes these
modifications to be better than the requirements set forth in the 2020
rule to effectuate efficient enforcement.\72\
---------------------------------------------------------------------------

\72\ F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502, 515
(2009) (stating that an agency ``need not demonstrate . . . that the
reasons for the new policy are better than the reasons for the old
one''); id. at 537 (stating that when changing or modifying policy,
an agency may act arbitrarily and capriciously if it ignores or
countermands its earlier factual findings without reasoned
explanation for doing so) (Kennedy, J. concurring in part and
concurring in judgment); see also Bernhardt, 472 F. Supp. 3d at 591
(explaining that the standard of review for assessing whether an
agency action is arbitrary and capricious is `` `highly deferential,
presuming the agency action to be valid and affirming the agency
action if a reasonable basis exists for its decision' '') (citing
Nw. Ecosystem All. v. United States Fish & Wildlife Serv., 475 F. 3d
1136, 1140 (9th Cir. 2007) (quoting Indep. Acceptance Co. v.
California, 204 F.3d 1247, 1251 (9th Cir. 2000))).
---------------------------------------------------------------------------

Some commenters also stated that the rule has not been in effect
for enough time to warrant revisions. These groups generally expressed
favorable opinions of the 2020 rule, with some asserting that it
promoted certainty, efficiency, and transparency in OFCCP's
enforcement. OFCCP disagrees with these comments. As described in the
NPRM and repeated herein, soon after implementation, OFCCP saw that the
2020 rule's heightened evidentiary standards spawned collateral
disputes about the interpretation of these evidentiary standards and
hampered OFCCP's ability to provide contractors with notification of
preliminary findings of potential discrimination.

B. Modifications to 41 CFR Parts 60-300 and 60-741

OFCCP has separate regulations for E.O. 11246, VEVRAA, and Section
503. In the Section 503 and VEVRAA regulations, OFCCP proposed parallel
changes to the definitions, evidentiary requirements, and pre-
enforcement and resolution procedures as those described above for E.O.
11246. No commenter suggested that these changes should apply
differently depending on the authority the agency is enforcing. For the
reasons discussed above, OFCCP thus adopts the same modifications and
provisions in 41 CFR part 60-300 (VEVRAA) and 41 CFR part 60-741
(Section 503) that are described above for the E.O. 11246 regulations.

C. Other Comments

OFCCP received two comments that are not addressed above because
they lacked relevance to the proposed rule.

V. Regulatory Procedures

A. Executive Order 12866 (Regulatory Planning and Review) and Executive
Order 13563 (Improving Regulation and Regulatory Review)

Under Executive Order 12866 (E.O. 12866), the Office of Management
and Budget's (OMB) Office of Information and Regulatory Affairs (OIRA)
determines whether a regulatory action is significant and, therefore,
subject to the requirements of E.O. 12866 and OMB review. Section 3(f)
of E.O. 12866 defines a ``significant regulatory action'' as an action
that is likely to result in a rule that: (1) has an annual effect on
the economy of $100 million or more, or adversely affects in a material
way a sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local, or tribal
governments or communities; (2) creates serious inconsistency or
otherwise interferes with an action taken or planned by another agency;
(3) materially alters the budgetary impacts of entitlement grants, user
fees, or loan programs, or the rights and obligations of recipients
thereof; or (4) raises novel legal or policy issues arising out of
legal mandates, the President's priorities, or the principles set forth
in E.O 12866. This final rule has been designated a ``significant
regulatory action,'' although not significant within the scope of
section 3(f)(1) of E.O. 12866. OMB has reviewed the final rule.
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), OIRA
designated the rule as not a ``major rule,'' as defined by 5 U.S.C.
804(2).
Executive Order 13563 (E.O. 13563) directs agencies to adopt a
regulation only upon a reasoned determination that its benefits justify
its costs; tailor the regulation to impose the least burden on society,
consistent with obtaining the regulatory objectives; and in choosing
among alternative regulatory approaches, select those approaches that
maximize net benefits. E.O. 13563 recognizes that some benefits are
difficult to quantify and provides that, where appropriate and
permitted by law, agencies may consider and discuss qualitatively
values that are difficult or impossible to quantify, including equity,
human dignity, fairness, and distributive impacts.
1. Need for Rulemaking
As discussed in the preamble, OFCCP received comments both
supporting and opposing the proposal. Those that supported the proposal
agree that the 2020 rule imposed onerous evidentiary standards that are
inconsistent with the preliminary nature of the pre-enforcement
notices, required OFCCP to share unnecessarily detailed evidence with
contractors during the investigatory stage, and made it more difficult
for the agency to protect workers from discrimination. These commenters
remarked that the heightened requirements conflict with Title VII and
OFCCP precedent, and had no basis in law and imposed unnecessary,
burdensome, and confusing enforcement standards onto OFCCP's pre-
enforcement processes that serve to hamper the ability of OFCCP to
engage with Federal contractors at the earliest stages to remedy
potential discrimination.
Commenters in opposition generally stated the 2020 rule provided
transparency, efficiency, and clarity to contractors and argued OFCCP
did not provide enough evidence in the proposal to modify the 2020
rule. For example, one commenter asserted that rescinding the 2020 rule
would prevent both OFCCP compliance officers and contractors from
focusing resources on true problem areas, leading to longer, less
efficient reviews.
After considering the comments received, OFCCP concluded the 2020
rule created rigid constraints, many of which are not required by Title
VII and are particularly inappropriate to apply to preliminary notices
long before the agency has committed to bring an enforcement action.
OFCCP determined that the 2020 rule narrowed the scope of the agency's
authority to protect workers and impeded the agency's effective
enforcement of E.O. 11246, Section 503, and VEVRAA. The 2020 rule
prescribed that OFCCP could only

[[Page 51731]]

issue a Predetermination Notice if it provided certain quantitative
evidence and qualitative evidence, with only limited exceptions. Under
the 2020 rule, if after providing the contractor an opportunity to
respond to the Predetermination Notice, OFCCP found a violation of an
equal opportunity clause, OFCCP issued a Notice of Violation, which
imposed the same rigid parameters that it imposed on the
Predetermination Notice. The purpose of a Predetermination Notice is to
provide the contractor with prompt written notice of preliminary
findings of potential discrimination and to provide the contractor an
opportunity to respond with additional information. As illustrated by
the case examples discussed above, requiring the agency to meet
heightened and formulaic standards of proof before it can proceed with
notifying the contractor of preliminary findings of potential
discrimination has limited the agency's ability to efficiently conduct
a compliance review tailored to the facts and evidence presented. In
addition, the 2020 rule has resulted in collateral disputes at the
Predetermination Notice stage over the implementation of the rule's
regulatory standards--diverting limited agency and contractor resources
away from resolving concerns of discrimination. As discussed above,
this diversion of resources has hindered OFCCP's ability to pursue
meritorious cases.
This final rule aims to create a streamlined, efficient, and
flexible process to ensure OFCCP utilizes its limited resources as
strategically as possible to advance the agency's mission. In a return
to agency policy prior to the 2020 rule, in place since 1988, OFCCP
will require a case-by-case evaluation of the facts and circumstances
of each compliance evaluation, including during the pre-enforcement
notice and conciliation stages. Doing so will remove unnecessary
constraints that impede effective enforcement and delay resolutions.
Removing the blanket regulatory requirements applied to early, pre-
enforcement procedural notices will also allow OFCCP to pursue
enforcement in the full scope of cases that would be actionable under
Title VII rather than the more limited scope of fact patterns that
conform to the evidentiary requirements set forth under the 2020 rule.
OFCCP remains committed to providing contractors with an explanation of
the basis for the agency's preliminary findings of potential
discrimination during a compliance evaluation. Such notice is mutually
beneficial for OFCCP and the contractor under review because it
provides the contractor with an earlier opportunity to respond to
potential issues before OFCCP makes a determination on violations.
Providing earlier notice to contractors can result in the prompt and
mutually satisfactory resolution of compliance evaluations, which
minimizes unnecessary burdens on contractors and agency staff. Going
forward, OFCCP will provide updated training to its compliance officers
on the pre-enforcement procedures. This training will reflect current
case law and provide consistency across the agency, while providing
OFCCP needed flexibility to adapt to the legal standards and
statistical techniques as they evolve.
2. Discussion of Impacts
In this section, OFCCP presents a summary of the costs associated
with the final rule. OFCCP utilizes the Employment Information Report
(EEO-1) data, which identifies the number of supply and service
contractors that could be scheduled for a compliance evaluation and
thus impacted by the rule. The EEO-1 Report must be filed by covered
Federal contractors that: (1) have 50 or more employees; (2) are prime
contractors or first-tier subcontractors; and (3) have a contract,
subcontract, or purchase order amounting to $50,000 or more. OFCCP
schedules only contractors that meet those thresholds for compliance
evaluations. The number of supply and service contractors possibly
impacted by the rule is 19,586.\73\
---------------------------------------------------------------------------

\73\ OFCCP obtained the total number of supply and service
contractors from the most recent EEO-1 Report data available, which
is from fiscal year (FY) 2020.
---------------------------------------------------------------------------

OFCCP also utilizes USASpending data, which identifies the number
of construction contractors that could be scheduled for a compliance
evaluation and thus impacted by the rule. The USASpending data accounts
for all construction contractors with contracts greater than $10,000
that meet the thresholds for compliance evaluations. The number of
construction contractors possibly impacted by the proposed modification
is 11,557.\74\
---------------------------------------------------------------------------

\74\ OFCCP obtained the total number of construction contractor
establishments from the FY 2021 USASpending data, available at
https://www.usaspending.gov/#/download_center/award_data_archive
(last accessed August 15, 2022).
---------------------------------------------------------------------------

The total number of contractors eligible to be scheduled that are
possibly impacted by the rule is 31,143.\75\ While OFCCP acknowledges
that all Federal contractors that could be scheduled for a compliance
evaluation may learn the requirements to comply with the laws that
OFCCP enforces, only those contractors who are actually scheduled are
likely to have a need to know the pre-enforcement procedures and will
be directly impacted by the rule. For this reason, the total number of
contractors impacted by the final rule is likely an overestimation
because not all of the eligible contractors will be scheduled for a
compliance evaluation.
---------------------------------------------------------------------------

\75\ 19,586 supply and service contractors + 11,557 construction
contractors = 31,143 contractors.
---------------------------------------------------------------------------

OFCCP has determined that either a Human Resources Manager (SOC 11-
3121) or a Lawyer (SOC 23-1011) would review the rule. OFCCP estimates
that 50 percent of the reviewers would be human resources managers and
50 percent would be in-house counsel. Thus, the mean hourly wage rate
reflects a \50/50\ split between human resources managers and lawyers.
The mean hourly wage of a human resources manager is $65.67, and the
mean hourly wage of a lawyer is $71.17.\76\
---------------------------------------------------------------------------

\76\ BLS, Occupational Employment Statistics, Occupational
Employment and Wages, May 2021, available at https://www.bls.gov/oes/current/oes_nat.htm (last accessed June 9, 2022).
---------------------------------------------------------------------------

Therefore, the average hourly wage rate is $68.42 (($65.67 +
$71.17)/2). OFCCP adjusted this wage rate to reflect fringe benefits
such as health insurance and retirement benefits, as well as overhead
costs such as rent, utilities, and office equipment. OFCCP uses a
fringe benefits rate of 45 percent \77\ and an overhead rate of 17
percent,\78\ resulting in a fully loaded hourly compensation rate of
$110.84 ($68.42 + ($68.42 x 45 percent) + ($68.42 x 17 percent)). The
estimated labor cost to contractors is reflected in Table 1, below.
---------------------------------------------------------------------------

\77\ BLS, Employer Costs for Employee Compensation, available at
https://www.bls.gov/ncs/data.htm (last accessed August 15, 2022).
Wages and salaries averaged $28.16 per hour worked in March 2022,
while benefit costs averaged $12.74, which is a benefits rate of 45
percent.
\78\ Cody Rice, U.S. Environmental Protection Agency, ``Wage
Rates for Economic Analyses of the Toxics Release Inventory
Program,'' (June 10, 2002), available at www.regulations.gov/document?D=EPA-HQ-OPPT-2014-0650-0005 (last accessed June 9, 2022).

[[Page 51732]]

Table 1--Labor Cost
----------------------------------------------------------------------------------------------------------------
Fully loaded
Average hourly Fringe benefit Overhead rate hourly
Major occupational groups wage rate rate (%) (%) compensation
(%)
----------------------------------------------------------------------------------------------------------------
Human Resources Managers and Lawyers........ $68.42 45 17 $110.84
----------------------------------------------------------------------------------------------------------------

a. Cost of Rule Familiarization
OFCCP acknowledges that 5 CFR 1320.3(b)(1)(i) requires agencies to
include in the burden analysis for a rule the estimated time it takes
for contractors to review and understand the instructions for
compliance. To minimize the burden, OFCCP will publish compliance
assistance materials regarding the final rule.
OFCCP received one comment opposing the burden estimate of 30
minutes for rule familiarization. The commenter stated, ``While reading
time for the NPRM per se may be 30 minutes for the fastest of readers,
it will be impossible to understand the background, history, and
practical implications of the new rule.''
OFCCP considered the comment and declines to make any changes in
the final rule. Both the NPRM and this final rule state that the 30-
minute estimate for rule familiarization is the average amount of time
it will take someone to familiarize themselves with the new regulations
by reading the regulatory text. OFCCP emphasizes that the 30-minute
estimate is an average across all contractors and acknowledges that the
precise amount of time each company will take is difficult to estimate.
OFCCP believes that a human resources manager or lawyer will take a
minimum of 30 minutes (.5 hours) to read the regulatory text.
Consequently, the estimated burden for rule familiarization is 15,572
hours (31,143 contractor firms x .5 hours). OFCCP calculates the total
estimated cost of rule familiarization as $1,726,000 (15,572 hours x
$110.84/hour) in the first year, which amounts to a 10-year annualized
cost of $196,446 at a discount rate of 3 percent (which is $6.31 per
contractor firm) or $229,667 at a discount rate of 7 percent (which is
$7.37 per contractor firm). Table 2, below, reflects the estimated rule
familiarization costs.

Table 2--Rule Familiarization Cost
------------------------------------------------------------------------

------------------------------------------------------------------------
Total number of contractors............... 31,143.
Time for rule familiarization............. 30 minutes.
Human Resources Managers fully loaded $110.84.
hourly compensation.
Rule familiarization cost in the first $1,726,000.
year.
Annualized cost with 3 percent discounting $196,446.
Annualized cost per contractor with 3 $6.31.
percent discounting.
Annualized cost with 7 percent discounting $229,667.
Annualized cost per contractor with 7 $7.37.
percent discounting.
------------------------------------------------------------------------

b. Benefits
E.O. 13563 recognizes that some rules have benefits that are
difficult to quantify or monetize but are nevertheless important and
states that agencies may consider such benefits. This rule has several
benefits, including equity and fairness benefits, which are explicitly
recognized in E.O. 13563. Key benefits include:
Supporting more effective enforcement of OFCCP's equal
opportunity laws by eliminating procedural inefficiencies and
heightened evidentiary standards created by the 2020 rule;
Facilitating earlier and more efficient resolutions;
Ensuring greater certainty and consistency in case
resolutions by maintaining adherence to Title VII and OFCCP case law
standards;
Promoting transparency by codifying the required use of
the Predetermination Notice when the agency identifies preliminary
findings of potential discrimination;
Allowing OFCCP to tailor the pre-enforcement process to
the specific facts and circumstances of each case, consistent with
judicial interpretations of the applicable legal authorities as they
evolve, which will in turn allow OFCCP to more effectively redress
unlawful discrimination;
Advancing a policy of promoting consistency between Title
VII and E.O. 11246 and removing unnecessary constraints on the agency's
ability to pursue meritorious cases. This approach will help OFCCP
advance the overriding policy goal of promoting nondiscrimination by
strengthening the enforcement of federal protections under E.O. 11246;
Reducing time-consuming disputes over unnecessary
standards that are inherently fact-specific; and
Furthering the strategic allocation of agency resources.
3. Alternatives
In response to the NPRM, OFCCP received one comment stating the
agency's proposed modifications did not meet the APA requirement of
considering less disruptive alternatives. However, OFCCP clearly
addressed the alternatives in the NPRM and describes in detail the
alternative approaches that were considered prior to finalizing the
rule below.\79\
---------------------------------------------------------------------------

\79\ See 87 FR 16138, 16151 (describing alternative approaches
OFCCP considered).
---------------------------------------------------------------------------

Specifically, OFCCP considered maintaining the current regulations
established in the 2020 rule. However, as discussed earlier in this
preamble, OFCCP determined that creating rigid regulatory standards to
govern its pre-enforcement compliance evaluation notice and
conciliation procedures is incompatible with the flexibility needed for
effective enforcement. Moreover, the 2020 rule places certain
obligations on OFCCP at this preliminary stage before its review can
proceed that go beyond the substantive legal requirements that E.O.
11246, Title VII, and interpretive case law require to state a claim
and prove discrimination at a much later stage, upon a full evidentiary
record. OFCCP has determined that imposing such rigid and heightened
standards early in its pre-enforcement proceedings unduly constrains
its ability to pursue

[[Page 51733]]

the full range of discrimination under its authority. The 2020 rule
also created an inefficient process where OFCCP's Predetermination
Notice (intended to notify the contractor of potential discrimination
and to invite the contractor to provide additional information on its
compliance before OFCCP makes its determination) and the Notice of
Violation (intended to inform the contractor of violations that require
corrective action and to invite conciliation through a written
agreement) were largely duplicative. Further, mandating regulatory
requirements to make inherently fact-specific determinations invites
time-consuming disputes over the application of the rule's
requirements, as OFCCP has already experienced in compliance
evaluations since the 2020 rule took effect. Modifying the 2020 rule
helps restore the enforcement discretion and flexibility OFCCP needs to
facilitate compliance through conciliation by providing pre-enforcement
notice of preliminary findings of potential discrimination and findings
of discrimination and applying Title VII to the facts and circumstances
of each compliance evaluation. OFCCP is modifying the regulatory text
to create a more streamlined and effective process for the agency to
communicate preliminary findings of potential discrimination to
contractors, provide contractors an opportunity to respond, notify
contractors of violations, and ultimately facilitate greater
understanding to obtain resolution through conciliation.
OFCCP also considered modifying the 2020 rule to rescind the
entirety of the rule except the correction to OFCCP's agency head title
or modifying the 2020 rule by eliminating the Predetermination Notice
entirely since it currently functions as a procedural redundancy.
However, OFCCP determined that retaining both pre-enforcement notices
in the regulatory text while rescinding the inflexible evidentiary
requirements for the Predetermination Notice and Notice of Violation
allows the contractor and OFCCP to engage in earlier discussions that
can lead to more efficient resolutions.

B. Regulatory Flexibility Act and Executive Order 13272 (Consideration
of Small Entities)

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq.,
establishes ``as a principle of regulatory issuance that agencies shall
endeavor, consistent with the objectives of the rule and applicable
statutes, to fit regulatory and informational requirements to the scale
of the businesses, organizations, and governmental jurisdictions
subject to regulation.'' Public Law 96-354, section 2(b). The RFA
requires agencies to consider the impact of a regulatory action on a
wide range of small entities, including small businesses, nonprofit
organizations, and small governmental jurisdictions.
Agencies must review whether a regulatory action would have a
significant economic impact on a substantial number of small entities.
See 5 U.S.C. 603. If the regulatory action would, then the agency must
prepare a regulatory flexibility analysis as described in the RFA. See
id. However, if the agency determines that the regulatory action would
not be expected to have a significant economic impact on a substantial
number of small entities, then the head of the agency may so certify
and the RFA does not require a regulatory flexibility analysis. See 5
U.S.C. 605. The certification must provide the factual basis for this
determination.
The final rule will not have a significant economic impact on a
substantial number of small entities. The first-year cost for small
entities at a discount rate of 7 percent for rule familiarization is
$51.80 per entity which is far less than 1 percent of the annual
revenue of the smallest of the small entities affected by the rule.
Accordingly, OFCCP certifies that the final rule will not have a
significant economic impact on a substantial number of small entities.

C. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 requires that OFCCP consider
the impact of paperwork and other information collection burdens
imposed on the public. See 44 U.S.C. 3507(d). An agency may not collect
or sponsor the collection of information or impose an information
collection requirement unless the information collection instrument
displays a currently valid OMB control number. See 5 CFR 1320.5(b)(1).
OFCCP has determined that there would be no new requirement for
information collection associated with this final rule. The information
collections contained in the existing Executive Order 11246, Section
503, and VEVRAA regulations are currently approved under OMB Control
Number 1250-0001 (Construction Recordkeeping and Reporting
Requirements), OMB Control Number 1250-0003 (Supply and Service
Program), OMB Control Number 1250-0004 (Recordkeeping and Reporting
Requirements Under the Vietnam Era Veterans' Readjustment Assistance
Act of 1974, as Amended), and OMB Control Number 1250-0005
(Recordkeeping and Reporting Requirements Under Rehabilitation Act of
1973, as Amended Section 503). Consequently, this final rule does not
require review by OMB under the authority of the Paperwork Reduction
Act.

D. Unfunded Mandates Reform Act of 1995

For purposes of the Unfunded Mandates Reform Act of 1995, 2 U.S.C.
1532, this final rule would not include any federal mandate that may
result in excess of $100 million in expenditures by state, local, and
tribal governments in the aggregate or by the private sector.

E. Executive Order 13132 (Federalism)

OFCCP has reviewed this final rule in accordance with Executive
Order 13132 regarding federalism and has determined that it does not
have ``federalism implications.'' The final rule will not ``have
substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government.''

F. Executive Order 13175 (Consultation and Coordination With Indian
Tribal Governments)

This final rule does not have tribal implications under Executive
Order 13175 that would require a tribal summary impact statement. The
final rule does not ``have substantial direct effects on one or more
Indian tribes, on the relationship between the Federal Government and
Indian tribes, or on the distribution of power and responsibilities
between the Federal Government and Indian tribes.''

List of Subjects

41 CFR Part 60-1

Administrative practice and procedure, Civil rights, Employment,
Equal employment opportunity, Government contracts, Government
procurement, Investigations, Labor, Reporting and recordkeeping
requirements.

41 CFR Part 60-2

Equal employment opportunity, Government procurement, Reporting and
recordkeeping requirements.

41 CFR Part 60-4

Construction industry, Equal employment opportunity, Government
procurement, Reporting and recordkeeping requirements.

[[Page 51734]]

41 CFR Part 60-20

Civil rights, Equal employment opportunity, Government procurement,
Labor, Sex discrimination, Women.

41 CFR Part 60-30

Administrative practice and procedure, Civil rights, Equal
employment opportunity, Government contracts, Government procurement,
Government property management, Individuals with Disabilities,
Reporting and recordkeeping requirements, Veterans.

41 CFR Part 60-40

Freedom of information, Reporting and recordkeeping requirements.

41 CFR Part 60-50

Equal employment opportunity, Government procurement, Religious
discrimination, Reporting and recordkeeping requirements.

41 CFR Parts 60-300 and 60-741

Administrative practice and procedure, Civil rights, Employment,
Equal employment opportunity, Government contracts, Government
procurement, Individuals with disabilities, Investigations, Labor,
Reporting and recordkeeping requirements, Veterans.

Michele Hodge,
Acting Director, Office of Federal Contract Compliance Programs.

For the reasons stated in the preamble, OFCCP revises 41 CFR parts
60-1, 60-2, 60-4, 60-20, 60-30, 60-40, 60-50, 60-300, and 60-741 as
follows:

PART 60-1--OBLIGATIONS OF CONTRACTORS AND SUBCONTRACTORS

0
1. The authority citation for part 60-1 continues to read as follows:

Authority: Sec. 201, E.O. 11246, 30 FR 12319, 3 CFR, 1964-1965
Comp., p. 339, as amended by E.O. 11375, 32 FR 14303, 3 CFR, 1966-
1970 Comp., p. 684, E.O. 12086, 43 FR 46501, 3 CFR, 1978 Comp., p.
230, E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258 and E.O.
13672, 79 FR 42971.

0
2. Amend Sec. 60-1.3 by removing the definitions for ``Qualitative
evidence'' and ``Quantitative evidence.''

0
3. Revise Sec. 60-1.20(b) to read as follows:
* * * * *
(b) Where deficiencies are found to exist, OFCCP will make
reasonable efforts to secure compliance through conciliation and
persuasion, pursuant to Sec. 60-1.33. The ``reasonable efforts''
standard shall be interpreted consistently with title VII of the Civil
Rights Act of 1964 and its requirement that the Equal Employment
Opportunity Commission endeavor to remove any such alleged unlawful
employment practice by informal methods of conference, conciliation,
and persuasion. Before the contractor can be found to be in compliance
with the order, it must make a specific commitment, in writing, to
correct any such deficiencies. The commitment must include the precise
action to be taken and dates for completion. The time period allotted
shall be no longer than the minimum period necessary to effect such
changes. Upon approval of the commitment, the contractor may be
considered in compliance, on condition that the commitments are
faithfully kept. The contractor shall be notified that making such
commitments does not preclude future determinations of noncompliance
based on a finding that the commitments are not sufficient to achieve
compliance.
* * * * *

Sec. 60-1.28 [Removed and reserved]

0
4. Remove and reserve Sec. 60-1.28.

0
5. Revise Sec. 60-1.33 to read as follows:

Sec. 60-1.33 Pre-enforcement notice and conciliation procedures.

(a) Predetermination Notice. If a compliance evaluation by OFCCP
indicates preliminary findings of potential discrimination, OFCCP will
issue a Predetermination Notice that describes the preliminary findings
and provides the contractor an opportunity to respond. The
Predetermination Notice may also include preliminary findings of other
potential violations that OFCCP has identified at that stage of the
review. After OFCCP issues the Predetermination Notice, the agency may
identify additional violations and include them in a subsequent Notice
of Violation or Show Cause Notice without amending the Predetermination
Notice. OFCCP will provide the contractor an opportunity to conciliate
additional violations identified in the Notice of Violation or Show
Cause Notice. Any response to a Predetermination Notice must be
received by OFCCP within 15 calendar days of receipt of the Notice,
which deadline OFCCP may extend for good cause. If the contractor does
not respond or OFCCP determines that the contractor's response and any
additional investigation undertaken by the agency did not resolve the
preliminary findings of potential discrimination or other violations
identified in the Predetermination Notice, OFCCP will proceed to issue
a Notice of Violation.
(b) Notice of Violation. If a compliance evaluation by OFCCP
indicates a violation of the equal opportunity clause, OFCCP will issue
a Notice of Violation to the contractor requiring corrective action.
The Notice of Violation will identify the violations found and describe
the recommended corrective actions. The Notice of Violation will invite
the contractor to conciliate the matter and resolve the findings
through a written conciliation agreement. After the Notice of Violation
is issued, OFCCP may include additional violations in a subsequent Show
Cause Notice without amendment to the Notice of Violation. OFCCP will
provide the contractor an opportunity to conciliate additional
violations identified in the Show Cause Notice.
(c) Conciliation agreement. If a compliance review, complaint
investigation, or other review by OFCCP or its representative indicates
a material violation of the equal opportunity clause, and:
(1) If the contractor, subcontractor, or bidder is willing to
correct the violations and/or deficiencies; and
(2) If OFCCP or its representative determines that settlement
(rather than referral for consideration of formal enforcement) is
appropriate, a written conciliation agreement shall be required. The
agreement shall provide for such remedial action as may be necessary to
correct the violations and/or deficiencies identified, including, where
appropriate (but not limited to), remedies such as back pay, salary
adjustments, and retroactive seniority.
(d) Show Cause Notice. When the Director has reasonable cause to
believe that a contractor has violated the equal opportunity clause the
Director may issue a notice requiring the contractor to show cause,
within 30 days, why monitoring, enforcement proceedings, or other
appropriate action to ensure compliance should not be instituted. OFCCP
may issue a Show Cause Notice without first issuing a Predetermination
Notice or Notice of Violation when 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. The Show Cause
Notice will include each violation that OFCCP has identified at the
time of issuance. Where OFCCP identifies additional violations after
issuing a Show Cause Notice, OFCCP will modify or amend the Show Cause
Notice.
(e) Expedited conciliation option. OFCCP may agree to waive the
procedures set forth in paragraphs (a) and/or (b) of this section to
enter directly into a conciliation agreement with a contractor. OFCCP
may offer the

[[Page 51735]]

contractor this expedited conciliation option but may not require or
insist that the contractor avail itself of the expedited conciliation
option.

0
6. Add Sec. 60-1.48 to subpart C to read as follows:

Sec. 60-1.48 Severability.

Should a court of competent jurisdiction hold any provision(s) of
this part to be invalid, such action will not affect any other
provision of this part.

PART 60-2--AFFIRMATIVE ACTION PROGRAMS

0
7. The authority citation for part 60-2 continues to read as follows:

Authority: Sec. 201, E.O. 11246, 30 FR 12319, E.O. 11375, 32 FR
14303, as amended by E.O. 12086, 43 FR 46501, and E.O. 13672, 79 FR
42971.

0
8. Add Sec. 60-2.36 to subpart C to read as follows:

Sec. 60-2.36 Severability.

Should a court of competent jurisdiction hold any provision(s) of
this part to be invalid, such action will not affect any other
provision of this part.

PART 60-4--CONSTRUCTION CONTRACTORS--AFFIRMATIVE ACTION
REQUIREMENTS

0
9. The authority citation for part 60-4 continues to read as follows:

Authority: Secs. 201, 202, 205, 211, 301, 302, and 303 of E.O.
11246, as amended, 30 FR 12319; 32 FR 14303, as amended by E.O.
12086; and E.O. 13672, 79 FR 42971.

0
10. Add Sec. 60-4.10 to read as follows:

Sec. 60-4.10 Severability.

Should a court of competent jurisdiction hold any provision(s) of
this part to be invalid, such action will not affect any other
provision of this part.

PART 60-20--DISCRIMINATION ON THE BASIS OF SEX

0
11. The authority citation for part 60-20 continues to read as follows:

Authority: Sec. 201, E.O. 11246, 30 FR 12319, 3 CFR, 1964-1965
Comp., p. 339 as amended by E.O. 11375, 32 FR 14303, 3 CFR 1966-1970
Comp., p. 684; E.O. 12086, 43 FR 46501, 3 CFR 1978 Comp., p. 230;
E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258; and E.O. 13672,
79 FR 42971.

0
12. Add Sec. 60-20.9 to read as follows:

Sec. 60-20.9 Severability.

Should a court of competent jurisdiction hold any provision(s) of
this part to be invalid, such action will not affect any other
provision of this part.

PART 60-30--RULES OF PRACTICE FOR ADMINISTRATIVE PROCEEDINGS TO
ENFORCE EQUAL OPPORTUNITY UNDER EXECUTIVE ORDER 11246

0
13. The authority citation for part 60-30 continues to read as follows:

Authority: Executive Order 11246, as amended, 30 FR 12319, 32 FR
14303, as amended by E.O. 12086; 29 U.S.C. 793, as amended, and 38
U.S.C. 4212, as amended.

0
14. Add Sec. 60-30.38 to read as follows:

Sec. 60-30.38 Severability.

Should a court of competent jurisdiction hold any provision(s) of
this part to be invalid, such action will not affect any other
provision of this part.

PART 60-40--EXAMINATION AND COPYING OF OFCCP DOCUMENTS

0
15. The authority citation for part 60-40 continues to read as follows:

Authority: E.O. 11246, as amended by E.O. 11375, and as amended
by E.O. 12086; 5 U.S.C. 552.

0
16. Add Sec. 60-40.9 to read as follows:

Sec. 60-40.9 Severability.

Should a court of competent jurisdiction hold any provision(s) of
this part to be invalid, such action will not affect any other
provision of this part or chapter.

PART 60-50--GUIDELINES ON DISCRIMINATION BECAUSE OF RELIGION OR
NATIONAL ORIGIN

0
17. The authority citation for part 60-50 continues to read as follows:

Authority: Sec. 201 of E.O. 11246, as amended, 30 FR 12319; 32
FR 14303, as amended by E.O. 12086; and E.O. 13672, 79 FR 42971.

0
18. Add Sec. 60-50.6 to read as follows:

Sec. 60-50.6 Severability.

Should a court of competent jurisdiction hold any provision(s) of
this part to be invalid, such action will not affect any other
provision of this part.

PART 60-300--AFFIRMATIVE ACTION AND NONDISCRIMINATION OBLIGATIONS
OF FEDERAL CONTRACTORS AND SUBCONTRACTORS REGARDING DISABLED
VETERANS, RECENTLY SEPARATED VETERANS, ACTIVE DUTY WARTIME OR
CAMPAIGN BADGE VETERANS, AND ARMED FORCES SERVICE MEDAL VETERANS

0
19. The authority citation for part 60-300 continues to read as
follows:

Authority: 29 U.S.C. 793; 38 U.S.C. 4211 and 4212; E.O. 11758 (3
CFR, 1971-1975 Comp., p. 841).

Sec. 60-300.2 [Amended]

0
20. Amend Sec. 60-300.2 by removing the definitions for ``Qualitative
evidence'' and ``Quantitative evidence.''

0
21. Revise Sec. 60-300.60(b) to read as follows:

Sec. 60-300.60 Compliance evaluations.

* * * * *
(b) Where deficiencies are found to exist, OFCCP will make
reasonable efforts to secure compliance through conciliation and
persuasion, pursuant to Sec. 60-300.62. The ``reasonable efforts''
standard shall be interpreted consistently with title VII of the Civil
Rights Act of 1964 and its requirement that the Equal Employment
Opportunity Commission endeavor to remove any such alleged unlawful
employment practice by informal methods of conference, conciliation,
and persuasion.
* * * * *

0
22. Revise Sec. 60-300.62 to read as follows:

Sec. 60-300.62 Pre-enforcement notice and conciliation procedures.

[[Page 51736]]

requiring corrective action. The Notice of Violation will identify the
violations found and describe the recommended corrective actions. The
Notice of Violation will invite the contractor to conciliate the matter
and resolve the findings through a written conciliation agreement.
After the Notice of Violation is issued, OFCCP may include additional
violations in a subsequent Show Cause Notice without amendment to the
Notice of Violation. OFCCP will provide the contractor an opportunity
to conciliate additional violations identified in the Show Cause
Notice.
(c) Conciliation agreement. If a compliance review, complaint
investigation, or other review by OFCCP or its representative indicates
a material violation of the equal opportunity clause, and:
(1) If the contractor, subcontractor, or bidder is willing to
correct the violations and/or deficiencies; and
(2) If OFCCP or its representative determines that settlement
(rather than referral for consideration of formal enforcement) is
appropriate, a written conciliation agreement shall be required. The
agreement shall provide for such remedial action as may be necessary to
correct the violations and/or deficiencies identified, including, where
appropriate (but not limited to), remedies such as back pay, salary
adjustments, and retroactive seniority.
(d) Show Cause Notice. When the Director has reasonable cause to
believe that a contractor has violated the equal opportunity clause the
Director may issue a notice requiring the contractor to show cause,
within 30 days, why monitoring, enforcement proceedings, or other
appropriate action to ensure compliance should not be instituted. OFCCP
may issue a Show Cause Notice without first issuing a Predetermination
Notice or Notice of Violation when 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. The Show Cause
Notice will include each violation that OFCCP has identified at the
time of issuance. Where OFCCP identifies additional violations after
issuing a Show Cause Notice, OFCCP will modify or amend the Show Cause
Notice.
(e) Expedited conciliation option. OFCCP may agree to waive the
procedures set forth in paragraphs (a) and/or (b) of this section to
enter directly into a conciliation agreement with a contractor. OFCCP
may offer the contractor this expedited conciliation option, but may
not require or insist that the contractor avail itself of the expedited
conciliation option.

Sec. 60-300.64 [Removed and Reserved]

0
23. Remove and reserve Sec. 60-300.64.

0
24. Add Sec. 60-300.85 to subpart D to read as follows:

Sec. 60-300.85 Severability.

Should a court of competent jurisdiction hold any provision(s) of
this part to be invalid, such action will not affect any other
provision of this part.

PART 60-741--AFFIRMATIVE ACTION AND NONDISCRIMINATION OBLIGATIONS
OF FEDERAL CONTRACTORS AND SUBCONTRACTORS REGARDING INDIVIDUALS
WITH DISABILITIES

0
25. The authority citation for part 60-741 continues to read as
follows:

Authority: 29 U.S.C. 705 and 793; E.O. 11758 (3 CFR, 1971-1975
Comp., p. 841).

0
26. Amend Sec. 60-741.2 by removing the definitions for ``Qualitative
evidence'' and ``Quantitative evidence.''

0
27. Revise Sec. 60-741.60(b) to read as follows:

Sec. 60-741.60 Compliance evaluations.

* * * * *
(b) Where deficiencies are found to exist, OFCCP will make
reasonable efforts to secure compliance through conciliation and
persuasion, pursuant to Sec. 60-741.62. The ``reasonable efforts''
standard shall be interpreted consistently with title VII of the Civil
Rights Act of 1964 and its requirement that the Equal Employment
Opportunity Commission endeavor to remove any such alleged unlawful
employment practice by informal methods of conference, conciliation,
and persuasion.
* * * * *

0
28. Revise Sec. 60-741.62 to read as follows:

Sec. 60-741.62 Pre-enforcement notice and conciliation procedures.

(a) Predetermination Notice. If a compliance evaluation by OFCCP
indicates preliminary findings of potential discrimination, OFCCP will
issue a Predetermination Notice that describes the preliminary findings
and provides the contractor an opportunity to respond. The
Predetermination Notice may also include preliminary findings of other
potential violations that OFCCP has identified at that stage of the
review. After OFCCP issues the Predetermination Notice, the agency may
identify additional violations and include them in a subsequent Notice
of Violation or Show Cause Notice without amending the Predetermination
Notice. OFCCP will provide the contractor an opportunity to conciliate
additional violations identified in the Notice of Violation or Show
Cause Notice. Any response to a Predetermination Notice must be
received by OFCCP within 15 calendar days of receipt of the Notice,
which deadline OFCCP may extend for good cause. If the contractor does
not respond or OFCCP determines that the contractor's response and any
additional investigation undertaken by the agency did not resolve the
preliminary findings of potential discrimination or other violations
identified in the Predetermination Notice, OFCCP will proceed to issue
a Notice of Violation.
(b) Notice of Violation. If a compliance evaluation by OFCCP
indicates a violation of the equal opportunity clause, OFCCP will issue
a Notice of Violation to the contractor requiring corrective action.
The Notice of Violation will identify the violations found and describe
the recommended corrective actions. The Notice of Violation will invite
the contractor to conciliate the matter and resolve the findings
through a written conciliation agreement. After the Notice of Violation
is issued, OFCCP may include additional violations in a subsequent Show
Cause Notice without amendment to the Notice of Violation. OFCCP will
provide the contractor an opportunity to conciliate additional
violations identified in the Show Cause Notice.
(c) Conciliation agreement. If a compliance review, complaint
investigation, or other review by OFCCP or its representative indicates
a material violation of the equal opportunity clause, and:
(1) If the contractor, subcontractor, or bidder is willing to
correct the violations and/or deficiencies; and
(2) If OFCCP or its representative determines that settlement
(rather than referral for consideration of formal enforcement) is
appropriate, a written conciliation agreement shall be required. The
agreement shall provide for such remedial action as may be necessary to
correct the violations and/or deficiencies identified, including, where
appropriate (but not limited to), remedies such as back pay, salary
adjustments, and retroactive seniority.
(d) Remedial benchmarks. The remedial action referenced in
paragraph (c) of this section may include the establishment of
benchmarks for the contractor's outreach, recruitment, hiring, or other
employment activities. The purpose of such benchmarks is to create a
quantifiable method by which the contractor's progress in correcting
identified violations and/or deficiencies can be measured.

[[Page 51737]]

(e) Show Cause Notice. When the Director has reasonable cause to
believe that a contractor has violated the equal opportunity clause the
Director may issue a notice requiring the contractor to show cause,
within 30 days, why monitoring, enforcement proceedings, or other
appropriate action to ensure compliance should not be instituted. OFCCP
may issue a Show Cause Notice without first issuing a Predetermination
Notice or Notice of Violation when 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. The Show Cause
Notice will include each violation that OFCCP has identified at the
time of issuance. Where OFCCP identifies additional violations after
issuing a Show Cause Notice, OFCCP will modify or amend the Show Cause
Notice.
(f) Expedited conciliation option. OFCCP may agree to waive the
procedures set forth in paragraphs (a) and/or (b) of this section to
enter directly into a conciliation agreement with a contractor. OFCCP
may offer the contractor this expedited conciliation option, but may
not require or insist that the contractor avail itself of the expedited
conciliation option.

Sec. 60-741.64 [Removed and Reserved]

0
29. Remove and reserve Sec. 60-741.64.

0
30. Add Sec. 60-741.84 to read as follows:

Sec. 60-741.84 Severability.

Should a court of competent jurisdiction hold any provision(s) of
this part to be invalid, such action will not affect any other
provision of this part.

[FR Doc. 2023-16098 Filed 8-3-23; 8:45 am]
BILLING CODE 4510-CM-P

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