OFCCP Announces New Early Resolution Procedures for Compliance Audits

December 14, 2018

The U.S. Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) has announced a new voluntary settlement process that would give federal contractors a five-year grace period from future audits at specific locations as long as the company agrees to substantial corporate-wide review and reporting requirements.

How your company could benefit: Under the new Early Resolution Procedures, federal contractors will have the opportunity, if offered by OFCCP, to resolve compliance violations prior to a Notice of Violation without being subjected to an intrusive onsite visit and employee interviews.

The price your company would have to pay:  Settling alleged material violations at a single establishment will require an “Early Resolution Conciliation Agreement with Corporate-Wide Corrective Action” (ERCAs) that will require a contractor to review all, or a negotiated subset, of its remaining establishments for similar violations and, if necessary, implement corrective actions at those locations.

The limits to the benefit: In exchange for a five-year grace period at the one establishment that was audited, ERCAs will require contractors to submit substantial progress reports to the OFCCP for a period of five years and the OFCCP will still be able to audit any other location the contractor has.

Settling alleged discrimination violations through an ERCA may be quicker and the OFCCP will not schedule any of the contractor’s establishments covered by the ERCA for new compliance audits, but the OFCCP will monitor compliance for five years through semi-annual progress reports.

Takeaway: As well-intentioned as the new settlement process is, the benefits for federal contractors may not be worth the cost and will likely result in most contractors sticking with the current audit resolution process.