Two California Courts of Appeal came to two different conclusions on motions to compel arbitration on the same day last week (April 10), again demonstrating the care that must be taken in drafting and presenting arbitration agreements to workers.

In Diaz v. Sohnen Enterprises (Second Appellate District Case No. B283077), the company called employees into a meeting, gave them an arbitration agreement, and expressly told them that continuing employment would constitute acceptance even if they refused to sign. The plaintiff kept working but told managers 12 days later that she did not want to sign the agreement. She was again advised by management that continuing to work would constitute acceptance.

A week later, she and her attorney sent a letter rejecting the agreement; she also served her complaint. The Court of Appeal held, nonetheless, that she should be required to go to arbitration. The Court noted that it is settled law that an employee impliedly consents to arbitration by continuing to work after being told that the agreement is a condition of employment.

The Court said that unlike other cases where employers tried to use a general handbook consent or required a signature for consent, Diaz was presented with the agreement and told twice that continuing her employment was acceptance. Her employer “could unilaterally change the terms of Diaz’s employment agreement, as long as it provided Diaz notice of the change.”

On the same day, however, another Court of Appeal refused to enforce an arbitration agreement in another case, finding the agreement was unconscionable. In Subcontracting Concepts (CT), LLC v. De Melo (First Appellate District Case No. A152205), the company sought to compel into arbitration an independent contractor who brought an administrative claim through the Department of Labor.

The Court of Appeal held that arbitration could not be compelled, however, because the take-it-or-leave-it agreement was presented only in English (a language the plaintiff was not fluent in), referred to the American Arbitration Association without specifying or providing the rules, required the plaintiff to share arbitration costs (precluding a relatively inexpensive administrative forum), limited damages to actual monetary damages, and barred Private Attorney General Act (“PAGA”) actions.

The company argued that the agreement should not be reviewed under standards applicable to employment arbitration agreements because the plaintiff was an independent contractor, but the Court disagreed. It noted that the plaintiff brought a misclassification claim and was alleging he was an employee and that the power imbalance between the parties was akin to an employment relationship.

The two holdings, taken together, should serve as a reminder that employers are free to make arbitration agreements a condition of continued employment but should take care to ensure that employees and independent contractors are given clear notice and the terms of the agreement are enforceable under California law.

[The Diaz opinion is available at The Subcontracting Concepts opinion is available at]

Although it has been more than a month since a federal district court judge ordered the reinstatement of a controversial EEO-1 pay data reporting rule, it is still unclear when employers will need to comply. Employers subject to EEO-1 reporting requirements—including employers with 100 or more employees and employers with 50 or more employees and a federal contract or subcontracting amounting to at least $50,000—should stay tuned for updates on this matter as they may be required to quickly prepare pay data to submit to the EEOC this year.

As we previously reported, after the judge ordered the immediate reinstatement of the rule in early March, she ordered the Equal Employment Opportunity Commission (“EEOC”) to file a brief explaining how it will implement her order. The EEOC’s brief asserted administrative authority to set a September 30, 2019 deadline for employers to submit EEO-1 pay data. Employee advocacy groups, however, have demanded an earlier date for submissions by May 31, 2019. Employer groups such as the U.S. Chamber of Commerce filed an amicus brief asking for at least eighteen months to gather and submit the required pay data. At this point, it is unclear whether the judge will defer to the EEOC’s September 30 date, or require something else. There is also the possibility that a party could file an appeal, or that administrative action could modify requirements or timing of the rule.

As a reminder, employers are still required to submit their normal EEO-1 reports (not including compensation data) to the EEOC by May 31, 2019.

The issue of pay equity has risen to the top of the news cycle—especially today, a day dubbed Equal Pay Day by advocates seeking to raise public awareness.  But pay equity also is ascending legislative agendas and enforcement priorities, particularly at the state level.  Recognizing this trend, the Hogan Lovells U.S. Employment Group will host a webinar on May 21, 2019 to address legal requirements and best practices for employers wrestling with the tricky compliance issues in this evolving and increasingly visible landscape.  More details to follow.

As of April 1, 2019, sexual harassment prevention training has become fully ingrained in both New York State and City law. As noted in past posts, just this past October, the State of New York mandated that all employers in New York State must either adopt or develop a sexual harassment policy that meets certain requirements, including the requirement that all employees engage in annual, interactive anti-harassment training. New York City has also implemented its own anti-sexual harassment legislation. Under the “Stop Sexual Harassment in NYC Act,” the New York City Commission on Human Rights (the “NYCCHR”) has mandated that, as of September 6, 2018, all NYC employers are required conspicuously post a notice regarding sexual harassment and reporting options, in both English and Spanish, and distribute a mandatory fact sheet regarding sexual harassment to all new hires.

Most notably under the new NYC law, effective April 1, 2019, all NYC employers with at least 15 employees are also now required to conduct annual, interactive sexual harassment training. To facilitate employers in implementing the NYC law, the NYCCHR has developed and recently released on its website an online training program that meets the training requirements mandated under the NYC law. Employers may choose to use NYCCHR’s model training or develop their own anti-sexual harassment training, assuming it includes all the required elements. Noteworthy elements of such training must include:

  • An explanation of sexual harassment as a form of unlawful discrimination under local law;
  • A statement that sexual harassment is also a form of unlawful discrimination under state and federal law;
  • A description and examples of what sexual harassment is;
  • Any internal complaint process available to employees by employer to address claims of sexual harassment;
  • The complaint process available through the NYC Commission on Human Rights, the New York State Division of Human Rights and the United States Equal Employment Opportunity Commission, including contact information;
  • The prohibition of retaliation, in addition to sexual harassment, and relevant examples of such;
  • Materials regarding bystander intervention; and
  • Specific responsibilities of supervisory and managerial employees in the prevention of sexual harassment and retaliation, and methods to properly address such situations.

Employers must provide this training to any NYC employee who works more than 80 hours in a calendar year and for at least 90 days, including independent contractors who have performed work in furtherance of the business for more than 90 days and more than 80 hours in the calendar year and any employees who work a portion of their time in NYC or interact with employees in NYC, even if they are based elsewhere.

The NYCCHR has partnered with the New York State Division of Human Rights and the New York State Department of Labor in developing the online training. In doing so, the NYCCHR has ensured that their online training meets the training requirements under both the NYC and NYS anti-sexual harassment laws. Note, however, that unlike the New York State anti-sexual harassment training requirements, the NYC law requires that employers keep a record of all trainings, including a signed employee acknowledgment for at least three years.

Employers should be diligent in ensuring they are in compliance with all requirements of both the New York State and City anti-sexual harassment laws. Steps employers should take to ensure compliance with New York anti-sexual harassment laws include:

  • Applicability. Consider how many employees were employed by employer at any point within the prior calendar year – If 15 or more individuals were employed, the employer is subject to the requirements of the NYC law in addition to the NYS law.
  • Training Program. Decide whether to use the model online training provided by the NYCCHR, or to develop an employer-specific anti-sexual harassment training. Employers may choose to use a third-party vendor or organization to implement the training. Employers should always review third-party training to ensure that it meets or exceeds the minimum requirements under the NYC law.
  • Interactive Training. Certify that the training utilizes participatory training. While the training does not need to be performed by an in-person instructor, it must be conducted in a manner in which the employee is engaged in trainer-trainee interaction, through the use of audio-visuals, or via some other interactive computer or online training program.
  • Record-Keeping. Once an employer administers anti-sexual harassment training under the NYC law, they must be certain to maintain accurate records of such training, as well as signed employee acknowledgments, for at least three years following. The NYCCHR has the right to request such records at any point therein.
  • Required Notice. Ensure that the anti-sexual harassment notice is posted in a conspicuous location, accessible to all employees. The notice must be posted in English and Spanish, but the NYCCHR offers the notice in nine additional languages if the employer finds such other postings useful to employees.
  • Required Fact Sheet. Distribute the sexual harassment act sheet to all new employees no later than the end of the employees’ first week of employment. The fact sheet may be distributed in the employee handbook or with other on-boarding materials, by any print or electronic means.
  • New York State Requirements. Though the NYCCHR has ensured their online training complies with both NYC and NYS training requirements, note that the NYC law is narrower in application than the NYS law. Unlike the NYC law that only applies to employers with a specified number of employees in NYC, the NYS anti-sexual harassment requirements apply to all employers in New York State, regardless of the number of individuals employed. Even if employers do not need to comply with the NYC law, they should review their policies to ensure NYS anti-sexual harassment compliance.

For more information regarding NYC anti-sexual harassment training requirements, FAQs may be found here. Hogan Lovells’ employment attorneys also have significant experience crafting policies and providing sexual harassment training in New York, and are available to help employers take the steps necessary to comply with New York’s new requirements.

Recent #MeToo-inspired media attention to workplace sexual harassment claims has caused a number of states to pass employee-friendly legislation intended to help prevent such conduct. On March 18, 2019, New Jersey Governor Phil Murphy joined the trend, signing into law a bill that, among other things, targets the use of so-called non-disclosure provisions in employment contracts and settlement agreements.

The new law, Senate Bill 121, prohibits employers from enforcing against employees or former employees any “provision in any employment contract or settlement agreement which has the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment.” While employees can negotiate and rely on such non-disclosure provisions if they so choose, they become unenforceable against the employer if the employee “publicly reveals sufficient details of the claim so that the employer is reasonably identifiable.” In fact the law requires all settlement agreements resolving workplace discrimination, retaliation or harassment claims to warn employees, prominently and in bold font, that they could waive the right to enforce a non-disclosure provision against their employer through such public revelations.

Senate Bill 121 contains other significant provisions as well. For instance it prohibits any contract provision “that waives any substantive or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment”—a provision that is likely to be challenged if it is interpreted to prohibit the use of arbitration agreements. The new law also prohibits retaliation against an employee who declines to sign an agreement with a provision that is unenforceable under the law; an employer who violates this section is liable for the employee’s attorneys’ fees and costs.

Also notable is that Senate Bill 121 is broader than its recently-enacted New York counterpart, which prohibits the use of non-disclosure provisions in settlement agreements *only* if they involve employee allegations of sexual harassment. New York law also permits non-disclosure provisions if the employee prefers and consents to such inclusion—an exception that is absent from the New Jersey law.

Senate Bill 121 is broadly but, in some ways, ambiguously worded, and the practical impact of the law on non-disclosure provisions in settlement agreements—a staple for sure—is yet to be determined and may be tested in litigation. (When, for instance, does an agreement have the “purpose or effect of concealing the details relating to a claim”? Does the non-disclosure prohibition extend to the details of a settlement agreement itself—for example the amount of any monetary consideration?) At a minimum, New Jersey employers should review their standard employment contracts and settlement agreements to ensure that they are in compliance with the new law. This includes giving due consideration to any amendments or automatic renewals, which could bring even existing agreements within Senate Bill 121. The employment team at Hogan Lovells has extensive and wide-ranging experience drafting employment contracts and settlement agreements, and is available to assist.


The U.S. Department of Labor (DOL) has issued an Opinion Letter to clarify that under the Family and Medical Leave Act (FMLA), employers cannot (1) delay the designation of FMLA-qualifying leave, even if the employee prefers the delay, or (2) designate more than 12 weeks (or 26 weeks if military caregiver leave) as FMLA leave.

The Opinion Letter expressly disagrees with the Ninth Circuit’s holding in Escriba v. Foster Poultry Farms, Inc., 743 F.3d 1236 (9th Cir. 2014), in which the court held that an employee can affirmatively decline to use FMLA leave in favor of first exhausting leave under other employer policies, even where the reason for the leave is FMLA-qualifying. Citing to the FMLA regulations regarding waiver of rights, the DOL clarifies that once an eligible employee communicates a need for leave for an FMLA-qualifying reason, neither the employer nor the employee may decline or delay the FMLA designation and protection for the leave. Therefore, the DOL states that employers must “start the clock” on FMLA leave concurrently with other applicable leave for those employees who seek to use PTO, paid sick leave, or other employer-provided leave for an FMLA-qualifying absence. Furthermore, although an applicable employer policy or plan may offer more than 12 (or 26) weeks of leave in a one-year period for an FMLA-qualifying reason, such additional leave cannot expand the employee’s leave entitlement or rights (e.g., job and employee benefits protection) under the FMLA for that period. Although this Opinion Letter can serve as persuasive authority, employers within the jurisdiction of the Ninth Circuit should note that the Letter does not overturn the Escriba decision.

Employers should review their FMLA and other leave policies and practices to take into account the DOL’s position but also any potentially conflicting case law in their jurisdiction. Employers must also continue to be mindful that certain absences that qualify for leave under a state or local law may not constitute FMLA-qualifying leave, such as paid sick leave to obtain services related to domestic violence, stalking, or sexual assault.

For more information about the FMLA, or any other legal issues in the workplace, contact the authors of this article or the Hogan Lovells lawyer with whom you work.

Last week, a federal judge overturned the suspension put in place in 2017 by the White House Office of Management and Budget of the EEO-1 form’s new pay data reporting provisions.  Although an appeal of the decision can be expected, it remains uncertain whether such an appeal would result in further delay of the requirements.

The reinstated provisions require employers who must file annual EEO-1 reports to, for the first time, report wage information and hours worked for all employees by race, ethnicity, and sex within 12 pay bands. The Equal Employment Opportunity Commission (EEOC) has touted the new provisions as a means to improve enforcement against pay discrimination. Critics, on the other hand, have characterized the requirements as administratively burdensome and ineffectual to achieve its stated purpose by failing to account for other nondiscriminatory variables encompassed in wage data, such as overtime and bonuses.

The current filing deadline for 2018 EEO-1 reports is May 31, 2019.  There has been no word yet from the EEOC, but the agency may be inclined to extend the May 31 filing deadline to allow employers time to collect the pay data component for reporting. It is important to note, however, that the U.S. District Court judge who issued the decision overturning the suspension ruled for the immediate reinstatement of the pay data provisions, rejecting the idea that employers would be unprepared to provide the additional information, in part, because the provisions were in effect for close to a year before their suspension.

In the meantime, employers should stay up to date on further developments in the legal action as well as from the EEOC, to ensure compliance for 2018 reporting and onward. For more information about EEO-1 reporting, or any other legal issues in the workplace, contact the authors of this article or the Hogan Lovells lawyer with whom you work.

Employers seeking to require binding arbitration for employee claims need to take notice of a recent decision.  In Jin v. Parsons Corp., 2019 WL 356902 (D.D.C. Jan. 29, 2019) a federal judge in D.C. held that an arbitration agreement sent via email by an employer, with a notice that continued employment would constitute assent, was not sufficient to bind an employee because the employee did not actually sign the agreement or show an intent to be bound by the agreement. The employer argued that in continuing employment, the employee had implicitly agreed to the arbitration agreement. The Court rejected that argument.

Unlike the New Jersey decision in our recent blog post finding that an employee agreed to an arbitration agreement by clicking a hyperlink, here the Court focused on the fact that the employee took no affirmative action to indicate that he was even aware of the arbitration agreement, let alone that he intended to be bound by its terms. The D.C. Court rested its decision on fundamental  contract law principles – an agreement is enforceable only if both parties have the distinct intention to be bound.  Generally, this requires that the employee “do something” to indicate that he or she intends to enter into an agreement. Merely continuing employment was not sufficient evidence of such intent where the employer could not prove that the employee knew that his agreement to arbitrate was a condition of employment. The Court considered whether the employee’s failure to sign the agreement, after repeated notice that his continued employment would constitute acceptance, was in fact acceptance or repeated refusal of acceptance. Ultimately the Court held that, without more, acceptance simply could not be imputed to the employee.

This decision is consistent with other rulings in recent years, such as  Cortez v. Doty Bros. Equip. Co., 15 Cal. App. 5th 1 (2017), where a California judge required extrinsic evidence establishing a party’s intent to arbitrate class claims, and held that silence on the issue could not be construed as assent to class arbitration.  And in Skuse v. Pfizer, Inc., 2019 WL 237301 (N.J. Super. Ct. App. Div. 2019), where a New Jersey state court held that an arbitration clause “acknowledged” by employees in a training module did not equate to explicit and affirmative assent, that would create a binding agreement between parties.

In light of these cases, employers should continually examine their arbitration agreements and on-boarding practices to ensure that employees have manifested a clear intention to be bound by their terms. The Hogan Lovells employment team has extensive experience drafting and advising on arbitration agreements, and is prepared to assist with any questions or concerns. For more information about the above, or any other legal issues in the workplace, contact the authors of this article or the Hogan Lovells lawyer with whom you work.

The Office of Federal Contract Compliance Programs (OFCCP) – the Department of Labor office responsible for overseeing federal contractors’ and subcontractors’ equal employment opportunity and affirmative action obligations – was very active in 2018. Led by new Director Craig Leen, who served as acting director of the agency until December 2018, OFCCP issued 12 new directives. Many of these directives suggest that OFCCP is moving in a direction intended to improve transparency, efficiency, and cooperation with contractors. Of course, it remains to be seen how OFCCP will implement the directives in practice.

This article provides an overview of OFCCP’s 2018 directives and what they could mean for contractors moving forward. It begins by describing OFCCP’s highly publicized directive regarding OFCCP’s compensation evaluation process. The article also describes some of the other key directives aimed at enhancing transparency, efficiency, and cooperation with contractors, including directives relating to the issuance of opinion letters and establishment of a help desk, establishment of an ombud service, and the requirement that predetermination notices be issued when there are preliminary findings of employment discrimination.

The article concludes by summarizing some of the notable directives issued by OFCCP last year, including the extension of the TRICARE moratorium, and OFCCP’s views on dealing with contractors’ religious beliefs.

Contractors should pay careful attention to the recent directives, which may provide greater latitude to push back during audits, and greater opportunities to take proactive steps before audits to enhance compliance and achieve better results if audited.

OFCCP’s new compensation directive says it aims to increase transparency and contractor cooperation in compensation reviews

On August 24, 2018, OFCCP issued Directive (DIR) 2018-05, which describes how OFCCP intends to examine compensation data during audits of federal contractors and subcontractors (each hereinafter referred to collectively as “contractors”). In DIR 2018-05, OFCCP attempts to provide contractors with clarity and transparency regarding its compensation evaluation process while increasing the efficiency of such evaluations. DIR 2018-05 applies to all OFCCP audits scheduled on or after August 24, 2018. OFCCP has also published a list of frequently asked questions (FAQs) here.

Background on pay discrimination

It is illegal for contractors and non-contractors alike to engage in pay discrimination. Pay discrimination can occur under a theory of disparate treatment (i.e., intentional discrimination on either a group or individual basis) or disparate impact (i.e., a facially neutral policy or practice that unintentionally results in compensation disparities among groups).

Executive Order 11246 (EO 11246), Section 503 of the Rehabilitation Act (Section 503), and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) prohibit contractors from engaging in pay discrimination on the basis of race, color, religion, sex, sexual orientation, gender identity, national origin, veteran status, or disability status. Further, contractors and non-contractors are prohibited from engaging in pay discrimination under a variety of other laws, including Title VII of the Civil Rights Act of 1964, the Equal Pay Act, and state and local laws. Some of these laws go beyond merely prohibiting pay discrimination. For example, some states and localities have passed laws that prohibit employers from inquiring into or considering a job applicant’s prior compensation history.

Pay equity and issues such as a gender pay gap have also gained recent focus from lawmakers and the public as a result of the #MeToo movement. All in all, the issue of pay equity is of particular importance for all employers, both in terms of complying with the law and in attracting and retaining top talent. Pay equity, however, is especially important for contractors, who are subject to proactive OFCCP audits of their compensation practices on the basis of gender, race, and ethnicity, and who are also required to perform self-audits of their compensation systems. See 41 C.F.R. § 60-2.17(b)(3) (requiring contractor evaluation of its compensation system to determine “whether there are gender-, race-, or ethnicity-based disparities”).

OFCCP states in DIR 2018-05 that enforcing the legal prohibition on pay discrimination is a “key OFCCP priority.” During an audit by OFCCP, contractors must provide individual-level compensation data on the basis of gender, race, and ethnicity, which OFCCP will statistically analyze to search for evidence of compensation discrimination. If OFCCP detects compensation discrimination, the consequences can include OFCCP demanding that a contractor enter into a conciliation agreement to

  1. Pay back pay and benefits.
  2. Make salary adjustments.
  3. Give promotions or job placements. In cases where a contractor and OFCCP are unable to agree on a conciliation agreement, OFCCP may initiate formal proceedings to pursue significant remedies, including cancelation of federal contracts and debarment from entering into future federal contracts for a period of time.

OFCCP states that its priority is to identify and resolve pay disparities that involve systemic disparate treatment or disparate impact – rather than identifying and resolving individual compensation disparities. In conducting its analysis, OFCCP identifies employees in different protected groups that are sufficiently similar and compares the manner in which they are compensated to determine whether this suggests that differences in compensation are the product of discrimination.

Key changes made By DIR 2018-05

DIR 2018-05 does not change the law of pay discrimination, but instead describes how OFCCP intends to evaluate contractor pay practices moving forward. DIR 2018-05 rescinds DIR 2013-03. also known as “Directive 307.” Directive 307 had left OFCCP largely unconstrained in conducting compensation evaluations on a case-by-case basis. As a result, Directive 307 was criticized for providing contractors little guidance regarding how OFCCP approached compensation evaluations. For example, under Directive 307, OFCCP sometimes informed contractors that there were “indicators” of pay discrimination, but would not provide sufficient information for the contractors to understand or rebut these indicators.

DIR 2018-05 attempts to provide greater transparency to contractors. Specifically, it explains that OFCCP will undertake the following key steps in evaluating contractor pay practices:

  1. When a contractor is scheduled for a compliance evaluation, OFCCP will request certain compensation data set forth in OFCCP’s Scheduling Letter as part of its desk audit. OFCCP states that the compliance officer’s analysis of the contractor’s compensation data will not begin until the submission is complete and acceptable, and that the compliance officer must work with the contractor to obtain any missing information.
  2. OFCCP will make comparisons of similarly situated employees by developing “pay analysis groupings” (PAGs) of comparable employees and then statistically controlling for differences among members of the PAG and individual employee characteristics. Significantly, and in a departure from Directive 307, OFCCP states that in an effort to “mirror a contractor’s compensation system…[i]f a contractor provides its compensation hierarchy and job structure…OFCCP will attempt to design its analysis based on that structure,” so long as
    • The structure is “reasonable.”
    • OFCCP can “verify the structure as reflected in the contractor compensation policies.”
    • “The analytical groupings are of a sufficient size to conduct a meaningful systemic statistical analysis.” If a contractor does not provide information about its own compensation system, DIR 2018-05 states that OFCCP “will conduct its preliminary desk audit analysis using either EEO-1 or AAP job groups, provided they are reasonable, meet the requirements of 41 C.F.R. § 60-2.12, and are of a sufficient size to conduct a meaningful statistical analysis.” OFCCP’s FAQs explain that there is no bright-line rule for what is a sufficient size, and provide more details regarding how OFCCP evaluates the size of a group.
  3. If a desk audit indicates further review of a contractor’s compensation practices is needed, OFCCP will seek additional information to understand the compensation system, and may alter the PAGs as needed. OFCCP must specifically notify the contractor in writing of “any preliminary compensation disparities that warrant further information requests or onsite review.”
  4. If OFCCP issues a Predetermination Notice (PDN) to indicate preliminary findings of employment discrimination, it must provide “individual-level data necessary for the contractor to replicate the PAGs and regression results,” and to give the contractor an opportunity to provide a response. OFCCP’s national office will review such responses. Likewise, OFCCP must provide similar information for a Notice of Violation for discrimination findings if such findings are different from the PDN.
  5. OFCCP states that while its primary method of determining whether a violation exists is statistics, it will also seek nonstatistical evidence, including anecdotal evidence drawn from reviews of documents and interviews of managers and workers. Notably, OFCCP states that it is “less likely to pursue a matter where the statistical data are not corroborated by non-statistical evidence of discrimination unless the statistical evidence is exceptionally strong.”
  6. DIR 2018-05 also describes aspects of OFCCP’s statistical methodology that it will generally follow in a compensation analysis. Although the description of the methodology is not entirely clear, contractors conducting their own pay equity audits should consider consulting this methodology in structuring self-audits.
  7. Although DIR 2018-05 contains a number of potentially positive aspects, it also raises concerns regarding the manner in which OFCCP states it will conduct its statistical analysis. As described above, if a contractor does not submit pay analysis groups, OFCCP may run the desk audit by either EEO-1 or AAP job group; and OFCCP will control for job title and other structural variables only in job titles with five or more employees.

Key takeaways

It is too early to tell whether DIR 2018-05 will significantly improve the audit process for contractors. Ultimately, the impact of DIR 2018-05 will be determined by how OFCCP implements it in compliance evaluations.

Contractors should consider taking the following steps in light of DIR 2018-05 and developments in the law and public opinion relating to pay equity:

  • Regularly audit compensation policies and practices. Consider conducting pay equity audits under attorney-client privilege, with the assistance of experienced counsel and a statistician. In conducting these audits, consider attempting to mirror (to the extent practicable) the statistical methodology described by OFCCP.
  • Document compensation policies and practices in writing and follow them consistently. If there are deviations from these policies for a legitimate reason, such deviation should be documented. Be prepared to provide this documentation to OFCCP so that it can structure PAGs consistent with your pay structure rather than defaulting to EEO-1 or AAP job groups or PAGS constructed by OFCCP.
  • Consider how performance reviews, job descriptions, and other factors play into compensation. Consider updating job descriptions if they do not accurately describe the duties, qualifications, and other aspects of the position. Consider whether performance reviews should be quantified.
  • Consider how state and local laws may impact your obligations in the area of pay equity.

OFCCP issues new directives aimed at enhancing transparency, efficiency, and cooperation

Below is a summary of the directives and guidance issued by OFCCP in 2018 focused on the themes of transparency, efficiency, and cooperation and the key takeaways for contractors:

  1. DIR 2019-01, Compliance review procedures (rescinds DIR 2011-01): OFCCP has rescinded its Active Case Enforcement procedures, which required full OFCCP desk audits under all three legal authorities: EO 11246, Section 503, and VEVRAA. Going forward, compliance reviews must be conducted by OFCCP staff in accordance with the OFCCP Federal Contractor Compliance Manual (FCCM) and its supplemental guidance. Additionally, the directive clarifies that any contractor establishment that OFCCP audits will not be audited again for 24 months after closure of a compliance evaluation or OFCCP’s acceptance of a final progress report. Also, OFCCP will continue to publish its scheduling methodology in its Freedom of Information Act Library. Finally, the scope of an onsite review is limited to “the nature or scope of the indicators or concerns that triggered the onsite review.”
  2. DIR 2019-02, Early resolution procedures (ERPs): OFCCP has established new ERPs, which allow OFCCP to resolve violations more quickly without going through the process of issuing a Predetermination Notice (PDN) or Notice of Violation. Specifically, the directive establishes procedures for investigating and resolving three types of audit violations for early resolution:
    • Nonmaterial, nondiscrimination violation — For minor violations that can be remedied during the desk audit and there are no indicators of potential discrimination, OFCCP staff are directed to work with the contractor to resolve the deficiency and once resolved, issue a closure letter.
    • Material, nondiscrimination violation — For material nondiscrimination violations, such as the failure to implement audit and reporting systems, OFCCP will attempt to resolve the deficiencies through a voluntary Early Resolution Conciliation Agreement with Company-Wide Corrective Action (ERCA). The ERCA will require the contractor to investigate if the violations exist at all of its establishments (or a negotiated subset) and ensure that the deficiencies are corrected. During the five-year period, the establishment will be under progress report monitoring. In exchange for agreeing to the ERCA terms, OFCCP will not audit the contractor’s establishment under review for five years, though all other establishments will be open to review.
    • Material, discrimination violations — For material violations that involve discrimination by a contractor with multiple establishments, OFCCP will seek resolution through an ERCA. OFCCP has established a 60-day process for it to collect data from the contractor, refine its analysis and engage in conciliation with the contractor including entering into an ERCA. Under the ERCA, OFCCP would monitor compliance and require progress reporting for a five-year period, during which all establishments covered by the ERCA are exempt from further compliance reviews.
  3. DIR 2019-03, Opinion letters and help desks: Under this directive, OFCCP will
    • Develop a public and searchable help desk FAQ repository.
    • Issue formal opinion letters. These initiatives are aimed to “ensure that contractors have practical and timely compliance assistance to understand and fully meet equal employment opportunity obligations.” OFCCP will accept requests for Opinion Letters from both employers and employees. In the opinion letters, OFCCP will be able to provide fact-specific guidance on the application of regulations. Significantly, OFCCP will now take into consideration when conducting compliance evaluations if a contractor has “acted consistently and in good faith with an opinion letter, directive, FAQ, help desk answer, or other OFCCP guidance.”
  4. DIR 2018-08, Transparency in OFCCP compliance activities: This directive emphasizes that “transparency should guide OFCCP staff during every stage of a compliance evaluation, from beginning to end,” and sets out OFCCP’s expectations for contractors during compliance evaluations by describing what they must submit and when. For example:
    • Delayed scheduling: OFCCP will delay scheduling of a compliance evaluation for 45 days after it issues Corporate Scheduling Announcement Letters (CSAL) in order to provide contractors more time to prepare. (CSALs are sent prior to sending scheduling letters.)
    • 30-day extensions: Contractors may receive a one-time 30-day extension on the deadline for providing supporting data if the request is made within 30 days of receiving the Scheduling Letter and the contractor timely submits its Affirmative Action plans (AAPs). If the contractor subsequently fails to meet the extended deadlines for submitting its AAPs and supporting data, OFCCP will immediately issue a procedural Notice to Show Cause, triggering an additional 30 days for the contractor to provide the AAPs and supporting data in response to the notice.
    • Efficient closures of desk audits: Compliance officers are required to begin desk audits promptly, ideally within five days upon receiving the contractor’s AAP and/or support data and work to close reviews quickly (ideally within 45 days) when there are no indicators of discrimination or other violations.
    • 15 days to address issues with initial submissions: During the desk audit, compliance officers must promptly notify the contractor of any deficiencies in its desk audit submissions and allow the contractor 15 days to provide complete submissions.
    • Limitations on additional data requests: During the desk audit, compliance officers must limit their requests for follow-up information to the data requested by the Scheduling Letter. The compliance officer can request information that goes beyond the Scheduling Letter only after the completion of a desk audit. Moreover, such requests must be reasonably tailored to the concern and request only information needed for OFCCP to “refine indicators and prepare for a potential onsite visit.”
    • Onsite confirmation letters: Onsite confirmation letters must include a high-level summary of any preliminary indicators of discrimination. A sample onsite confirmation letter is attached to the directive.
    • Conciliation efforts: OFCCP anticipates a collaborative approach with contractors including the mutual sharing of information and source data and working together to find “innovative remedies” to ensure contractor compliance.
  5. DIR 2018-06, Contractor recognition program: OFCCP will develop a Contractor Recognition Program to recognize contractors with “high-quality and high-performing compliance programs and initiatives.” Specifically, OFCCP plans to acknowledge those contractors that have implemented model practices, contractor mentoring programs, and created other initiatives to encourage collaboration and feedback with OFCCP.
  6. DIR 2018-09, OFCCP ombud service: OFCCP will implement a new ombud service in its national office to facilitate the “fair and equitable resolution” of concerns raised by stakeholders including contractors, employees, and industry groups. The ombud will act as a liaison to resolve certain issues after stakeholders have exhausted district and regional office channels. Additionally, the ombud will listen to feedback of stakeholders and make recommendations for improvement of OFCCP services. The ombud will not handle routine compliance and technical assistance issues or give legal advice.
  7. DIR 2018-01, Use of PDNs: This directive establishes a uniform protocol of the use of PDNs in discrimination cases, both individual and systematic. OFCCP uses PDN letters to inform contractors of preliminary findings of employment discrimination. Regional OFCCP offices will no longer have discretion as to whether to issue PDNs. Now, OFCCP staff must first issue a PDN, in the form a letter to the contractor, explaining its proposed discrimination findings before it issues a final Notice of Violation, and provide the contractor 15 calendar days to rebut OFCCP’s proposed findings.

Other notable OFCCP directives in 2018

In addition to its directives focused on the themes of transparency, efficiency, and cooperation, OFCCP has issued a handful of other directives that contractors should review.

  1. Moratorium extension on TRICARE subcontractor enforcement activities. DIR 2018-02 extends the current moratorium on the enforcement of TRICARE subcontractors’ affirmative action obligations for another two years – until May 7, 2021. This moratorium applies to all health care entities that participate in TRICARE as subcontractors under a prime contract between the Department of Defense (DoD) TRICARE Management Activity and one of the prime managed-care contractors. For more information, please see the original moratorium (DIR 2014-01).
  2. 204(c) Religious exemption. DIR 2018-03 instructs OFCCP staff to act in a neutral and tolerant manner toward religious beliefs and to be sensitive to the religious practices of contractors. OFCCP staff are prohibited from acting “in a manner that passes judgment upon or presupposes the illegitimacy of religious beliefs and practices” and from conditioning the availability of opportunities on a contractor’s willingness to surrender its religious character. In addition, OFCCP must comply with the Religious Freedom Restoration Act (RFRA) in promulgating regulations, permit faith-based organizations “to compete on a level playing field for” government contracts, and respect the right of individuals and institutions “to practice their faith without fear of discrimination or retaliation” by the government. It is unclear whether the application of DIR 2018-03 will conflict with OFCCP’s preexisting regulations and policies regarding gender identity and sexual orientation, and if such conflicts arise, how the regulators will deal with them. One footnote suggests that it supersedes OFCCP’s FAQs on gender identity and sexual orientation, but at the same time, the directive does not purport to override regulations on these subjects.
  3. Focused Reviews of EO 11246, Section 503, and VEVRAA. DIR 2018-04 sets forth OFCCP’s plan to implement so-called “focused reviews” of contractor compliance of the laws OFCCP enforces. While the details of this plan are unclear at this time, the directive indicates that a portion of future contractor compliance reviews will concentrate on either EO 11246, Section 503, or VEVRAA, and involve an on-site review. OFCCP will develop a standard protocol for conducting the focused reviews, to be released in its FAQs prior to the next scheduling list being issued.
  4. Affirmative Action program verification initiative. DIR 2018-07 sets forth OFCCP’s plans to implement a new verification process that will require contractors to certify annually that they are in compliance with AAP requirements. Failure to annually certify will increase the likelihood of an audit, among other things. The directive only announces the establishment of a verification program at some point in the future. OFCCP has not indicated exactly what the program will entail or when it aims to implement it. The directive mentions that when the program is developed, it will prepare a “public outreach and education campaign.”
  5. Functional Affirmative Action programs (FAAPs). OFCCP is currently in the process of promulgating a directive to establish policies and procedures for FAAPs. A FAAP is an alternative to the normal procedure of establishing an AAP for each contractor “establishment,” and instead allows a covered federal contractor or subcontractor “to organize its AAP to reflect how the company operates functionally and not where its facilities and people are physically located.” It has typically been burdensome and time-consuming for contractors to apply and be approved for a FAAP. However, OFCCP’s proposed directive may indicate that it will be easier and more attractive in the future to pursue a FAAP.


The year 2018 was very busy for OFCCP, and more directives and information are expected from them in 2019. OFCCP is taking an approach that suggests a greater desire to be transparent and cooperate with contractors, though again, it remains to be seen how OFCCP will behave in practice. Nonetheless, contractors should take advantage of this opportunity by considering some of the following actions:

  • Review compensation policies and practices in light of the new compensation directive.
  • Request additional information from OFCCP in the context of audits, and request extensions when needed.
  • Seek guidance from OFCCP when encountering challenging compliance questions via OFCCP’s opinion letters and help desk resources, or seek assistance from the OFCCP ombud service.

As always, contractors should ensure that they are satisfying the basic requirements of OFCCP. Given OFCCP’s plans to implement a verification process requiring annual certification of compliance with AAP requirements, it is even more important for contractors to ensure that they have appropriate AAPs in place if required.

Hogan Lovells will continue to monitor these developments and provide updates on OFCCP. For more information about OFCCP, the above directives, or any other legal issues in the workplace, contact the authors of this article or the Hogan Lovells lawyer with whom you work.

On February 18, 2019, the NYC Commission on Human Rights issued guidance  and announced that the New York City Human Rights Law (“NYCHRL”) will now protect against a new class of discrimination – hair. The NYCHRL generally prohibits discrimination by employers on the basis of age, alienage/citizenship, color, disability, gender, gender identity, marital/partnership status, national origin, pregnancy, race, religion, sexual orientation, status as a veteran, and now, hair. Under the new law, discrimination on the basis of an individual’s natural hair or hairstyle will be considered a subset of race discrimination.  New Yorkers will now be protected in maintaining whatever hairstyle they prefer, whether it be twists, braids, cornrows, Afros, Bantu knots, fades, and/or locs.

These new protections under the NYCHRL may, however, pose problems for employers who have certain grooming or appearance policies prohibiting hairstyles related to a particular racial, ethnic, or cultural group. The new law comes in response to such policies, which are often rooted in white and European standards of beauty, and perpetuate racial stereotypes that hairstyles most closely associated with African, African American, Afro-Caribbean, and Afro-Latinx persons are unprofessional. New York City employers will now be forced to confront such stereotypes and recognize black hairstyles, an inherent part of black identity, as a protected racial characteristic.

Examples of practices that will now be considered a violation of NYCHRL’s anti-discrimination provisions include:

  • A grooming policy prohibiting twists, locs, braids, cornrows, Afros, Bantu knots, or fades;
  • A grooming policy requiring employees to alter the state of their hair, e.g. straightening or relaxing it, to conform to the company’s appearance standards; or
  • A grooming policy banning hair beyond a certain length for men, where no such ban exists for women, or banning hair that extends a certain number of inches from the scalp, thereby prohibiting Afros.

Further even facially neutral grooming policies, not necessarily associated with a particular protected class, will be deemed discriminatory if they are applied in manner that reinforces disparate practices associated with racial, cultural, or ethnic identity.  For instance, a grooming policy that bans the use of color/dye, extensions, and/or patterned or shaved hairstyles against Black employees only violates the NYCHRL. Moreover, the Commission warns against other employer practices that may amount to harassment on the basis of hair. Such harassing behavior may include:

  • Requiring Black employees to obtain supervisory approval prior to changing hairstyles, but not imposing the same requirement on others;
  • Requiring only Black employees to alter or cut their hair or risk losing their jobs;
  • Telling a Black employee with locs that they cannot be in a customer-facing role unless they change their hairstyle;
  • Refusing to hire a Black applicant with cornrows because her hairstyle does not fit the “image” the employer is trying to project for sales representatives; or
  • Mandating that Black employees hide their hair or hairstyle with a hat or visor.

If an employer has a legitimate safety or health concern, they should consider alternative ways to address that concern, prior to imposing a ban or restriction on employees’ hairstyles. Such alternatives may include the use of hair ties, hair nets, or head coverings.

The New York City Commission on Human Rights (the “Commission”) will now provide recourse for individuals who are discriminated against, harassed, punished, not hired, or fired because of their hairstyle or length of their hair. The Commission can levy penalties up to $250,000 on employers and entities found to be in violation of the guidelines, and there is no cap on damages.

Hogan Lovells’ employment attorneys have extensive experience crafting neutral and inclusive workplace policies, and are available to help employers take the necessary steps to comply with New York’s anti-discrimination requirements.