The Impact of the New OFCCP Ruling on Your Organization: An Inconvenient Truth? A Discussion With Kurt Ronn

Working exclusively with blue chip clients, the company has partnered with organizations across all industries. Ronn speaks nationally on diversity, recruitment process and governance related to OFCCP compliance and is a member of the RPO (Recruitment Process Outsourcing) Association Board of Directors.

Employers have spent much time and energy over the past year reacting to the Office of the Federal Contract Compliance Programs’ (OFCCP) new Internet Applicant Rule. However, what is important to recognize is that the OFCCP has actually fundamentally changed the way it investigates applicant adverse impact; coupled with the ruling, this has major implications for federal contractors and the third-party search firms they use.

The OFCCP implemented the Internet Applicant ruling in February 2006. The lengthy definition considers the electronic advancements in recruiting. It defines Internet Applicants, identifies specific electronic data techniques, creates a new “Basic Qualification” standard and sets the recordkeeping requirements necessary to be compliant.

What is significantly different about the OFCCP’s approach to the new Internet Applicant guidelines that should cause employers concern?

It is the responsibility of the company to keep the records necessary for the OFCCP to review the hiring process. Failure to produce proper records will force the OFCCP to reconstruct your hiring process and the related data. The recordkeeping requirements extend to all activities by all parties involved, including hiring managers and recruiters, both internal and external.
“Systemic discrimination” as defined by the law can be present at any stage within the hiring process and is inclusive of the entire queue of candidates, not just those selected for the final interview. Basically, it involves any decisions made that result in an “adverse impact”, such as selecting fewer women to advance to the next round of interviews.

What’s the method for investigating adverse impact?

The Uniform Guidelines on Employee Selection Procedures (UGESP) clearly describes the method for investigating adverse impact:

“If [the applicant and hire data] shows that the total selection process for a job has an adverse impact, the individual components of the selection process should be evaluated for adverse impact. If this information shows that the total selection process does not have an adverse impact, the Federal enforcement agencies…in usual circumstances, will not expect a user to evaluate the individual components for adverse impact or to validate such individual components…”

UGESP has been around since 1978; the difference is really the enforcement by the OFCCP. The OFCCP has statisticians on staff to identify statistically significant adverse impact at each distinct recruitment/selection stage. And for each stage producing statistically significant adverse impact, the OFCCP will expect the employer to defend the selection state on a systemic level, i.e., demonstrating that the selection criteria are job-related and that the employer consistently applied those criteria for all applicants.

What does the OFCCP’s new approach to investigating applicant adverse impact mean for employers?

It is important to note that the OFCCP is holding itself to a higher bar when evaluating its own performance. To use a term that Mr. Charles James, director of the OFCCP, used at a recent meeting of the National Industry Liaison Group in Phoenix, the days of “drive-by” audits are over. Using a statically-based systemic employment discrimination approach raises the probability of stronger cases, larger monetary settlements and tougher litigation. The agency is holding itself accountable for case-worthy audits and measuring dollars collected.

The electronic nature of recruitment provides much more data, and the analysis of the data gives better visibility to systemic discrimination issues than ever before. The impact on the recruiting landscape is huge; the recruitment industry is now subject to a much higher level of governance. Additionally, the Equal Employment Opportunity Commission (EEOC) is heading in the same direction, as indicated in the EEOC's Systemic Task Force Report of March 2006.

What are the potential ramifications?

First, penalties. Discrimination of employees during the recruitment process by federal contractors (companies supplying goods or services to the government) led to more than $51 million of collection by the OFCCP in 2006 alone. Eighty-eight percent of this recovery involved cases with systemic discrimination. An OFCCP review considers the entire scope of the recruitment/hiring process and chiefly looks for examples of race, gender or ethnic discrimination, either intentional or unintentional. And as data increasingly becomes available for analysis and the OFCCP sharpens its case-worthy approach over the next few years, we can anticipate exponential growth from the $51 million collection.

Second, consider how this can affect image and brand. A negative image can impact both future sales and future hires. Once a stigma of discrimination is attached to a company name, an expensive brand overhaul could be necessary.

What if the systemic employment discrimination is unintentional?

Unintentional systemic employment discrimination and intentional systemic discrimination are no different under a legal lens. The OFCCP ruling sends the message to employers that, if statistical analysis indicates any step in your talent-acquisition process is having an adverse impact on your hiring decisions, the result will be the same whether you were cognizant of the discriminatory practices or not. There will be penalties.

How does this impact a company’s internal recordkeeping and third-party search?

This is one of the most misunderstood and wide-ranging implications of the Internet ruling. The recordkeeping requirements are squarely the responsibility of the federal contractor. However, the guidelines dictate that responsibility for compliance is non-delegatable. In essence, federal contractors are responsible for the recruitment practices of their own recruiters, but are also responsible for the recruitment practices of contract recruiters and all third-party search firms.

When the OFCCP comes to audit for compliance, the federal contractor must be able to produce the records for themselves as well as those of the search firm. Things like electronic search strings used when searching for résumés, candidates returned in the search, race, gender and data management techniques all have to be documented and available for audit.

What about Applicant Tracking Systems?

Applicant Tracking Systems (ATS) are tools that track information once a job seeker has applied to a company careers page. A good ATS is an important recruitment tool and assists with recordkeeping, as it can help identify at which particular stage a candidate fell out of the process and who was eventually selected. Note, however, that the OFCCP ruling extends beyond the top of the ATS funnel and out to the entire population of job seekers. A job seeker can be defined broadly: essentially, anyone with job profile data available electronically on the Internet.

Recruiters searching the Internet for possible candidates make decisions about which job seekers to consider based on a number of factors: a search string entered into a job board, Google or the internal ATS database. The OFCCP’s ruling speaks directly to potential discrimination based on search criteria. Good recordkeeping does not always mean good compliance. Compliance includes the actions a recruiter takes to identify and consider job seekers.

How can companies mitigate risk?

Companies need to analyze both their internal recruitment process and their external recruitment relationships and demand compliance. Waiting until the OFCCP comes to audit practices before instigating changes is not prudent, as issues of systemic discrimination can be both expensive and disruptive to business.

Consider centralizing your recruitment functions, as such a focused approach can ease training, certification and auditing. Bonus benefits include better performance and economies of scale. External search firm contracts should be amended to include specific OFCCP compliant language, particularly related to recordkeeping. Then, you need to regularly audit the practices of all players, both internal and external, to ensure the recruitment execution, from Internet search to hiring manager interview and offer, is compliant.

Will the new ruling make it more difficult for companies to attract top talent?

No. The OFCCP ruling certainly makes it more cumbersome for both internal and third-party recruiters to comply. The recordkeeping requirements are considerable and the guidelines are very specific on how recruiters can search the Internet and parse the data. However, attracting top talent is a combination of a number of factors: company, opportunity and available talent. Recruiters must learn to work within the guidelines and continue to be creative.

Recruitment technology has advanced considerably over the past ten years; hence, the OFCCP’s systemic approach is a natural extension of today’s electronic nature of recruitment data. The ruling forces everyone to ask some tough questions relating to basic, required job qualifications. Such scrutiny could result in broader job descriptions, which could open up entirely new pools of candidates for consideration. And with the shortage of talent in the workforce, a broader pool of candidates is welcome.

Kurt Ronn is the president and founder of HRworks, a national recruitment firm that helps major companies acquire talent to build their organizations. For more information, visit HRworks.com.