4B Pre-Desk Audit Actions

Generally, within 15 calendar days after the Scheduling Letter is sent, COs must contact the contractor’s head of human resources to inform him or her that the compliance evaluation will be a CMCE and to explain what is involved in the evaluation. In addition, this initial contact should include:

• The identification of the CO who will be involved in the evaluation;
• The establishment of the lines of communication between the contractor and OFCCP;
• The answers to any questions the contractor may have about the information OFCCP requested in the Scheduling Letter; and
• The answers to any questions regarding the differences between a standard compliance evaluation and a CMCE.

COs should offer any technical assistance the contractor needs to ensure the efficient and effective completion of the evaluation. This may include advising the contractor of its recordkeeping requirements during the course of the evaluation.

Before starting the evaluation, the CO should gather appropriate background information about the corporation he or she will evaluate. Using an array of data sources, including the Internet, the CO should try to learn as much as possible about the corporation’s operations, personnel procedures and EEO compliance history in order to facilitate the process of the CMCE. Other important information that may impact the evaluation includes the history of the corporation and its product/service line(s), the corporate leadership and business trends (with specific focus on how that may impact corporate employment).

COs should learn as much about the contractor and its industry as possible. There are several resources available but only a few are listed below.

• Industry resources such as Hoover’s, Standard and Poor’s, and Moody’s provide comprehensive industry information, company profiles, key contact data, financial research and analysis, and news.
• Publications such as the “International Directory of Company Histories” and the “Reference Book of Corporate Managements” are sources of information on corporate histories and the backgrounds, executive leadership, labor and management actions, NAICS codes, key dates, ticker symbol, principal subsidiaries, principal divisions, principal operating units, principle competitors and other significant milestones.
• Articles on the corporation within the past two years in business oriented newspapers and periodicals such as The Wall Street Journal, and Forbes and Fortune magazines.
• Corporate websites may contain the most current information regarding the changes in corporate management or other pertinent information.
• Public records, including court documents on discrimination lawsuits, settlements and findings.

FCCM 4B11, Evaluation and Analysis of Corporate Information, provides details on how to use this and other research information. If a CO does not have ready access to this or other research materials, he or she may email a Request for Literature Search to the DOL Library at library@dol.gov or call the library for assistance at (202) 693-6600.

In addition to the publication search, COs must retrieve the latest “Form 10-K” for corporations that are required to file. The Securities and Exchange Commission (SEC) requires all publicly held corporations to file a “Form 10-K” report annually. Domestic corporations must make their filings on EDGAR, SEC’s Electronic Data Gathering, Analysis and Retrieval system.

Filings maintained on EDGAR are found at the web address listed below.

http://www.sec.gov/edgar/searchedgar/webusers.htm (last accessed Sept. 2015)

Use of this information is discussed in FCCM 4B11, Evaluation and Analysis of Corporate Information.

As discussed elsewhere in the Manual, EEO-1 reports are required of all private employers who are:

• Subject to Title VII, as amended, and have 100 or more employees excluding state and local governments, primary and secondary school systems, institutions of higher education, Indian tribes and tax-exempt private membership clubs other than labor organizations; or
• Subject to Title VII and have fewer than 100 employees if the company is owned by or affiliated with another company, or there is centralized ownership, control or management so that the group legally constitutes a single enterprise, and the entire enterprise employs a total of 100 or more employees.

All federal contractors who are private employers file the report if they are not exempt under 41 CFR 60-1.5, have 50 or more employees,270 and:

• Are prime contractors or first-tier subcontractors, and have a contract, subcontract or purchase order amounting to $50,000 or more; or
• Serve as a depository of Government funds in any amount; or
• Are financial institutions that are issuing and paying agents for U.S. Savings Bonds and Notes.

The filing deadline is set by EEOC and is generally in September each year. Only those establishments located in the District of Columbia and the 50 states are required to submit an EEO-1. No reports are filed for establishments in Puerto Rico, the Virgin Islands or other U.S. Territories.

COs must retrieve a contractor’s two most recent EEO-1 reports from the Equal Employment Data System (EEDS). The EEDS is designed to provide information annually on the EEO characteristics of supply and service contractors and other employers. The system contains five years of EEO-1 data. The EEO-1 report includes the three report types below detailing various aspects of multi-establishment corporations.271

• Type 2 report. A consolidated report that covers all employees corporate-wide, including those at headquarters and those in establishments too small to require a separate establishment report.
• Type 3 report. A headquarters report covering employees at the corporate headquarters location.
• Type 4 report. A separate report for each establishment employing 50 or more people.

FCCM 4B12, Evaluation of EEO-1 Reports, reviews the possible uses of this information. If the EEO-1 information is not available through the EEDS system, a CO should request this data from the contractor directly.

The CO must check the electronic CMS and EIS to obtain a list of prior compliance evaluations of the contractor’s corporate headquarters and other establishments, and to identify any issues in the reviews. This may be useful for identifying information that the CO should obtain or examine during the on-site review. If this task was a part of a previous related desk audit, the CO should review this information as part of the preparation for the on-site. If a CA was obtained in a prior review, the on-site review should provide an opportunity to confirm that the contractor took and appropriately maintained the corrective action. FCCM 5B03, OFCCP Compliance History Reports, reviews the use of this information.

Before starting the evaluation, a CO must also seek information regarding the employment policies and practices of the contractor from the EEOC, VETS and other EEO and labor law enforcement agencies. This information provides the CO with a better understanding of the contractor’s workforce and operations, and may indicate potential problem areas.

a. EEOC and State and Local FEP Agencies. Simultaneous with the sending of the Scheduling Letter, a CO must send the standard inquiry letter to the appropriate district office of the EEOC, and to the appropriate state and local FEP agencies.272 This letter requests information regarding discrimination complaints filed against the contractor and any other information that may be pertinent to assess the contractor’s EEO posture. After 15 calendar days, the CO will follow-up by telephone with any agency that failed to reply or from which the CO needs additional information.

b. VETS, ESDS, and DOL Enforcement Agencies. The CO must also check the VETS-4212 database and contact the VETS regional office, and the appropriate local ESDS to request any information that could be pertinent to the pending review.273 Additionally, the CO must check the DOL Enforcement Database for closed complaints and compliance evaluations of the contractor’s establishments, as well as contact other DOL enforcement agencies, such as OSHA and the WHD to identify the number, types and status of any complaints that have been filed against the contractor.

A CO must examine all the information regarding complaints against the contractor that he or she receives from federal, state and local agencies in response to the standard inquiry letter and enter the information on the SCER. Any complaints involving management jobs or “glass ceiling” issues should also be addressed in the SCER.

If the response does not provide enough information to determine whether a complaint involves a management job or “glass ceiling” issue, the CO should contact the responding agency for additional information.

When needed, the CO should contact the appropriate EEOC office or state or local fair employment practices agency to arrange to review relevant discrimination complaint files as part of the compliance evaluation. This action can be particularly useful when, as a result of the desk audit, the CO identifies potential systemic problems in complaint areas.

After receiving the AAPs and supporting data, any information the contractor provided with respect to current or past complaints must be compared with the information received from the agencies. The CO will note discrepancies and information that the contractor did not provide for possible further investigation during the review, if warranted. The contractor should be asked to explain discrepancies and to provide additional information. In conducting the desk audit, the CO should pay particular attention to any indication of a potentially broader problem in the type of activity and management area/level that was an issue in previous complaints.

If, during the conduct of a compliance evaluation, a CO finds that the contractor is involved in litigation or is under a court order for EEO matters, he or she should identify the EEO issues involved, the court, the parties, the case name and number and bring the matter to the attention of his or her supervisor. The field office, in consultation with the RSOL, will determine whether the litigation or court order should impose any limitations on the conduct of the compliance evaluation.

If a CO is not knowledgeable about the local organizations in the area in which the corporate headquarters is located, he or she should review the field office’s community resource files to become familiar with local community groups, and introduce himself or herself to the various organizations. If the corporate headquarters is located near an Indian reservation, the CO should contact OFCCP’s INAERP to discuss recommendations for contractor outreach and recruitment. Chapter 2 discusses how COs can establish relationships with local organizations representing members of covered groups.274

Based upon the information gathered in FCCM 4B, Pre-Desk Audit Actions, the CO should review the contractor’s compliance history to identify cases with violations involving a corporate-wide policy or practice. Examples would be violations for prior discriminatory acts, failure to conduct a self-audit, discriminatory benefits or testing practices, or unlawful medical screening practices. As appropriate, a CO can contact the OFCCP office that conducted the evaluation or investigation to obtain further information on the violations, their resolution and whether they applied to management jobs. The purpose of obtaining this information is not to revisit closed compliance actions, but to determine whether the same problem could exist corporate-wide. If the information indicates a potentially corporate-wide problem, especially one that could affect management jobs, the CO should include a review of that area in the On-site Plan.

After conducting research on the contractor as described in subsections 4B01 through 4B10 and receiving the results, COs must sort and analyze the material. Particular emphasis should be given to areas that could be relevant to the evaluation. For example, a recent acquisition or merger could have significant impact on feeder pools for management positions. While reviewing and sorting the data, COs should place the information into one of three categories:

• Corporate Organization;
• Corporate History and Trends; or
• Backgrounds of Top Corporate Officials.

The scope and purpose of each of these categories are described below.

a. Corporate Organization. This category includes information related to the organization of the entire corporation, rather than just the corporate headquarters facility. If a contractor uses an Organizational Display, as described at 41 CFR 60-2.11(b), as part of its AAP, COs should be able to compare the Organizational Display to the current corporate organizational chart. Industry directories and handbooks can provide an overview of this information, with detail often provided in the corporation’s Annual Report and portions of its “10-K” filed with the SEC. Information and data related to the below questions will normally be in this category.

• What are the corporation’s major components or businesses, groups and divisions; and its subsidiaries, both domestic and foreign?
• What are the components’ major functions and/or products?
• Where are the corporation’s major components located?
• What percentage of total corporate personnel does each component employ (e.g., the ADC Products Group accounts for about 40% of total corporate personnel)?

This information will be helpful in identifying such factors as potential feeder pools for rotational assignments and headquarters management jobs. Also, information on the corporate organization will help OFCCP determine the degree to which willingness to relocate may impact advancement.

After receiving the contractor’s desk audit submission, COs will compare the corporate structure, as shown in this information, with that shown in any published corporate organization charts.

b. Corporate History and Recent Trends. There are several sources for this information, including industry directories and handbooks, particularly Hoover’s Directories, at www.hoovers.com; specialized publications such as the “International Directory of Company Histories;” annual corporate reports and SEC submissions; newspapers and periodicals; and the corporation’s website. COs should review these and other appropriate resources to gather information that answers these and other relevant questions.

• When was the corporation founded?
• What was its initial primary business? How has this changed over time?
• Has the corporation undergone a recent merger or acquisition?
• What are its most and least profitable components over the last several years?
• Has the corporation recently undergone, or is it projecting, substantial growth or cutbacks in particular areas of its business? If so, what are they?
• Has the corporation recently been awarded or lost major contracts? What business area(s) did the award or loss affect and how?
• What are its long-range projections for areas of business growth?

This information is relevant to a preliminary understanding of the business and economic context within which the corporation operates, and also will assist in evaluating particular corporate management issues. For example, recent mergers or major acquisitions may have caused a substantial change in the overall business mix of the corporation and in top management. Such changes may correspondingly impact corporate culture, and the skills mix that the corporation seeks in middle and senior-level management staff.

Sources of current profitability usually influence allocation of bonus pools among different business components and often indicate where growth in management opportunities is likely to occur.

c. Background of Top Officials. The corporation’s website, annual report, Form 10-K or other sources, such as the “Reference Book of Corporate Managements,” may provide information on the backgrounds of top corporate officials. This information usually includes education, background, time with the corporation and the positions held.

Such information can help verify past corporate practices like the degree to which the contractor traditionally filled top positions internally versus externally. It also may help identify shifts in the type of background that top management may value like differences in the backgrounds, experiences, educational fields and/or levels of more recent entries to top management versus others.

The CO should summarize the information in the appropriate section in the SCER.

EEO-1 reports are valuable sources of information on changes in the workforce. Therefore, COs must review the total corporate-wide employment shown in the latest consolidated (Type 2) EEO-1 report. A CO should compare this with the corporate-wide employment in the preceding consolidated report to determine whether total employment is stable, growing or declining. This review also helps determine which EEO-1 categories have changed the most.

COs should use the corporate headquarters EEO-1 reports, i.e., the Type 3 reports, to conduct EEO trend analyses on the direction of headquarters employment generally, and by EEO-1 category, including changes in groups determined to be unfavored through other analyses.

Comparisons of the participation of nonfavored groups in the two Officials and Managers (O&M) categories and the Professional category on the Type 3 report, with their representation in the same categories on the Type 2 report, should also be conducted by COs.

COs should review the latest individual establishment reports to identify major facility locations. A major facility is one that contains 150 or more employees, or in the case of smaller corporations where no individual facility reaches the 150 employees mark, a facility where the number of employees is at least 33% higher than the average of all facilities. COs will compare the participation of nonfavored group members in the two O&M categories and the Professional category on the headquarters’ Type 3 report, with their representation in the same categories on the individual Type 4 reports, for the selected establishments. The COs will also compare individual establishments and note any significant differences in the participation of members of nonfavored groups in specific categories between establishments, as well as within a given establishment from one year to the next.

COs should discuss any areas of potential concern or interest resulting from these analyses in the appropriate section of the SCER.