The federal contractor community has taken note of the quiet demeanor of the Office of Federal Contract Compliance Programs (OFCCP) since the Biden Administration took office. However, amongst the quiet comes big changes ahead – many of which might cause a stir for the federal contractor and subcontractor community. Tune in as DirectEmployers Executive Director Candee Chambers and employment law expert John C. Fox of Fox, Wang & Morgan discuss the undoing of all things Trump, the OFCCP’s upcoming priorities, and the new AAP verification program coming in February of 2022.
The federal contractor community has taken note of the quiet demeanor of the Office of Federal Contract Compliance Programs (OFCCP) since the Biden Administration took office. However, amongst the quiet comes big changes ahead – many of which might cause a stir for the federal contractor and subcontractor community. Tune in as DirectEmployers Executive Director Candee Chambers and employment law expert John C. Fox of Fox, Wang & Morgan discuss the undoing of all things Trump, the OFCCP’s upcoming priorities, and the new AAP verification program coming in February of 2022.
Candee Chambers:
Welcome to the DE Talk Podcast! Tune in for dialogue between HR experts to amp up your HR strategies. Don't worry, we'll mix in a few laughs as we know you need it.
Welcome to the DE Talk Podcast. I'm Candee Chambers with DirectEmployers Association. With 2021 in the books, we're looking ahead at what federal contractors can expect in 2022 and what curve balls may be lurking around the corner. Here joining me today, I have John C. Fox of Fox, Wang & Morgan, resident employment law expert and longtime DE partner. If you read our weekly blog post, the OFCCP Week In Review, you know that vaccination mandates have taken over as employers, states and OSHA go head-to-head. While this remains a huge topic of discussion across the board, we have so much other news to cover, so let's dive in.
Gosh, John, in nine days, Joe Biden will have been president for one year and Jenny Yang will also celebrate her first year as the OFCCP director. It was a year of OFCCP slowly getting comfortable with itself as staffing and budget challenges beset the agency. COVID-19 kept the OFCCP workplace out of the office as OFCCP joined the 43% of the federal government, which worked from home as all the while the agency played wrecking ball to rid itself of all things Trump. We reported on that constantly in our Week In Review, I think we called it couple different things, a flip-flop meter, and we changed that because of some people not really liking that terminology, but it basically was that. We kept going back and forth, I guess, is a better way of describing it.
John, as the Biden OFCCP now begins the fifth full month of the first full fiscal year it is planned, budgeted for and led, what do you see coming down the pike at OFCCP for the remaining seven and a half months OFCCP's fiscal year 2022?
John C. Fox:
Candee, thanks for having me. This is a great topic. Jenny Yang has fought a very slow motion delay and delousing action as I'll call it of taking office, trying to undo everything that was Trump. That's a government-wide initiative not limited to the OFCCP, but most of the regulatory, most of the policy decision-making has been just what I'll call defensive. Just playing defensive volleyball, stopping what is coming over the net at the Biden administration, just turning back everything to where it was as president Obama left office. A new thing happened here that has made this more pronounced. We haven't quite seen this ever before in modern history, and that is as the Trump administration left office, it littered the freeway with all kinds of obstacles for the Biden administration to spend their precious first year in office. It's always precious to every new incoming president, because that's when they've got their mandate from the people and they can take action.
But the Republicans typically are just content to be satisfied that they manage the government well under their tutelage and they don't typically try to leave legacy obligation or to obstruct the incoming administration. But the Trump guy did and they left the law of debris and you're seeing the agencies one by one go about the task of turning it back. But keep in mind as to the slow motion delay issue that all levels of government, from towns to cities, to counties, to state governments, to the federal government, have all been operating as though they're just working in jello. They're just embedded in a massive jello and moving slowly and their sound is and their voices and their actions are muted, and OFCCP is no exception.
The state and federal agencies just do not have the electronic systems to work remote like most of the private sector, white collar workforce has been able to do with great success. You hear from almost every client, every member, their revenues are up, their profits are up, they've done well during the pandemic. If you're manufacturing, you got to go sit at a job or have a restaurant or some retail service, you've been hurt, but if you're a white collar remote worker, this has been a very good time, but not for the federal government, but it's not unique, it's just what has occurred and state and federal agencies have slowed to a crawl everywhere you look. Just this week, the IRS announced, for example, that it is woefully understaffed following the onset of the COVID-19 pandemic and that tax returns would take a long time to process this tax season and refunds will be slow. This is a sure way to ... yeah?
Candee Chambers:
My husband last night, it was on the news and he said, "Well, I guess we won't. It doesn't really affect us because we haven't had a refund in a long time." I was like, "Yeah, really." But they did say that people will get interest, thank goodness. My daughter actually had to wait over a year for her refund a year ago.
John C. Fox:
Everywhere you look. The immigration service processing of visas, anybody trying to go to a courthouse, gosh, they don't even serve the complaints now for four or five, six weeks often. But not sending back tax returns on an expedited basis is a sure way to anger Americans with our fascination with taxes. But no one in the federal government intends that, but that's the reality that's unfolding in this understaffed federal government, which is operating very awkwardly and in slow motion.
The other thing that's key to managing in the COVID-19 pandemic, which I think the federal government has been very, very slow to pick up on just generally, is that it requires a different kind of manager than we have trained and brought up through the ranks historically. The COVID 19 manager, obviously, has to be innovative, has to be ready to quickly pivot and make work appealing to his or her workforce since we now have 4 million Americans that have left the workforce purposely and consciously. You got millions of jobs coursing through the NLx pipe at DE every day and they are going unfilled. We see the number of jobs being filled only hovering around 200,000 a month. If they just took all the jobs that DE has available, you could fill 2 million tomorrow. But that's not what's happening. You got to find ways to lure people to want to come into work.
The successful COVID-19 manager we've seen in the private sector has to have the courage to break with tradition and find a way to make a way forward. The OFCCP managers are just learning this now, but they've got to pivot and they've got to make it appealing as you've done so successfully, for example, at DirectEmployers. You've done a lot of things differently that, I think, two years ago you would've never done. You were a staunch opponent of remote work and look how you quickly pivoted and embraced it and made it work. But managing in this environment is a challenge for any organization, since we just have not trained managers for what has unfolded. I think that's going to continue to haunt the federal government and the labor department until they start getting innovated and figure out how to work in this environment, not just a two or three-week tunnel like we thought in March of 2020. We're now coming up on two years and probably more successive waves of variants.
That's the new reality, but you got to keep morphing with each wave after wave of depressing COVID-19 news, and I think the four watch words for managers these days is resilience, innovation, what I'd call positivity and connectedness. As we're getting farther scattered, we've got to be more and more connected. But that's what's driving successful organizations and I don't see a lot of that discussion going on in the federal government. They're not finding the way to lure people to work and almost every federal agency is understaffed at this point.
For its part, OFCCP's three main missions to date in the almost year of this first Biden OFCCP administration has been to do three things, undo everything Trump, as you mentioned, that's the delousing mission of OFCCP that leadership there perceives it needs to undertake and undertake first, and that will continue as I'll specifically mention in a moment. There's still things to undo from the Trump world in the mind of the OFCCP managers in Washington. Then number two, they need to hire up to deal with a fleeing workforce like everybody these days. OFCCP has authorized, as you know, to 451 employees, which by the way is a very small number. When I was helping to run OFCCP, I had a thousand people reporting every day and I had 400 alone reporting to me in Washington DC through four different fully-fueled divisions in the national office.
Candee Chambers:
John.
John C. Fox:
When they sell the fewer ... yeah?
Candee Chambers:
What's really interesting about that is that there have got to be so many more federal government contractors today and less than half of the total number of employees that are overseeing the regulatory requirements of that larger number of contractors, which right there tells you how difficult that is, plus all of the additional regulatory requirements that they have to undertake, the contractor community.
John C. Fox:
Yes, you're quite right, Candee. Federal contracting has been increasing as the federal budget has been exploding in size over the last 25 years as we've used the government contracting mechanism also as a way to fuel the economy. It's another device to help invigorate economic growth, it’s been a key strategy. But OFCCP has fallen last year to fewer than 400 employees. They were hovering around there and then dipped below for a bit, and so they're hiring back right now but they're not adding to stock, if you will, they're just doing replacement hiring and still have a long way to go.
They're fighting a very difficult battle too because the morale is very low at the agency and a lot of people are very much looking forward to retirement. This is going to be a big year of retirements at OFCCP it appears just because of the age of the managers and the duration of time they've been in the federal government and they all want to get out. District director after district director tells me they literally count the day down until they can retire. It's not what you like to hear if you're a manager of those managers, but it's the reality that's on the table.
The third thing that OFCCP has been out to do and they've stated this very clearly and very candidly that they want to get a plan to run the OFCCP. We had the last two managers hit the ground running very hard, very fast in, I would say three, actually going back to the Bush administration, you had it there an OFCCP director who had been a federal contractor affirmative action plan manager for a large company, Mid-Atlantic Bell, and used to sit in my National Employment Law Institute affirmative action briefing annually and was studying everything there was about OFCCP for years, the back row in Washington DC. I remember him there for years and years and years.
Candee Chambers:
Charles James, right?
John C. Fox:
Charles James, he knew exactly what to do and he walked in the door. He was one of three managers of OFCCP directors who ever knew what OFCCP was and could tell the difference between an affirmative action plan and a telephone book. Then came Pat Shiu in the Obama administration and she was very knowledgeable about discrimination law. She had been an unemployment lawyer actually in the firm I had been in in San Francisco and didn't have to do much study on that. The affirmative action side of the world was new to her, but she had planned an action before she arrived in Washington. I had lunch with her a month before she took office and she had it all mapped. She was ready to go spring-loaded.
Then you had two different directors in the Trump administration who knew what they wanted to do pretty quickly. They were both well-trained in discrimination law, learning about the affirmative of action side of the house, but sprang into action rather quickly. One of the things that's now happened to us all and will continue this year is what seems like silence from OFCCP because Pat Shiu and the Obama administration and Craig Leen in the Trump administration, published and came up with new policy ideas weekly. We could barely read all the literature that came out of the Obama administration, the Week In Review was filled with OFCCP stories every week, and we could just barely keep up with it all. We've gone from that kind of a frenetic pace to an almost quiet that you'd see very little published.
Candee Chambers:
But you know what, John, I don't think it's Jenny, because Jenny has a civil rights background, a discrimination law background and an EOC chair background and she's very smart. I thought that she would come right in and do the same thing, especially as Pat Shiu. But then we also started kind of expecting Pat Shiu's remarks to be presented to her by the White House because there was a lot of control over what they publicly said. I think Jenny is just suffering some of those same types of controls, but those controls now have been elaborated upon. Now that she's, I think she's doing work behind the scenes that maybe we haven't seen yet, but I think that just in the times I've met Jenny and talked with her, I know she has a lot of ideas and I know they're going to be working on some initiatives for people with disabilities that Craig Leen, I think, started, and they're working very hard behind the scenes, I believe.
But I think she's been not able to voice a lot of her ideas publicly because of some of the other things, obviously, the vaccination situation and COVID-19. I think other things are taking a backseat. The IRS, if the IRS is taking a backseat, other agencies like the OFCCP are definitely going to, don't you agree?
John C. Fox:
Yes. She's basically been under house arrest. OFCCP has always been disliked within the labor department because its main mission at the labor department is employees and unions. The unions don't like OFCCP and never have, because they've always been afraid that OFCCP is going to meddle with the seniority. You try to order retroactive seniority in a discrimination failure to hire a case in a unionized environment, they just go nuts.
Candee Chambers:
There you Have it then. Marty Walsh is a huge labor proponent.
John C. Fox:
Oh! Of course.
Candee Chambers:
Yeah, so there you go.
John C. Fox:
The labor department and democratic administrations is almost always all about wage hour, wage hour and wage hour. OSHA as a secondary but close second, but wage hour is considered the Rock of Gibraltar and what protects the vulnerable population as they call it in the Democrat administrations. Pat Shiu was different. Pat Shiu broke the mold for Democrat OFCCP directors because she had a direct line to the White House. The chief of staff to President Obama was a personal friend of hers that she knew from Chicago and he was running the White House policy and was a brilliant, brilliant guy named David Axelrod, who plotted the whole democratic course for years. He used Pat as an instrument in that activity, and that was really the first time in modern history we had seen the OFCCP used as a political tool. I'm going to show you some evidence of it now, because it's now the third generation with the Trump administration and now the Biden administration looking at OFCCP less frankly as an enforcement agency and more as a political tool to create messaging to the various bases of either the Republican party or the Democratic party.
You'll see that in looking at the proposed regulatory agenda that shines light on the major regulatory policies the Biden administration wants to pursue at OFCCP in the next 12 months. Let me start with the nearest policy initiative coming up first and then work to those policy initiatives that OFCCP hopes to complete by the end of the fiscal year 2022, which ends on September 30, 2022. October 1 will begin the new fiscal year 2023 this coming September 30, 2022. We wrote about this on our Week In Review published Friday, December 13, 2021, and cataloged all five of these initiatives that I'll just briefly mesh mention, but you'll see the political issue bleed through here.
Candee Chambers:
Right. I know what you're going to say, but go ahead. I might throw one in myself.
John C. Fox:
Okay. All right. First, they're going to start very soon they say in the next month with technical amendments to OFCCP rules, which are long overdue. These are just cleanups to spell the names of the statutes correctly, get the jurisdictional thresholds updated, correct the OMB control numbers that have been assigned to allow each of these various pieces of regulations to come to be over the years. They want to fix all the pronouns as well, but I'll call that a technical cleanup. They're promising that by February of this year.
Candee Chambers:
That one doesn't-
John C. Fox:
OFCCP is running late. It'll probably be spring.
Candee Chambers:
Yeah, and that doesn't really seem to me to be that important.
John C. Fox:
No.
Candee Chambers:
We've lived with it like this for quite a while. The one that I think is really important and a little disconcerting I think for the contractor community is their proposed modifications to their PDN rule, the predetermination rule. I think that's going to be interesting. I think all of the government contractor community was concerned about the transparency initiative that Craig Leen had put together, and is that going to continue? With the PDN rule, it requires OFCCP to tell the contractor what the alleged violation is and give them 15 days to respond and say, "No, that's not right. You didn't perceive it correctly. This is what's really going on." They can ask for an extension, it's easily extended, because there's a lot of information.
The one concern I think is that they don't issue the PDN until it's been to the national office and the national office has signed off on it. It's one of those things you get it, and I've told all of our Members don't ever try to respond to a PDN on your own. You've got to get legal counsel involved because the likelihood of winning, and I don't know, John, if you had situations, but the likelihood of winning is lessened because the national office already has their eyes on it. I think that's one that the contractor community is a little nervous about what might happen with that.
John C. Fox:
Yes. The concern is that OFCCP is going to follow the path of the EEOC of reducing transparency.
Candee Chambers:
Exactly.
John C. Fox:
The PDN rule requires OFCCP to write down their allegations that they believe they have evidence to prove against the contractor and then present that to the contractor, let the contractor respond to it point by point, see the evidence, duplicate, replicate what the economic studies on the other side are if it's a compensation case or failure to hire case, a lot of statistics involved typically.
Candee Chambers:
The OFCCP has to-
John C. Fox:
They want to be able to replicate that.
Candee Chambers:
Right, and the OFCCP has to give them that type of information to say, "This is what we did, this is why we say that this is an alleged violation," right?
John C. Fox:
OFCCP is clearly going to pull back on all of that, but they want to play hide and seek with what they know and make you think that they know more than they really do and contractors are going to be very unhappy about this and OFCCP is just going to steamroll them, I fearlessly predict. The third thing is the prime contractor notification to OFCCP of subcontract awards. They're proposing to do that by spring, I think it'll be much later than that, but this will very much upset the subcontractor community and also prime contractors when the Carter administration tried to do this in 1979. The contractor community went nuts because they did not want to have these prime contractors in the middle of OFCCP and using them to drop a dime in effect on their subcontractors and cause subcontractors to perhaps not participate in federal subcontract.
This rule is going to backfire on OFCCP if they do go forward with it though, in my judgment, because what will happen is that many, many more companies that think currently that they are a federal subcontractor will find out that they are not because the definition of subcontractor is very convoluted, but it can be boiled down if one were to read all eight lawsuits.
Candee Chambers:
Necessary to, right?
John C. Fox:
Yeah. That's one of the two definitions, but that definition has been narrowed by the case law to mean that you're only necessary to the prime contract or necessary to some other federal covered subcontract, if it's legally necessary.
Candee Chambers:
Oh, interesting, interesting, okay.
John C. Fox:
Not that it's a good idea or it's useful over the project, it has to be mandated by law. An example would be an insurance company, providing a state law required workers compensation insurance for the federal contractor, the federal subcontractor to do the work or an insurance company that has to issue a bond for, let's say, construction of a federal highway. That's legally required to have that bond. It's only those that are legally required subcontract, which eliminates about 95% of them all.
Candee Chambers:
I think for corporate America, that's going to be very challenging because when I used to do affirmative action planning at my companies and the OFCCP would always ask for a copy of your contract. You could hardly ever find them.
John C. Fox:
Exactly.
Candee Chambers:
Then, each contract, if you have several subsidiaries, you have locations across the country, the contracts may be overseen by different individuals, you have different subcontractors for each contract. Trying to come up with a list of subcontractors is going to be next to impossible. Finding the contracts is next to impossible.
John C. Fox:
Then, once you do identify them, then some lawyer can't be HR, some lawyer is going to have to sit around and parse which one is a subcontractor meeting OFCCP's definition, and they got to go read the nine case decisions that inform the answer to that question. But that all potentially lies ahead, look for that realistically in the summer.
The fourth one is changing OFCCP record keeping rules that they say they want to do by September of 2022. You can see they're really backlogged. This is something they wanted to do in the Trump administration. It's not a high priority issue, but they really need to do this if they're going to follow through on the contractor portal, which they're intent on, and we'll talk about. It's going to be reflective here of just how backlogged they are and how understaffed they are that they can't just push this out six, seven months ago.
Finally, here's the one that really reflects on the political control of OFCCP through the White House, and that's rescinding certain portions of OFCCP's controversial religious exemption rules for federal contractors and subcontractors. Jenny Yang and the president both said within days of taking office a year ago that the OFCCP religious exemption rule would be yanked and reformed. The concern there is from the Democratic party side of the house that in a collision between a federal contractor exerting religious requirements for duress or for the non-hiring and non-employment of gay, lesbian and transgender employees, that contractors were getting too good a deal in these rules that would allow them to escape the non-discrimination provisions of the Executive Order 11246. Those rules are written to rescind, it's easy to rescind those. They've already written it probably in the first 30 days they were in office. Why are they holding it until what? September of 2022?
Candee Chambers:
Yeah, I don't understand that. Do you have any insight?
John C. Fox:
The next month after that and the next month after that, that becomes November of 2022, the election.
Candee Chambers:
I was just going to say, yep.
John C. Fox:
The elections, the midterm elections. They're staging. The White House has programmed this to stage to occur to rally the base for the midterm elections. Meanwhile, this rule doesn't really play in the real world. There aren't that many federal contractors that claim religious exemptions. It's happened once or twice. I saw it once in the four years I was helping to run OFCCP, but it was a trifle of an issue, easily disposed of and jurisdiction maintained against that company, but it's a great political issue, and so that's why it's being especially saved for that moment.
Candee Chambers:
That makes sense. That'll be interesting. John, let me ask you this. Do you think that the volume of OFCCP audits will ever return to their prior normal level? I think we're seeing just a handful each year. Gosh! When I was doing audits from the corporate America side, I would have 8, 10, 12 audits at the same time going on. Some companies on the CSAL have 10 potential audits, but I don't know many, a couple of our board members have about 10 or 12 at any given time, but not a multitude of companies. You think it'll ever return to normal?
John C. Fox:
Not anytime soon. It is not because of a lack of employees. The volume of audits per OFCCP employee and per compliance officer has plummeted. I used to do 7,200 to 7,700 full onsite audits per year when I was helping to run OFCCP, with audits onsite that lasted from three to five days on average.
Candee Chambers:
Two people would normally be there too.
John C. Fox:
At least two people, sometimes four or five.
Candee Chambers:
Yeah, I remember.
John C. Fox:
Now, those are all gone. What caused the change was Pat Shiu went to a process that we talked about at some length in the Week In Review back in the day. The Deep Dive, Deep Dredge, her view was different than Shirley Wilcher's in the Clinton administration, and I thought Shirley really had it right. Shirley's view was there's always 2% year in and year out regardless whether you're Republicans or Democrats, north, south, east west violation rates for discrimination.
Candee Chambers:
To do a lot of [crosstalk 00:31:13].
John C. Fox:
Two percent is going to be found with violations, let's just do more audits. Two percent of a thousand is a lot more violations than 2% of a hundred. She'd kick the door down, look around, if there wasn't any discrimination, she'd get out. Pat Shiu went the other way. She said, "We're missing things, so let's dig deeper." She told the Congress in her budget reports beginning in 2014 and 2015 that she was going to slow it down and she did and now it's at a crawl. With the COVID-19, they're almost not doing audits, and the audits they've been doing have been the mini audits, compliance checks, 20 minutes, 30 minutes of OFCCP time per audit times 500. They do fewer than a thousand now per year. They had 500 compliance checks, focus reviews, which Jenny Yang banished within the first two months she was in office. The first 500 focus reviews and innovation of the Trump administration, they found only two technical violations total, no discrimination violations, nothing of substance.
You're seeing a very, very different auditing profile. There are still, as you say, a lot of the big companies that were caught up and are still fighting Obama era audits.
Candee Chambers:
That's true, that's true.
John C. Fox:
Those audits are still unwinding. That process will probably complete this year. We may have a 10-year anniversary of finishing the Obama audits here pretty soon.
Candee Chambers:
Yeah, cheers.
John C. Fox:
It's taken a while. There's not going to be big volumes, there's not going to be big back pay numbers anytime soon until the philosophy of audit changes and they increase the number of audits per employee. You can't have 400+ employees do under a thousand audits a year.
Candee Chambers:
Then, keep in mind the hiring that they're doing. I remember I was sent to do my first onsite audit after I only had six months of experience in the affirmative action business. I was scared to death and it went beautifully, but nonetheless, I was scared to death. If you've got new employees and you're giving them audits to do, they don't know what they don't know, and they're following the FCCM, which has been updated but still could stand additional updates. That's a difficult challenge for the new compliance officers. It's an ongoing problem that they're going to have with all of their hiring that they hope to get approved.
Let's skip over the audit discussion, because I've held this, one of my last questions based on the biggest news that has come out of the OFCCP, and that's the AAP verification project. There's three key dates that are coming up pretty darn quickly that we just published in our December 6 Week In Review. We've got February 1, the portal is open for access registration, and that's where OFCCP is intending to send an email to each covered federal government contractor and the email information they have available in its system inviting them to register all of their locations, all of their establishments. March 31, the contractors can begin certifying their affirmative action compliance.
They basically have two months to set all of their locations up in OFCCP's portal, and I know, John, you've got some clients with like 10,000 plans and 10,000 establishments, so God help them. Then, by June 30, all existing contractors must certify whether they have developed and maintained an affirmative action program for each establishment and/or functional unit and must affirm that the contractor understands that it may not later change its affirmative action plan after certification. I met with Jenny Yang about a month or so ago and I told her that this was a concern about not changing your affirmative action plan. I actually suggested that they put some FAQs out to help contractors understand because it's a penalty, it's a federal law to provide false information to any government agent. John, based on all of that information, what do you thinks going to happen this year with the affirmative action plan portal?
John C. Fox:
Candee, let me start with two things which ought to happen and won't happen. First, they ought to stop the process immediately and go to rule-making. There's so many wrinkles involved in this thing, and the contractor community needs to have an opportunity to express itself about all of this and help OFCCP frame it up properly. But they rejected that, they told the White House that they were not going to do that, they're proceeding ahead. The second thing they should do is at least delay this whole process for about another six months while they talk, at least informally. even if you're going to push forward an illegal program, you can talk informally to the contractor community and get some better ideas. You saw the Baltimore ILG that we published in the Week In Review this past week January 10 had a lot of technical questions as to contractors across the country, which OFCCP then tried to answer through FAQs. But there's a whole host more of technical issues that people are running into even before they've tried to go online when it opens up in February to create their establishment pages and report data eventually and certifications.
Let's talk about the two things which are going to happen. They are going to open on that schedule that their current statement, and I doubt that this close to February 1 that they would suddenly have a change of heart, although you hope they would. A wisdom late is better than wisdom never. The second thing that's going to happen is that a lot of contractors based on surveys, the contractor community are not going to participate, and then OFCCP is going to be in a dilemma as to what to do with them. If they sue them, they will undoubtedly lose that lawsuit because they will have been found to not have gone through the rule-making process that is required whenever you're going to impose a burden on a regulated community, so we'll have to see who plays and who doesn't.
Then, the endgame on all of this, and I think this is confusing the contractors, but I'm not sure why because when Craig Leen envisioned this, Pat Shiu envisioned this first in the Obama administration, Craig Leen talked about it and set up the internal infrastructure in the Trump administration, and Jenny Yang then finally pulled the trigger with the White House, the Office of Management Budget and her administrative, but they've all said from day one that they were going to use these data not to make discrimination findings, but rather to audit and primarily based on compensation, they want to use it as a compensation discrimination finding tool and contractors ought to applaud that, because where OFCCP makes its money is not comp. There's very little compensation discrimination that OFCCP or any agency has ever found. It's all about failure to hire. That's where the money is, and that's where contractors have problems particularly if they have entry level production labor workforces and evergreen jobs. Oh my gosh! That's just a dollar situation.
Candee Chambers:
Yeah, it's probably one of our Members' biggest questions. John, let me just say this, and it's kind of interesting, because I was talking with one of your partners yesterday about rule-making and the OSHA ETS and things, and I asked point blank if the Supreme Court doesn't approve that to move forward, he said, "Well, it will depend upon what their reason for saying that it's not appropriate, and if they say it's basically because they didn't go through rule-making, then OSHA could say, okay, well, we'll go through rule-making," which you and I have talked about earlier this year that some of the other vaccination mandates ran into that same problem and they decided, "Okay, well, we'll go through rule making and then we'll be good." Interesting, when I spoke with Jenny, she said, and you and I have talked about at this as well in the past that the OFCCP is saying that they don't have to go through rule-making because the authority for them to do the verification already exists in the regulations.
I know lawyers, other lawyers, because Jenny's a lawyer, I know that other outside attorneys don't necessarily agree with that, but it will be very interesting in a legal situation if they are forced to go through rule-making. I think it would be a very interesting exercise and see what comments they would receive. I'm going to skip over that because it is what it is and we'll see what happens come February 1. Let me go ahead and finish with this question, John, since as a leader of DirectEmployers, I know that budget is everything and that bigger budgets mean more success in the marketplace, happier employees and more productivity.
Success, basically, just begets success. Let me just make it clear, I'm glad I don't have Jenny Yang's budget worries or her budget challenges because we fortunately have come off here at DE from a second in a row, all time, high year of membership numbers, revenue growth, head count, growth, customer services growth. We've been one of those companies that has just succeeded amazingly so during this pandemic and I even complimented all of our employees at our all staff meeting on Monday that I think our collaboration is at an all-time high. I think it's because you don't see that person sitting next to you that you just really want to argue with. You just have to pick up the phone or have them see you on Zoom.
I heard yesterday one of our folks literally was in an interview, the spouse was in an interview and they asked him to stand up to see what he was wearing if he had really had a suit on, and I thought, "That was pretty interesting." There've been a lot of fun things that have happened during the pandemic as well. What do you think is going to happen to OFCCP's budget and its hopes for, basically, a third percent increase in its budget and the dream of adding additional 188 jobs to their head count? What do you think?
John C. Fox:
Yeah, they wanted to go up from about 105 million a year to 143 million a year as they did with a lot of the federal agencies, but it's not going to happen. As you know, there's a continuing resolution in the Congress right now on the budget for 2022, they still have not settled and landed that budget. A continuing resolution means that they're just continuing the agencies at the prior year's level of funding. By the way, that's very bad news for an agency.
Candee Chambers:
Because of the inflation, especially.
John C. Fox:
Yeah. If you've got any increases in your cost of doing business and, as you know, inflation is raging right now, leasehold expense, payroll pensions, all those go up about $2 million a year at OFCCP in modern times. You do $2 million, what would that buy you? Well, $2 million is almost 20 compliance officers. If you keep the same budget, you just lost 20 compliance officers. The way they do that at OFCCP is that they don't fire people, they've got so many open jobs they just keep lowering their headcount authorization from, let's say, 451 down to 431. That accounts for the loss in budget due to the increase in cost of doing business. But they're not going to get it. The likelihood in Washington is that there's still going to be a stalemate on this. The Democrats have punted twice on the budget and we'll take it up next in February.
The great likelihood based on history is that you never have a third continuing resolution. Usually, at that point, the administration realizes that the Congress is not going to play ball, and so they just do a continuing resolution for the remainder of the year. That will likely happen in my judgment, but we'll see. But if they do get a budget other than a continuing resolution budget, OFCCP is not going to get a huge dollar up increase nor is the EEOC. They're staffing currently against their last budget it and that's going to be probably their reality, as I say, which is not a great answer for OFCCP, but they need to motivate people and they need to work with what they've got and bring those audit numbers up to at least what they would have in any normal use of personnel.
I think we're going to see a very difficult year for OFCCP. They're going to have to trim sale and not do all the things with the computers and not all the things with people and staffing that they wanted to. They're also, as a final thought, staffing at the senior levels. They're staffing managers and not compliance officers, and that's not going to help audit, by the way, either because managers don't do audits. I'm not sure why they need that manager structure out in the field anymore given the ability to work remote. What they need is worker bees. They need a lot of those people. I begged the contractor community at the National Industrial Liaison Group annual meeting in Nashville last year to support OFCCP in its mission to try and get more budget, because I think the agency, and I've said this for almost 15 years now, is too small to run as a standalone subagency of the labor department. It's becoming almost what we used to call a bureau, something very tiny that has a small defined mission. You need to put some more meat on those bones and very soon.
Candee Chambers:
All right. Thanks, John. It's another enlightening conversation with you, I think every single one of them is. But we like to end on a fun note with all of our podcasts, and I'm going to give you five rapid fire questions, so our listeners can learn just a little bit about what makes you tick. All you have to do is say the first thing that comes to mind, are you ready?
John C. Fox:
Okay.
Candee Chambers:
Okay. The best advice you've ever received.
John C. Fox:
Oh. To be cautious and not assume more than you know.
Candee Chambers:
Okay. All right. Early to rise or a night owl?
John C. Fox:
Oh, early to rise. I've always gotten up, been on the job by 7:00 AM for decades. Usually up at 4:15 in the morning and in the gym by 5:00.
Candee Chambers:
Wow! Okay. If you had the opportunity, would you rather travel to the past or to the future?
John C. Fox:
Oh, absolutely, to the past. I just think there's so many things fascinating about our history to date. The future seems less rich to me.
Candee Chambers:
Okay. Street smarts or book smarts.
John C. Fox:
Oh, book smarts.
Candee Chambers:
I could answer that one for you, John.
John C. Fox:
Yeah, but I love to read, I love to absorb and have always been a bookworm.
Candee Chambers:
All right. This is going to be the toughest question for you of all, you wait till I finish. Chick-fil-A or Diet Dr. Pepper? You can only pick one.
John C. Fox:
No, I want the combo.
Candee Chambers:
I know. I said you needed to listen until I was finished and you can only pick one.
John C. Fox:
That's a pure Sophie's Choice. You want to pick your son or your daughter, oh my gosh. I'd have to go with Diet Dr. Pepper if I were forced to span it to a choice, but hopefully it's Diet Dr. Pepper and Chick-fil-A.
Candee Chambers:
I've been there with you when you've had it, so I know. John, as I said, it's been a real pleasure having you join us today and talk more about what's looming on the horizon for federal government contractors. I speak for DirectEmployers and our Members when I say we are incredibly thankful for your insight and guidance. If an employer would like to connect with you, what's the best way that they get in touch?
John C. Fox:
You could reach me at my phone number (650) 400-2121 or via my email, which is on our Fox, Wang Morgan website. If you put that in your browser, it will pop up, but it's jfox@foxwang, that's W, A as in apple, N as in Nancy, G as in go, foxwangmorgan, like Captain Morgan, the rum, foxwangmorgan.com. Yeah, everybody always gets that because, oh yeah, we know that rum.
Candee Chambers:
Exactly. Exactly. Thank you for tuning in for another episode of the DE Talk Podcast. Stay connected with DirectEmployers on Facebook, Twitter, and LinkedIn, and subscribe to our emails by visiting directemployers.org/subscribe to receive notifications of new episodes each month.