OFCCP Abolishes Attorney-Client Privilege Protection for Pay Audits

With little fanfare, on March 15, the Office of Federal Contract Compliance Programs (OFCCP) put out a new enforcement directive, 2022-01, that abolishes the longstanding tradition of allowing contractors to protect self-conducted audits as attorney-client work-product. OFCCP is a lesser-known agency in the DOL that oversees affirmative action requirements for federal contractors.

Many federal contractors will work with their outside counsel to conduct pay audits so they can identify disparities that need correcting and remain in compliance with federal anti-discrimination requirements. Ideally, they can adjust their compensation practices to address any problems that might be found. These audits, obviously, contain highly sensitive and confidential data and analyses which is why they are conducted under attorney-client relationships to establish the privilege that protects them from being disclosed. This privilege has a long tradition of being recognized by OFCCP, as well as other agencies where companies are being audited or investigated. Attorney-client privilege also enjoys broad bipartisan support in Congress.

Not only does the enforcement directive make clear OFCCP will no longer recognize attorney-client privilege, but if a contractor asserts privilege as a reason for not turning over an audit, they will be subject to OFCCP concluding they are out of compliance and discriminating in their compensation practices. Contractors are thus damned if they do turn over their audits, and damned if they do not.

The enforcement directive went into effect as of issuance, with no opportunity for comments or input from those affected by it. However, because this is such a departure from previous practices, the Chamber felt compelled to send a letter to OFCCP objecting strenuously to the enforcement directive and explaining the problems it will cause.  The chief effect of it will be to discourage contractors from conducting their own audits to uncover compensation disparities so that they can be rectified—exactly the opposite effect OFCCP should want.

While we believe this to be a terribly flawed policy and should be withdrawn entirely, if OFCCP believes this radical new policy is necessary, then the only way it can happen is through a full notice and comment rulemaking where OFCCP is transparent about the impact this change will have, welcomes comments and input about it, and provides analyses on how it will affect contractors subject to it, including small businesses. New policy cannot be made through enforcement directives that read like edicts from on high.

Story by Marc Freedman, U.S. Chamber of Commerce

Marc Freedman is vice president of employment policy at the U.S. Chamber of Commerce. He is responsible for developing and advocating the Chamber’s response to OSHA matters, the Employee Free Choice Act, the Family and Medical Leave Act and mandated leave issues, and other labor and workplace issues.