Having Government Contracts and Using Assessments?
The only reason to read this insights advice today is if you answer this question with a positive “yes” response. The question is simply…
Do You Currently Have Government Contracts AND Use Assessments within Your Organization?
When answering yes, you have placed a target upon your back regarding an EEOC agency ruling known in the industry as the “Adverse Impact” ruling.
You may be thinking – well this is something for HR or our Labor Attorney. As the say in the world of sports – Not So Fast My Friend!” This is a law or ruling which can cause you significant financial fines. Just ask 3M which just paid a $12 million fine because they could not prove compliance with this rule. Now, in my book a $12 million fine is a significant risk if you have no knowledge about this rule. Yet, it only counts if you are selling to a government institution or agency (including the military).
Here are the key factors covered in this ruling…
- Proactive Watchdog Agency
Under the EEOC is a sub agency called the Office of Federal Contract Compliance Programs (OFCCP). This agency is a proactive group looking for compliance of Federal Laws for companies engaging in work with the government. This agency can audit your hiring and selection practices looking for non-compliance. If they find any they can go back two years in assessing fines and penalties.
- 80% Rule or 4/5’s Rule
Every key factor in your employment practice must be conform to the 80% rule. Meaning employees and candidates for employment must not be discriminated in any form and any criteria used must be above the 80% acceptable range. This means you need to be able to show no adverse statistic data points outside of a 20% variation. The key question which seems to be a hot button is “who or how many are included in the total numbers?” for determining compliance. There are two points of view, so have your labor attorney keep an eye on this factor.
- Back Dating for 2 Years
Once a violation is found, the agency can assess fines retroactively for two years, which in many cases can then become a very large fine. The key is to cover your variables up front so no violations are found – because there are none to find.
- 30 Day Show Compliance Window
When a violation is found you will be given only a 30 day window to either show evidence their information is incorrect or to gain compliance for the future. Either way, it is a very short time span for most organizations to act regarding compliance issues after the fact. Again, it is better to have compliance in the front end. You will need to find organizations who furnish you with hiring systems, tools or assessments to show their research to you and your labor attorneys. Beware of the partial or conditional statements from these groups – they are either in compliance or not in compliance with no exceptions made by the OFCCP.
- Use of Any Assessments
If you use assessments for hiring and selection or even training and development – you must be able to show compliance with these instruments. Compliance means there is NO discrimination to any of the protected groups according to the Laws.
- Minimum Number of Employees
Currently the law applies to companies or organizations with more than 15 employees on the payroll. Be careful of the number of contractors or independent contractors you use as an aggressive auditor may attempt to include some of these people in your employee count. If you have less than 15 employees you are usually not a target of this aggressive or proactive agency since the cost benefit ratio is lower.
There you have the basics of the law and key terms for you to be aware of regarding the topic of compliance.
The targeted or protected groups fall into five primary groups…
- Age – specifically the above 40 group.
- Disability – Physical or Mentally disabled are covered under this law.
- Sex – Men and Women must be treated identically under the law.
- Race, Creed or Religious Belief– All origins of people must be treated the same under this law.
- Veterans – A late addition designed to protect our returning veterans of the armed forces from discrimination.
Understanding this information could effectively save your company a sizable fine issued by the US Government. Monitor your in-house system to ensure compliance.
A key component of this compliance deals with your hiring and selection systems. If you are currently using assessment tools in your hiring and selection process, you must immediately determine they are compliant on ALL traits used in their reports. If they cannot definitely show the statistical evidence of compliance, then find a new provider of assessments who can show ALL the traits and measurements for each of the five major categories.
An important issue we are finding in the business environment are assessment organizations who are not disciplined enough to follow the letter of the law. More interested in making sales than protecting their customers from OFCCP audits and their destructive fines is – well – careless and shows a lack of accountability on their part.
If you would like to learn about a totally compliant Hiring System, I would enjoy the opportunity to talk with you and learn about your organization. Then, we could discuss options – which are fully compliant with the EEOC and OFCCP. In addition, I would be able to finish your legal department with statistical proof for their review immediately.
In conclusion, if you are selling to or receiving revenue from a government agency or department, you are at risk under the Adverse Impact audits and practice reviews. Therefore, make certain your systems and particularly your assessment tools are in compliance (making certain means getting statistical data to prove compliance – no exceptions or oversights allowed.) and if you are not certain of compliance begin a process to change your current systems to a compliant system.
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Tags: adverse impact, author Voss W Graham, Compliant Hiring Systems, discrimination in hiring and selection factors, EEOC, hiring law factors, OFCCP, Office of Federal Contractors Compliance Programs