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Caught in the Screen

Two recent settlements serve as a reminder that companies doing business with the federal government need to ensure their applicant-screening processes comply with the applicable rules. The same goes for record-keeping, too.

Thursday, July 12, 2012
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As part of a settlement between it and the Labor Department's Office of Federal Contract Compliance Programs, Baldor Electric Co. will pay $2 million to a group of nearly 800 women and minorities who had applied for jobs with the company. The OFCCP says an audit of Baldor's applicant-screening process revealed that it unfairly blocked the group of job seekers from obtaining entry-level positions at the company, which is a federal contractor.

The agreement between the OFCCP and Baldor comes in the wake of one of the agency's largest settlements ever. In March, the OFCCP announced a settlement with FedEx Ground and FedEx SmartPost, both part of Memphis-based FedEx, in which the companies agreed to pay a total of $3 million in back wages and interest to 21,635 applicants who were rejected for entry-level positions at the companies' facilities.

The agency said its compliance officers found evidence that FedEx's hiring processes and selection procedures discriminated against men and women as well as people of every ethnic category, including Caucasian. The OFCCP also said the audit uncovered extensive violations of its record-keeping requirements for federal contractors.

The settlements are a reminder that the so-called "desk audits" of the past, in which federal agencies such as the Equal Employment Opportunity Commission were more willing to accept company hiring data rather than conducting their own investigations, are largely a thing of the past, says one attorney.

"They're doing fewer audits than before, but the ones they are doing are more in-depth," says Constantinos G. Panagopoulos, an employment attorney and partner at Ballard Spahr in Washington. "They're going to come in and slice the data in different ways.

The OFCCP's action against Baldor began in 2006, when an audit revealed the company, which manufactures industrial motors and generators, engaged in systemic discrimination stemming from its applicant-screening process at its Fort Smith, Ark., facility. OFCCP investigators determined that the process violated Executive Order 11246 because it had a disparate impact on women and minorities. As a result, the OFCCP said, 795 qualified women, African-Americans, Hispanics and Asian-Americans were denied the opportunity to advance to the interview stage when applying for production and laborer positions.

Under the terms of the agreement, Baldor will pay a total of $2 million in back wages and interest to the 795 applicants and will make at least 50 job offers to members of the original class as positions become available.

According to Baldor spokeswoman Tracy Long, the company doesn't believe it's done anything wrong.

"It was going to be a much lengthier process to fight it any longer," Long said in an interview with Insurance Journal. "We don't admit that we've done anything wrong. This was purely a statistical analysis on [the Labor Department's] part."

In a statement announcing the settlement with Baldor, OFCCP director Patricia A. Shiu cited the importance of accurate record-keeping.

"Discrimination is preventable when employers have certain processes in place and see to it that they are followed," she said. "That's why it's so important for federal contractors to implement their affirmative- action programs, keep accurate employment records and commit to ending barriers to fair employment."

The DOL's statement about the importance of keeping accurate employment records is notable, says employment attorney Jay Warren, a partner at Bryan Cave in New York.

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"This suggests [the violation] may have been a failure to keep accurate records, because there are very specific requirements about the records a contractor has to keep about applicant-flow data to comply with their affirmative-action requirements as a federal contractor," he says.

"Complying with record-keeping requirements is crucial because, when you have an audit and it's apparent you haven't complied, it immediately turns an auditor into a skeptic," he adds. 

Although companies that aren't federal contractors obviously don't have to worry about OFCCP audits, other government agencies -- including the EEOC -- are sharply focusing on applicant-screening policies that may be discriminatory, says Warren.

"The EEOC has pushed back on the use of arrest records and criminal histories" in applicant screening because the practice has been shown to have an adverse impact on minority applicants, he says.

That's not to say HR leaders should necessarily be fearful, says Warren.

"The majority of employment discrimination cases are brought on behalf of current employees, not applicants," he says. "Employees have a better understanding of the organization they work for. But applicants tend not to file charges, because they usually don't have much information on why they were turned down."

If your organization does happen to be a federal contractor, or you're concerned about unwanted attention from the EEOC on this matter, Warren suggests working with an attorney to conduct an audit of your firm's screening process.

"Do your own audit before the government does theirs," he says.

Should a self-audit reveal any potential disparate impacts on a group of people, says Panagopoulos, either change the process or determine whether a sustainable position exists for retaining it.

"Be ready to defend what you're doing, or be ready to make some changes," he says.

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