United States: Google Prevails, In Part (And For Now), In Compensation Data Dispute With OFCCP

On July 14, 2017, an Administrative Law Judge ("ALJ") for the Department of Labor issued a Recommended Decision and Order (the "Opinion") in the case brought by the Office of Federal Contractor Compliance Programs ("OFCCP") against Google over Google's refusal to turn over certain employee data as part of a compliance audit.  The ALJ's thorough opinion is informative, providing insights into OFCCP's processes in compliance audits, basic canons of administrative and constitutional law, as well as the administrative proceedings that have garnered so much of the government contractor community's attention.

Many of the commentators initially declared the decision a big "win" for Google and the government contractor community generally.  Although Google succeeded in part in its efforts to resist OFCCP's invasive and burdensome data demands, its success in the proceeding was limited.  In the end, Google avoided only one (albeit a significant one) of OFCCP's data requests.  Moreover, the Opinion does not preclude OFCCP from seeking that information again in the future.  Further, the record reflects that prior to these proceedings, Google produced significant quantities of data and documents to OFCCP at considerable cost and burden – by Google's estimates the collection process cost $500,000 and took 2,300 person hours.  Although Google obtained some favorable rulings that contractors can use in their dealings with OFCCP, it is unclear whether this ruling will permit contractors to obtain significant relief from OFCCP's demands in the future.

Background Of The Case

The case arose out of a traditional compliance evaluation of Google's headquarters which commenced in 2015.  In response to its initial scheduling letter, OFCCP received from Google a snapshot of compensation data for over 21,000 employees, including data such as "gender, 'race/ethnicity,' hire date, job title, EEO-1 category (such as clerical or executive), job group, base salary or wage rate, hours worked in a typical workweek, and other compensation or adjustments to salary (bonuses, incentives, commissions, merit increases, locality pay, and overtime)."  After several follow up requests for information and data, the evaluation morphed into an onsite review that included interviews of more than 20 managers.

Following the interviews, OFCCP requested additional information, including the following categories of information for each of the employees in the establishment:

name, date of birth, bonus earned, bonus period covered, campus hire or industry hire ..., whether the employee had a competing offer, current "CompaRatio," current job code, current job family, current level, current manager, current organization, department hired into, education, equity adjustment, hiring manager, job history, locality, long-term incentive eligibility and grants, market reference point, market target, performance rating for past 3 years, prior experience, prior salary, referral bonus, salary history, short-term incentive eligibility and grants, starting CompaRatio, starting job code, starting job family, starting level, starting organization, starting position/title, starting salary, stock monetary value at award date, target bonus, and total cash compensation, and 'any other factors related to Compensation.'

Google produced most of this information to OFCCP.  Then, OFCCP requested that Google again supplement its snapshot data to include the following additional categories of information:  "the employees' ID, country of citizenship, secondary country of citizenship, visa (yes/no), visa type, and place of birth."  Google produced this data as well.  All in, Google produced "844,560 compensation data points for the 21,114 employees on the snapshot."  However, Google refused to comply with a number of the additional requests of OFCCP, including:

  1. "A "snapshot" as of September 1, 2014 – a year earlier than the first snapshot."
  2. "A salary history (a list of starting salary and each salary change) and job history (a list of starting job and each change in job) for each person whom Google employed at its headquarters on either of the two snapshot dates. The histories must cover the entire time Google employed each person, going back for its longest-term employees to the founding of the corporation in 1998."
  3. "The name, address, telephone number, and personal email of every employee reflected on either the 2014 snapshot or the 2015 snapshot."

After Google refused to produce the requested information, OFCCP filed a complaint against Google to compel production.

The ALJ's Rulings

After a hearing on the matter, the ALJ found that OFCCP's request for an additional data snapshot from September 1, 2014 was reasonable.  OFCCP argued that "an additional snapshot is relevant because it will show whether the same indications of a possible adverse impact violation existed over time, not just on the single day reflected on the September 1, 2015 snapshot."  After a detailed analysis, the ALJ found that OFCCP had provided sufficient evidence "to meet the deferential standard that applies in the narrow Fourth Amendment review appropriate to administrative subpoenas."

In ruling that Google needed to provide the additional snapshot data, the ALJ found "no reason to question the relevance of most of the data categories that OFCCP requests Google include on the snapshot."  He did, however, modify the required data fields slightly to exclude:  "place of birth, citizenship, and visa status," "any other factors related to compensation" (because "OFCCP ha[d] withdrawn [its] request" for this information), "date of birth" and "locality information."  The ALJ found these categories either irrelevant or unduly burdensome for Google.

With respect to the request for contact information for all employees at Google headquarters, the ALJ ruled that this request, as written, was unreasonable.  The ALJ seemed most concerned about the "extent to which the employee contact information, once at OFCCP, will be secure from hacking, OFCCP employee misuse, and similar potential intrusions or disclosures."  He also raised questions about employee due process, as their information was being provided to the government without their knowledge and without their ability to opt out.  Based on these concerns, the ALJ ruled that after conducting more due diligence as to Google's compensation procedures, OFCCP can request a list of 5,000 employee names and Google will provide the contact information for those employees.  This will allow OFCCP to determine which 100-300 employees it wishes to interview, without Google knowing the identities of these employees.  The ALJ also ruled that, if needed, OFCCP may request contact information for an additional 3,000 employees following the interviews of its first group of employees.

Finally, the ALJ denied "without prejudice" OFCCP's request for historical compensation information going back to each employee's hire date.  The ALJ reasoned that OFCCP had not sufficiently supported its need for the information to conduct its investigation.  He found that although OFCCP had identified disparities in Google's compensation and had developed a theory as to the cause of those disparities, it had failed to take steps to investigate Google's compensation practices to test its theory before demanding voluminous and burdensome compensation data.

For example, OFCCP supported its request by theorizing that Google's alleged compensation disparities are the result of women being less effective negotiators than men at the time of hire.  However, the hearing record showed that Google generally does not negotiate compensation at the time of hire or promotion.  As such, OFCCP had failed to test its theory against Google's actual practices before making its burdensome request.  Moreover, the support OFCCP offered for this theory – two media articles – were stricken from the record by the ALJ.

Even so, the ALJ invited OFCCP to request this information in the future "if it can show that the request is reasonable, within its authority, relevant to the investigation, focused, and not unduly burdensome."  However, the ALJ ordered OFCCP to "offer to engage with Google in meaningful, good faith conciliation to resolve any dispute, including by showing why the information sought is reasonable, relevant, focused, and not unduly burdensome" prior to engaging in any further litigation.

Key Take Aways

Putting aside the specifics of the ALJ's rulings, his thoughtful Opinion provides contractors with helpful guidance to use when under audit by OFCCP.

  • Signing a Government Contract Does Not Waive Contractors' Fourth Amendment Rights. The ALJ forcefully rejected OFCCP's argument that by signing a government contract with a provision permitting the government to access its records, Google had waived its Fourth Amendment rights in their entirety – deeming OFCCP's position to be "without merit."  As such, contractors can point to the Opinion if faced with overzealous compliance officers claiming they have an unfettered right to access contractor files.  Rather, such requests must be reasonable, relevant and material to the investigation and may not be too indefinite or broad.  To this end, the ALJ deemed requests for information concerning employees' place of birth, citizenship or visa status irrelevant to matters within OFCCP's authority.
  • OFCCP Must Be More Transparent. The ALJ emphasized that when Google first resisted OFCCP's third effort to obtain these data, it demanded to know the issues OFCCP was investigating and "in what part of Google's operations those issues arose."  At that point, Google had provided extensive compensation data, and OFCCP had provided "no information about the issues it was finding, which prevented Google from evaluating whether OFCCP's additional requests were relevant to the investigation."  OFCCP refused to explain to Google its findings or its justification for its broad request.  Instead, it ordered Google to show cause why OFCCP should not bring an enforcement action.  "Google responded with an offer to continue producing certain information and discuss[] the parties' disagreement," and noted that OFCCP's refusal to provide any explanation of the relevance of the information sought contravened its own regulations.  In response, OFCCP filed its administrative action against Google.  It was only during the administrative hearing that Google learned for the first time that OFCCP was investigating potential "systemic compensation disparities against women."

Google's experience unfortunately is not unusual.  Contractors participating in a compliance audit often are frustrated by OFCCP's refusal to explain why its data requests are relevant to or to share even the most basic information about its investigations.  Contractors are often left with a difficult choice:  comply with what appear to be unreasonable and/or unfounded requests or challenge OFCCP and risk litigation.[1]  The Opinion makes clear that if OFCCP had provided information about its findings in its investigation, litigation could have been avoided.  Google had been very cooperative earlier in the investigation, and may have continued to provide information if OFCCP had provided the information necessary to assess the reasonableness of OFCCP's requests.  In addition, the dialogue that may have ensued may have caused OFCCP to reconsider the scope of its requests.

With the Opinion, contractors now have a helpful resource upon which to rely when facing what appear to be unreasonable requests for information and compliance officers unwilling to provide information justifying the requests.

  • OFCCP Must Identify The Cause For Disparities That Exist And Must Tether Its Requests To That Cause. The ALJ noted that in requesting additional compensation information during its compliance evaluation, "OFCCP is on a search for the cause of a disparity it has found on a preliminary basis."  The ALJ pointed to Directive 307 – "Procedures for Reviewing Contractor Compensation Systems and Practices" – as the standard OFCCP must follow to identify the cause of any pay disparities.  The ALJ found that "OFCCP should engage in an iterative process, asking Google for information, interviewing Google's officials and managers, reviewing the documentary materials and data Google has produced, considering information gathered from the EEOC and the California Department of Fair Employment and Housing, and reviewing information from any other source it has."  Following this, OFCCP "should consider Google's statements of its policies and practices ...," "determine whether Google's representations are consistent with the data and other information obtained," and "then adjust its models and request further information consistent with observable indicators in the information it has."

The ALJ found that, absent this process, "OFCCP's requests for information are untethered to any factual basis and are no more than speculation."  It is on this basis that the ALJ found OFCCP's request for historical compensation data to be unreasonable.  The ALJ found that "OFCCP has not taken sufficient steps to learn how Google's system works, identify actual policies and practices that might cause the disparity, and then craft focused requests for information that bears on these identified potential causes," resulting in the requests being "unreasonable: unfocused, irrelevant, and unduly burdensome."

Based on this analysis, when faced with additional compensation data requests by OFCCP, contractors should press the agency to identify and justify the specific practice it believes caused the disparity.  This will allow contractors to engage in a dialogue with OFCCP regarding this claimed practice and to determine whether OFCCP has undertaken all of the steps specified in Directive 307 before it demands the production of additional data supporting its claim.  Contractors should point to this decision as support for the notion that contractors need not merely acquiesce to unreasonable demands from OFCCP until it undertakes the steps specified in the Directive and then provides additional information to support the justification for its requests.

[1] Proskauer's approach to representing clients in OFCCP's audits aims to avoid such circumstances by developing a good rapport with OFCCP compliance officers so when disputes arise they can usually be negotiated to a mutually-satisfactory resolution.

Google Prevails, In Part (And For Now), In Compensation Data Dispute With OFCCP

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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