On February 13, 2019, the U.S. Department of Labor, Office of Federal Contract Compliance Programs (“OFCCP”) issued Directive 2019-04, “Voluntary Enterprise-wide Review Program (VERP).” VERP is essentially an elective audit program and, while it may seem to have some appealing components, it is hard to imagine how the risk of participation would outweigh the reward for the vast majority of government contractors.
When OFCCP was designing VERP, OFCCP researched the Voluntary Protection Programs (VPP) provided by the Occupational Safety and Health Administration. VPP’s purpose is to “recognize and promote effective worksite-based safety and health management systems.” So, similarly, the stated purpose of VERP is to “establish a voluntary enterprise-wide compliance program for high-performing federal contractors.”
According to OFCCP, the program “blend[s] its compliance evaluation and compliance assistance activities to work with high-performing contractors toward a mutual goal of sustained, enterprise-wide (corporate-wide) compliance, outside of OFCCP’s neutral establishment-based scheduling process.” OFCCP claims this program compliments its Early Resolution Procedure, Directive 2019-02, which provides incentives for early corporate-wide resolution of violations during compliance evaluations, and Opinion Letters and Help Desk, Directive 2019-03, which aims to enhance compliance assistance by making certain Help Desk responses available and searchable.
Contractors need to apply to be admitted into VERP. The application process opens the beginning of the 2020 Fiscal Year. The application process entails OFCCP conducting a compliance review of the contractor’s headquarters location and a sample subset of its establishments. If the applicant is not qualified for the program, OFCCP states it will not automatically place the rejected applicant on a scheduling list to have a compliance evaluation.
If admitted into VERP, the contractor will be assigned into one of two tiers. The top tier consists of top-performing contractors achieving corporate-wide diversity and inclusion. Contractors in the top tier can remain in VERP for a period of five years and be re-evaluated at the five-year mark to stay in the program. The second tier consists of OFCCP-compliant contractors that will received individualized compliance assistance. Contractors in the second tier may remain in the program for three (3) years. OFCCP retains the right to terminate agreements with program participants who do not maintain the requirements of VERP and return the contractors to the pool from which OFCCP schedules compliance evaluations. The idea is that contractors benefit from the certainty of not receiving a separate audit during the VERP period, as OFCCP agrees to remove VERP participants from the normal audit scheduling process.
Should My Company Consider VERP?
It is hard to imagine a situation in which the benefits of participating in VERP outweigh the risks. First, VERP applicants essentially automatically subject themselves to multiple compliance reviews—a headquarters audit and a sample subset of establishments. Normally, audits are conducted on an establishment-specific basis; VERP would entail multiple reviews going on at once. While this can happen through the normal audit scheduling process, it is a guarantee with VERP as currently described.
Second, as any contractor who has been through an OFCCP audit knows, compliance reviews can consume an extreme amount of time and money. It is unclear how extensive the compliance review under VERP will be compared with a typical audit, but audit defense can cost tens of thousands of dollars depending on the audit length and depth.
Third, applying for VERP does not equate to being selected for participation in VERP, so a contractor may go through all of the time and expense of the VERP application process without any ultimate benefit at all. And while OFCCP claims it will not automatically place a rejected applicant on an audit scheduling list, a rejected applicant will just necessarily be on OFCCP’s radar.
Finally, the major “benefit” to VERP—the certainty of not being unexpectedly subjected to an audit for some period of time—is not much of a benefit since the odds of being subjected to an audit are low anyway. A Government Accountability Office report from September 2016 found that OFCCP conducts evaluations for only 2 percent of federal contractor establishments annually, and of that amount, the vast majority had no adverse findings at all. Only 2 percent of the audits resulted in findings of discrimination.
If you are considering participating in VERP, we recommend consulting legal counsel to determine whether there is a unique reason why the benefits may outweigh the risks.