By Lauren Weber and Khadeeja Safdar
The U.S. Labor Department is investigating companies with
federal contracts that have included specific numerical goals in
their pledges to increase diversity, arguing that these resemble
illegal quotas and could potentially discriminate against white
applicants and other groups, according to people familiar with the
matter.
The department, which sent letters to Microsoft Corp. and Wells
Fargo & Co. last week about their stated goals to hire more
Black employees into management roles, is now looking more broadly
and might contact other companies soon, those people said. The
department has asked for documents relating to these initiatives
going back to Jan. 1, 2020, and has given the companies until the
end of this month to deliver a report.
A Labor Department spokesman wouldn't comment on other possible
inquiries, but said the department would send letters to other
contractors if it feels an inquiry is needed to confirm that
companies aren't using race- or sex-based hiring preferences or
quotas.
"Companies must take affirmative action but must not
discriminate in doing so," the spokesman said.
The scrutiny, along with a recent White House directive to put
some limits on racial-sensitivity training, has caused confusion
for many businesses that have federal contracts because federal
rules not only allow, but encourage, companies to set diverse
hiring goals, said David Cohen, co-founder of the Institute for
Workplace Equality, a trade association for federal contractors
that counts Microsoft and Wells Fargo as members. The rules were
put in place to help expand the pools of job candidates considered
to more closely mirror the available workforce, he added.
Rules for federal contractors say they must identify the gaps
between their workforces and available labor pools, then establish
placement goals and plans for meeting them.
Microsoft said the Office of Federal Contract Compliance
Programs, a division of the Labor Department, is questioning
whether its June pledge to double the number of Black managers and
leaders in its U.S. workforce by 2025 violates federal laws
prohibiting discrimination based on race. Wells Fargo also pledged
in June to double Black leaders over the next five years and said
it would tie certain bonuses to achieving that goal. It too
received a letter from the same agency reminding the bank that it
may not discriminate on the basis of race to provide additional
opportunities and that quotas are prohibited.
Both companies said they are confident their efforts comply with
U.S. employment laws.
Some top contractors that announced recent diversity
initiatives, including Boeing Co., said they haven't received
similar letters from the OFCCP. Boeing pledged to increase its
number of Black employees in the U.S. by 20% without giving a time
frame.
Enforcing racial or other diversity quotas in hiring is illegal,
but spelling out hiring goals is not, several labor law experts
said.
Yet hiring goals can cross the line into quotas if they involve
fixed numbers, said Ondray Harris, special counsel at Hunton
Andrews Kurth LLP and former director of the OFCCP under President
Trump.
Companies can draw the scrutiny of the federal government if
they fall short in hiring Black employees, but also if they take
the wrong approach to fixing the problem, Mr. Harris said. "You may
need a scalpel and not a sledgehammer," he said.
"Affirmative action is OK as long as you are taking qualified
individuals and throwing them into the pool of candidates," he
said. "Anything that looks like concrete numbers, set-asides or
quotas is going to create a problem."
Jenny Yang, the former chair of the Equal Employment Opportunity
Commission under President Obama, said the rules regarding diverse
hiring aren't as complicated as some people make them out to
be.
"Goals are flexible," she said. "I worry the OFCCP is confusing
matters by suggesting that simply having a goal as a federal
contractor is somehow going to land you in hot water."
In July, the agency said the San Jose, Calif., office of Mphasis
Corp., a technology services firm, had discriminated against white
applicants "in favor of Asian applicants, particularly Asian
Indians, based upon race in its hiring practices" for computer
systems analyst positions. The company agreed to pay $171,000 in
lost wages and interest to some white applicants who weren't hired.
The company denied OFCCP's findings and allegations, according to
the agreement Mphasis signed with the agency.
The case, focusing on discrimination against white job
candidates, was unusual in OFCCP investigations, said close
observers of the agency. Mphasis didn't immediately respond to a
request for comment.
"OFCCP has entered into many conciliation agreements where
whites or men were in the protected class," the Labor Department
spokesman said. "OFCCP continues to strongly support affirmative
action for minorities and women in employment."
Firms that sell goods and services to the federal government
have been obligated to take affirmative action to expand workplace
opportunity since President Lyndon Johnson signed Executive Order
11246 in 1965, codifying ideas first put in practice by previous
presidents during and after World War II. The order requires
federal contractors to ensure equal opportunity regardless of race,
religion, national origin and other characteristics.
In 2014, President Obama added sexual orientation and gender
identity to the list of protected characteristics. That year, the
administration also asked contractors to have a target of employing
a minimum of 7% for people with disabilities and a similar share of
veterans. The targets were "aspirational," not rigid quotas,
administration officials said at the time.
While the Johnson order aimed to expand the diversity of job
candidate pools, it doesn't allow the use of hiring quotas, Mr.
Cohen and others said. Race or other characteristics, such as
religion or sexual orientation, can't be used as determining
factors in employment decisions. So a company may set a target to
hire African-Americans or veterans for 20% of its open vice
president positions. But it can't require that African-Americans or
veterans be offered 20% of those jobs.
Write to Lauren Weber at lauren.weber@wsj.com and Khadeeja
Safdar at khadeeja.safdar@wsj.com
(END) Dow Jones Newswires
October 08, 2020 20:07 ET (00:07 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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