FedEx Makes Economic Decision to Settle Charges of Hiring Discrimination for $3 Million Dollars

The U.S. Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) proudly announced on March 22, 2012 that it entered into a conciliation agreement to resolve allegations of hiring discrimination by two subsidiaries of FedEx Corp. with federal contracts.  These subsidiaries, like most companies that are awarded federal contracts, must comply with OFCCP requirements and regulations.

By way of background, federal contractors of a certain size or with federal contracts of a certain amount must file annual affirmative action plans (“AAPs”).  AAPs are generated using computer software.  The computer software creates an overview of the federal contractor’s workforce based on the overall workforce and the number of applicants, hires, promotions, and terminations that occurred during the previous year.  Such computer programs specifically look at the number of female and minority applicants, hires, promotions, and terminations to determine whether the federal contractor’s decisions with respect to hiring, promoting, and terminating indicates any statistically disparate impact on females and minorities.

In the case of the two FedEx subsidiaries, the OFCCP’s allegations against the FedEx subsidiaries were based on computer statistical analysis that presumably indicated a disparity in the subsidiaries’ hiring process and sparked the OFCCP’s investigation.  In other words, the OFCCP’s allegations against FedEx did not step from individual complaints of discrimination.  Even though no one apparently complained that FedEx’s subsidiaries discriminated against them during the hiring process, according to Secretary of Labor, Hilda L. Solis, that is okay because findings of discrimination can rest on disparate impact statistical analysis alone.  In the FedEx case, according to Solis, the OFCCP saw statistical “trends of discrimination, not only against one group, but against many groups across the country.”

More specifically, according to the OFCCP News Release, during a series of regularly scheduled reviews, OFCCP compliance officers found evidence that FedEx’s hiring processes and selection procedures violated Executive Order 11246 by discriminating on the bases of sex, race, and/or national origin against specific groups identified at 23 facilities in 15 states.  The reviews also allegedly uncovered extensive violations of the executive order’s record-keeping requirements.

The FedEx subsidiaries admitted no wrongdoing, but rather than engage in a prolonged and expensive resolution process with the Department of Labor, the subsidiaries entered into a conciliation agreement with the OFCCP under 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 package handler and parcel assistant positions and agreed to extend job offers to 1,703 of the affected workers as positions become available.

The FedEx subsidiaries also committed to wide-ranging reforms including: (1) the company promising to correct any discriminatory hiring practices and implement equal employment opportunity training; (2) launching extensive self-monitoring measures to ensure that all hiring practices fully comply with the law; (3) agreeing to engage an outside consultant to perform an extensive review of the company’s hiring practice and provide recommendations to change and improve those practices; (4) agreeing to train incumbent and future supervisors and employees to monitor compliance with the equal opportunity laws enforced by the OFCCP; and (5) taking necessary steps to comply with all record keeping requirements.

The conciliation agreement entered into by the FedEx subsidiaries appears to have been an economic decision made by the company.  It will forever remain unknown whether FedEx actually engaged in discriminatory hiring decisions.

What’s clear from the FedEx ordeal is that federal contractors should be particularly attentive when it comes to OFCCP compliance. In addition to Executive Order 11246, the OFCCP enforces certain other acts aimed at protecting the disabled and veterans.  Those who do business with the federal government, both contractors and subcontractors, must not discriminate in employment on the basis of sex, race, color, religion, national origin, disability or status as a protected veteran.

For assistance with creating your Affirmative Action Plan or other OFCCP compliance issues, please contact Harmon & Davies, P.C.

This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice.  Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

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