The Fourth Amendment to the U.S. Constitution guarantees the “right of the people to be secure in their persons, houses, paper, and effects against unreasonable searches and seizures,” and provides that no warrant shall issue with probable cause. In a recent decision in Bank of America v. Hilsa L. Solis, 1:09-CV-2009 (D.D.C. December 13, 2011), the Court extended these protections to an Office of Federal Contract Compliance request for documents during an investigation into an employer’s employment practices under Executive Order No. 11246. The ruling underscores the stakes – and considerable legal issues – underlying governmental workplace enforcement actions.
Overview Of Executive Order No. 11246 And How It Is Enforced
Executive Order No. 11246 provides that government contractors are prohibited from discriminating against any employee or applicant for employment because of race, color, religion, sex, or national origin. Contractors covered by Executive Order No. 11246 must develop and maintain affirmative action programs for each of their facilities. The Office of Federal Contract Compliance Programs (“OFCCP”) was established to enforce this Executive Order per 41 C.F.R. §§ 60-1.2, 60-1.20(a). The OFCCP is within the U.S. Department of Labor (“DOL”).
To enforce this Executive Order, the OFCCP is authorized to conduct compliance evaluations. One compliance evaluation investigation procedure used by the OFCCP is a “compliance review,” which is comprised of a “comprehensive analysis of the hiring and employment practices of the contractor, the written affirmative action program, and the results of the affirmative action efforts undertaken by the contractor.” 41 C.F.R. § 60-1.20(a)(1).
A compliance review may proceed in three stages, including: (i) a desk audit; (ii) an on-site review; and (iii) when necessary, an off-site analysis. Id. A desk audit is normally conducted at OFCCP offices, and involves a request by the OFCCP of specific documents from the contractor, including the contractor’s affirmative action plan and supporting documentation, and a review of those documents to determine whether all elements required by the regulations are satisfied. 41 C.F.R. § 60-1.20(a)(1)(i). If the OFCCP determines that a follow-up investigation is needed based on the information received during the desk audit, it can demand an on-site review be conducted at the contractor’s establishment. 41 C.F.R. § 60-1.20(a)(1)(ii). These on-site reviews usually involve examining the contractor’s personnel and employment policies, inspecting and copying documents related to employment actions, and interviewing employees, supervisors, managers, and hiring officials. Id.
To select contractors for the compliance review, the OFCCP maintains a random computer-generated list of government contractors in a given geographic area. Under its internal regulations, the OFCCP is supposed to select contractors from the list in strict sequential order. In other words, the OFCCP is required to start at the top of the list and work its way through each contractor one-by-one before going on to the next name of the list.
Under the Obama Administration, the DOL has stepped up the OFCCP’s enforcement efforts relative to employers covered by Executive Order No. 11246.
Facts Of The Bank Of America Case
In early 2004, the OFCCP notified Bank of America that it had selected the bank’s facility located in Charlotte, North Carolina for a compliance review, and it requested a number of documents from Bank of America as part of its proposed desk audit. In the notice, the OFCCP warned that it could file an enforcement action if Bank of America refused to cooperate in the desk audit.
In response to the OFCCP’s letter, Bank of America agreed to cooperate with the OFCCP, but it requested that the OFCCP first provide it with information about how the OFCCP had come to select this facility for the desk audit. The OFCCP responded that it had selected the facility based on its internal selection procedures. Based on the OFCCP’s representation, Bank of America provided the documents requested by the OFCCP.
After reviewing these documents, the OFCCP requested that an on-site investigation be conducted because it determined that the initial information provided by Bank of America demonstrated preliminary evidence of pay discrimination between men and women. When the OFCCP requested the on-site investigation, Bank of America refused to cooperate further until the OFCCP could show definitively how it chose this facility to be selected initially for the desk audit.
Rather than provide this information to Bank of America, the OFCCP filed an enforcement action with the DOL to gain access to Bank of America’s facility. During the discovery stages of the enforcement action, Bank of America learned that the OFCCP had not complied with its internal selection regulations because there were 20 other employers above Bank of America on the OFCCP’s selection list that the OFCCP had made no attempt to investigate prior to contacting Bank of America about the desk audit. Bank of America argued that the information the OFCCP obtained from the employer was in violation of the Fourth Amendment because the OFCCP had no specific evidence of a violation of the Executive Order and because the OFCCP had selected the facility without relying on neutral criteria (i.e., by correctly using the selection list).
In response, the OFCCP argued that the Fourth Amendment did not apply to the desk audit portion of the compliance review. As to the on-site portion of the compliance review, the OFCCP conceded that the Fourth Amendment applied to this portion of the compliance review, but it argued that the on-sight review was supported by probable cause based on the information it had secured as part of the desk audit. Additionally, even if the Fourth Amendment applied to the desk audit portion of the compliance review, the OFCCP argued that Bank of America waived its Fourth Amendment rights by voluntarily producing the documents requested.
The DOL rejected Bank of America’s arguments, and its Administrative Review Board upheld the administrative enforcement complaint over the materials sought from Bank of America. The DOL likewise notified the employer that its failure to comply with the order would subject the company to termination or suspension of its current governmental contracts. Id. at 11. Subsequently, Bank of American filed an action in the U.S. District Court for the District of Columbia pursuant to the Administrative Procedure Act, 5 U.S.C. § 702 et seq., seeking relief from the DOL’s order.
The Court’s Analysis
Relying upon holdings in other contexts from the Supreme Court in Donovan v. Dewey, 452 U.S. 594, 598 (1980), and Marshall v. Barlow’s Inc., 436 U.S. 307, 311 (1978), the Court began its analysis by agreeing with Bank of America’s position that the OFCCP’s desk audit amounted to an “administrative search” and that Fourth Amendment’s protections applied to this portion of the compliance review. Id. at 13-14. According to the Court, the Government can satisfy the Fourth Amendment’s standards only if can demonstrate that the request is based on “specific evidence of an existing violation” or a showing that the search is pursuant to “an administrative plan containing specific neutral criteria.” Id. at 27. Because the OFCCP could not show that it had specific evidence of a violation (prior to receiving the information from the desk audit) and because the OFCCP could not demonstrate that it selected the bank’s facility based on neutral criteria, the Court determined that the OFCCP was not entitled to the information requested as part of the desk audit under the Fourth Amendment. Id. at 29.
Nevertheless, the Court determined that the OFCCP had legally obtained the information as part of the desk audit because Bank of America had voluntarily consented to the search by producing the documents initially requested by the OFCCP. The Court rejected two additional arguments raised by Bank of America on the waiver issue. First, Bank of America argued that it was coerced to consent to the search based on the OFCCP’s threat of litigation if it did not comply with desk audit. Second, Bank of America argued that it only produced the documents based on the OFCCP’s misrepresentation that the OFCCP had selected Bank of America based on neutral criteria. In rejecting these two contentions, the Court reasoned that Bank of America was a sophisticated company, it knew its rights under the DOL regulations, and it should have made greater effort to protect those rights before producing the documents to the OFCCP. Id. at 31-34.
Implications For Employers
Notwithstanding the result, the Bank of America decision is a positive development for employers because it extends the Fourth Amendment’s probable cause requirement to the Government’s requests for documents during workplace investigations. If the Government selects an employer for an OFCCP desk audit, an employer can demand that the Government prove that it selected the employer through a neutral selection process; thus, the Government cannot arbitrarily chose an employer for an OFCCP compliance review. The decision makes clear, however, that an employer must be diligent in protecting these Fourth Amendment rights or else it risks a ruling in a future enforcement action that that it has waived those rights.