OFCCP v. Firestone Tire & Rubber Co., Inc., 80-OFC-15 (Sec'y July 13,
1980)
Date: July 13, 1980
Case No. 80-OFCCP-15
In the matter of:
U.S. Department of Labor
Office of Federal Contract
Compliance Programs
Plaintiff
v.
Firestone Tire and Rubber Co., Inc.
Defendant
DECISION AND FINAL ORDER OF
THE SECRETARY OF LABOR
Preliminary Statement
This matter arises under Executive Order 11246, as amended
(Order), and the regulations found at 41 CFR Chapter 60. The
Order imposes nondiscrimination and affirmative action
obligations on Government contractors. The required contents of
and procedures for affirmative action programs for non-
construction contractors are contained in 41 CFR 60-2, also known
as "Revised Order No. 4."
This is an action brought by the Office of Federal Contract
Compliance Programs (OFCCP or Plaintiff) against Firestone Tire &
Rubber Company, Inc. (Defendant or Firestone) seeking injunctive
relief and the termination of Firestone's existing Government
contracts and subcontracts and to have Firestone declared
ineligible for all future contracts and subcontracts until such
time as it satisfies the Director of OFCCP that it is in full
compliance with the Order and regulations issued pursuant
thereto.
An Administrative Complaint alleging that Firestone had
violated the Order and the regulations issued thereunder, was
issued by OFCCP on February 22, 1980. The complaint alleged
several deficiencies which rendered Defendant's second revised
1978 Affirmative Action Program (AAP)[1] for its Orange, Texas
facility unacceptable.
The issues raised by the complaint fit within the newly
adopted Expedited Hearing Procedures provided for in 41 CPR
§§60-30.31-37 and Plaintiff elected to bring the action
thereunder. All parties were represented by counsel at the
hearing conducted in May 1980 and were afforded full opportunity
to be heard, to
[PAGE 2]
examine and cross examine witnesses,, and to introduce evidence
bearing on the issues involved. The hearing was completed on May
14, 1980. The Administrative Law Judge (ALJ) promptly issued his
Recommended Decision on May 29, 1980, pursuant to 41 CFR 60-
30.35. The ALJ concluded that Plaintiff has failed to sustain its
burden of proving any violation of the Executive Order or of the
regulations promulgated thereunder. The ALJ recommended that the
administrative complaint be dismissed without prejudice to
renewal upon other grounds.
The parties timely filed Exceptions to the Administrative
Law Judge's Recommended Decision and Responses to those
Exceptions. The record is now before me for review pursuant to
41 CFR 60-30.37.
Statement of the Case
I agree with and adopt the following portion of the ALJ's
Statement of the Case.
"On or about February 22, 1980, Plaintiff issued and served
by mail upon the Defendant an administrative complaint alleging
in substance that Defendant, a Government contractor, had
violated Executive Order 11246, and pertinent regulations
thereunder, in that its revised 1978 Affirmative Action Program
(AAP) for its facility at Orange, Texas was deficient and
unacceptable in the following respects:
1. It failed to declare underutilization of minorities
and females in various job groups in accordance with Plaintiff's
interpretation of the regulations at 41 CFR 60-2.11(b);
2. It failed to establish goals and timetables in
accordance with Plaintiff's interpretations of the regulations at
41 CPR 60-2.10 and 60-2.12; and
3. It failed-to include adequate action-oriented programs
to correct problem areas in job groups and organizational units
as required by 41 CPR 60-2.13, 60-2.23 and 60-2.24.
By reason of these alleged delinquencies, Plaintiff seeks
injunctive relief and imposition of the sanctions of cancellation
of contracts and debarment pursuant to Section 209(a)(5)(6) of
the Order. The complaint was amended as of course on or about
March 4, 1980 (without change in the operative allegations), and
an answer was duly filed on March 18, 1980, with a request for
hearing.
In its answer Defendant admitted in effect that its revised
1978 AAP for its Orange facility did not declare underutilization
in conformity with Plaintiff's interpretation of the pertinent
regulations, but denied violating the order or regulation,
alleging that it had fully complied with all the requirements of
the pertinent regulations.with respect to underutilization. By
way of affirmative defense, Defendant alleged that Plaintiff's
interpretation was arbitrary and capricious and that it deprived
[PAGE 3]
Defendant of due process of law.
It should be noted that Defendant is not charged with
discrimination against minorities or females. No discriminatory
act or effect at Defendant's orange facility has been alleged or
proved. The proceeding deals solely with the sufficiency of the
Affirmative Action Program adopted at that facility for 1978.
Discussion
Utilization Analysis
As both of the parties and the ALJ recognized, the core
issue of this proceeding is the method to be employed in
determining availability and declaring underutilization of
minorities and women.
OFCCP requires a contractor to declare underutilization in
its Affirmative Action Program (AAP) whenever the percentage, in
a job or group of jobs, of minorities or women is lower than the
percentage of such persons available in that job category within
the applicable labor area. Defendant asserts that
underutilization need not be declared if the disparity between
incumbency and availability is no greater than would be expected
applying a 5 percent statistical significance test.
I have concluded that OFCCP's direct comparison of
incumbency to availability is the only method cognizable under
the regulations at §60-2.11(b).
The dispute arises because §60-2.11(b) defines
underutilization "as having fewer minorities or women in a
particular job group than would reasonably be expected by
their availability." (Emphasis supplied) Defendant has
interpreted the underscored phrase as permitting it to apply the
5 percent test to determine what would reasonably be expected.
Defendant's interpretation fails to recognize that the
regulations themselves supply the meaning of "reasonably be
expected."
The text of §60-2.11(b) explicitly directs the
contractor to consider at least all of the eight factors listed
in 41 CFR 60-2.1(b)(1)(1) and (2) when determining
underutilization. The eight factors listed in 41 CFR 60-
2.11(b)(1) and (2) establish the guidelines for insuring a
"reasonable" underutilizaton analysis.
The section preceding the list of factors states:
"In determining whether minorities are being underutilized
in any job group, the contractor will consider at least all
of the following factors:"
(emphasis supplied)
Incumbency is to be compared with availability on a one-to-
one basis once availability has been determined. If there are
fewer incumbents than availability figures would indicate, the
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contractor must declare underutilization.
The Ninth Circuit Court of Appeals has read the regulations
in the same manner presented above when it stated:
"The comparison of percentages is mechanical, but the
percentages to be compared are computed on the basis of
the full range of variables specified in the
regulations."
"Underutilizations are fewer minorities or women in a
particular job group than would be reasonably expected by
their availability, 41 CFR 60-2.11(b). Availability
figures are to reflect only qualified workers reasonably
available in the relevant labor pool." Legal Aid Society
of Alameda County v. Brennan, 608 F.2d 1319, 1341 (9th
Cir. 1979) cert. denied, ___ U.S. ___ (1980).
(emphasis supplied.)
It might be noted that the regulations stated above permit
the consideration of additional factors which are not
specifically listed (41 CFR 60-2.11(b)(1) and (2)). Accordingly
it can be argued that the 5 percent statistical significance
test, proposed by the Defendant is, such an additional factor and
may properly be applied. I do not,.agree that a 5 percent
"margin of error" can properly be considered an additional factor
under the meaning of the regulations.
It should be noted that the above interpretation is
consistent with the doctrine of ejusdem generis. The doctrine
states that general words are construed to embrace only objects
similar in nature to those enumerated by the specific words. (4A
Sutherland, Statutory Construction S 47.17) The 5 percent test is
not of the same character as the other factors set forth in the
regulations.
It may be arguable that in other cases the 5 percent test is
appropriate to determine whether an occurrence happened by chance
in order to disprove discriminatory intent. A declaration of
underutilization, however, carries no stigma or imputation of
discriminatory intent. It is a statement of fact, i.e. that
incumbents are fewer than potentially available employees. In
any event, the 5 percent test is an inappropriate factor
particularly in light of the fact that the data is an
approximation that already provides for substantial variables.
Legislative or Interpretive Rule
I disagree with the ALJ's finding that TGM No. 1 is a
legislative rule. The ALJ concluded that the TGM No. 1 does not
interpret the regulations but amends it by substituting a precise
mathematical formula for the flexible concept of reasonable
expectation. Because the ALJ concludes that it effects a
substantive change in the rule he concludes that it is a
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legislative rule. A legislative rule must be promulgated
pursuant to the notice and comment requirements of the
Administrative Procedure Act (APA) (5 U.S.C §553) to have
the force and effect of law. The ALJ correctly stated the conse-
quences of the alternative finding that a rule or statement is
interpretative. If it is an interpretative statement it is
exempted from the general notice and comment requirements of the
APA (5 U.S.C. §553(b) and (d)) (Recommended Decision, pp. 8-
9).
I have concluded that the regulation itself requires the
procedure described by TGM No. 1. Therefore, the definition in
TGM No. 1 is not a legislative rule but an interpretative
statement.
The disputed language of TGM No. 1 does not go beyond the
regulation's stated procedure for comparing incumbency to
availability. It reads:
"(4) Underutilization Analysis. Whenever the percentage
in a job or group of jobs of total minorities, or of any
minority group exceeding 2 percent or more of the labor
area, or of women is lower than the percentage of such
persons available in that job category within the
applicable labor area, the affirmative action program must
specifically state that underutilization exists in the
category."
This is an alternative statement of the Procedure required by the
regulations. It is an interpretative statement exempt from the
notice and comment requirements of 5 USC §553.
TGM No. 1 is consistent with the regulations, as a
restatement of the regulations express mandate, and is not
plainly erroneous. It is entitled to deference. "[A]n
administrative agency's interpretation of its own rules is
usually followed unless it is plainly erroneous or inconsistent
with the regulation. See Udall v. Tallman, 380 U.S. 1, 85
S.Ct. 792 (1965); Bowles v. Seminole Rock and Sand Co.,
325 U.S. 410, 65 S.Ct. 1215 (1945); 2 K Davis, Administrative
Law Treatise, §7.22 (2d ed. 1979)." (Recommended
Decision, P. 9.)
Job Groups
The second issue raised by the language at 41 CFR 60-2.11(b)
is: Which job groups must a contractor subject to utilization
analyses?
The regulations at 41 CFR 60-2.11(b) require a government
contractor to conduct an utilization analysis of all major
job groups. I do not fully agree with Plaintiff's contention
that the regulations require an utilization analysis for all job
groups,regardless of size. I also do not agree with Defendant's
interpretation of 'major', as limited to 50 or more persons,
Rather, a contractor must conduct a utilization analysis for, at
least, those job groups that are major by virtue of their
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importance, as indicated by their enumeration in the regulation,
regardless of size.
41 CFR 60-2.11, which is the general section of the
utilization analyses provision provides:
"Based upon the Government's experience with compliance
reviews under the Executive Order program and the
contractor reporting system, minority groups are most
likely to be underutilized in departments and jobs within
departments that fall within the following Employer's
Information Report (EEO-1) designations: Officials and
managers, professionals technicians, sales workers, office
and clerical and craftsmen (skilled). As categorized by
the EEO-l designations, women are likely to be
underutilized in departments and jobs within departments
as follows: Officials and managers, professionals,
technicians, sales workers (except over-the-counter sales
in certain retail establishments), craftsmen (skilled and
semi-skilled). Therefore, the contractor shall direct
special attention to such jobs in its analysis and goal
setting for minorities and women. Affirmative
action programs must contain the following
information."
"Major" job categories or groups include, at least, the EEO
job designations enumerated in that introductory section.
An earlier regulation required an utilization analysis in
wall job categories.' (§60-1.40b(l)(1968)) The regulations
were expanded in 1970 by the addition of 41 CFR 60-2. Revised
Order No. 4. The 1970 revision of the utilization analysis
requirement incorporated,, for the first time, a listing of those
six job categories that 8 years of experience had indicated was
where minority groups were most likely to be underutilized
(§60-2.11(d)). The present regulations have expanded these
categories to include experience of underutilization findings for
women (§60-2.11).
As outlined above, §60-2.11 itself provides a minimum
of job groups that must be considered major when it lists the job
categories which experience has demonstrated have been the jobs
where minorities and women are most likely to be underutilized.
All such enumerated job groups must be subjected to an utili-
zation analysis regardless of size. Other job groups may be
characterized as major because of their numerical significance or
other important attributes.
It should be noted that OFCCP's Compliance Manual does not
limit major job groups to 50 or more. It recommends 50 person
groups to permit meaningful analysis and suggests regrouping of
job groups for this purpose (Section 2-150.2). It does not set
that as a minimum. The testimony of OFCCP's Director is not to
[PAGE 7]
the contrary (Tr. 142-44).
"Major" is not limited to an arbitrarily assigned number of
fifty. Such a limitation would have resulted in Firestone's not
having to analyze utilization of minorities and females for 16 of
its 21 job groups (76 percent), representing 213 of its total
employee force of 688 (31 percent). Imposing a 50 person minimum
on job group analysis would severely impair enforcement of the
Executive Order's mandate of affirmative action and the
monitoring of compliance with the AAP regulations to achieve full
utilization of minorities and females.
AAP Deficiencies under 41 CFR 60-2.10, 2.11, 2.12, 2.13, 2.23 and
2.24.
Firestone's AAP is deficient in several respects in addition
to its failure to declare underutilization as required by 41 CFR
60-2.11(b). Declaring underutilization is only the first step in
complying with the requirements of 560-2.10. Section 60-2.10
requires a contractor to establish goals and timetables to which
a contractor's good faith efforts must be directed to correct the
deficiencies. A contractor must set ultimate percentage goals
equal to availability whenever underutilization exists. Legal
Aid Society of Alameda County v. Brennan, 608 F.2d 1319 (9th
Cir. 1979), cert. denied, ___ U.S. ___ (1980).
Firestone has failed to establish goals and timetables for
job groups in violation of §§60-2.10 and 2.12.
Defendant only set goals for those job groups where
underutilization exceeded the 5 percent statistical significance
test. Section 60-2.12 provides the guidelines for establishment
of goals and timetables required by §60-2.10. Section 60-
2.12(g) requires that goals, timetables and affirmative action
commitments must be "designed to correct any identifiable
deficiencies." Firestone's AAP is deficient in not setting goals
and timetables for those groups where there was a disparity
between utilization and availability.
41 C.F.R. 60-2.13 lists several additional ingredients of an
acceptable AAP. The obligations imposed by §60-2.13(f) are
at issue in this case.
Defendant has failed to develop and execute action-oriented
programs designed to eliminate problem areas and attain
established goals and objectives. The ALJ found that Defendant's
AAPs did not include these action-oriented steps (Finding of Fact
No. 18). I have reviewed and adopted his conclusion.
Section 60-2.23 provides additional guidance on how a
contractor is to identify problem areas. It lists ten factors to
be considered and 19 specific problems that warrant remedial
action. The ALJ found that Firestone's AAP contains an analysis
of all 10 items required to be considered in identifying problem
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areas in organizational units. I have adopted his finding, as
amended, (Finding of Fact No. 15).
The other matters at issue in this proceeding will be
discussed in my Findings of Fact and Conclusions of Law and
Rulings on Exceptions.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
In light of the foregoing discussion and my review of the
entire record in this case, I make the following Findings of Fact
and Conclusions of Law.
Findings of Fact
I accept and adopt the ALJ's Findings of Fact Nos. 1-14, 16-
18, and 25, as supplemented by the additional findings of fact
established by grant or denial of Plaintiff's or Defendant's
Exceptions.
I amend Finding of Fact No. 4 to eliminate the
characterization of Technical Guidance Memo No. I as a "policy
directive".
I amend Finding of Fact No. 15 to show that Firestone# in
part satisfied its identification of problems areas by
organizational unit by submitting a utilization analysis by
organizational unit. The utilization analysis satisfied the
requirement to perform an in-depth analysis of (1) composition of
the workforce by minority group status and sex. §60-
2.23(a)(1). This analysis revealed underutilization of minorities
and women by organizational units. Firestone identified a
problem area for which it did not design action-oriented
programs. §60-2,12(f).
I agree with and adopt Finding of Fact No. 19 as amended to
include the other deficiencies cited in the Show Cause Notice
issued August 15, 1978 in accordance with Plaintiff's Exception
No. III-H.
Finding of Fact No. 20 is modified, in accordance with grant
of Plaintiff's Exception III-E. to include a finding that
Firestone's initial AAP declared underutilization and set goals
whenever there was underutilization of 1/2 person or more.
Finding of Fact No. 21 is amended, as consistent with the
grant of Plaintiff's Exception No. III-B. to specify that the 5
percent statistical significance test is a common method of
measuring probability and has been employed to establish
discriminatory intent but inappropriate to declarations of
underutilization.
Finding of Fact No. 22 is stricken, consistent with my grant
of Plaintiff's Exception No. III-J. Defendant employed a number
of different methods for determining availability, not a number
of methods to compare incumbency with availability.
Finding of Fact No. 23 is stricken. Consistent with denial
of Plaintiff's Exception No. 12 and grant of
Plaintiff's,Exception No. III-K. I find that availability
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figures are not precise, but are reasonable estimates.
Finding of Fact No. 24 is stricken. The record does not
support the ALJ's statement of OFCCP's position.
Finding of Fact No. 26 is amended to state: Technical
Guidance Memorandum No. 1 has never been published for notice and
comment.
Conclusions of Law
I adopt the ALJ's Conclusions of Law regarding the Secretary
of Labor's authority to promulgate the regulations contained in
41 CFR Part 60-2. under sections 201 and 202 of Executive Order
11246 (Recommended Decision, p. 7 lines 7-22).
The ALJ's Conclusions of Law (Recommended Decision p. 8
lines 14-46, p. 9, lines 1-4) are amended to reflect my
conclusion that TGM No. l's numerical disparity test of
underutilization is an interpretative statement that neither
alters or amends the obligations dictated by the regulations at
41 CFR 60-2.11(b). The regulation itself provider clear guidance
as to the meaning of the contested or provisions and requires a
one-to-one comparison of availability to incumbency.
The ALJ's Conclusions of Law are further amended and
supplemented by the Conclusions of Law established by grant or
denial of the parties' Exceptions.
I also adopt the ALJ's conclusion that an administrative
agency's interpretation of its own rules is usually followed
unless it is plainly erroneous or inconsistent with the
regulation. (Recommended Decision, p. 9, lines 5-10).
I adopt the ALJ's conclusion that Defendant has not
sustained its burden of proving that Plaintiff's interpretation
was arbitrary and capricious or that Defendant has been denied
due process of law. (Recommended Decision, p. 10, lines 7-10).
I further conclude that:
The direct comparison of percentage rates of incumbency
and availability provided for in 41 CFR 60-2.11(b) and TGM
No. 1, is a simple, fair and uniform method of determining
underutilization.
Firestone has violated its obligations under the Order and
regulations contained at 41 CFR Chapter 60, specifically
41 CFR 60-2.11(b) by failing to declare underutilization for
all major job groups having fewer minorities or women than
would reasonably be expected by their availability.
The 5 percent statistical significance test is
inappropriate in computing underutilization.
The 5 percent statistical significance test is not one of
the tests or factors that can be considered in determining
the number of minorities or women that may reasonably be
expected.
[PAGE 10]
An interpretative rule or statement is excepted from the
notice and comment requirements of the Administrative
Procedure Act (5 USC §§530 §553b and d).
TGM No. 1's statement of method for comparing utilization
percentages with availability percentages is interpretative.
As an administrative agency's interpretation of its
regulations, TGM No. 1. is entitled to deference.
Firestone's AAP is deficient in setting goals and
timetables to correct deficiencies in major job groups where
women or minorities were underutilized. (§§60-2.10
and 2.12).
Job groups which a contractor must analyze include those
that the regulation itself defines as major. Major is no
less than the categories enumerated in 41 CPR 60-2.11 that
experience has shown to be the traditional areas of
underutilization.
Firestone has failed to comply with the requirements of
the regulations at 41 CFR 60-2 including §§60-
2.10l 2.11, 2.12, 2.13, 2.23, and 2.24.
Firestone's challenge to the regulations as violative of
federal procurement law is without merit, as are its
challenges to the regulations under the Order, Title VII of
the Civil Rights Act of 1964, and the United States
Constitution.
For the foregoing reasons, I further conclude that
Firestone has failed to comply with Executive Order 11246,
including specifically, section 202 which sets forth
appropriate requirements for affirmative action.
Finally, I conclude that the appropriate remedy is
cancellation of Firestone's present Government contracts and
subcontracts and that Firestone be declared ineligible for
future contracts and subcontracts and from extensions or
modifications of any existing contracts and subcontracts as
provided in my Order below.
RULINGS ON EXCEPTIONS
Underutilization Analysis
Plaintiff's Exceptions Nos. III-B, III-I, III-K, IV-F, F-4
and Defendant's Exceptions Nos. 2, 3, 12(b) and 13 all relate to
the proper method of determining availability of qualified
minorities and women and declaring underutilization.
Plaintiff's Exceptions Nos. III-B, III-I, and IV-F, III-K,
IV-F and F-4 are granted; Defendant's Exceptions Nos. 3, 12(b)
and 13 are denied.
Defendant's Exception No. 2 excepts to the ALJ's failure to
find that applicant flow or the number of qualified persons is
the best measure of availability.
We note that in the list of factors at §60-2.11(b) does
not
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contain applicant flow[2] or the number of qualified persons
willing to accept a particular position. Although such matters
may be additional factors that employers can consider. The use
of such considerations is not at issue in this case. Therefore,
a ruling on which is the best measure of availability is
irrelevant to this case.
Defendant excepts to the ALJ's failure to find that the use
of the 5 percent test of statistical significance is an
acceptable and legal method declaration underutilization
(Defendant's Exception No. 3).
Defendant's 5 percent statistical significance test is not
an acceptable or legal method for computing underutilization,
because it is contrary to the procedure required by the
regulations at 41 CFR 60-2.11(b).[3] As Plaintiff contends,
Defendant's expert witness, Dr. Michelson, declined to endorse
the 5 percent test as appropriate to underutilization analysis
(Tr. 486). Firestone is obligated to declare underutilization
whenever availability exceeds actual utilization and has failed
to comply with that obligation. (Plaintiff's Exception No. IV-F
and F-4 are granted; Defendant's Exception No. 3 is denied.)
The 5 percent statistical significance test has been used to
determine discriminatory motive or intent or fairness (Tr. 450,
485). The question asked in discrimination cases is: "Could the
disparity between incumbency and availability have happened by
chance or is it the product of discriminatory motive?" By
contrast, a finding of underutilization carries no imputation of
improper discriminatory motive (Tr. 71).
Plaintiff's Exception No. III-B is granted. Under-
utilization is a statement of fact, i.e., that there are fewer
minorities or women employees than would reasonably be expected
from their availability.
Defendant's Exception No. 12(b) excepts to the ALJ's failure
to find that OFCCP's interpretation of underutilization presumes
that availability estimates are precise.
Contrary to Defendant's assertion, the use of the numerical
disparity test does not presume that availability estimates are
precise. In fact, the numerical disparity test is of special
importance because the availability estimates are themselves
reasonable estimates. The contractor is given great flexibility
in determining availability. The record shows that Firestone
availed itself of this flexibility by assigning different weights
and values to the factors it considered in setting availability
depending upon the nature of the job group (Tr. 441-443) and
included qualitative factors such as applicant flow (Joint
Exhibit 3, Attachment 14, 2nd Revised AAP), location of the
plant, commuting distances and pay rates (Tr. 417). Defendant's
' availability rates were accepted by the compliance agency
[PAGE 12]
(joint Exhibits 5 and 6, Item 1-4) and Defendant only accepted
revisions in its availability rates if "it was something
reasonable." (Tr. 333-41 Plaintiff's Exception III-K).
Defendant asserts that in comparing incumbency with
availability it is appropriate and legal to introduce a 5 percent
significance test. Defendant believes that such a test give
meaning to the words "reasonably to be expected'" I do not
agree. The factors listed in the regulation and others like it,
are to be used in determining the minorities and women who are
reasonably to be expected. These factors themselves contain sub-
stantial flexibility. Plaintiff's Exception III-K is granted,
Defendant's Exception No. 12(b) is denied.
Defendant's Exception No. 13 excepts to the ALJ's failure to
find OFCCP's interpretation regarding underutilization is
unreasonable, arbitrary, capricious and an abuse of discretion.
It should be noted that the ALJ has characterized the OFCCP's
test as having many attributes, including simplicity, fairness
and uniformity (ALJ Recommended Decision, p. 7). I agree with
this view of the ALJ and disagree with the position asserted by
Defendant in Exception 13. Defendant's Exception No. 13 is
denied.
Interpretive Rules or Statements
Plaintiff's Exceptions Nos. III-A, III-E, III-J, IV-F-1, F-3
and Defendant's Exceptions Nos. 10, 11 and 12(a) concern the
issue of the deference due interpretative rules and statements.
Plaintiff's Exceptions Nos. III-A, III-E, III-J, IV-F-1, and
-3 are granted; Defendant's Exceptions Nos. 10, 11 and 12(a) are
denied.
I have concluded that the regulations themselves require a
direct, one-to-one comparison of incumbency to availability (41
CFR 60-2.11(b)) and that TGM No. 1 is an interpretative statement
because it restates the regulation's requirement. Plaintiff's
Exception IV-F-2 requests a finding that OFCCP's interpretation
of underutilization does not substantially affect contractor's
obligation. Plaintiff's Exception No. IV-F-2 is granted.
Plaintiff's Exception IV F-3 requests a finding that OFCCP's
interpretation is entitled to deference. It raises the unifying
issue that relates the exceptions noted above: Is OFCCP's
interpretation entitled to deference? An agency's interpretation
is entitled to deference if it is not plainly erroneous or
inconsistent with the regulation. (Udall v. Tallman,
supra, Bowles v. Seminole Rock and Sand Co., supra.
Plaintiff's Exception No. IV-F-3 is granted.
Plaintiff's and Defendant's other exceptions concern the
impact of additional factors on the degree of deference to be
accorded an agency's interpretation. The factors at issue are
whether the interpretation was made contemporaneously with the
[PAGE 13]
promulgation of the regulation being interpreted and whether the
agency's interpretation has been consistent over a period of
time.
Defendant's Exception 12(a) excepts to the ALJ's failure to
find that OFCCP's interpretation of underutilization was not made
contemporaneously with the issuance of the relevant regulations
or the Executive Order. Plaintiff's Exception III-A excepts to
the ALJ's failure to find that OFCCP has maintained the same
interpretation of the term underutilization since at least 1974,
when the Purpose Provision in Revised Order No. 4 was amended to
require prompt and full utilization of minorities and women. The
text of Plaintiff's Exception III-A, asserts that the issuance
was contemporaneous because it was published 8 days after the
amendment was issued.
I conclude that TGM No. 1 was issued contemporaneously with
the regulation. The Purpose Section of 41 CFR 60-2 was amended
in 1974. The amendment, with which the TGM No. 1 is
contemporaneous, altered the policy of the regulation to require
achievement of full utilization of minorities and women
rather than the prior aim of just materially increasing
utilization of those groups. Section 60-2.10. Defendant's
Exception 12(a) is denied. Plaintiff's Exception III-A is
granted.
Plaintiff's Exception No. IV F-1 asserts that the definition
of underutilization should be construed in the context of the new
purposes of the regulations. I agree, however, it should be
pointed out that a reading of §60-2.11(b) itself warrants
our view of the meaning of this regulation, as set forth in this
opinion. Plaintiff's Exception IV-P-1 is granted.
Defendant's Exceptions Nos. 10 and 11 except to the ALJ's
failure to find that OFCCP has inconsistently interpreted the
regulations regarding underutilization and goal setting and that
OFCCP has approved various methods of declaring underutilization.
Plaintiff's Exceptions III-E excepts to the ALJ's failure to find
that Defendant had itself used the OFCCP's basic method in
determining underutilization in its AAPs prior-to the first
revised AAP for 1978. Plaintiff's Exception No. III-J excepts to
the ALJ's finding (Finding of Fact No. 22) that Defendant used a
variety of methods for determining underutilization in its 1973-
1979 AAP's for other facilities. Defendant asserts that the use
of these varying methods were approved by OFCCP.
I conclude that OFCCP has consistently interpreted the
regulations regarding underutilization and that Firestone,
itself, has not used a variety of methods for determining
underutilization.
Defendant supports its Exception No. 11 with reference to
its Post-Hearing Brief pages 47-50. In those pages, Defendant
cites testimony (Tr. 243, 244, 278) and" Exhibits regarding AAP's
[PAGE 14]
for its other facilities which were approved despite the absence
of declarations of underutilization for a few job groups where
utilization fell short of availability by less than 1/2 person.
These examples of Firestone's deviations from OFCCP's announced
procedures, in otherwise presumably acceptable AAP's. do not
establish OFCCP's inconsistency. Defendant, routinely declared
underutilization and set goals whenever underutilization exceeded
1/2 person. (Tr. 342, 352) Mr. Rougeau, the Director of OFCCP,
testified that OFCCP has consistently interpreted
underutilization since at least 1974 (Tr. 71-72, 75).
(Defendant's Exception No. 11 is denied; Plaintiff's Exception
No. III-E is granted.
The ALJ's Finding of Fact No. 22 states that between 1973
and 1979 Firestone employed different methods for determining
underutilization. I have found otherwise. The parties
stipulated that Firestone used different methods for determining
availability not underutilization. (Tr. 206, 214, 327-28, 336-9).
All of the methods considered the eight factors listed in 52.11
(Tr. 206207). Defendant's Exception No. 10, incorporates pages
50-51 of its Post-Hearing Brief. Those pages discuss the variety
of methods for setting availability not declaring
underutilization. (Plaintiff's Exception No. III-J). Plaintiff's
Exception No. III-J is granted, Defendant's Exception No. 10 is
denied.
Job Groups
Plaintiff's Exception No. III-L excepts to the ALJ's failure
to find that the regulations require a utilization analysis for
all job groups regardless of size. Defendant's Exception No. 1
objects to the ALJ's failure to find that it is not necessary "to
conduct a utilization analysis or set goals and timetables for
job groups that contain less than 50 persons, i.e., those that
are not 'major.'"
Plaintiff's Exception No. III-L is granted in part and
Defendant's Exception No. 1 is denied.
Plaintiff's assertion (Exception No. III-L) that an
utilization analysis is required for all job groups, regardless
of size, is clearly at odds with the text of §60-2.11(b),
which requires an analysis of "all major job groups at the
facility." However, if a job group is major because the
regulation enumerated it, it must be analyzed regardless of its
size.
Defendant's proposed definition of major is also erroneous.
major is not limited to an arbitrarily assigned number of fifty,
although a job group of 50 persons may be of significance.
Both of the parties assertions as to which job groups must
be analyzed and underutilization declared are in conflict with
the regulations. As discussed above, the regulation itself (41
CFR 60-2.11) enumerates certain job groups. These job groups
[PAGE 15]
must be considered to be "major", and they must be analyzed and
underutilization declared without regard to the number of
employees in such groups along with other job groups that are
major by virtue of other attributes such as size, or rank that
signal their importance. Defendant has not done so in this case.
Goals and Timetables, Identification of Problem Areas and Action-
Oriented Steps
Plaintiff's Exceptions Nos. III-C, III-F, III-G, III-H, IV-
G, IV-H and Defendant's Exceptions Nos. 5, 6, 7, 8, and 9 concern
the responsibilities imposed by §§60-2.101 2.12, 2.13
and 2.23 to set goals and timetables, identify problem areas and
design action-oriented corrective plans.
Plaintiff's Exceptions Nos. III-C, III-F, III-H, IV-G, IV-H
are granted; Plaintiff's Exception No. III-G is denied.
Defendant's Exceptions Nos. 5, 6, 7, 8, 9 are denied.
Plaintiff's Exception No. III-F excepts to the ALJ's failure
to find the magnitude of underutilization identified by Firestone
in job groups and organizational units for which it failed to
specify action-oriented steps.
Defendant's utilization analyses for job groups and
organizational units reveal a total underutilization of 73
persons in job groups (52 minorities, 21 women) and a total
underutilization of 68 persons (47 minorities; 21 women) in
organizational units (Joint Exhibit 3, Attachments 12 and 14).
Plaintiff's Exception III-F is granted.
Defendant has excepted to the failure to find that the
regulations do not require a contractor.to estimate availability,
to conduct a utilization analysis, or to set numerical or
percentage goals for organizational units (Defendant's Exception
No. 7).
Plaintiff has not alleged and I have not concluded that
Firestone's AAP is deficient in estimating availability, in
conducting utilization analysis, or in setting goals by
organizational units. The issue of whether the regulations
require such analysis, estimates or goals is not before me.
Defendant's Exception No. 7 is denied.
Plaintiff's Exception IV-G requests a finding that Firestone
has violated its obligation to set goals and timetables in job
groups where availability exceeds utilization. A contractor must
set ultimate percentage goals whenever underutilization exists.
The ultimate goals must be established in the context of the
announced policy of full utilization of minorities and women (41
CFR 60-1.40). They must be based on availability levels.
Legal Aid Society of Alameda County (LASAC) v. Brennan,
supra, 608 F.2d at 1341. Plaintiff's Exception No. IV-G is
granted.
Defendant's Exception No. 8 requests a finding that
[PAGE 16]
Firestone fully complied with its obligation to identify and
correct problem areas by organizational unit. 41 CFR 60-2.23
requires a contractor to do an in-depth analyses of 10 factors,
including composition of its work force. Defendant did an
organizational unit utilization analysis which fulfilled its
obligation to analyze it work force. Identification of a problem
area does not fulfill a contractor's obligation under 560-2.13 to
take action-oriented steps to eliminate problem. Defendant
identified the problem area but did not fulfill its obligation to
correct the problems. Defendant's Exception No. 8 is denied.
Plaintiff's Exception III-G is denied.
Defendant's AAPs did not specify what action-oriented steps
it would take to attempt to correct underutilization or problem
areas in job groups or organizational units (ALJ Finding of Fact
No. 16). Defendant's Exception No. 9 is denied. Plaintiff's
Exception No. IV-H is granted.
As Plaintiff asserts in Exception III-H, the August 15, 1978
show cause notice issued to Firestone cited the absence of
action-oriented programs as a deficiency in Defendant's 1978 AAP,
and this deficiency was alleged in Plaintiff's Administrative
Complaint. Plaintiff's Exception III-H is granted.
Defendant's Exception No. 5 objects to the ALJ's failure to
find that the "JAAR" method, used by a compliance office to
identify problem areas by organizational unit, is an improper
tool for such analysis. Defendant's Exception No. 5 is denied
because the propriety of the "JARR" method is irrelevant to
Defendant's obligation to itself identify those problem areas.
In like manner, Defendant's Exception No. 6, with respect to the
existence of an obligation to perform an underrepresentation
analysis is not in issue. Defendant's Exception No. 6 is denied.
Plaintiff's Exception No. III-C requests correction of a
typographical error in the ALJ's Finding of Fact No. 5.
"Utilization" should be corrected to read "under utilization".
The Executive Order
Defendant's Exceptions Nos. 14, 15, 16 and 17 except to the
ALJ's failure to find that: the Executive order does not require
a contractor to select anyone other than the most qualified
applicant; OFCCP's interpretation of its regulations, in this
case, would require employment decisions on the basis of race and
sex rather than qualifications, in violation of the Executive
Order, Title VII of the Civil Rights Act of 1964 and the
Constitution; and that the Order, Title VII and the Constitution
prohibit race- or sex-conscious goals in the absence of a finding
of discrimination.
Plaintiff's Exception No. IV-A excepts to the failure to
conclude that Executive Order 11246 and the regulations issued
pursuant thereto have the force and effect of law.
[PAGE 17]
Plaintiff's Exception No. IV-B excepts to the ALJ's failure
to conclude that the regulations in issue are consistent with the
Executive Order's purposes and have the force and effect of law.
Plaintiff's Exception Nos. IV-A and IV-B are granted;
Defendant's Exceptions Nos. 14, 15, 16 and 17 are denied.
Defendant's Exception No. 14 is irrelevant to the issues in this
case and I do not agree with the factual and legal conclusions
set forth in Exceptions 15, 16 and 17.
Conciliation Agreements
Plaintiff's Exception No. III-D excepts to the ALJ's failure
to find that a conciliation agreement remedying an affected class
of Blacks at the Orange facility was entered in 1972, and that
there was a conciliation agreement following the May 1977 on-site
review regarding access to documents. Defendant's Exception No.
4 excepts to the ALJ's failure to find that Firestone's Orange
facility had made satisfactory EEO progress.
Plaintiff's Exception No. III-D is granted, Defendant's
Exception No. 4 is granted as modified.
The record supports the finding requested by Plaintiff.
Plaintiff's Exception No. III-D is granted.
Defendant's Exception No. 4 excepts to the ALJ's failure to
find that Firestone Orange facility had made satisfactory EEO
progress. I also find that the satisfactory progress referred to
was during the 12-month period preceding the on-site review in
May 1977 (Defendant's Exhibit 0).
Federal Procurement Law
Plaintiff's Exception IV-C and Defendant's Exceptions 18 and
19 address the validity of the OFCCP regulations regarding
utilization analysis, goals and timetables as they relate to the
Federal Government's right to set terms and conditions of its
contracts and Federal procurement law.
Defendants' Exception No. 18 excepts to the ALJ's failure to
find that the OFCCP regulations regarding utilization analyses
and goals and timetables are contrary to the principles of
federal procurement statutes from which the Executive order
derives its authority. Defendants' Exception No. 19 excepts to
the ALJ's failure to find that the OFCCP regulations at issue in
this case are so vague, and their applications so inconsistent as
to render them unlawful under controlling federal procurement
law.
Plaintiff's Exception No. IV-C is granted in part;
Defendant's Exceptions Nos. 18 and 19 are denied. I conclude
that the regulations at issue are lawful and are not unlawfully
vague. I disagree with Defendant's assertions concerning the
consistency of their interpretations. With regard to Plaintiff's
Exception IV-C, I agree that the Government may set the terms and
conditions of its contracts but only so long as those conditions
[PAGE 18]
are consistent with law.
Other Exceptions
Plaintiff's Exceptions II A, B, C, D all concern Firestone's
obligations under the Order and regulations. Plaintiff excepts
to the ALJ's failure to find that Firestone is obligated: to
maintain and update annual AAP3 for its Orange? Texas facility;
to seek prompt and full utilization of minority groups and women;
to set goals, timetables and make affirmative action commitments
to correct any identified deficiencies; to identify problem areas
by organizational units and job groups; to establish goals and
timetables and to develop action-oriented programs to eliminate
problems and attain goals and timetables. Plaintiff's Exception
No. IV-D, excepts to the ALJ's failure to conclude that any
violation of the Order or its implementing regulations may
justify sanctions against a non-complying contractor.
Plaintiff's Exception No. IV-E excepts to the ALJ's failure to
conclude that Defendant is obliged to comply with the Secretary
of Labor's regulations at 41 CFR 602 and that non-compliance with
any portion of 41 CFR 60-2.10-2.13 means that Defendant's AAP is
unacceptable. Finally, Plaintiff's Exception IV-I argues for the
imposition of sanctions for each of Firestone's violations of the
order and implementing regulations.
Plaintiff's Exceptions II-A, B, C, D, IV-D, IV-E, and IV-I
are granted.
Conclusion and Order
After review of the record, I conclude for the reasons
stated above that Firestone Tire and Rubber Co., Inc. has
violated Executive Order 11246, as amended and the regulations
issued pursuant thereto, specifically 41 CFR Chapter 60-2.
Therefore, I hereby order, in accordance with sections
209(a)(5) and 6 of the Order and 41 CFR 60-1.26 and 60-30.30
that:
Firestone's present Government contracts be cancelled,
terminated or suspended and that Firestone be declared ineligible
from further contracts and subcontracts, and from extensions or
modifications of any existing contracts and subcontracts, until
such time that it can satisfy the Director of OFCCP that it is in
compliance with those provisions of Executive 0rder 11246 and the
regulations issued pursuant thereto, which I have found to have
been violated in this case.
The sanctions invoked herein shall be applicable to
Firestone, its officers, subsidiaries and divisions and all
purchasers, successors, assignees and transferees.
Signed at Washington, D.C., this 13th day of July, 1980.
RAY MARSHALL
Secretary of Labor
[ENDNOTES]
[1] Defendant prepared 3 AAP's for 1978. The initial version and
the first revision were rejected by the compliance officer. The
AAP at issue in this case is the second revised AAP.
[2] Defendant's AAP did use applicant flow data in its analysis
for Job Groups 3C, 7A-1, and 9 (T.R. 347-51, Joint Exhibit No. 3,
Attachment 14).
[3] Plaintiff Exception No. III-I excepts to the ALJ's failure to
find that the use of the 5 percent test precludes Firestone from
ever declaring underutilization in 15 of the 21 job groups for
women and 14 of the 21 job groups for minorities. The record
supports this analysis (Tr. 489-508). Plaintiff's Exception No.
III-I is granted.
