ALJ orders Google to provide only a portion of information sought by OFCCP in suit over denial of access to compensation records

By Cynthia L. Hackerot — In an opinion largely favorably to the interests of federal contractors, ALJ Steven Berlin ordered Google to provide only a portion of the information sought by the OFCCP in an administrative action where the agency asserted that Google unlawfully denied it access to requested compensation records.

The ALJ found that portions of the OFCCP’s requests were unreasonable, and therefore, failed  Fourth Amendment requirements. These requests, seeking salary history, job history, and related informed “exceed[ed even the considerable deference owed OFCCP on a determination of relevance, and as they create an unreasonable burden on Google and its employees,” the ALJ ruled. He also expressed his concerns about this information being subject to data breeches. As such, the OFCCP will have to do more, specified in the order, if Google is to be ordered to provide this data. Judge Berlin also ordered the parties to engage in further conciliation, noting that the exchange of information provided by witness testimony at the hearing in this matter had occurred earlier, it may have prevented the litigation altogether. (OFCCP v. Google, Inc., DOL ALJ No 2017-OFC-4, July 14, 2017)

Dispute background. Since its formation in 1998, Google has been a federal contractor covered by the requirements of Executive Order (EO) 11246 at various times. Google had its first government contract in 2007, and it was a government contractor at various unspecified times between 2007 and 2012. On June 2, 2014, the General Services Administration (GSA) accepted Google’s bid on a contract for “Advertising and Marketing Solutions” (the AIMS contract). There was no evidence in the record to show that Google was a government contractor or subcontractor in 2013 or any of 2014 prior to being awarded the AIMS contract.

In its administrative complaint, the OFCCP asserted that Google violated the laws enforced by the agency and breached its obligations as a federal contractor when it refused to provide certain requested information as part of a routine compliance evaluation of the multinational company’s Mountain View, California headquarters. The agency initiated the review in September 2015 with its standard audit scheduling letter, and, in November 2015, Google produced information and documentation responsive to the demands in that letter. Google also produced further information in response to the OFCCP’s follow-up demands, both before and after the OFCCP filed its complaint, but it did not produce everything the agency OFCCP requested.

Following Google’s repeated refusal to produce the requested information, the agency issued a Notice to Show Cause on September 16, 2016; the agency’s complaint, signed on December 29, 2016, alleges that, as of that date, Google has “persisted in its refusal” to produce the items at issue.

Still at issue in the case was Google’s refusal to provide the following information:

A compensation snapshot (i.e. a moment frozen in time) as of September 1, 2014;
Job and salary history for employees in a September 1, 2015 compensation snapshot that Google had already produced and the requested September 1, 2014 snapshot, including starting salary, starting position, starting “compa-ratio,” starting job code, starting job family, starting job level, starting organization, and changes to the foregoing; and
The names and contact information for employees in the previously produced September 1, 2015 snapshot and the requested September 1, 2014 snapshot.

Hearing and previous rulings in the case. On February 21, 2017, the ALJ granted the OFCCP’s request to apply expedited hearing procedures pursuant to the agency’s regulations at 41 C.F.R. §§ 60-30.31-60-30. On March 15, 2017, the ALJ denied the OFCCP’s motion for summary judgment because the regulations providing for expedited procedures do not permit such motions. Further, the ALJ stated that, even he were to reach the merits, he would deny the motion, finding that much of the OFCCP’s data demands were unduly burdensome. In particular, he pointed out that the cost of meeting the OFCCP’s data demands would greatly exceed the revenue generated from Google’s government contract.

The expedited hearing began on April 7, 2017. ALJ Berlin adjourned the hearing mid-afternoon to allow Google time to file a motion to dismiss. On May 2, 2017, the ALJ denied that motion.  Google’s motion was based on in its claim that statements made to the press by an OFCCP Regional Solicitor indicated that the agency had completed its investigation. However, ALJ Steven Berlin found those statements, although ill-advised, did not carry as much weight as hearing testimony in the matter by OFCCP Pacific Regional Director Janette Wipper due to the differing contexts in which the statements were made. The hearing resumed by stipulation on May 26, 2017, and concluded on that day.

Witness testimony. Over the two hearing days, the OFCCP called as witnesses Regional Director Wipper, Deputy Regional Director Jane Suhr, and contractor Michael Brunetti, Ph.D., who is an economist and statistician. Google called its Vice President of Compensation Frank Wagner and Senior Legal Operations Manager Kristin Zrmhal.

ALJ orders further conciliation. In the present ruling, ALJ Berlin first ordered the parties to engage in further conciliation. While observing that the parties had “exchanged views a number of times before reaching an impasse,” the ALJ found that circumstances had changed by the time of his order such that further conciliation was appropriate.

The primary reason for the parties’ impasse concerned Google’s demand to know what issues OFCCP was continuing to investigate and in what part of Google’s operations these issues arose. Google argued that collaboration with the agency was difficult because the OFCCP had offered no information about the issues it was finding with the information the company had already provided, which prevented Google from evaluating whether OFCCP’s additional requests were relevant to the investigation. As late as its March 2017 motion for summary judgment, the OFCCP maintained that it would not disclose any information about its internal deliberations concerning the ongoing compliance evaluation. Yet, at the hearing, the OFCCP reversed course when Regional Director Wipper testified that the September 1, 2015 snapshot showed systemic compensation disparities against women pretty much across the entire Google headquarters workforce and that the agency sought follow-up information, including earlier compensation data, to understand the cause of the disparity. It appeared that Wipper’s testimony, which  “[o]bviously surprised” Google, nevertheless, provided the contractor with the information it had been requesting, the ALJ stated.

Likely, the OFCCP’s reversal was made in good faith following the denial of the agency’s summary judgment motion, the ALJ concluded. Included in that ruling was the ALJ’s finding that much of the OFCCP’s data demands were unduly burdensome. In particular, he pointed out that the cost of meeting the OFCCP’s data demands would greatly exceed the revenue generated from the AIMS contract.

Prior to the hearing, the OFCCP’s understanding of Google’s organizational structure and pay policies and practices was lacking, but Wagner’s testimony corrected errors and filled in gaps, the ALJ noted. Wagner “delivered an organized, complete description of those policies and practices”, the judge wrote (and the ALJ’s order included a detailed description of that testimony). ALJ Berlin, clearly impressed with Wagner’s credibility, wrote that his testimony, “reflected Wagner’s extensive, personal knowledge of the matters under discussion that he has derived from his work in Google’s executive leadership on compensation issues over the past ten years.” In the judge’s view, it was evident that the questions OFCCP investigators posed to Wagner during the onsite review failed to elicit the quality of description that Wagner provided at the hearing because “the interviewers did not entirely understand the information that they did elicit.”

“Had OFCCP made its disclosures and had Google presented Wagner’s information earlier, it might have made the present litigation unnecessary,” the ALJ observed.

Fourth Amendment standards. The parties agreed that the OFCCP’s request for information in this case is akin to an administrative subpoena. Under the Supreme Court’s 1984 ruling in Donovan v Lone Steer, the Fourth Amendment requires that an administrative subpoena be sufficiently limited in scope, relevant in purpose, and specific in directive so that compliance will not be unreasonably burdensome. The U.S. District Court for the District of Columbia applied the Lone Steer standard to an OFCCP compliance evaluation dispute in its November 2011 decision in United Space Alliance, LLC v. Solis. For the purposes of this litigation, Google stipulated that it would not dispute that OFCCP based its selection of Google on specific neutral criteria

Government contract does not waive Fourth Amendment rights. Citing the U.S. Supreme Court’s 1946 decision in Zap v. U.S., the OFCCP argued that Google waived its Fourth Amendment rights in their entirety when it agreed in the AIMS contract to give the government access to its records and other material relevant to the investigation and its compliance with EO 11246. Zap was a criminal case involving the FBI’s warrantless seizure of a falsified check that the defendant allegedly used to defraud the Navy on a cost-plus contract. The ALJ found a multitude of deficiencies with the OFCCP’s reliance on Zap. First, the Zap Court vacated its decision on rehearing and ordered the district court to dismiss the indictment. Second, Zap concerned administrative warrants, not administrative subpoenas, and the Court still required that the search be reasonable. Moreover, (1) the Zap Court did not find that the contractual agreement to make records available was a waiver of all Fourth Amendment protection;  (2) the portions of the decision on which OFCCP relies were dicta; (3) Zap was an early application of the exclusionary rule, and the law has changed since 1946; and (4) the Zap decision occurred less than a year after the end of World War II, and thus, the Court had motivation to affirm the conviction of a war profiteer who relied on what the Court viewed as a “technicality” to escape the consequences of defrauding the Navy.

More on point here was the Supreme Court’s 2017 decision in McLane Co., Inc. v. EEOC , where the Court found that Title VII grants the EEOC subpoena authority to obtain evidence “relevant to the charge under consideration.” Still the High Court ruled that relevance alone is not enough; an EEOC subpoena is not enforceable if it is too indefinite, is issued for an improper purpose (e.g., beyond the agency’s authority), or is unduly burdensome, the ALJ explained.

Portions of information requests unreasonable. Although the scope of judicial review in an administrative subpoena enforcement proceeding is quite narrow, the government must still show that: (1) Congress has granted the authority to investigate; (2) the applicable procedural requirements have been followed; and (3) the evidence is relevant and material to the investigation. While finding that the OFCCP was acting within its authority, the ALJ nevertheless found that portions of the agency’s requests were unreasonable, and thus, failed Fourth Amendment requirements.

Because the dispute here was based on an audit, rather than a pending complaint or charge, there was a vast amount of information that could potentially be relevant. “[The] OFCCP must search, not only for causes of the disparity that are actionable, but also those that are lawful. It is difficult to imagine a broader search in the employment law context,” the ALJ observed.

Under the OFCCP’s Directive 307, compensation investigations require an iterative process involving a wide range of experts, tools, sources, steps, and case-by-case adjustments as the OFCCP learns more, and the investigation must be tailored to the contractor’s compensation practices. Here, the agency identified two areas of focus: (1) data on factors relevant to compensation decisions; and (2) information going to a theory of causation for which it contends there are some indicators. This theory is that women, on average, are less successful negotiators that men, and that because Google negotiates starting pay women have entered Google’s workforce with lower pay relative to men. Further, raises during employment are based on existing pay rates, meaning that women’s lower pay at hire leads to ongoing pay disparity even for female employees who have worked at Google since the company was formed in 1998.

Information requests at issue. Turning to the information requests at issue, the ALJ first addressed the request for the September 1, 2014 snapshot, ruling that Google must provide it within 60 days after his order becomes final, with certain limitations described below. The OFCCP argued that an additional snapshot is relevant because it will show whether the same indications of a possible adverse impact violation existed over time, not just on the single day reflected on the September 1, 2015 snapshot. The ALJ found this request sufficiently relevant to meet the deferential standard that applies in the narrow Fourth Amendment review appropriate to administrative subpoenas. The OFCCP showed that Google managers exercise discretion on several compensation decisions. In addition, about 17,000 of the employees working for Google on September 1, 2014, also worked for Google on the date of the snapshot Google already provided for September 1, 2015. Also, the information sought pertained to a time when Google was performing the AIMS contract.

Yet, the ALJ modified the scope of the data that Google must to produce regarding the other requested information. Specifically, the judge ruled that the following:

The categories that the Office of Management and Budget approved and are listed in Item 19 of the scheduling letter are relevant, not burdensome, and must be included.
If OFCCP’s request includes categories concerning place of birth, citizenship, and visa status these (which it appeared not be requesting), its request for an order requiring them is denied.
Because the OFCCP has withdrawn the request for “any other factors related to compensation,” Google need not provide that information, but it may be in the company’s interest to volunteer it.
Google need not include information regarding job and salary histories in the September 1, 2014 snapshot. The OFCCP generally limits compliance review investigations to the two-year period preceding issuance of the scheduling letter, yet the agency here was seeking information that could in some cases go back to Google’s formation in 1998. As stated above, there was no evidence that Google was a government contractor prior to 2007, or that Google even had the requisite number of employees to be covered under Title VII when it first formed. The ALJ also found that the Supreme Court’s 2007 decision in Ledbetter v. Goodyear Tire & Rubber Co., Inc. and the subsequent Lilly Ledbetter Fair Pay Act of 2009, which revises the statute of limitations as to Title VII compensation claims, had no bearing on the present case. In any event, the provision in the Federal Contract Compliance Manual (Directive 307) allowing OFCCP investigators to look back more than two years only when a potential continuing violation is at issue “does not imply that OFCCP investigators can look back across decades,” the judge wrote. The OFCCP should be able to accomplish its task by looking back three or four years, and if the agency finds discrimination consistent with its theory, it can look back somewhat further if it chooses, again consistent with the iterative approach in Directive 307. “Or perhaps, instead, it could conciliate with Google and arrive at a resolution that will compensate adversely affected employees promptly and correct the unlawful practices discovered,” the judge encouraged.
The OFCCP’s request for each employee’s date of birth was not relevant because age discrimination is not an area of enforcement within OFCCP’s authority.
The request for locality information is unduly burdensome because the single defining characteristic of all of the employees is that, on the date of the snapshot, the employee worked at Google’s Mountain View headquarters.
Google must include in the snapshot for September 1, 2014, responses to each of the other categories on OFCCP’s follow-up June 1, 2016 list for each employee within the headquarters affirmative action plan, to the extent that Google has that information within its possession, custody, or control.

Hacking concerns regarding employee contact information. As to the OFCCP’s request for the names and contact information for employees in the previously produced September 1, 2015 snapshot and the requested September 1, 2014 snapshot, the ALJ was persuaded that anecdotal information obtained from employees was relevant to OFCCP’s systemic adverse impact investigation. Even though ALJ Berlin found Wagner’s testimony credible, he said that Wagner could not know with certainty that Google’s managers were faithfully implementing Google’s policies and practice. In addition, the ALJ noted the Ninth Circuit’s recent decision in EEOC v. McLane Co., Inc. , where the court held as a matter of law that an EEOC subpoena for contact information was relevant to the EEOC’s investigation involving whether an individual charge of discrimination should be expanded to cover systemic disparate treatment.

Still, the ALJ found that OFCCP’s request for contact information to be unreasonable in that it is over-broad, intrusive on employee privacy, unduly burdensome, and insufficiently focused on obtaining the relevant information.

“My concern centers on to extent to which the employee contact information, once at OFCCP, will be secure from hacking, OFCCP employee misuse, and similar potential intrusions or disclosures,” the judge wrote. “OFCCP has already collected for 21,114 employees information such as name, date of birth, place of birth, citizenship status, visa status, salary, and stock grants. That information, if hacked or misused, could subject tens of thousands of employees to risk of identity theft, other fraud, or the improper public disclosure of private facts. Adding contact data, such as personal phone numbers and email addresses, increases the risk of harm to Google’s employees. The contact information could ease the efforts of malicious hackers or misdirected government employees.”

Even though Wipper testified that she was not aware of any data breaches sustained by the OFCCP, and that the agency gives “high priority” to data security, the ALJ pointed out the federal government generally, and the DOL in particular, are not immune to hacking or to the improper release of confidential, private materials about people involved in departmental investigations. Among the examples he cited were data breaches in 2015 at the Office of Personnel Management that resulted in the exposure of private, personally identifiable information (including, for example, fingerprints) for millions of current and former federal employees and applicants for federal employment. Moreover, [a]nyone alive today likely is aware of data breaches surrounding this country’s most recent Presidential election,” he wrote.  Indeed, the Department of Labor, of which OFCCP is a part, was recently attacked with ransomware, and even the DOL’s Office of Administrative Law judges has been hacked, he observed.

In addition, Google would likely have legal exposure to its employees if it unnecessarily revealed their private information. At the least, this intrusion into Google’s employees’ privacy might negatively impact its relationship with the impacted employees as well as Google’s reputation as an employer, and Google’s ability to recruit and retain the best employees.

To address these concerns, the ALJ ordered the OFCCP to: (1) take reasonable steps to protect the information it obtains, and (2) limit the number of employees whose contact information Google will supply. After receiving the Google’s second snapshot, the OFCCP may submit to Google the names of up to 5,000 employees from among those listed on either snapshot. Google must provide the OFCCP with a list organized by name, showing the personal address, personal telephone number, and personal email address for each of the employees whom the agency selected. The judge excused Google from providing any information that it does not have in its records. For follow-up interviews, the OFCCP was allowed to obtain from Google a second list of up to 3,000 additional names.

Adverse impact theory. The ALJ also expressed concern with the OFCCP’s adverse impact theory. Earlier this year, the Ninth Circuit, in Rizo v. Yovino, rejected an assertion that an employer’s use of prior salary in setting starting salaries at hire cannot be justified as a decision based on a factor other than sex and motivated by a legitimate business purpose. In light of this case precedent, the OFCCP’s proffered theory is that research shows that women proportionately are not as effective negotiators as men, and that this (rather than prior salaries) has resulted in the alleged sex-based wage disparity. However, the OFCCP spent two days with a group of investigators interviewing Google’s relevant executives and managers, and it has not established that Google engages in what most would consider negotiation when it sets starting salaries, the ALJ pointed out.  Moreover, the OFCCP essentially conceded, and the record showed, that Google does not negotiate starting salaries at all. Indeed, for many of these hires, the applicant never had a previous job. In cases were starting salaries are based on previous jobs or competing job offers, rates are determined by a compensation team that does not have knowledge of the applicants gender. The evidence on record also showed that promotions and merit increases are determined by non-objective means that do not factor in gender.

In any event, the record showed that the OFCCP has not taken sufficient steps to learn how Google’s compensation system works, identify actual policies and practices that might cause the disparity, and then craft focused requests for information that bears on these identified potential causes. Without such information, the requests become unreasonable: unfocused, irrelevant, and unduly burdensome, the ALJ noted.

Cost of Google’s efforts to provide requested information. The ALJ also spent a considerable portion of the order discussing Google’s economic capacity to comply with the OFCCP’s requests. When the audit began, Google had over 21,000 employees covered under its EO 11246-mandated affirmative action plan (AAP) for its Mountain View headquarters establishment, the ALJ noted, adding that “[t]his explains how the Google compliance review became the largest in the OFCCP’s Pacific Region. He also explained that, to collect and produce the information that Google did make available to the OFCCP, the contractor initially relied on its own employees in a litigation support unit. When extra help was needed, the company hired an outside contractor. In all, Google expended about 2,300 person hours on these tasks, with almost half of that time  spent on attorneys, including outside counsel, who reviewed the materials to be certain that private employee information was properly protected. Making this task more complicated was Google’s practice, designed to protect employee privacy, of storing much information about individual applicants and employees in different locations and in ways that are intentionally difficult to access. Indeed, Google engineers had to develop tools to access the information OFCCP wanted. Although the OFCCP offered to do some of the work in accessing this data, the ALJ found that, even with security information from Google, it was not at all certain that OFCCP could have developed the needed scripts. The contractor produced nearly 1.3 million data points about its applicant flow; 400,000 to 500,000 data points on compensation; and 329,000 documents, totaling about 740,000 pages. The project cost Google about $500,000, a significant amount when compared to the $600,000 gross total that GSA paid Google under the AIMS contract from June 2014 through December 29, 2016, the ALJ stated.

Moreover, the burdens at issue were not merely financial; Google’s compliance with the OFCCP’s earlier demands hindered its normal operations, and the additional steps that required in the ALJ’s present order will add to that burden, the judge noted.

Offer of conciliation must accompany any further information requests. Finally, the ALJ ordered that, before re-asserting its requests for job and salary history or any similar request, the OFCCP must offer to engage with Google in meaningful, good faith conciliation to resolve any dispute, including by showing why the information sought is reasonable, relevant, focused, and not unduly burdensome. If Google offers information that tends to show the request is unreasonable, irrelevant, unfocused, or unduly burdensome, the OFCCP must consider Google’s information, determine whether it is accurate, determine how it affects the relevance of the request or the burden of compliance, modify the request if appropriate, and only then may the agency go forward with the request. If Google chooses not conciliate or does not conciliate in good faith, the OFCCP has fulfilled its conciliation obligation under the order.

Source: ALJ orders Google to provide only a portion of information sought by OFCCP in suit over denial of access to compensation records