Section 342 of the Dodd-Frank Act, which includes diversity and inclusion mandates designed to correct racial and gender imbalances on Wall Street, has left many regulated firms and employers uncertain of the regulatory future.
The provision, proposed by Rep. Maxine Waters (D-Calif.), applies to federal financial agencies, firms that contract with such agencies and private financial firms regulated by the agencies. The provision has largely remained in the background, but its potential implications for employment law have drawn attention to the measure on Capitol Hill.
Under the rule, nine federal financial agencies would be required to establish an Office of Minority and Women Inclusion by January 2011. Each OMWI would be responsible for promoting diversity within the agency, as well as for creating a set of standards related to agency diversity, increased participation in agency programs by minority- or women-owned businesses and assessment of diversity policies of the entities regulated by the agency.
Additionally, the rule requires the OMWI to develop standards by which its director can determine whether an agency contractor or subcontractor has made a “good faith effort” to diversify its workforce. If the director finds that the contractor failed to make a good faith effort, he or she must recommend to the agency administrator that the contract be terminated.
The ability of the OMWI to assess the diversity policies of regulated agencies could have the most profound effect on private industry employers, as all regulated entities will be affected, though the rule offers no guidance regarding the criteria that should be used by the OMWI to conduct the assessment.
Private employers are, therefore, left to speculate about the nature of the standards with which they will be expected to comply. Many employers have already, however, adopted Equal Opportunity Policies and begun compiling data on the demographics of its workforce and applicant pool.
OMWIs have been slow to develop and present regulations related to the assessments, though the offices have organized a number of industry roundtables aimed at eliciting feedback from regulated entities and employers.