It's based on a really bad/incorrect interpretation of equal opportunity employment law. Once upon a time I work for a company where if they wanted to promote you, they would post the job internally and externally. Then, a VP would pull you into a room and say something like "You should really think about applying for this position. Do you understand what I'm telling you? You should really really think really hard about applying for this job."

If you applied for it, they would conduct a series of [sham] interviews and then just hire the person they intended to promote to begin with. If you didn't apply, you would be deemed "ungrateful" and forced out. Oddly enough, they had a similar practice for company vehicles. If they wanted you to have a company vehicle, which just meant they could monopolize more of your free time, they would bring you a set of keys like, "This is your now. Drive it." It was never a request. More of a directive. And you couldn't say no or there would be consequences.

Pretty much exactly the kind of place that would feel the need to pretend to follow federal employment law and generate lots of paperwork demonstrating how thoroughly they're pretending to follow it.