Government Contracts Monitor

New OFCCP Regulations Change the Landscape for Federal Contractors Regarding Persons with Disabilities and Veterans

September 25, 2013

The U.S. Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) recently updated its regulations regarding individuals with disabilities and veterans (41 C.F.R. Parts 60-741 and 60-300). See 78 Fed. Reg. 58614; 78 Fed. Reg. 58682. The new regulations take effect on March 24, 2014. There are several items of note in these new regulations that will require federal contractors of all tiers to review and update their affirmative action programs and compliance efforts.

The OFCCP’s mission, as part of the U.S. Department of Labor, is “to enforce, for the benefit of job seekers and wage earners, the contractual promise of affirmative action and equal employment opportunity required of those who do business with the Federal government.” OFCCP typically carries out its affirmative action and equal employment opportunity mission through regulations that implement existing federal laws. Among the laws that OFCCP enforces are the Rehabilitation Act (which prohibits discrimination against persons with disabilities when working on federal projects) (“Rehab Act”) and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (which prohibits discrimination against veterans) (“VEVRAA”).

OFCCP’s Rehab Act regulations (41 C.F.R. Part 60-741) apply to all federal contracts and subcontracts of $10,000 or more and apply only to work performed within the United States. Both the old and the updated Rehab Act regulations require the federal government to place an equal opportunity clause in all covered contracts. The clause, found at 41 C.F.R. § 60-741.5(a), essentially requires contractors to (i) agree to take affirmative action to employ individuals with disabilities and not discriminate again such individuals in recruitment, hiring, promotion, pay, job assignment, seniority, fringe benefits, training, apprenticeship, and any other term, condition or privilege of employment; (ii) list job openings with state workforce agencies or job banks, or other job services or exchanges; (iii) post notices from OFCCP informing employees of their rights; and (iv) otherwise comply with applicable law and regulations. The equal opportunity clause must be included in all subcontracts of $10,000 or more. Covered contractors and subcontractors with fifty (50) or more employees and a federal contract or subcontract of $50,000 or more are required to prepare, implement, and enforce an affirmative action program designed to foster hiring of individuals with disabilities and prevent employment discrimination against such individuals.

OFCCP’s VEVRAA regulations (41 C.F.R. Part 60-300) impose similar requirements as the Rehab Act regulations discussed above, but apply to covered veterans, as opposed to individuals with disabilities. The VEVRAA regulations apply to all federal contracts and subcontracts of $100,000 or more and apply only to work performed within the United States. Covered contractors with fifty (50) or more employees and a federal contract or subcontract of $100,000 or more are required to prepare, implement, and enforce an affirmative action program designed to foster hiring of covered veterans and prevent employment discrimination against veterans.

The new regulations published on September 24, 2013 retain the same basic nondiscrimination and affirmative action requirements and, in addition, require the use of new tools and techniques. Federal contractors should be particularly aware of the following changes/additions to the OFCCP regulations – most of which only apply to those covered contractors otherwise required by the regulations to develop and implement an affirmative action program:

Invitation to Self-Identify: Under both the new Rehab Act and VEVRAA regulations, contractors are now required to invite applicants to self-identify as veterans and/or as individuals with disabilities at both the pre-offer and post-offer phases of the application process. 41 C.F.R. §§ 60-300.42, 60-741.42. The VEVRAA rules provide a sample form to use for the self-identification. Sample language for the Rehab Act rules self-identification requirement are supposed to be posted on the OFCCP website “soon.” Self-identification data must be retained for compliance purposes.
External Outreach and Recruitment and Related Self-Assessment: The new regulations provide a detailed and non-exclusive list of state, federal and local agencies and private organizations which contractors should use, as part of their affirmative action programs, in order to properly seek veterans for employment and post job openings. 41 C.F.R. §§ 60-300.44(f)(2), 60-741.44(f)(2). In addition, the new regulations both now require covered contractors to perform an annual written assessment to determine the effectiveness of their outreach and recruitment efforts – and retain those self-assessment documents for at least three years. 41 C.F.R. §§ 60-300.44(f)(3), 60-741.44(f)(3).
Data Collection and Analysis: Another feature of the amended regulations is to require covered contractors to collect and analyze specific compliance data: (i) the number of applicants who self-identified as veterans and/or individuals with disabilities; (ii) the total number of job openings and total number of jobs filled; (iii) the total number of applicants for all jobs; (iv) the number of veterans and individuals with disabilities hired; and (v) the total number of applicants hired. All of this data and analysis must be kept for at least three years. 41 C.F.R. §§ 60-300.44(k), 60-741.44(k).
Benchmarks for Veterans: Covered contractors are now required to set annual veteran hiring benchmarks. Benchmarks are intended “to create a quantifiable method by which the contractor can measure its progress towards achieving equal employment opportunity for protected veterans.” These benchmarks must be set at either the national percentage of veterans in the civilian labor force or one of five other approved benchmark measures. Covered contractors must document how and why they set their benchmarks and retain those records for three years. 41 C.F.R. § 60-300.45.
Utilization Goals for Individuals with Disabilities: Covered contractors must also strive to achieve at least a seven percent (7%) utilization goal for employment of individuals with disabilities. This goal applies to each job group or, for employers with one hundred or fewer employees, the goal applies to the entire workforce. Covered contractors are required to conduct an annual utilization analysis and self-assessment of problem areas, and to develop and implement programs to address any identified problems. 41 C.F.R. § 60-741.45.
Voluntary Affirmative Action Programs for Employees With Disabilities: The new Rehab Act regulations expressly give covered contractors permission to establish their own training and affirmative action programs for individuals with disabilities. 41 C.F.R. § 60-741.46.
Pre-award Compliance Evaluations: For procurements of $10M or more, prime contractors and all known first-tier subcontractors with subcontracts of $10M or more will be subject to a compliance evaluation before the award of the contract unless OFCCP has conducted an evaluation and found them to be in compliance” within the preceding 24 months. 41 C.F.R. §§ 60-300.60(d), 60-741.60(c). These new provisions mirror the existing pre-award compliance evaluation requirements of FAR 52.222-24 applicable to race, color, religion, sex, or national origin discrimination and affirmative action covered by FAR 52.222-26.
Record Access: Finally, both sets of new regulations provide OFCCP, in connection with its investigations or data requests, with greater rights to obtain records from covered contractors. All compliance documents and records required to be maintained must be provided to OFCCP and, when requested, OFCCP must be informed of “all format(s), including specific electronic formats, in which the contractor maintains its records and other information.” 41 C.F.R. §§ 60-300.81, 60-741.81.

The basic legal requirements for nondiscrimination and affirmative action for veterans and individuals with disabilities have not changed. What has changed are the tools contractors and subcontractors are now required to use to demonstrate their compliance with such nondiscrimination and affirmative action requirements.

The new regulations take effect on March 24, 2014. Affirmative action programs in existence on March 24^th need not be changed. However, all affirmative action programs created or required to be updated after the new regulations’ effective date must be fully compliant.

Federal contractors of all tiers are advised to assess whether they are covered by the new regulations and, if so, to review their existing Rehab Act and VEVRAA affirmative action programs to ensure compliance going forward. Careful consideration should be given to the new data collection, data analysis, and record keeping requirements. While larger contractors with sophisticated in-house OFCCP compliance expertise may wish to develop their own programs, most other federal contractors would be advised to consult with legal outside counsel or other consultants with an understanding of the new regulations and experience in the preparation of affirmative action programs to ensure that the nuances of the new regulations are addressed and such contractors are in the best position possible to respond to an OFCCP audit applying the new regulations.

Michael J. Schrier is the attorney responsible for the content of this article.