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The Office of Federal What Said I Had to Hire Who?

by: Erin Ebeler, Woods & Aitken LLP

The Office of Federal Contract Compliance Programs (“OFCCP”) enforces the affirmative action and equal employment opportunity obligations imposed on companies that do business with the federal government with contracts or subcontracts of certain amounts. Over the past year, there has been a noticeable increase in the number of OFCCP audits, and OFCCP’s reach is broad. OFCCP has the authority not only to audit companies that have direct contracts with the federal government, but also to audit subcontractors on federal jobs and those contractors/subcontractors working on construction contracts that merely receive federal funding in the form of grants, loans, insurance, or guarantees.

To perform such audits, OFCCP primarily looks at issues such as whether contractors and subcontractors are in compliance with the “Sixteen Steps” set forth in the Standard Federal Equal Employment Opportunity Construction Contract Specifications (Executive Order 11246) and evaluates compliance with laws such as the Americans with Disabilities Act (“ADA”), Section 503 of the Rehabilitation Act (“Section 503”), the Vietnam Era Veterans’ Readjustment Assistance Act (“VEVRAA”), the American Recovery & Reinvestment Act (“ARRA”), and others.

In connection with its enforcement of Section 503 and VEVRAA, the OFCCP announced two final rules on August 27, 2013, that have a large impact on contractors’ and subcontractors’ obligations to hire veterans and disabled individuals. For most contractors covered by OFCCP, the rules are expected to go into effect in March 2014.

1. New Rule Relating to the Hiring of Veterans
The basic principle of VEVRAA is that federal contractors and subcontractors may not discriminate against certain categories of protected veterans and must take affirmative steps to recruit, hire, and train those individuals. Further, VEVRAA requires these employers to file annual reports showing the results of their efforts and to identify the number of current employees who are “veterans” as defined by VEVRAA. Not every veteran is a veteran under VEVRAA. Generally and broadly speaking, VEVRAA protects veterans who (1) served in Vietnam; (2) are disabled according to the laws administered by the Department of Veteran Affairs (certain levels of disability required) or were discharged/released from active duty because of a service-connected disability; or (3) served on active duty during a war or in a campaign or expedition for which a campaign badge was authorized.

Among other things, the revised VEVRAA rules establish hiring benchmarks equal to either (1) the national percentage of veterans in the civilian labor force (currently 8 percent) or (2) a benchmark established through data published by the Bureau of Labor Statistics, Veterans’ Employment and Training Service/Employment and Training Administration (VETS/ETA), and OFCCP, as well as “other factors that reflect the contractor’s unique hiring circumstances.” It is notable that the new rule specifically states that the benchmark established “is not a rigid and inflexible quota which must be met, nor is it to be considered either a ceiling or a floor for the employment of particular groups.” Rather, the rule provides that the benchmark’s purpose is to “create a quantifiable method by which the contractor can measure its progress toward achieving equal employment opportunity for protected veterans.” However, at this point, it is unclear what criteria will be used to evaluate a contractor or subcontractor that fails to meet the benchmark or how the OFCCP will determine whether a contractor is moving quickly enough toward reaching the benchmark.

Further, the revised rule imposes obligations pertaining to:
• data collection and reporting requirements (including requiring employers to invite applicants and employees to self-identify as protected veterans);
• the use of specific language to be used in subcontracts relating to equal employment opportunity clauses;
• information in job listings; and
• OFCCP investigators’ access to documents on- or off-site at the OFCCP’s option.

Notably, one of the other amendments was to change VEVRAA’s applicability to government contracts and subcontracts of $100,000.00 or more. However, to the extent that a veteran was protected under the unamended rule which applied to a contract or subcontract of $25,000.00 or more, that veteran is still protected by VEVRAA. Violation of the rule carries sanctions and penalties that include withholding progress payments, terminating of federal contracts, and debarment.

2. New Rule Relating to the Hiring of Disabled Individuals
Section 503 prohibits federal contractors and subcontractors from discriminating against individuals with disabilities. Further and as with VEVRAA, these employers must take steps to recruit, hire, and train these individuals.

With regard to the rule amendments for Section 503, there is a new utilization goal of 7 percent nationwide for individuals with disabilities. This goal is not tied to any moving statistic such as the percentage of individuals with disabilities in the workforce. Moreover, this percentage is to be determined by reference to each of an employer’s job groups, unless the employer has 100 or fewer employees. Notably, the description of the 7 percent goal in this rule is quite different than the “benchmark” set in VEVRAA. Rather, this rule states, “The utilization goal serves as an equal employment opportunity objective that should be attainable by complying with all aspects of the affirmative action requirements of this part.” As such, there is a very significant question about whether employers who fail to meet the 7 percent utilization “goal” will have a defense to that failure if audited by the OFCCP.

Similarly to the new VEVRAA rule, the final rule associated with Section 503 imposes obligations pertaining to:
• data collection and reporting requirements (including requiring employers to invite applicants and employees to self-identify as protected veterans);
• the use of specific language to be used in subcontracts relating to equal employment opportunity clauses;
• information in job listings; and
• OFCCP investigators’ access to documents on-site or off-site at the OFCCP’s option.

Significantly, and with regard to the invitation to self-identify as being an individual with a disability, the rule states there will be prescribed language that must be used, which will be posted on the OFCCP’s website. That language does not appear to be posted at this time.

Generally speaking, the rules pertaining to Section 503 apply to all federal contracts and subcontracts in excess of $10,000 for the purchase, sale or use of personal property or non-personal services (including construction). Violation of the rule carries sanctions and penalties that include withholding progress payments, termination of federal contracts, and debarment.