OFCCP’s New Affirmative Action Rules Effective March 24, 2014
September 24, 2013

On Sept. 24, the U.S. Department of Labor’s Office of Federal Contract Compliance Program’s (OFCCP) long-anticipated final rules on veterans and individuals with disabilities (IWD) were posted in the Federal Register.  Both rules increase the affirmative action requirements of direct federal contractors and subcontractors.  The agency pre-released each of the final rules in August but announced that they would not go into effect until 180 days after being published. The effective date of both rules is March 24, 2014.  However, for contractors with a written affirmative action program in place at that time, the affirmative action program requirements do not go into effect until the beginning of the next plan year.

Although AGC supports OFCCP’s goals and objectives, AGC is disappointed with the agency’s decision to finalize the two regulations, in particular due to the lack of need for the rules and the costs associated with implementing and complying with the new requirements.  However, after several meetings with government agencies, legislative efforts and press campaigns, AGC persuaded OFCCP to reduce the regulations, as proposed, by more than 50 percent.  While contractors will be required to do more than is currently required, the impact on contractors is minimal compared to what was suggested in the proposed rules.  (For more on the veterans proposed rule, click here.  For more on the disability proposed rule, click here.)

The veterans rule, which updates regulations implementing the Vietnam Era Veterans’ Readjustment Assistance Act  of 1974 (VEVRAA), prohibits discrimination and requires contractors to take affirmative action in all personnel practices regarding covered veterans.  While VEVRAA originally covered only veterans from the Vietnam Era, coverage was later extended to disabled veterans, Armed Forces service medal veterans, recently separated veterans, and other protected veterans who served during a war or in a campaign or expedition for which a campaign badge has been authorized.  Previously, there were two sets of regulation applicable to VEVRAA.  One for contracts entered into before December 1, 2003, and one for contracts entered into after, with different thresholds for coverage.  Since there is a belief that there are no pre-December 1, 2003, contracts currently in existence, the new regulations adopt an across-the-board coverage threshold of $100,000 or more.  In addition, covered contractors or subcontractors with 50 or more employees are required to develop and maintain a written VEVRAA affirmative action program.

The disabilities rule, which updates Section 503 of the Rehabilitation Act of 1973 (Section 503), prohibits discrimination and requires contractors to take affirmative action in all personnel practices for qualified IWDs.  These requirements apply to contractors and subcontractors with a covered federal contract or subcontract valued in excess of $10,000.  In addition, covered contractors and subcontractors with contracts valued at $50,000 or more and 50 or more employees must develop and maintain a written Section 503 affirmative action program.

The two rules are mostly parallel; however, there are some aspects of each rule that are unique.

Recordkeeping Requirements

The proposed rules would have extended several recordkeeping requirements from two to five years, particularly pertaining to the affirmative action program requirements.  However, the final rule limits the extension to three years.

Equal Opportunity Clause (E.O. Clause)

Currently, each contracting agency and contractor must reference the E.O. Clause in each covered contract and subcontract as required by the Federal Acquisition Regulation.  While the proposed rule required contractors to list the E.O. Clause in its entirety in each contract, the final rule allows contractors to continue to merely reference the clause in the contract, as long as the reference is followed by the following bolded text:  “This contractor and subcontractor shall abide by the requirements of 41 CFR 60-300.5(a). This regulation prohibits discrimination against qualified 49 protected veterans, and requires affirmative action by covered prime contractors and subcontractors to employ and advance in employment qualified protected veterans.”

Written Reasonable Accommodation Procedures (Disabilities Rule Only)

The proposed rule required contractors to develop and implement written reasonable accommodation procedures.  This required, among other things, a written confirmation acknowledging receipt of every reasonable accommodation request and, for all denied requests, and a denial in writing along with the basis for the denial along with the decision maker’s name.  In addition, contractors were to be required to post a notice online notifying applicants who may need a reasonable accommodation that they are entitled to one.  The final rule does not adopt these requirements.  It only suggests them as a “best practice.”

Written Affirmative Action Program

As stated, the requirement to have a written affirmative action program applies only to covered contractors that meet the dollar threshold ($100,000 for VEVRAA and $50,000 for Section 503) and have 50 or more employees.  For both rules, the written affirmative action program includes the obligation to offer individuals the opportunity to self-identify as a protected veteran or IWD, periodic reviews of personnel policies and physical/mental job qualifications, internal and external policy dissemination requirements, training for all employees involved in the hiring and disciplinary process, collection and maintenance of hiring and employment data regarding veterans and IWDs, and the establishment of hiring benchmarks and utilization goals.  According to the final rule, the full affirmative action program, absent the data metrics, must be made available to any employee or applicant for inspection upon request.  The location and hours during which the program is available must be posted at each establishment.

New Hiring Benchmark and Utilization Goal

Probably the most notable update to the affirmative action program requirements of the regulations is the adoption of a hiring benchmark for veterans and a utilization goal for IWDs.  OFCCP did not agree with AGC’s argument regarding the overall lack of need for requiring benchmarks or goals, as federal data show that veterans are already more likely to be employed in construction than non-veterans and that IWDs are as likely to be employed in construction as people without disabilities.  As a result, the hiring benchmark and goal were adopted in the final rule.

For veterans, the final rule gives contractors the option of establishing their own benchmark using a combination of national, state and local data, or setting the benchmark equal to the national percentage of veterans in the civilian labor force – currently eight percent.  The proposed rule required a benchmark for each establishment; however, after several discussions regarding the number of establishments maintained by construction contractors, the requirement to establish the hiring benchmark for each establishment was eliminated.  As a result, the hiring benchmark may be applied across the entire workforce.

For IWDs, the proposed rule suggested a seven percent utilization goal per establishment with a two percent utilization goal for individuals with severe disabilities per establishment.  While the seven percent goal was adopted in the final rule, the two percent goal was eliminated.  According to the final rule, contractors with more than 100 employees must apply the goal using the same job groups established for utilization analyses under Executive Order 11246. In some cases, the nine EEO-1 job categories may be used (i.e., officials/managers, professionals, technicians, sales workers, administrative support staff, craft workers, operatives, laborers/helpers, service workers.  Contractors with fewer than 100 employees have the option of applying the goal across the entire workforce.

Invitation to Self-Identify 

Under both regulations, contractors are already required to offer applicants the opportunity to self-identify as a protected veteran and/or IWD post-offer.  The proposed rules extended this obligation to the pre-offer stage.  They also required contractors to inquire about reasonable accommodation when an IWD or protected veteran self-identified as disabled.  OFCCP did not agree with AGC’s objections to contractors being required to offer applicants the opportunity to self-identify as a protected veteran or IWD pre-offer – mainly due to the costs associated with changing manual and electronic applicant tracking systems, a possible conflict with the Americans with Disabilities Act, and the possibility that IWDs may choose not to self-identify as disabled for a number of reasons.  In conjunction with the final rule, OFCCP posted a letter on its website from the Equal Employment Opportunity Commission (EEOC) explaining that offers to self-identify may occur pre-offer as long as the intent is for affirmative action purposes.  For covered veterans, the requirement to inquire about a reasonable accommodation was not included in the final rule.  Instead, OFCCP reverted back to the existing requirements.  However, this is not the case for the Section 503 rule which does require contractors to initiate the discussion and adds additional responsibilities for contractors.  For example, the Section 503 regulations require contractors to initially extend the offer to self-identify as an IWD to employees within one year of the regulation’s effective date and then again once every five years.  Within the five year period, contractors must remind employees of their ability to self-identify as an IWD at anytime, should their disability status change.  Also, for applicants or employees who don’t self-identify as an IWD, contractors are now permitted to identify a person’s disability status if it is known or obvious, as is done under Executive Order 11246 with regard to race and gender.

Required Content of Affirmative Action Programs

In addition to expanding the self-identification invitation obligations of contractors, both the VEVRAA and the Section 503 proposed rules attempted to expand – from periodically to annually – the requirement to review and modify personnel processes.  The proposed language included obligations to document, for each applicant or employee, all vacancies, training programs and promotions for which the applicant or employee was considered.  In addition, contractors were to provide a written description of accommodations considered and a statement of reason for rejection, to be made available to the applicant or employee upon request.  None of these proposed changes were adopted in the final rule.

AGC was also effective in eliminating the “build-a-file” requirement from the proposed rule, which would have required annual reviews of job descriptions for physical and mental qualifications.  AGC’s comments to OFCCP stated that a thorough and thoughtful review of job descriptions takes time and often requires input from many departments within a company.  As a result, OFCCP reverted back to the existing requirement to conduct periodic reviews of job descriptions.

External and Internal Dissemination of Policy, Outreach and Recruitment

Both proposed rules would have required contractors to establish a minimum of three linkage agreements with external recruitment sources that specialize in veteran and/or disabled training or placement.  AGC was effective in explaining to OFCCP the burden that would be imposed on contractors to establish and maintain three linkage agreements per establishment – particularly when each establishment could mean each jobsite.   As a result, OFCCP eliminated the requirement to establish linkage agreements and reverted back to the existing regulations with regard to outreach efforts, including efforts mandated by statute for the recruitment of veterans.

OFCCP also proposed requiring contractors to post jobs with state and local employment services in the manner “required” by each office and include, and update annually, the name and address of each hiring location and hiring official.  The final rules adopt the term “permitted” instead of “required.” Both rules also now allow contractors to list, and update as-needed, the name and contact information, of any company representative, such as an HR representative, who can answer questions about the job posting.  Additionally, contractors must send written notification of the company’s policy regarding affirmative action to all subcontractors including subcontracting vendors, suppliers, and union hiring halls (if applicable) requesting appropriate action on their part.

With regard to internal dissemination, per the final rules, contractors are not required to conduct annual meetings with staff to explain the intent of the affirmative action policy as proposed.  Instead, contractors must include the policy in the company’s policy manual or make otherwise available to employees.

Training

Both proposed rules included extensive training requirements.  Training was to be conducted for each rule independently, and for all staff.  Subjects to be covered included the benefits of employing protected veterans and IWDs, appropriate sensitivity toward protected veterans and IWDs, and the legal responsibilities of the contractor and its agents with regard to reasonable accommodation and related rights.  The proposed rules would have required contractors to document and maintain for three years the specific subject matter(s) covered in the training, who conducted the training, who received the training, when the training took place, and any associated training materials.  The final rules reverted back to the existing regulations that require training only for personnel involved in the recruitment, screening, selection, promotion, disciplinary, and related processes.

Data Collection Analysis

Both proposed rules required contractors to collect and maintain 10-11 new data points on an annual basis pertaining to applicants and new hires. The final rules adopted just five of the points:

(1) The number of applicants who self-identified as protected veterans or IWDs, or who are otherwise known as such;

(2) The total number of job openings and total number of jobs filled;

(3) The total number of applicants for all jobs;

(4) The number of protected veteran or disabled applicants hired; and

(5) The total number of applicants hired.

More Information

Complete, side-by-side analyses of all changes from the existing to the final regulations are available on OFCCP’s website. (VEVRAA Comparison / Disability Comparison)

There are several resources available on the OFCCP website to help contractors comply with the requirements of the new rules.  These resources include fact sheets and FAQ documents for both the VEVRAA and Section 503 rules.  Although not intended to be a direct resource for contractors, OFCCP’s newly revised reference manual for its auditors, the Federal Contracting Compliance Manual, is available to contractors as well.

AGC is also making compliance assistance resources available to contractors by updating its Affirmative Action Manual for Construction and hosting a webinar detailing the requirements and impact of the rules on the construction industry.  For more information on the webinar or to register, visit www.agc.org/OFCCPwebinar.

In addition, a session on the new rules has been added to the schedule for AGC’s 2013 Construction HR & Training Professionals Conference.  The conference will be held Oct. 16-17, in Chicago, Ill.  For more information or to register, visit www.agc.org/trainingHRconference.