Federal government contractors will soon be subject to expansive
new affirmative action regulations under the Vietnam Era
Veterans' Readjustment Assistance Act ("VEVRAA") and
Section 503 of the Rehabilitation Act ("Section 503").
Published on September 24, these new regulations impose, among
other things, new hiring benchmarks and utilization goals for
veterans and individuals with disabilities. The new regulations
will take effect on March 24, 2014. While many provisions will take
effect immediately on that date, contractors will not be required
to amend affirmative action plans that are then in place; they
will, however, have to ensure that affirmative action plans
prepared after the effective date comply with the expanded
obligations.
Shortly before issuing these regulations, the OFCCP also issued a
new, comprehensive compliance manual to guide agency compliance
officers in their compliance evaluations and complaint
investigations. And, earlier in the year, the agency rescinded its
prior guidance on compensation discrimination and issued a new
Compliance Directive 307. Given these various developments, federal
government contractors would be well advised to thoroughly review
their affirmative action and OFCCP compliance efforts and put into
place measures to ensure compliance going forward.
Key Provisions of New Regulations
The new regulations impose the following key new requirements on
contractors:
Prime contractors will be required to include certain
specified language in their subcontracts to make subcontractors
aware of their affirmative action and compliance
obligations. Lengthy equal opportunity clauses applicable
to protected veterans and workers with disabilities are set out in
both sets of regulations. Although prime contractors will not be
required to include the entirety of these clauses verbatim in their
contracts, the clauses must be made part of those subcontracts by
referencing VEVRAA by citation to 41 C.F.R. § 60-300.5(a), and
Section 503 by citation to 41 C.F.R. § 60-741.5(a). Contracts
must also include specific language, set in bold text, stating that
these regulations prohibit discrimination against qualified
protected veterans and individuals on the basis of disability, and
require affirmative action by covered prime contractors and
subcontractors to employ and advance in employment qualified
protected veterans and individuals with disabilities. For the
specific language required, see 41 C.F.R. §§
60-300.5(d), 60-741.5(d).
While this language is now required, the regulations also state
that whether or not the language is physically incorporated into a
contract, and whether or not there is a written contract between
the agency and the contractor, these clauses will, by operation of
law, be considered to be a part of every contract. See 41
C.F.R. §§ 60-300.5(e), 60-741.5(e). In other words,
failure to include these clauses in a contract will not absolve
subcontracting parties of their responsibility to abide by their
terms.
Contractors will be required to establish annual hiring
benchmarks for veterans based either on the national percentage of
veterans in the workforce as reported annually by the OFCCP
(currently 8 percent) or on their own availability estimates
derived using the best available data. The VEVRAA
regulations state that this new hiring benchmark "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." See 78 Fed. Reg. 58613, 58638
(Sept. 24, 2013). Rather, the OFCCP's stated purpose for
establishing the benchmark "is simply to provide the
contractor a quantifiable means to measure its progress towards
achieving equal employment opportunity for protected
veterans." See id. at 58639. Nevertheless, the OFCCP
estimates that, to meet the 8 percent benchmark, federal
contractors will need to hire an additional 205,500 protected
veterans.
If contractors determine that the national average is not
appropriate for their workplace, the regulations allow them to opt
to establish their own hiring benchmark for protected veterans. If
a contractor chooses to establish its own benchmark based on its
own data, the regulations lay out five factors it must take into
account in doing so. These factors are: (i) the average percentage
of veterans in the labor force in the state where the contractor is
located, as calculated by the Bureau of Labor Statistics; (ii) the
raw number of veterans who participated in the employment service
delivery system in the state where the contractor is located; (iii)
the applicant ratio and hiring ratio for the previous year; (iv)
the contractor's recent assessment of the effectiveness of its
external outreach and recruitment efforts; and (v) any other
factors, including the nature of the contractor's job openings
and/or its location, which would tend to affect the availability of
qualified protected veterans. See 41 C.F.R. §
60-300.45(b)(2). This last factor in particular allows a contractor
flexibility to take into account additional factors it thinks may
increase or decrease a reasonable benchmark and to weigh those
factors in a reasonable manner. The OFCCP has stated that
"[s]o long as the contractor adequately described and
documented the factors it took into account, it would comply with
the § 60-300.45 requirement." See 78 Fed. Reg.
at 58638.
Thus, contractors are required to document the hiring benchmark
they establish and retain this data for three years. Failure to
implement a benchmark will be considered a violation and could lead
to an enforcement action. The OFCCP has explained, however, that a
contractor will not be subject to an enforcement action or
additional affirmative action obligations based "solely"
on its failure to meet the hiring benchmark. See id.
Rather, the agency will "expect that as part of its annual
recruitment and outreach assessment, the contractor would assess
why it did not meet the benchmark and adjust its recruitment
efforts for the following year based on what it has learned."
See id.
Contractors will be subject to a 7 percent utilization
goal for employment of qualified individuals with disabilities for
each job group or, for smaller employers, for the entire
workforce. OFCCP derived its 7 percent utilization goal by
combining estimates of the current representation of individuals
with disabilities in the workforce (5.7 percent) with an estimate
of what the OFCCP deems to be the discouraged worker effect
(estimated at 1.7 percent). Although OFCCP states that the
"utilization goal," like VEVRAA's "hiring
benchmark," is not an inflexible quota that must be met but,
rather, "serves as an equal employment opportunity objective
that should be attainable by complying with all aspects of the
affirmative action requirements of this part," OFCCP also
states that it expects that to meet this utilization target,
government contractors will have to hire an additional 600,000
people with disabilities. See 78 Fed. Reg. 58684, 58708
(Sept. 24, 2013).
The OFCCP denies that the utilization goal will require
"disability-based decision making," and insists that it
should instead be used as a tool to measure the effectiveness of
the contractor's employment practices as they relate to equal
employment opportunity for qualified individuals with disabilities.
Id. The regulations explicitly state, and the OFCCP has
reiterated, that a contractor's failure to meet this goal will
not result in any violation and does not in and of itself
constitute either a finding or admission of discrimination. See
id.; 41 C.F.R. § 60-741.45(g). However, the regulations
make clear that if the utilization goal is not met, the contractor
will have to take steps to determine whether and where impediments
to equal opportunity exist and must develop and execute
action-oriented programs designed to correct any identified problem
areas. See 41 C.F.R. § 60-741.45(e), (f). Because
this is not merely a hiring benchmark but a goal relating to the
utilization of individuals with disabilities, contractors
will need to evaluate not only their recruiting and hiring
practices but also their retention of individuals with
disabilities. Thus, contractors should be aware that failure to
reach the 7 percent utilization goal may implicate their
responsibility to take concrete steps to address the discrepancy
and may lead to heightened scrutiny by the agency.
Contractors are to invite applicants to
self-identify as protected veterans or individuals with
disabilities at both the pre-offer and post-offer phases of the
application process. The VEVRAA regulations require
contractors to invite applicants to self-identify pre-offer as a
"protected veteran" and then to invite a successful
applicant to inform the employer whether he or she believes that he
or she belongs to one or more of the specific categories of
protected veterans (e.g., disabled veteran, Armed Forces service
medal veteran, recently separated veteran, or active duty wartime
or campaign badge veteran). The Section 503 regulations similarly
require contractors to invite applicants to self-identify as an
individual with a disability at both the pre- and post-offer phases
of the application process, using language provided by the
agency.
OFCCP has stated that it intends for the data provided through
self-identification to enable the contractor and the OFCCP to
measure the effectiveness of the contractor's recruitment and
affirmative action efforts over time, and thereby identify and
promote successful recruitment and affirmative efforts taken by the
contractor community. See, e.g., 78 Fed. Reg. at
58627.
Many individuals and organizations that commented on these
proposed rule changes, however, expressed concern that such
invitations to self-identify were not legally permissible under the
Americans with Disabilities Act ("ADA") and its
respective regulations, which limit the extent to which employers
may inquire about disabilities prior to an offer of employment. The
OFCCP's position is that the ADA's affirmative action
exception clearly allows the type of pre-offer self-identification
proposed by the new regulations. Specifically, OFCCP points to the
ADA and Section 503 regulations that state that a contractor may
conduct a pre-offer inquiry into disability status if it is
"made pursuant to a Federal, state or local law requiring
affirmative action for individuals with disabilities," such as
Section 503 or VEVRAA. See 78 Fed. Reg. at 58627 (citing
29 C.F.R. §§ 1630.13, 1630.14; 41 C.F.R. §
60-741.42). In defending this position, the OFCCP relies in part on
a letter obtained from EEOC's Office of Legal Counsel, which
affirmed that a requirement to invite pre-offer self-identification
of disability is permissible under the ADA and its regulations.
See 78 Fed. Reg. at 58627 n.19.
With respect to commenters' additional concern that obtaining
information about the disability status of an applicant could
potentially expose contractors to claims of discrimination by
disappointed job seekers, OFCCP stated that although knowledge is a
component of an intentional discrimination claim, it must also be
proven that the contractor treated the person less
favorably because of his or her disability. See 78 Fed.
Reg. at 58623. In addition, OFCCP points out that generally,
self-identification information would be obtained by and would
reside with human resources offices and will not be provided to
interviewing, testing, or hiring officials, as it is confidential
information that must be kept separate from regular personnel
records, which will help ensure that these officials do not, in
fact, have knowledge of which applicants have chosen to
self-identify as having a disability. See id.
The regulations make clear that all self-identification
information must be kept confidential and that disability
demographic information must be maintained in a data analysis file,
not with an individual's application or in an individual's
personnel file. Thus, with regard to veterans, the contractor is
required to maintain a separate file on persons who have
self-identified as disabled veterans.
Finally, the new Section 503 regulations add the requirement that
employers invite employees to voluntarily self-identify every five
years and to remind employees between these invitations that they
may change their disability status at any time. Contractors will be
required to make these invitations by using a new OFCCP form that
will be posted on the OFCCP website.
VEVRAA regulations require contractors to list their job
openings with appropriate state or local job services and do so in
a manner that complies with the mandatory job listing requirements
of the Equal Opportunity clause detailed in the
regulations. State and local job service agencies,
referred to in the new regulations as "employment service
delivery systems," are required by statute to refer qualified
protected veterans to fill employment openings listed by
contractors. See 41 C.F.R. § 60-300.2(j). The new
VEVRAA regulations require that contractors not only list job
openings with those services but that they do so "in any
manner and format" that the appropriate employment service
permits that will allow it to provide priority referrals to the
contractor. See 41 C.F.R. § 60-300.5(a)(2). In
addition, the Equal Opportunity clause found in the regulations
mandates that contractors now provide to the employment service not
only the name and location of each of the contractor's hiring
locations but also the contact information for the hiring official
in each location in the state, its request for priority referral,
and its status as a federal contractor.
Both sets of regulations impose new data collection
obligations so contractors (and the OFCCP) will know the number of
veterans and individuals with disabilities who have applied and
been hired each year. For both sets of regulations,
contractors must now, on an annual basis, document (i) the number
of applicants who self-identify as protected veterans or
individuals with disabilities, or who are otherwise known to be
protected veterans 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
protected veteran applicants and applicants with disabilities
hired; and (v) the total number of applicants hired. These
computations and comparisons must be maintained for a period of
three years. See 41 C.F.R. §§ 60-300.44(k),
60-741.44(k).
Both sets of regulations clarify that contractors must
allow OFCCP access to their records on- or off-site and that the
OFCCP may seek data beyond the current plan year. The new
regulations require contractors to retain certain records for three
years and to provide OFCCP access to any documents or records or to
any other material the agency deems relevant to a compliance check
or complaint investigation. In addition, contractors must now
provide off-site access to materials if OFCCP so requests, and they
must inform OFCCP of all formats in which records are maintained
and provide those records to the agency in whichever of those
formats OFCCP requests. The regulations clarify that
contractors' records will be treated as confidential to the
extent permitted by the Freedom of Information Act. See 41
C.F.R. §§ 60-300.81, 60-741.81.
Both sets of regulations contain "best
practices" that contractors should note. Finally, in
response to the many comments OFCCP received, the agency
"dropped" as requirements some of the more controversial
provisions from the final regulations. However, OFCCP included some
of these same provisions as "best practices." For
example, in the disability regulations, OFCCP dropped its proposed
requirement that the contractor enter into linkage agreements with
three different entities and list employment opportunities with
certain organizations. Instead, the regulation now provides a
number of "suggested resources." 41 C.F.R. §
741.44(f)(2). A similar provision appears in the VEVRAA
regulations. 41 C.F.R. § 60-300.44(f)(2). OFCCP also dropped
from the final disability regulations a provision requiring
contractors to develop and implement written procedures for
processing requests for reasonable accommodation. OFCCP decided not
to incorporate this proposal in the final rule but instead included
it as a best practice and added a new Appendix B titled
"Developing Reasonable Accommodation Procedures."
Contractors would be well-advised to review these sections as
compliance officers will undoubtedly assess their compliance with
these provisions in mind even though they are not requirements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.