Gimme 5: What Every Lawyer Should Know about Contracting with the Federal Government and the Office of Federal Contract Compliance Programs
By Holly R. Lake, an associate in Paul, Hastings, Janofsky & Walker LLP’s Los Angeles office, who practices employment law, and Cindy J. Morgan, also an associate in the firm’s Los Angeles office, who practices employment law. They can be reached at HollyLake@paulhastings.com and CindyMorgan@paulhastings.com, respectively. This article is provided for informational purposes only and does not constitute legal advice.
The Office of Federal Contract Compliance Programs administers a body of law that many employers overlook or fail to appreciate. While it is impossible here to provide an in-depth primer on how to comply with all obligations that fall within the purview of the OFCCP, here are five important issues for practitioners to consider when interacting with clients that may indeed be covered by the law.
1. What is the OFCCP and why should it matter to me? The OFCCP is a subdivision of the U.S. Department of Labor that is responsible for administering Executive Order 11246, the Rehabilitation Act of 1973, and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974. These laws prohibit “covered” federal contractors and subcontractors from discriminating on the basis of race, sex, national origin, disability, and protected veteran status. Executive Order 11246 also requires that “covered” contractors and subcontractors take “affirmative action” to ensure that hiring and promotion practices allow for equal employment and advancement opportunities.
2. What is a “covered” federal contractor or subcontractor? Whether an employer is a “covered” contractor and subcontractor depends on which law is applied:
Executive Order 11246: A covered entity is one that (i) has 50 or more employees and a single government contract or subcontract worth $50,000 or more, (ii) accepts federal funds for deposit, or (iii) sells or redeems savings bonds. In addition, the general guideline is that an entity is a covered subcontractor when its goods or services are necessary to the performance of a covered federal contract. An entity also may become a contractor by virtue of its corporate relationships. Whether an employer is a “covered” entity is a factual issue, determined on a case-by-case basis, and should be considered carefully.
Rehabilitation Act of 1973: A covered contractor or subcontractor is one that enters into government contracts in excess of $10,000 for the procurement of personal property and nonpersonal services, including construction.
VEVRAA: Any contractor who receives a contract from the federal government in excess of $25,000, or any subcontractor who receives a contract of $25,000 or more from a covered contractor, is covered. For contracts entered into after December 1, 2003, the threshold is $100,000. Any contractor or subcontractor with 50 or more employees and a contract of at least $50,000 is also required to implement an Affirmative Action Program with regard to qualified veterans.
Practice Pointer: Each employer should be evaluated closely to determine if it is a covered contractor or subcontractor under any of the applicable laws.
3. If my client is “covered,” what does it mean to “take affirmative action to ensure their hiring and promotion practices allow for equal employment and advancement opportunities”? While each law has its own obligations, the OFCCP requires a contractor to engage in a self-analysis for the purpose of discovering any barriers to equal employment opportunity. More specifically, there are three general compliance issues:
First, every year, the employer must develop one AAP for women and minorities and another for veterans and disabled persons. An AAP is a management tool that identifies specific and result-oriented procedures that an employer, using good faith efforts, implements to achieve diversity goals. Good faith efforts may include outreach, recruitment, training, and other activities to increase both the application and advancement of qualified minorities and women. The AAP analyzes an entity’s incumbency versus the availability of qualified women and minorities, as well as the rates of hiring, promotions, and terminations. An AAP should be a “live” document that is implemented and used in all considerations regarding recruiting, hiring, promotions, and terminations.
Second, an equal employment opportunity officer must be designated. The EEO officer will evaluate the company’s hiring and promoting practices, and ensure that the company adheres to the practices in the AAP and is in compliance with all EEO laws.
Third, annually, each entity must analyze its compensation structure. Where appropriate, statistical analysis may be required to explain variations in compensation within the company or to identify jobs the OFCCP might target.
Practice Pointer: The development of an AAP requires a subject-matter understanding and skill level beyond many human resource professionals. In addition, certain strategic decisions should be made with the advice of an attorney specializing in this area of law.
4. Does that mean employers have to reduce their employment qualifications to hire women and minorities? No. While a contractor is required develop diversity goals consistent with its AAP, Executive Order 11246 does not command an employer to create specific jobs for women or minorities or set aside jobs for them. Indeed, quotas and preferential hiring and promotion are specifically prohibited. An employer never has to hire anyone other than the best-qualified candidate while attempting to eliminate the need for diversity goals. Thus, AAPs should be used to gauge already existing measures directed to eradicate and prevent discrimination and challenge contractors to consider alternative good-faith efforts to attract women and minorities to their workforce.
5. Does the OFCCP ever “check” to ensure compliance? What if my client is not in compliance? At any time, the OFCCP may initiate what is termed a “compliance evaluation.” The review by the OFCCP may take the one of many different forms. Among these forms are compliance checks, focused reviews, corporate management compliance evaluations, and, most commonly, a compliance review.
After a compliance review, if the OFCCP determines that a covered contractor or subcontractor is not in compliance, there are consequences of varying degrees:
First, after identifying any problems, the OFCCP will bring them to the attention of the contractor with instructions to resolve the issue. If the government finds any victims of discrimination in either hiring, promotion, termination, benefits, or any other personnel practices, the OFCCP may require the contractor to make each individual whole.
Depending on the extent of the area of noncompliance, the OFCCP may require the employer to enter into a Conciliation Agreement. This Conciliation Agreement will lay out certain reporting or other ongoing obligations that the contractor must meet to be considered in compliance.
If the area of noncompliance is considered severe, the OFCCP can debar the entity. Debarment means that the employer may no longer enter into any qualifying federal contracts.
Practice Pointer: Once an employer receives a notice of a compliance evaluation, it should contact an attorney specialized in this area of practice to help it prepare for an audit. The consequences of being unprepared, underprepared, or underestimating the scope of a review by the OFCCP can be grave.