VOLUME I Chapter 14 Affirmative Action Obligations of Federal Government Contractors

• Jurisdiction: South Carolina

Chapter 14 Affirmative Action Obligations of Federal Government ContractorsLeigh M. NasonJanet Q. LewisOgletree, Deakins, Nash, Smoak & Stewart, P.C.

Many employers have contracts, subcontracts, or grants with the federal government. This chapter explores the affirmative action obligations arising from doing business with the federal government.¹

I. Affirmative Action

Affirmative action obligations are imposed upon businesses contracting to provide goods or services to the federal government or functioning as subcontractors for federal contractors. The obligations of federal contractors and subcontractors are set forth in Executive Order 11246 and the implementing regulations found at 41 C.F.R. Parts 60-1 and 60-2; the Rehabilitation Act of 1973, as amended,² and 41 C.F.R. Part 60-741; the Vietnam Era Veterans' Readjustment Assistance Act of 1974 (VEVRAA); the Veterans Employment Opportunities Act of 1998 (VEOA); and the Jobs for Veterans Act (JVA),³ as well as 41 C.F.R. Part 60-300. These laws and regulations not only prohibit discrimination by covered employers, but require them to take positive, results-oriented actions to employ and advance in employment minorities, women, disabled individuals, disabled veterans, and other protected veterans.

If a federal contractor or subcontractor holds contracts or subcontracts aggregating to more than $10,000 a year, it is subject to federal affirmative action regulations promulgated under Executive Order 11246;⁴ the threshold is $15,000 for Section 503 of the Rehabilitation Act of 1973.⁵ Depositories of Government funds in any amount are, likewise, covered. If the contract or subcontract to be performed in the United States is for $150,000 or more, a contractor is also subject to regulations promulgated under VEVRAA, as amended.⁶ Moreover, contractors having a single federal contract or subcontract of at least $50,000⁷ (or $150,000 under VEVRAA) and having 50 or more employees must develop and implement written affirmative action programs (AAPs) under these laws.

The U.S. Department of Labor, through the Office of Federal Contract Compliance Programs (OFCCP), is the federal agency responsible for enforcing the affirmative action laws and regulations.

A. Executive Order 11246

Executive Order 11246 applies to all federal contractors and subcontractors, and contractors performing under federally assisted construction contracts exceeding $10,000, unless exempted under the regulations.⁸ A contractor meets the threshold coverage amount if it has federal government contracts or subcontracts in any 12-month period that have (or can reasonably be expected to have) an aggregate total value exceeding $10,000.

A "contract" with the federal government is any agreement or modification thereof between a governmental agency and any person for the purchase, sale, or use of personal property or nonpersonal services.⁹ A "subcontract" is an agreement or arrangement between a contractor and any person (1) for the purchase, sale, or use of personal property or nonpersonal services which are necessary for the performance of any contract; or (2) under which any portion of the contractor's obligation under any contract is performed, undertaken, or assumed.¹⁰ A "federally assisted construction contract" includes construction contracts paid for in whole or in part with funds obtained from the federal government or borrowed on the credit of the federal government pursuant to a grant, contract, loan, insurance, or guarantee. Such contracts also include contracts undertaken pursuant to any federal program involving such a grant, contract, loan, insurance, or guarantee. To determine whether a federally assisted construction contract meets the threshold coverage amount, the amount of the contract - rather than the amount of the federal financial assistance - governs.¹¹Moreover, financial institutions which serve as depositories of Government funds must comply with Executive Order 11246 obligations regardless of the contract amount.¹² Some exemptions to these requirements may apply.¹³

Executive Order 11246 requires that non-exempt contractors and subcontractors take affirmative action to employ applicants and to treat employees during their employment without regard to race, color, religion, sex, sexual orientation, gender identity, or national origin.¹⁴ This obligation to take affirmative action exists with regard to working conditions and facilities as well as to all employment decisions in the areas of hiring, terminations, training, promotions, and compensation. All employees of a covered contractor/subcontractor are protected by the Order's requirements regardless of whether they are working on the contractor's federal projects.

In addition to being prohibited from engaging in employment discrimination and being required to take affirmative action to ensure that applicants and employees are treated without regard to protected characteristics, each contractor/subcontractor subject to the Executive Order must:

¦ post an approved EEO poster in conspicuous places available to employees and applicants to notify them of the protections afforded to them by the laws OFCCP enforces;¹⁵
¦ include an equal opportunity statement in all solicitations and advertisements for employment;¹⁶
¦ advise each labor union with which it has dealings of its equal employment opportunity and affirmative action policies;¹⁷
¦ include the equal opportunity clause in all subcontracts and purchase orders of more than $10,000 related to the carrying out of the government contract;¹⁸
¦ comply with the Uniform Guidelines on Employee Selection Procedures (UGESP);¹⁹
¦ comply with OFCCP's Guidelines on Discrimination Because of Religion or National Origin;²⁰ and
¦ furnish all information and reports required by the Executive Order to the OFCCP and permit access by the OFCCP to relevant books, records, computerized information, and accounts for the purpose of investigation.²¹

Certain "supply and service" contractors with at least 50 employees company-wide must develop a written (hard copy or electronic format) AAP for minorities and women pursuant to Executive Order 11246.²² Such contractors include those who hold a government contract of at least $50,000, those who hold government bills of lading that total or are expected to total $50,000 in any 12-month period, and those who serve as a depository of federal Government funds in any amount.²³

An acceptable AAP must be developed within 120 days of the commencement of the contract and updated annually.²⁴ Written AAPs must be developed for each of the contractor's establishments and every employee in the contractor's workforce must be included in an AAP.²⁵ Each AAP must contain the elements specified in the regulations, including: a policy statement, assignment of responsibility, a plan for publicizing the contractor's EEO commitments, an organizational profile, an availability analysis of major job groups, a comparison of incumbency to availability, and placement goals for correcting underutilization identified in any job group.²⁶ The AAP must also analyze the contractor's overall employment practices - including selections and compensation, identify problem areas, and state what steps the contractor will take to correct any existing problems. An internal audit and reporting system must be established to monitor the contractor's progress under the AAP. ²⁷ Finally, the contractor must demonstrate compliance with the regulatory guidelines regarding sex, religion, and national origin discrimination.²⁸

OFCCP is responsible for monitoring the employment practices and AAPs of federal contractors and subcontractors through compliance evaluations (audits).²⁹ OFCCP compliance evaluations are initiated through the agency's neutral selection system.³⁰Contractors are notified of their selection for an audit through a scheduling letter which requests copies of AAPs and other information for a "desk audit" and requires that the information be submitted to OFCCP for review within 30 days of receipt. After the contractor provides the desk audit materials, OFCCP may request additional data and/or may conduct an on-site investigation of the contractor's facility, during which it generally interviews employees and managers, and tours the facility.³¹

If OFCCP determines that a contractor is not in compliance with Executive Order 11246, OFCCP can, after attempts to conciliate identified violations, initiate administrative enforcement proceedings.³² Available remedies and sanctions include:

¦ a conciliation agreement remedying technical and substantive regulatory violations;
¦ requiring the contractor to make offers for hire or promotion to individuals from an "affected class" for unexplained statistical discrepancies between the percentage of applicants and the percentage of hires or promotions, based on race/ethnicity and/or gender;³³
¦ provision of "lost wages" and interest to minorities and females who should have been hired or promoted;
¦ "blacklisting" or term debarment of the non-complying contractor from future government contract work until the contractor has demonstrated compliance with the Executive Order;
¦ canceling the contract(s) of a non-compliant contractor; and
¦ a criminal action by the Justice Department in instances when the contractor knowingly furnishes OFCCP with false information.³⁴

Employees of a federal contractor or subcontractor can file complaints alleging discrimination in employment within 180 days of an alleged discriminatory or retaliatory action.³⁵ All OFCCP complaints are dual-filed with the Equal Employment Opportunity Commission (EEOC), and OFCCP may refer the investigation of certain complaints to EEOC for processing.³⁶

Additional information is available on OFCCP's website at http://www.dol.gov/ofccp.

B. The Rehabilitation Act of 1973

Section 503 of the Rehabilitation Act of 1973 requires contractors to "take affirmative action to employ and advance in employment...