For the first time ever, the federal government is imposing nose-counting requirements on contractors’ hiring and retention of protected veterans and individuals with disabilities (IWDs).

The moving target that is “individuals with disabilities” is reasonably familiar to the bar these days. The less-encountered group, covered veterans, is now comprised of (1) disabled veterans; (2) those discharged within the past three years; (3) those who earned a service medal during active duty; and (4) those who served active duty while a war, campaign expedition for which a campaign badge was issued.

The Office of Federal Contract Compliance Programs (OFCCP) of the U.S Department of Labor enforces the affirmative action obligations imposed on federal government contractors. Under Executive Order 11246, contractors are used to setting goals and timetables for attempting to match the representation of racial minorities and women in their employee ranks to the representation one would expect in such a workforce in a world free of artificial barriers to employment based on race and sex.

While qualifying contractors have also long had obligations under Section 503 of the Rehabilitation Act (Rehab Act) and the Vietnam Era Veterans Readjustment Assistance Act (VEVRA) to work towards eliminating artificial barriers to employment and advancement in employment faced by IWDs and vets, the obligation never extended to measuring representation in the contractor’s workforce of people belonging to these groups and comparing it to any general data. Those contractors with affirmative action plan obligations should learn and implement the new rules. Affirmative action plan obligations under VEVRA apply to all businesses with 50 or more employees and a federal contract worth at least $100,000. Under the Rehab Act, the standard is 50 employees and a $50,000 contract.

The vice president announced the new rules and the OFCCP sent out a press release on them on August 27, 2013. OFCCP published the new regulations in the Federal Register on September 24, 2013 and they take effect about six months after that, on March 24, 2014. Notably, though, the affirmative application plan compliance will not be required during any “plan year” in progress when the regulations take effect. Also, the OFCCP will provide technical assistance for contractors to achieve compliance.

The new measurement rules for the Rehab Act and for VEVRA are not identical. The Rehab Act goals are similar to those for racial minorities and women already familiar under E.O. 11246, without an availability analysis. Instead of determining the percentage of IWDs that should be expected to be qualified and available to fill positions within each job group by considering census data about the population with requisite skills in the business’s local and recruitment areas, a one-size- fits-all approach is adopted here. Based on data about the percentage of IWDs in the U.S. workforce and the discouraged worker population, OFCCP has determined that currently 7 percent is the right target for every contractor to set and measure its progress towards achieving. (Notably, discouraged workers are not considered in the unemployment rate numbers the DOL publishes monthly that are often used as evidence of recovery in our troubled U.S. economy.)

Future changes to this number are possible if OFCCP deems changing data warrants them. Contractors must apply the disability target and evaluate progress toward it by job group or EEO-1 category according to size just as it must race/sex goals under E.O. 11246, except that those with fewer than 100 employees may simply apply the goal to, and measure progress in, its entire workforce. If the target is not met, the contractor is required to identify problem areas and develop and implement specific action plans to better its chances for future success.

Measurement Tools

By contrast to the Rehab Act’s new goals, the new “benchmarks” for VEVRA are measurement tools, not aspirational targets the employer is supposed to aim to achieve. Unlike E.O. 11246′s race and sex goals, the VEVRA benchmarks need not be tailored to the particular recruitment circumstances of the contractor, although a five-factor analysis with some recognition of these is an option. The other option is to set the benchmark at the government’s published percentage of covered veterans’ participation in the civilian labor force of the United States. The VEVRA benchmarks can be applied workforce-wide and need not be identified for each job group or EEO-1 category in the contractor’s workforce.

Familiar VEVRA job-listing obligations are expanded under the new rules with contractors required to provide additional information to job posting agencies about contractor status and site-specific contact persons.

New formulaic sentences for contractors to give subcontractors notice of their VEVRA and Rehab Act obligations and the obligation to print them in boldface are prescribed, probably requiring modification of purchase order forms.

Now contractors will have to collect annually and maintain for three years, applicant flow data on the numbers of job applicants and hires in general and those who self-identify as vets and IWDs. To make this data collection possible, contractors will now be required to invite self-identification by applicants earlier in the selection process than under existing rules, which required this step only at the “post-offer” stage.

In the case of online recruiting, the inquiry (and applicant number count) can be delayed until after an initial “basic qualifications” screen eliminates clearly unqualified applicants from the process, which is something of a blessing in this age of online recruitment, high unemployment and automatic computer functions that can generate ridiculously high numbers of putative applications for every posted job opening. The new Rehab Act regulations actually require that invitations to self-identify as an IWD be extended both pre- and post-offer before hire and periodically to the entire incumbent workforce since disability status is subject to change.

Documentation

In addition to the new applicant flow and benchmark records, contractors are newly required to create and maintain documentation of their review and audit of their personnel practices for the purpose of identifying and addressing problems affecting job and advancement access for IWDs and vets.

Compliance evaluations by OFCCP staff under the new regulations will specifically be allowed to include events and actions taken after the date of the review scheduling letter, will be authorized to occur on or off-site at the preliminary and in-depth stages and will require the contractor to cooperate with OFCCP’s preference from among the contractor’s existing data formats. Pre-award reviews like those under EO 11246 for race and sex issues will not be conducted for VEVRA and Rehab Act purposes as well.

All in all, the new regulations add a considerable amount of recordkeeping, analysis, reporting and communication obligations to companies that do business with the federal government. The regulations stress the “privilege” nature of contractor status, implying that a business wishing not to undertake the obligations and responsibilities of affirmative action should simply eschew government work.

But this idea of business choice in whether or not to deal with the government is illusory. This is because the rules are not limited to first tier government contractors signing up with their eyes open. These rules apply to second- and third-tier and beyond, sub-sub-sub-contractors with little real economic opportunity to decline customers who might be using what they purchase from the unwitting sub- sub- sub to fulfill a federal government contract obligation. Moreover, the growing role of the federal government in American economic life makes it even more difficult to carve out a sustainable government-free business model.

In short, this change in the compliance terrain warrants close attention.•