In-house counsel at companies with federal contracts or subcontracts must ensure that their organizations are in compliance with new requirements from the Office of Federal Contract Compliance Programs (OFCCP). Compliance with OFCCP regulations is necessary where the company has a federal contract in the amount of $50,000 or more (or a subcontract performing work necessary for the performance of a federal contract) and when a company has 50 employees. Financial institutions covered by FDIC are also required to comply.

In addition to the affirmative action requirements for race and gender imposed by Executive Order 11246, covered companies must comply with disabilities and veterans outreach and data collection requirements. Section 503 of the Rehabilitation Act of 1973 and the Vietnam Era Veterans Readjustment and Assistance Act (VEVRAA) require federal contractors to take affirmative action to recruit, employ, and promote individuals with disabilities as well as protected veterans. For years, Section 503 and VEVRAA required only that a company ask new employees, at the post-offer stage, if they wanted to identify themselves as disabled or as a veteran, file a VETS-100 Report (if the company had contracts in the amount of $100,000 or more), and create “boilerplate” affirmative action programs that included a description of the company’s outreach efforts in these categories.

New disability and veterans regulations that became effective on March 24, 2014, have dramatically changed federal contractors’ obligations for data collection, tracking, training, and overall affirmative action efforts for disabled individuals and protected veterans. The legal team is often charged with ensuring the company meets these new compliance requirements. Key action items appear below.

What changes must everyone have in place as of March 24, 2014?

Although phased-in compliance is permitted for some parts of the new regulations, all federal contractor employers must:

  1. Revise the Equal Opportunity Clause in contracts, subcontracts, and purchase orders; and
  2. Revise the Equal Opportunity tag line in job postings and advertisements to specifically include references to individuals with disabilities and protected veterans.

OFCCP has posted several webinars and FAQs on its website to help guide employers through the required changes. The FAQs provide approved language for the employer’s Equal Opportunity Clause, which must appear in bold type and include the required language verbatim.

How to comply with Section 503 disability data requirements?

Federal contractors with an affirmative action program (AAP) already in place as of March 24, 2014, need not begin the new data collection and other AAP requirements until they prepare their next AAP. This phased-in compliance period allows time for the contractor to revise its computer systems to incorporate the new data collection requirements.

The OFCCP website has the form that contractors are required to provide to applicants and employees for voluntary self-identification of a disability. If a contractor wants to provide the form electronically, there are specific requirements posted on the OFCCP’s website for font size, font type and inclusion of the OMB Number and date. The timing and frequency of when the Section 503 form must be offered is new:

  1. All applicants must receive the form at the pre-offer stage, at the same time they receive the voluntary self-identification form to identify race, gender, and veteran status.
  2. At the post-offer stage, all newly-hired employees must be given the same form again, so that they have a second opportunity to identify a disability.
  3. The entire workforce must be given the form with an opportunity to identify as disabled within one year of the effective date of the regulations, that is, by March 24, 2015.
  4. The entire workforce must be given the form every five years thereafter, with at least one reminder provided to employees in the intervening five-year period.

A company must meet the utilization goal of 7 percent disabled employees in each of its job groups.  Counsel will be responsible for ensuring that hiring managers and decision makers understand the difference between the required utilization goal (similar to the placement goals for minorities and females) and an illegal quota.

What are the requirements for veterans’ data?

Although the OFCCP provided guidance for contractors in the appendix to the new VEVRAA regulations, it did not create an actual form that contractors must use to collect the protected veterans’ data. Instead, contractors should modify their current voluntary self-ID forms that collect race and gender data to incorporate the new veterans categories and the new data collection requirements. These requirements are distinctly different from the Section 503 requirements.

  1. At the pre-offer stage, the contractor must provide the new protected veterans categories and ask the applicant, at the same time the applicant is asked to identify race and gender, to respond with a “yes” or “no” as to whether the applicant considers himself or herself a protected veteran. The applicant is not to indicate the specific veterans categories with which he or she identifies at that time.
  2. At the post-offer stage, the new employee is provided a different form that includes the four protected veterans categories with definitions, and the individual is asked to indicate each of the veterans categories with which he or she identifies.

The data collected will hopefully meet the hiring benchmark established and posted by the OFCCP. The benchmark is currently 7.2 percent. Unlike the Section 503 utilization goal, the hiring benchmark applies to the contractor’s entire workforce, not job groups.

What are the other new requirements?

Although the contractor community has been focused on the new data collection requirements, the regulations impose additional new requirements for training, language that must be included in the AAP, designation of endorsement of the company’s AAP programs by its highest executive official, and other requirements.

In addition, the OFCCP’s new compensation directive issued February 2013 has revised the way the agency will conduct its compensation reviews during an audit. Companies are well-advised to ensure they conduct compensation self-audits, with the assistance of counsel, to identify any compensation issues prior to their discovery during an OFCCP audit. This allows the company an opportunity to create its strategy for how to address any compensation issues and correct any inaccurate job titles or classifications. Ensuring these reviews can be conducted under an attorney-client privilege not only provides the legal guidance to prevent someone from inadvertently establishing a quota, but it also protects the process while identifying and making any corrections.

The OFCCP’s increased aggressive enforcement means the company has a greater likelihood of facing an audit and potentially facing a violation. Involvement by the company’s in-house counsel will help prevent inadvertent inaccuracies in disclosures to the agency and ensure the compliance audit proceeds consistently with the company’s corporate objectives.