The OFCCP Proposes to Increase the Obligations of Direct Federal Contractors and Subcontractors Regarding Veterans
The Office of Federal Contractor Compliance Programs (OFCCP), the agency that administers various affirmative action laws applicable to federal contractors, published proposed regulations on April 26, 2011, that, if implemented, will significantly increase contractors' obligations as they relate to protected veterans.
As with the current regulations, the proposed regulations will apply to companies with a direct contract (as opposed to federally-assisted contracts) with the federal government entered into, on or after December 1, 2003 and valued at $100,000 or more, or with a subcontract of the same value with a direct federal contractor that is necessary for the completion of a federal contract. Companies with covered contracts should become familiar with the proposed regulations and consider the effect the changes will have on their business. If a contractor wishes to express a concern related to the proposed regulations, the OFCCP is accepting comments until June 27, 2011 (visit the federal rulemaking portal for instructions on submitting comments).
As expected, the proposed regulations expand the obligations of federal contractors toward veterans. Under the proposed regulations, direct federal contractors will be required to track the veteran status of applicants (in addition to new hires) and, if the contractor has 50 or more employees, establish hiring goals for protected veterans. The proposed regulations also require federal contractors with 50 or more employees to document employment decisions affecting protected veterans thoroughly and to retain such records for an expanded period of time.
In addition, covered federal contractors will be required to establish at least three "linkage agreements" with certain veterans organizations (which has been a focus of the OFCCP in recent audits). The regulations also implement mandatory obligations for internal communications about the contractor's affirmative action policy. Each of these proposed changes will increase the affirmative action burdens of federal contractors and the cost of doing business with the federal government.
One of the most significant changes in the proposed regulations relate to applicant tracking and data gathering. Currently, covered federal contractors are not required to track the veteran status of applicants, but must invite new employees to identify their specific veteran status after the individual accepts an offer of employment. Under the proposed regulations, covered federal contractors (apparently without regard to number of employees) will be required to invite all applicants to identify voluntarily whether they are a protected veteran generally (without asking the applicants to identify the specific protected veteran category into which they fall). This will require changes to contractors' current applicant questionnaires, which likely only cover gender and race/ethnicity. Federal contractors will still be required to invite new employees to identify voluntarily the specific veteran category into which they fall.
In addition, covered federal contractors with 50 or more employees will be required under the proposed regulations to maintain certain data related to their applicants and new hires. Specifically, the federal contractor must maintain the following data:
- The number of referrals of protected veterans received from the applicable veterans or unemployment office (presumably, even if the individuals are not qualified);
- The total number of referrals (without regard to whether such referrals are protected veterans) received from the veterans or unemployment office (again, presumably even if not qualified);
- The number of applicants who identified themselves as protected veterans (or who are otherwise known to be protected veterans);
- The total number of job openings and total number of jobs filled;
- The ratio of jobs filled to job openings;
- The total number of applicants for all jobs;
- The ratio of protected veteran applicants to all applicants;
- The number of protected veteran applicants hired;
- The total number of applicants hired; and
- The ratio of protected veterans hired to all hires.
The requirement to maintain this information will result in additional applicant tracking logs beyond those currently required.
Another significant addition in the proposed regulations is the first-time requirement for covered federal contractors with 50 or more employees to establish benchmarks for hiring. Currently, federal contractors are not required to establish numerical benchmarks or goals related to veterans. If these proposed regulations are adopted, benchmarks will need to be established on an annual basis, which will increase the cost of the preparation of an affirmative action plan for veterans. Covered federal contractors will be required to consider the following information when setting benchmarks:
- The average percentage over the past three years of veterans in the civilian labor force in the state where the contractor is located. These percentages will be calculated by the Bureau of Labor Statistics and published on the OFCCP website.
- The number of veterans, over the previous four quarters, who were participants in the unemployment or veterans service in the state where the contractor is located. These percentages will be tabulated by the Veterans' Employment and Training Service and published on the OFCCP website.
- The ratios (described above) calculated by the contractor for the previous year.
- The contractor's recent assessment of the effectiveness of its outreach and recruitment efforts.
- Any other factors that affect the availability of qualified protected veterans.
Contractors will use these benchmarks to evaluate the effectiveness of their outreach and recruitment efforts, some of the requirement for which are discussed below.
Documents showing the calculation of the benchmark must be retained for five years. This effectively expands the scope of any OFCCP audit related to veterans, which has historically been a two year period, to a period of five years.
Records of Employment Decisions and Review of Qualifications
Covered contractors with more than 50 employees will also be required to maintain detailed records about employment decisions related to covered veterans and their review of position qualifications. For employment decisions, the proposed regulations require that, at a minimum, federal contractors maintain the following information:
- Each position or training program for which the employer considered an applicant or current employee who is a covered veteran;
- A statement regarding the reason the employer rejected the individual for the position or training and any accommodation considered; and
- A description of any accommodation provided to a disabled veteran who is selected for a position or training.
The records related to the reason the employer rejected a covered veteran must be made available to the applicant or employee upon request.
In addition to maintaining records related to employment decisions, the proposed regulations require that covered contractors maintain specific records related to an annual review of their position qualifications, including the methods used to complete the annual review, the results of the annual review, and any actions taken in response. If these regulations are implemented, contractors will need to be cautious about creating a document that might be interpreted as an admission of discrimination.
External Outreach Efforts and Linkage Agreements
Under the proposed regulations, covered federal contractors will be required to establish what is being referred to as "linkage agreements." Linkage agreements are defined as agreements describing the connection between the contractor and certain recruitment sources. Contractors must establish these agreements with the Local Veterans' Employment Representative in the local unemployment office and at least one of the following:
- The Department of Veterans Affairs Regional Office;
- The veterans' counselors and coordinators on college campuses;
- The service officers of the national veterans' groups active in the area;
- Local veterans' groups and veterans' service centers; and
- The Department of Defense Transition Assistance Program.
The contractor must also establish a linkage agreement with one or more sources listed as a veterans' service organization on the Employer Resources section of the National Resources Directory.
Beyond these mandatory external outreach requirements, the proposed regulations contain suggested external outreach requirements, such as holding formal briefing sessions with recruitment sources, incorporating special efforts to reach students who are protected veterans, using protected veterans in recruitment and community activities, and considering veteran applicants for all available positions, even those to which they did not apply.
Internal Dissemination and Training
Noting the value of internal support, the proposed regulations also require that contractors undertake the following internal steps:
- Include their affirmative action policy in their policy manuals;
- Inform all employees and applicants of their commitment to affirmative action, including annual meetings with employees to discuss their affirmative action policies, explain the responsibilities under these policies, and identify opportunities for advancement;
- Conduct meetings with executive, management and supervisory personnel to explain the intent of the policy and the individual responsibilities for implementation;
- Discuss the policy thoroughly in employee orientation and management training; and
- Meet with any union representing its workforce to inform the union of the contractor's policy and request the union's cooperation.
As with the external outreach provisions, the proposed regulations also encourage additional internal efforts. Furthermore, the proposed regulations require that contractors train all personnel involved in recruitment, screening, selection, promotion, discipline, and related processes. The training program must include the benefits of employing protected veterans, appropriate sensitivity toward protected veterans, and the legal obligations toward protected veterans (including disabled veterans). The contractor will be requirement to maintain records documenting the subject matter covered, who conducted the training, who received the training, and when the training took place.
Evaluation of Recruitment and Outreach Efforts
The proposed regulations require that the covered federal contractors document an annual evaluation of the effectiveness of these and other non-mandatory outreach and recruitment efforts undertaken, including the minimum criteria it used and the contractor's conclusion as to whether the effort was effective. This evaluation must include data collected during the current and two preceding years. If the evaluation concludes that the efforts were not effective, the contractor must identify and implement alternative efforts.
All documents related to linkage agreements and other outreach efforts, along with its evaluation of such efforts, must be kept by a covered federal contractor for five years. This retention period exceeds the record retention requirements for other personnel or employment records by three or four years (depending on the size of a contractor's workforce and the value of its contracts) and, as noted above, has the effect of expanding the scope of any OFCCP audit to a period of five years.
While these regulations are only proposed at this point, federal contractors should be familiar with their requirements. Even if the proposed regulations are modified in the future, they demonstrate the OFCCP's proactive efforts to address the unemployment rates of veterans in a more meaningful way than the current regulations. We will likely see many of the concepts implemented, even before the OFCCP issues final regulations. We also anticipate similar proposals in upcoming regulations related to affirmative action for individuals with disabilities.
Editor's note: This article was written by guest author Tami Earnhart. Ms. Earnhart is a partner in Ice Miller's Labor and Employment Group. She represents employers in all aspects of employment and labor law, including discrimination and other litigation, claims filed with administrative agencies, audits by administrative agencies, and labor arbitrations. She helps employers avoid employment disputes, when possible, and advises companies in making personnel decisions and creating policies in compliance with state and federal laws, including affirmative action policies and programs. She is also a contributing author of AGC's Affirmative Action Manual for Construction and has served as a speaker in AGC audio conferences and webinars on employment law matters.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.
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