OFCCP Places New Risks and Obligations on Contractors

Labor & Employment Alert

Client Alert


Lost among much of the other news of recent weeks, the Office of Federal Contract Compliance Programs (OFCCP) has taken steps that will likely complicate the management of organizations that choose to do business with the federal government. These steps include (1) the rescission of two documents that provided guidance to OFCCP compliance officers investigating claims relating to compensation issues and (2) the implementation of two final rules, one updating a contractor’s obligations relating to hiring veterans and the other relating to hiring individuals with disabilities. Together, these changes not only increase the risk of doing business with the federal government, but they also add to the administrative costs and hassles that go along with the relationship.

The two guidance documents were rescinded effective February 28 of this year. They were issued in 2006 and provided enforcement guidance that the current OFCCP apparently believed unnecessarily limited its ability to fully investigate and prosecute race and gender discrimination claims relating to compensation. With those limitations removed, the OFCCP insists investigators will be able to better investigate and examine practices and other evidence to uncover discrimination and evaluate contractor compliance with Executive Order 11246. That may be so, but a certain impact of the decision is that going forward such investigations will be more difficult and costly for contractors than they were in the past. However, at least for now, that burden may pale in comparison to the costs emanating from the effect of the two new final rules.

The two new rules update a federal contractor’s obligations relating to hiring veterans and the disabled, respectively. The first rule updates the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA); the second updates Section 503 of the Rehabilitation Act of 1973. While the rules add several obligations under VEVRAA and Section 503, the most significant new obligations come in the form of a hiring “benchmark” for veterans and a hiring “goal” for individuals with disabilities. There is a purported difference between the two concepts, but that topic is beyond the scope of this alert.

The benchmark percentage of veterans in a covered contractor’s workforce is a moving target but currently works out to approximately eight percent of the workforce; the goal for employment of individuals with disabilities is a hard seven percent. Of course, other administrative obligations go along with these goals, including data collection, recordkeeping, required solicitations for self-identification, and recruiting and outreach obligations. The Section 503 requirement includes (1) an annual utilization analysis and assessment of problem areas and (2) the establishment of specific “action-oriented programs” to address any identified problems.

Many of the concepts should be familiar to contractors already obligated to implement affirmative action plans under the applicable 41 CFR Part 60 regulations. However, since the concepts have not been applied in these specific contexts before, implementation may present unforeseen challenges. Therefore, we recommend that contractors begin taking the necessary steps now in order to meet their new obligations by March 24, 2014, as required by the new rules.