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OFCCP proposed veterans regulations “pure affirmative action play,” says expert; agency undergoing “greatest moment of change”

November 1st, 2011  |  Cynthia L. Hackerott

The OFCCP has “turned up the heat dramatically” on hiring protected veterans, John C. Fox, president and a founder of Fox, Wang & Morgan P.C., said at the National Employment Law Institute’s (NELI) Twenty-Ninth Annual Affirmative Action Briefing held in Chicago, Illinois. Fox described the OFCCP’s pending proposal to revise its regulations regarding protected veterans as a “pure affirmative action play.” Over the course of the two-day briefing, Fox covered various aspects of OFCCP enforcement activities, describing recent developments as “the greatest moment of change in the history of the agency.”

VEVRAA regulations. Currently, the OFCCP is reviewing public comments on its notice of proposed rulemaking (NPRM) to revise the regulations at 41 CFR Parts 60-250 and 60-300 that implement the Vietnam Era Veterans Readjustment Assistance Act (VEVRAA). This NPRM was published the Federal Register on April 26, 2011 (76 FR 23358-23425), and the comment period ended on July 11, 2011. The proposed changes would require contractors, for the first time ever, to establish annual hiring benchmarks (i.e. numerical targets) to assist in measuring the effectiveness of their affirmative action efforts, and it would increase data collection requirement on job referrals, applicants and hires. To this end, the proposed rule would require that all applicants be invited to self-identify as a “protected veteran” before they are offered a job.

In addition, the proposal would clarify mandatory job listing requirements, under which a contractor must provide job vacancy and contact information for each of its locations to an appropriate employment service delivery system. Among the outreach efforts that would be required is that contractors would have to enter into “linkage agreements” with the local veterans’ employment representative in the local employment service office nearest the contractor’s establishment. Contractors would also have to enter into a linkage agreement with at least one of several other listed organizations and agencies for purposes of recruitment and developing training opportunities and would have to consult the Employer Resources section of the National Resource Directory (a website which provides prospective employers access to veterans’ service organizations) existing job banks of veterans seeking employment, and other resources at all levels of government.

Fox said that the Obama Administration believes the use of job service centers are the linchpin for increasing the employment of protected veterans, but he reported that employers rarely find good candidates from job services centers.

Included in Fox’s detailed review of the provisions in the proposal was his observation that many actions considered to be “best practices,” including specified outreach and recruitment efforts and internal dissemination of policies, would become mandatory should the revisions be finalized as proposed.

Despite calls from some members of the contractor community to withdraw the proposal, the Office of Management and Budget (OMB) will approve it, Fox predicted. Contractors’ main concerns about the proposed regulations are that they focus on process over results and will be very burdensome and expensive to implement. According to Fox, the cost will be much more than the $560 per year per contractor that the OFCCP has calculated will be expended to comply with the proposal. The proposed regulations “won’t be terribly effective, but will be very costly to implement,” Fox said.

Contractors should expect to see similar provisions in the OFCCP’s upcoming proposal to revise its regulations at 41 CFR Part 60-741 that implement the nondiscrimination and affirmative action provisions of Section 503 of the Rehabilitation Act of 1973, Fox also advised.

FAAPs. A Functional Affirmative Action Program (FAAP) is an Affirmative Action Program (AAP) that is developed and prepared based on functional or business units within a corporate structure rather than an AAP based solely on an individual establishment location. Current OFCCP regulations permit contractors to negotiate with the OFCCP, subject to the approval of the OFCCP Director, for permission to use FAAPs (41 CFR §60-2.1(d)(4)). In the absence of an approved agreement under 41 CFR 60-2.1(d)(4), the regulations require contractors to develop, implement, and maintain a separate AAP for each physical location of an establishment with 50 or more employees.

The first procedural directive for processing contractor functional AAP requests (No 254) was approved by then OFCCP Director Charles James, Sr., on March 21, 2002, and the agency sent out it first FAAP on July 16, 2002. Under the policy articulated in that directive, more than 130 FAAP agreements covering more than 1800 functional or business units and approximately 2 million employees were approved.

However, according to Fox, the Obama Administration was very wary of these plans, believing them to be a way for contractors to largely avoid audits. In February of 2010, the OFCCP announced that it was not approving any new requests to develop or renew FAAP agreements while the program was under review.

On June 14, 2011, OFCCP Director Patricia Shiu issued a new FAAP directive (No 296). Under the policy stated in this new directive, approval of FAAP agreements is not automatic; rather, an agreement will be approved, for a three-year period, only if the OFCCP Director determines that the contractor’s overall operational structure, compliance history, and proposed functional AAPs meet the criteria set forth in the new directive.

The new policy does not contain a requirement that the contractor supply the FAAP to the OFCCP for review before the OFCCP’s approves its use, Fox observed.  Rather, review of a contractor’s FAAP will occur in the event of a scheduled compliance review. Also, a contractor with an approved FAAP agreement must have had at least two functional units undergo a compliance evaluation during the three-year term of the agreement to be eligible for renewal of the existing agreement. Furthermore, as part of a FAAP agreement under the new policy, a contractor must submit to the OFCCP “its applicant flow, hire, promotion, termination and compensation data in a readable and usable electronic format when OFCCP conducts a compliance evaluation.” Under the previous policy, no disparity analysis was required, he noted.

Fox predicted that, under this new policy, the number of FAAP agreements will go down from the current number of approximately 130 to about 10 or 20 because FAAP agreements will no longer be a way to avoid audits. Those contractors who will enter into such agreements will do so because they fit the structure of their workforce, Fox said.

TRICARE provision in pending legislation. In June, the Senate Armed Services Committee approved a draft of the National Defense Authorization Act for Fiscal Year 2012 that would exclude TRICARE providers from OFCCP jurisdiction. TRICARE Management Activity (TRICARE) is a Department of Defense (DOD) Field Activity tasked with administering the TRICARE program, the DOD’s worldwide health care program for active duty and retired military service members and their families. The bill would exclude “TRICARE institutional, professional, and pharmacy network providers from being considered subcontractors for the purposes of Federal Acquisition Regulation or any other law, in order to maintain adequate TRICARE provider networks.”

An OFCCP directive (No 293) issued on December 16, 2010, maintains that TRICARE providers can be subject to OFCCP jurisdiction, and this issue is currently the subject of pending litigation. On October 18, 2010, a DOL ALJ ruled, in OFCCP v Florida Hosp of Orlando (ALJ Case No 2009-OFC-00002) that an acute care, not-for-profit hospital that contracted with a government contractor to provide medical services to military service members, their survivors, and their families as part of the TRICARE program was subject to OFCCP jurisdiction as a federal subcontractor. The case is currently on appeal to the Labor Department’s Administrative Review Board.

This legislative provision is not likely to survive, Fox said, noting that it would be unprecedented to exclude a whole industry from OFCCP jurisdiction. He also predicted that the OFCCP would prevail in the Florida Hosp of Orlando case.

Fox, president and a founder of Fox, Wang & Morgan P.C., represents companies and tries cases in state and federal courts that involve primarily individual trade secret claims, employment contract disputes, wage-hour and employment discrimination class actions, wrongful termination, corporate investigations, and the use of statistics in employment matters. Fox previously served as Executive Assistant to the Director of the OFCCP, where he was responsible for all enforcement and policy matters.

NELI’s Twenty-Ninth Annual Affirmative Action Briefing was held in Chicago on October 20-21, 2011. For more information on NELI, including its publications and future programs, call (303) 861-5600 or go to NELI’s website at: http://www.neli.org/.

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