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Contractors must demonstrate dedication to affirmative action for veterans and the disabled under new regulations, expert says

October 14th, 2013  |  Cynthia L. Hackerott

Federal contractors must be prepared to “spend the money” to meet their upcoming obligations under the OFCCP’s revised regulations regarding the disabled and protected veterans, said employment law expert Brian W. Bulger at the National Employment Law Institute’s (NELI) Thirty-First Annual Affirmative Action Briefing in Chicago, Illinois on October 3, 2013. Among other expenses, contractors’ HR and IT departments will need to work together to create new programs to meet the revised requirements. “No one has programs to make this happen yet,” according to Bulger, a founding partner at Meckler Bulger Tilson Marick & Pearson in Chicago.

Among the existing obligations that have been maintained under the new rules is the requirement that each covered contractor assign responsibility for implementation of affirmative action responsibilities to a specified company official and that this official be given the necessary senior management support and staff to manage implementation, he pointed out. Thus, federal contractors are required to come up with the budget and staffing resources necessary to meet the new obligations required under these changes to the law. “You need to show the OFCCP that you get it,” he told the audience.

The final rules containing these regulatory revisions were published in the Federal Register on September 24, 2013. The first rule (78 FR 58614–58679) revises the agency’s regulations at 41 CFR Part 60-300 that implement the provisions of the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA) (and rescinds the outdated regulations at 41 CFR Part 60-250); the second rule (78 FR 58682-58752) revises the regulations in 41 CFR Part 60-741 that implement the provisions of Section 503 of the Rehabilitation Act of 1973, as amended (Section 503).  On that same day, the OFCCP submitted the paperwork requirements under the two final rules for Office of Management and Budget (OMB) approval. Bulger noted that the paperwork requirements of the rules must be approved before they can be implemented.

Rulemaking background. The OFCCP published a Notice of Proposed Rulemaking (NPRM) regarding it proposed revisions to the agency’s VEVRAA regulations on April 25, 2011 (76 FR 23358-23425) and the NPRM on the Section 503 proposed revisions was published in the Federal Register on December 9, 2011 (76 FR 77056-77105). On August 27, 2013, the OMB approved the final rules, which were announced by the OFCCP and Vice President Biden that same day.

Both rules underwent a “final edit” prior to Federal Register publication, noted John C. Fox, a former OFCCP official and current president of Fox, Wang & Morgan P.C. in San Jose, California. As a result, there are “subtle changes” between what was posted on the OFCCP website when the final rules were announced on August 27 and the version of these rules published in the Federal Register on September 24.

Commenting on the final rules overall, Bulger said “this isn’t bad,” particularly compared to what was in the NPRMs. The agency took out some of the most onerous parts of the recordkeeping requirements contained in the proposed rules, he noted.  In the end, the agency “did this in a reasonable way.”

Effective date. The rules are scheduled to take effect on March 24, 2014. Although federal contractors and subcontractors will be required to comply with most of the requirements of the new rules by this date, contractors with existing affirmative action programs (AAPs) on the effective date may wait to come into compliance with Subpart C of both rules as part of their standard AAP review and updating cycle. In other words, contractors that have an AAP in operation (mid-cycle) on March 24, 2014 may wait to comply with Subpart C of both rules until their new annual AAP cycle begins.

The current government shutdown will likely not impact the effective date, Fox said. Under the Administrative Procedure Act, an agency is only required to allow 30 days following publication for new rules to take effect, he explained. Thus, the OFCCP’s decision to make the effective date 180 days following publication was “generous.” Ultimately, it is up to OFCCP Director Patricia Shiu to decide if she wants to extend the effective date.  In any event, Fox predicted that regulations will become effective. “Nothing is going to stop them now,” he said.

Importance of preambles. The preambles included in the Federal Register publication of the final rules – which contain important OFCCP statements regarding enforcement policies – will not be included when the updated regulations are published in the Code of Federal Regulations (CFR). Therefore, contractors should preserve them, Fox advised.

FAQs. The OFCCP has posted FAQs for the upcoming changes to the VEVRAA and Section 503 regulations on its website. In Bulger’s assessment, these FAQs are “well thought out and well done” and “written in relatively plain English.” He suggested that contractors start with the FAQs before consulting a lawyer for guidance on compliance questions.

Invitations to self-identify. The final VEVRAA rule requires that contractors invite applicants to self-identify as protected veterans at both the pre-offer and post-offer phases of the application process. At the pre-offer stage, contractors must extend an invitation to self-identify generally as a “protected veteran.”  At the post-offer stage, contractors must extend an invitation to self-identify as to the specific veteran category(ies) that contractors are required to report on in the VETS-100A form.

Appendix B of the VEVRAA final rule includes sample invitations to self-identify (for both the pre-offer and post-offer stages) that contractors may use. Unlike the requirements of the Section 503 final rule, contractors are not required to use any specific form for the VEVRAA invitations. Nevertheless, contractors that do not use the sample forms provided in Appendix B must still ensure that the format they use meets the criteria provided in the VEVRAA rule.

The final Section 503 rule requires contractors to invite applicants to self-identify as individuals with disabilities (IWDs) at both the pre-offer and post-offer phases of the application process. The final rule also requires that contractors invite their incumbent employees to self-identify as IWDs every five years. All invitations must use the standardized form prescribed by the OFCCP. That form was included in the supporting documentation filed with the OMB.

There will be definitely be under reporting at both pre and post offer stages, Bulger said. However, workers will become more comfortable self-identifying as protected veterans and/or IWDs over time, he predicted.

No ADA conflict with pre-offer invitation. There has been concern in the contractor community that the pre-offer invitation requirement might violate the ADA’s general prohibition against pre-offer disability-related inquiries. In the preamble to the final Section 503 rule, the OFCCP notes that the EEOC has provided a letter to the OFCCP to clarify this issue. The letter, dated August 8, 2013, was sent by EEOC Legal Counsel Peggy R. Mastroianni to OFCCP Director Patricia Shiu and explains that the pre-offer inquiry requirement will not violate the ADA because, among other reasons, the EEOC’s ADA regulations (at 29 CFR Part 1630.1(c)(2)) permit employers to conduct a pre-offer inquiry into disability status if it is made pursuant to a federal, state or local law requiring affirmative action for individuals with disabilities.

In Bulger’s view, no federal judge will, in light of this letter, cite a contractor for asking an applicant to self-identify as required under the revised Section 503 regulations.

Timing of pre-offer invitation. While neither of the final rules adopts the Internet Applicant Rule, the preambles to both final rules provide that contractors may extend the disability and veterans status identification invitations at the same time they are required to extend the invitation to self-identify as to race, gender, and ethnicity under Executive Order (EO) 11246.

Contractors should not use one catch-all form for the required invitations, Bulger advised. Rather, a contractor should use its current form for race and sex self-identification and attach a separate form for veteran status identification and another, separate form (the form to be proscribed by the OFCCP) for disability status identification.

44(k) documentation requirements. The final rules (at 41 CFR 60-300.44(k) and 41 CFR 60-741.44(k)) will require contractors to document and update annually the following data:

•           number of IWD and protected veteran applicants;

•           total number of applicants for all jobs;

•           total number of job openings and jobs filled;

•           number of IWDs and protected veterans hired; and

•           total number of applicants hired.

This data must be maintained for three years.

These 44(k) obligations require documentation but not any Impact Ratio Analysis, Bulger noted. In the preambles to the final rules, the OFCCP states that compliance determinations for the 44 (k) requirements will be made based simply on whether the contractor has documented and maintained the five metrics listed above. OFCCP compliance officers will not be using the applicant and hiring data to conduct underutilization or impact ratio analyses, as is the case under EO 11246, the preambles state.

Nevertheless, Bulger thinks compliance officers will apply Impact Ratio Analysis at some point because compliance officers are used to doing this under EO 11246. Therefore, he suggests that contractors conduct Impact Ration Analysis for protected veterans and IWDs anyway, but so do under attorney client privilege.

VEVRAA benchmark. The VEVRAA rule will require contractors to establish an annual hiring benchmark, either based on the national percentage of veterans in the workforce (currently 8 percent), or based on the best available data and factors (specified in the regulations) unique to their establishments. Records related to the criteria and conclusions regarding contractor established hiring benchmarks must be kept for three years.

Although the revised regulations do not require that contractors apply this benchmark to each of their AAP job groups, Bulger recommended that contractors should, for their own information, examine the hiring benchmark by job group anyway, but not report this analysis in their AAPs.

Bulger advised against contractors setting their own benchmarks. Even if a contractor can come up with a lessor number its own, that contractor will be opening itself up to another line of OFCCP inquiry as well as more documentation and recordkeeping obligations, he pointed out. Nevertheless, he added that in a few years, once contractors have more experience with these new obligations, they may be in a better position to establish their own benchmarks.

Moreover, Fox pointed out “there really is no down side” for contractors who fail to meet the 8 percent benchmark, calling the benchmark a “requirement without a remedy.”  In both the preamble to the final rule and the subsequent OFCCP webinars on the rule, the agency has made clear that failing to meet the benchmark is not a violation of the law and will not carry any penalties.

However, failing to meet the data collection, analysis, and recordkeeping requirements related to this benchmark will constitute violations, Bulger cautioned.

Section 503 utilization goal. The Section 503 rule (78 FR 58682-58752) will require contractors to establish a 7 percent utilization goal for the employment of individuals with disabilities (IWDs). The OFCCP derived this goal primarily from disability data collected as part of the Census Bureau’s American Community Survey. Contractors must apply the utilization goal to each of their AAP job groups, with the exception of contractors with 100 or fewer employees, who may apply the go to their entire workforce. In addition, contractors must conduct an annual utilization analysis and assessment of problem areas, and establish specific action-oriented programs to address any identified problems.

Even though the revised regulations require contractors with more than 100 employees to apply this utilization goal to each of their job groups, rather than to their workforce as a whole, Bulger suggested that contractors should, for their own information, examine the percentage as to their entire workforce as well.

As with the VEVRAA benchmarks, the OFCCP has made clear in both the preamble to the final rule and the subsequent OFCCP webinars on the rule, that failing to meet the utilization goal under the Section 503 regulations is not a violation of the law and will not carry any penalties. Failures to meet the data collection, analysis, and recordkeeping requirements related to this goal will, however, constitute violations.

Outreach and recruitment. The current VEVRAA and Section 503 regulations require contractors to engage in outreach and recruitment activities for IWDs and protected veterans. Under the revised regulations, contractors still have flexibility to choose methods that meet their needs, but will have the additional obligation to document each outreach and recruitment effort and undergo an annual written assessment of the effectiveness of each of activities. If the totality of the contractor’s efforts is not effective, the contractor must identify and implement alternative efforts. Further, contractors must retain records relating to these efforts for three years.

The revised regulations (at 41 CFR 60-300.44(f) and 41 CFR 60-741.44(f)) provide examples of appropriate outreach and positive recruitment activities in which contractors may engage to meet their affirmative action obligations. The list is not intended to be exhaustive, but rather is designed to provide contractors examples of “best practices,” from which to choose, and contractors outreach activities are not limited to what is included in the list.

When selecting from this list or otherwise deciding the extent of their outreach efforts, contractors should “look for the high, not the low, end,” Bulger advised. Contractors who reach for the high end will be less likely to be cited by the OFCCP for inadequate outreach efforts.

As to assessing the effectiveness of outreach efforts, Bulger recommended that if a particular effort is ineffective on the first try, don’t delete it, but rather, put it on a “watch list.” Contractors should also document success stories, he suggested.

Job listings required by VEVRAA. VEVRAA, as amended by the JVA, requires covered contractors to list all employment openings with “the appropriate employment service delivery system” which is defined as “a service delivery system at which or through which labor exchange services, including employment, training, and placement services, are offered in accordance with the Wagner-Peyser Act” [see 38 USC §4101(7)]. (The Wagner-Peyser Act established the Employment Service, which is a nationwide system of public employment offices.) A contractor also may list employment openings with “one-stop career centers under the Workforce Investment Act of 1998, other appropriate service delivery points, or America’s Job Bank (or any additional or subsequent national electronic job bank established by the Department of Labor).”

The new VEVRAA regulatory revisions clarify that when listing their job openings, contractors must provide that information in a manner and format permitted by the appropriate state or local job service, so that the service can access and use the information to make the job listings available to job seekers.

What this revision means, explained Bulger, is that whatever a contractor is currently doing to provide job listing information that its state/local agency is accepting, the contractor may keep doing that; however, if the state/local agency changes its job listing information requirements, the contractor will have to make the necessary changes to comply with the state/local agency requirements.

The job listings requirement in VEVRAA is not a requirement under Section 503, Fox observed.

Background on presenters. Bulger has advised and represented public, private, union and non-union employers on all aspects of the employment relationship for over 25 years. He holds an AV rating in the Martindale-Hubbell Law Directory, the highest possible distinction for legal ability and ethical standards. In addition, the National Law Journal named Bulger as one of the nation’s “Best Litigators in Employment Law.”

Fox 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. He previously served as Executive Assistant to the Director of the OFCCP, where he was responsible for all enforcement and policy matters.

NELI’s Thirty-First Annual Affirmative Action Briefing was held in Chicago on October 3-4, 2013. For more information on NELI, including its publications and future programs, call (303) 861-5600 or go to NELI’s website at: www.neli.org.

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