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NELI webinar provides transactional approach to compliance with OFCCP’s revised disability and veterans rules

February 5th, 2014  |  Cynthia L. Hackerott

Federal contractors are still in the process of absorbing all of the basic information regarding the new requirements of the OFCCP’s revised regulations on protected veterans and workers with disabilities, noted OFCCP expert John C. Fox during the first part of a two-part webinar presented by the National Employment Law Institute (NELI). Therefore, many contractors have not yet focused on the nuts and bolts of the all the new transactions that will be required. To that end, the webinar was designed to provide a transactional approach.

The revised regulations were published in the Federal Register on September 24, 2013 (78 FR 58614–58679 and 78 FR 58682-58752). The VEVRAA rule revises the OFCCP’s regulations at 41 CFR Part 60-300 (and rescinds the outdated regulations at 41 CFR Part 60-250); the Section 503 rule revises the agency’s regulations in 41 CFR Part 60-741. The revised regulations will require federal contractors to establish a 7 percent utilization goal for workers with disabilities and a variable hiring benchmark for protected veterans as well as impose new data collection and recordkeeping requirements.

Understanding the architecture. Fox, a former OFCCP official and current president of Fox, Wang & Morgan P.C. in San Jose, California, offered some practice tips for understanding the architecture of the revised regulations. First, he advised that contractors should work only from the Federal Register version of each of the regulations (cited above) because there have been some subtle changes between what was posted on the OFCCP website when the final rules were first announced on August 27, 2013 and the version of these rules published in the Federal Register on the following month. Second, he suggested that contractors should read the regulations themselves first, the preamble second, and the economic analyses last.

The revised regulations are divided into the following five subparts:

Subpart A: “Preliminary Matters, Equal Opportunity Clause”

Subpart B: “Discrimination Prohibition”

Subpart C: “Affirmative Action Program”

Subpart D: “General Enforcement and Complaint Procedures”

Subpart E: “Recordkeeping”

Subpart C contains “the guts” of the new rules, Fox said. Under the current regulations, there are ten “ingredients” required for AAPs (at 41 CFR 60-300.44(a)-(j) and 41 CFR 60-741.44(a)-(j)). The revised regulations add some new obligations to the majority of the existing AAP ingredients, and add a new ingredient (at .44(k)), “data collection analysis,” Fox noted.

Effective date and compliance deadlines. Although federal contractors and subcontractors will be required to comply with Subparts A, B, D, and E of both new rules by March 24, 2014, the obligations in Subpart C of the new rules will be phased in. The timing of when certain Subpart C provisions will be phased in has been “on a roller coaster” since the regulations were published, Fox observed.  Nevertheless, the most recent information from the OFCCP is that contractors with existing affirmative action programs (AAPs) on the effective date may wait to comply with the new requirements of Subpart C of both rules as part of their standard AAP review and updating cycle. In other words, contractors with AAPs in operation (mid-cycle) on March 24 do not have to create a new AAP on that date to comply with the new requirements, but rather can continue under the current rules until the conclusion of the annual AAP cycle. However, contractors must still comply with all existing obligations under the current regulations while they are waiting for their new annual AAP cycle (and thus, the new requirements) to begin.

While contractors may choose to take advantage of the OFCCP’s phased-in implementation allowances, they do not have to do so, Fox said. Thus, contractors who chose to do so may began to implement all the requirements of the new rules on March 24, 2014, Fox said.

Transitional AAPs. The OFCCP refers to the first AAP that a contractor will develop after March 24, 2014 as a “transitional AAP.”  Fox noted that the OFCCP has announced it will not find contractors out of compliance as to their “transitional AAP” if the contractor documents in the AAP:

(1) what compliance obligation(s) it has not accomplished, and

(2) what efforts the contractor is undertaking to bring itself into compliance.

Invitations to self-identify (41 CFR §60-300.42 and 41 CFR §60-741.42). 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 Section 503 rule — unlike the VEVRAA rule — also requires “post-employment” invitations, Fox said, noting that there are three post-employment invitations:

(1) in the first year that a contractor is subject to the new rule;

(2) every five-year interval thereafter; and

(3) at least once during the intervening years between these invitations, contractors must remind employees that they may voluntarily update their disability status.

All invitations under the Section 503 rule must use the standardized form prescribed by the OFCCP, which is now posted on the OFCCP website.

The obligation to solicit pre-offer self-identification information will not arise until the occurrence of the contractor’s first opening after March 24, 2014, Fox pointed out.

Confidentiality requirements (41 CFR §60-300.42(d-e); 41 CFR §60-741.42(e)). Under both rules, contractors will be required to keep all self-identification forms confidential. At the same time, the section of the regulations dealing with medical examinations and inquiries (41 CFR §300.23 (d) and §741.23(d)) requires that any information regarding the medical condition or history of any applicant or employee must be maintained in a separate medical file and treated as a confidential medical record (subject to specified exceptions). The Section 503 rule, unlike the VEVRAA rule, will require contractors to keep all Section 503 self-identification forms in a “data analysis file” and not in the employee’s medical file.

Therefore, a “multiple-file” or confidential access system will be necessary for employee files, Fox advised. For Section 503 compliance, contractors will need the following three files/access systems: (1) personnel file; (2) ADA/Section 503 medical file; and (3) data analysis file. Under the VEVRAA rule, contractors will need: (1) personnel file; (2) ADA/Section 503 medical file (if medical information is included in the post-offer self-id form); and (3) confidential pre-offer self-id forms file. What this means is that different groups of people will have access to each file depending on function.

Assessment of outreach and positive recruitment (41 CFR §60-300.44(f)(3) and 41 CFR §60-741.44(f)(3)). The current regulations require contractors to engage in outreach and recruitment of IWDs and protected veterans. Under the revised outreach and recruitment provisions, contractors will have the additional obligation to document their outreach and recruitment efforts and undergo an annual written assessment of their effectiveness.

If the contractor concludes that the totality of its efforts was not effective, it must “implement alternative efforts” listed at .44 (f)(1) or (f)(2) of both rules. Notably, (f)(1) incorporates all the efforts listed in (f)(2), so contractors would, in reality, have to do (f)(2) even if they chose the (f)(1) option, Fox observed.  Realistically, what contractor would “point the gun at themselves” by deeming themselves, their recruiters, or their hiring managers as “not effective?” Fox queried.

EEO clauses (41 CFR §60-300.5(d) and 41 CFR §60-741.5(d)). Under the revised regulations, contractors may incorporate the required Section 503/VEVRAA equal opportunity clause into covered subcontracts by reference to the regulations, only if they use the language specified in both regulations at part .5 (d). However, a covered contractor does not have to automatically go back and universally embed new EEO clauses into its existing (i.e. “original”) subcontracts on or before March 24, 2014, Fox clarified. Rather, if a contractor “modifies”, “renews” or “extends” an existing covered federal subcontract on or after March 24, 2014, then and only then is the contractor required to put the mandated language of the EEO clauses in its covered federal subcontracts.

Is starting early advisable? He advised that contractors may choose to exercise their management discretion to implement early (i.e. before March 24, 2014) all of the VEVRAA compliance obligations and most of the Section 503 obligations with the exception of the following:

(1) The pre-offer invitation to self-identify disability; and

(2) The post-employment invitation to self-identify disability.

Under the Section 503 regulations currently in force, pre-offer inquiries about disability are prohibited and post-employment inquiries about disability are illegal unless they are “job related and consistent with business necessity.” Thus, the pre-offer and post-employment invitations to self-identify disability will only be permissible once the revised regulations become effective on March 24, 2014, Fox explained. In contrast, there is no law or regulation currently in force that prohibits any of the actions the VEVRAA final rule will require. Still, contractors must be careful to avoid inquiries about disability when extending pre-offer invitations to self-identify as to veterans status prior to March 24, he cautioned.

Although contractors will need to make preparations (such as getting systems and draft language ready) to implement the new requirements prior to the effective date, contractors should think about whether it is practical to roll out any portions of their plans to comply with the new rules prior to March 24, he advised.

Budget and staffing. Implementing all these new requirements “is not something you will fold in causally on a Friday afternoon,” Fox told the listeners, noting that there will be two types of costs over time. The first type is the initial, one-time conversion costs, including: (a) outside consultant costs (if any); and (b) the time it will take managers and other employees responsible for implementation to study the rules’ changes and to design and draft new notices, clauses, forms, AAPs, analyses (“effectiveness” and “internal audits”), surveys, training materials, and HRIS requirements. The second type is the annual “maintenance” or “recurring” costs, such as: (a) data collection; (b) outreach; (c) analyses (“effectiveness” & “internal audits”); (d) surveys; and (e) training.

In terms of staffing, a “tremendous” amount of the workload will be going to document clerks as opposed to HR managers and generalists, he said. Clerks will be needed to count heads and take care of recordkeeping, while managers will be handling tasks such as outreach/recruiting, analyses, surveys, self-evaluations, and training.

For the first year of compliance, the OFCCP estimates the costs will be about $3,000 – $4,400 per establishment. In contrast, some industry analysts say a more realistic estimate is $20,000 – $24,000 per establishment, Fox reported. Following the first year, the OFCCP estimates $440 of recurring (maintenance) costs per AAP establishment/per year. Industry analysts appear to suggest that recurring costs of at least $2,200 per establishment/per year is a more realistic estimate.

Likelihood of court injunction. On November 19, 2013, the Associated Builders and Contractors (ABC) filed a federal court complaint seeking declaratory and injunctive relief to stop the Section 503 final rule (Associated Builders & Contractors v Shiu, DDC, No 1:13-cv-01806-EGS). However, Fox said that he does not foresee the court granting ABC’s injunction request to stop the Section 503 rule from taking effect as scheduled.

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.

The webinar, presented on January 23, 2014, was the first segment of a two part program, entitled, “What You Need to do to Implement OFCCP’s Final Section 503/VEVRAA regulations: A Transactional Approach.” The second segment of the webinar was presented on January 30, 2014. Re-broadcasts of both segments may be ordered by going to NELI’s website at www.neli.org.