The OFCCP has significantly underestimated the cost to construction employers of proposed regulatory revisions for federal contractors regarding workers with disabilities and veterans, concludes a new analysis by the Associated General Contractors of America (AGC). The analysis was based on detailed evaluations of the hiring requirements conducted by construction firms that would be covered by the rule. According to the report, the disability regulations proposal, if implemented as proposed, would cost employers 30 times more than the agency has predicted and the veterans regulatory proposal would cost employers 20 times more.

“The administration has grossly underestimated the financial and administrative burdens that these new rules would impose, particularly on small businesses,” said Brian Turmail, the association’s spokesperson in a statement. “If the proposed rules take effect, many small construction firms may no longer be able to afford to work on federal projects.”

Regulatory proposal regarding workers with disabilities. Of deep concern in the contractor community is the OFCCP’s pending proposal that would require federal contractors (and subcontractors) to set a 7 percent hiring goal for workers with disabilities and would impose increased data collection, recordkeeping, recruitment, training, and policy dissemination requirements. The OFCCP’s Notice of Proposed Rulemaking (NPRM) containing these and other proposed amendments to its regulations implementing Section 503 of the Rehabilitation Act of 1973 was published in the Federal Register (76 FR 77056-77105) on December 9, 2011.

Specifically, the OFCCP is suggesting that federal contractors would be required to set a hiring goal of having seven percent of their employees be workers with disabilities in each job group of the contractors’ workforce, but it is soliciting comments on the potential use of a utilization range between four and ten percent. To annually evaluate their utilization of individuals with disabilities, the NPRM proposes that contractors use the job groups established for utilization analyses under their Executive Order 11246 affirmative action programs. The proposed goal is derived primarily from disability data collected as part of the Census Bureau’s American Community Survey.

The comment period on this proposal closed on February 21, 2012, and approximately 540 comments were submitted. Those stakeholders opposing the proposal generally focused on their assertions that the regulations would not be effective as a practical matter and on the extraordinary cost burden of compliance.

Veterans’ employment regulatory proposal. Another pending initiative receiving a lot of attention is the proposal to revise the OFCCP’s regulations at 41 CFR Parts 60-250 and 60-300 that implement the Vietnam Era Veterans Readjustment Assistance Act (VEVRAA). This NPRM was published in 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. It would also 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. In addition, it would require contractors to engage in at least three specified types of outreach and recruitment efforts each year and require that all applicants be invited to self-identify as a “protected veteran” before they are offered a job.

Approximately 110 comments were submitted regarding this proposal. The main concerns expressed by contractors was that the proposal focused on process over results, that it would be very burdensome and expensive to implement, and that it would ultimately not be very effective in its goal of increasing the employment opportunities of veterans.

Goals and benchmarks or quotas? The AGC asserts that both proposals would require contractors to implement hiring quotas, but the OFCCP has vehemently denied that either proposal mandates quotas. The disability regulations proposal refers to “goals” and the veterans’ proposal requires “benchmarks,” yet the AGC has rejected the agency’s characterizations, and the term “quotas,” rather than “goals” or “benchmarks” is used throughout the AGC’s report and accompanying press statement.

Some experts agree that the disability regulations proposal would require hiring quotas, but note that hiring quotas for the disabled are lawful because individuals without disabilities are not a protected class. Unlike race- or gender-based quotas, there is apparently no case law or statutory requirement to indicate that quotas for individuals with disabilities or for veterans are unlawful. However, some commentators have pointed out that the implementation of goals, benchmarks and/or quotas for individuals with disabilities, and especially veterans, may have an unlawful disparate impact on protected race and gender groups. Therefore, even if the “goals” and “benchmarks” are constructively quotas, it is not clear that they would be unlawful, and if so, under what circumstances.

Compliance burdens. According to Turmail, the disability regulations proposal would cost construction firms $14,056 per year for each of their establishment locations, 30 times higher than the $473 compliance cost the administration suggested in its proposed rules. In addition, employers would have to spend at least 1,444 hours per establishment location complying with the new rule, 185 times longer than the 7.8 hours federal officials estimated.

The veterans’ proposal would cost construction firm employers a minimum of $11,333 per year per office location, 20 times more than the $560 estimated by the OFCCP, Turmail said. Moreover, that proposal would require construction employers to spend at least 1,267 hours per year per office site to comply, 140 times longer than the nine hours OFCCP originally suggested. Turmail asserted that the added burden the new rules would impose on firms, when combined with the cost of complying with other regulations would likely be too much to bear for many small firms considering working on federal projects.

Given that the AGC’s report was issued on June 27, 2012, well after the comment deadline for both proposals, it is not clear what, if any, impact it might have on the pending final regulations or any subsequent legal challenges thereto.