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Experts discuss lingering misconceptions about OFCCP’s veterans and disability regulations

November 17th, 2015  |  Cynthia L. Hackerott

Misinformation regarding the OFCCP’s revised regulations on protected veterans and workers with disabilities is abundant on OFCCP compliance vendor and law firm blogs, according to attorney John C. Fox, a former OFCCP official and current president of Fox, Wang & Morgan P.C. in Los Gatos, California. Candee Chambers, SPHR, Sr. CAAP, and Vice President of Compliance & Partnerships at DirectEmployers Association, joined Fox at the National Employment Law Institute’s (NELI) Thirty-Third Annual Affirmative Action Briefing in Chicago, Illinois in a presentation discussing aspects of the new requirements that many contractors still do not understand.

Differences in regulatory architecture. The regulatory requirements for the OFCCP’s three program authorities—enforcement of Executive Order (EO) 11246, Section 503 of the Rehabilitation Act of 1973 (Section 503) and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) — are not homogenous, the speakers pointed out. The data collection and recordkeeping/retention requirements vary for each set of regulations, and the required assessments vary as well.

Major revisions to the OFCCP’s regulations implementing VEVRAA (78 FR 58614–58679) and Section 503 of the Rehabilitation Act of 1973 (Section 503) (78 FR 58682-58752) took effect on March 24, 2014. The revised regulations require covered federal contractors to establish a 7 percent utilization goal for workers with disabilities (per job group) and a variable hiring benchmark for protected veterans (per establishment) and also impose new data collection and recordkeeping requirements.

Veterans hiring benchmark. The revised VEVRAA regulations (41 CFR §60-300)  provide that covered contractors must set, for each of their establishments, annual hiring benchmarks for protected veterans, either based on the national percentage of veterans in the workforce (currently 7 percent – see, www.dol.gov/ofccp/regs/compliance/AnnualVEVRAABenchmarkEffectiveDates.htm), or based on the five factors described in 41 CFR §60-300.45(b)(2). The benchmark applies only to hiring data and does not need to be applied to each AAP job group. The agency has repeatedly made clear that failing to meet the benchmark is not a violation of the regulations and will not carry any penalties. However, failure to set the benchmark and meet the data collection, analysis, and recordkeeping requirements related to this benchmark does violate the regulations.

Utilization analysis regarding workers with disabilities. The revised Section 503 regulations (41 CFR §60-741) require covered federal contractors to establish a 7 percent utilization goal for the employment of workers with disabilities (IWDs). Contractors must apply the utilization goal to each of their Affirmative Action Plan (AAP) job groups, with the exception of contractors with 100 or fewer employees, who may apply the goal to their entire workforce.

Comparisons. The 7 percent utilization goal for IWDs required by the Section 503 regulations means that contractors must compare 7 percent versus their on-roll employment percentage of IWDs for each AAP job group. This utilization goal is similar to the EO 11246 placement goal for minorities and women which requires measuring a calculated (as prescribed in the regulations) availability percentage against the contractor’s incumbent on-roll percentages of employment, explained Fox.

In contrast, the VEVRAA hiring benchmark is NOT a goal, he emphasized. Moreover, it is a hiring benchmark, not an on-roll employment benchmark. Thus, contractors merely have to set the benchmark (for each establishment) and stop; they do not have to compare the benchmark to their on-roll percentage of protected veterans or to anything else.

Measuring goal attainment. The OFCCP thinks of the goals required under Section 503 and EO 11246 as “destinations,” Fox said, but measuring whether the contractor has attained these goals (i.e. arrived at the destination) differs under each program authority.

Under the EO 11246 regulations (at 41 CFR §60-2.15), contractors do not have to set a placement goal unless the percentage of minorities or women employed in a particular job group is “less than would reasonably be expected” given their availability percentage in that particular job group. This “reasonably expected” language gives contractors the flexibility to use many different tools to measure whether they have to set a placement goal, including:

  • The “Any Difference Rule” — which means if there is any difference between the percentage available and the percentage employed, the contractor must set a placement goal.
  • The “80 Percent Rule”which means that the contractor can be as much as 20 percent below the percentage available before having to set a placement goal. “It’s like horseshoes, where close still counts,” Fox said.
  • The Statistical Tests: Two Standard Deviations Test and Fischer’s Exact Test—under these tests, the contractor can miss the destination by a lot, but still be “there,” he stated.

The Section 503 regulations, however, do not allow for this type of flexibility in measuring the attainment of the 7 percent utilization goal for employment of IWDs. Rather, the regulations (at 41 CFR §60-741.45(e)) provide that when the percentage of IWDs is less than the utilization goal, the contractor must take certain steps (specified in the regulations) to determine “whether and where impediments to equal employment opportunity exist.” Thus, the Any Difference Rule applies under Section 503, Fox explained. Accordingly, if a contractor has less than 7 percent of IWDs employed in any given job group, the contractor must set a utilization goal to meet the 7 percent mark.

As noted above, the VEVRAA regulations do not have a goal requirement. Therefore, even if a contractor has zero percent protected veterans hired/employed, that contractor is not required to meet any percentage goal. Given that there is no percentage goal required under the VEVRAA regulations, what is the purpose of the benchmark? As Fox subsequently explained, the purpose is to inform another requirement of the regulations—the “effectiveness review” (detailed below).

In light of these differences, Fox “strongly recommends” that contractors have separate AAPs for each of the three programs, rather than combined AAPs.

“Good faith efforts” no longer sufficient. Some blogs have “missed the boat entirely” by stating that the revised VEVRAA and Section 503 regulations call for “good faith efforts,” Fox warned. While the OFCCP’s EO 11246 regulations (at 41 CFR §60-2.16(a) and §60-2.17(c)) maintain that contractors must apply/demonstrate “good faith efforts” designed to reach any placement goals set, “good faith efforts” are no longer sufficient under the revised VEVRAA and Section 503 regulations.

“They don’t ask for your good faith efforts anymore” Chambers said. Instead, the OFCCP wants engaged “outreach and positive recruitment” (as specified in §60-300.44(f)(2)(i) and §60-741.44(f)(2)(i)) of protected veterans and IWDs. Chambers noted OFCCP Director Patricia Shiu’s keynote address at the 2011 Industry Liaison Group National Conference in New Orleans in which Shiu stated that “affirmative action can no longer be defined by ‘good faith efforts’” (a statement that Shiu reiterated at the NELI Affirmative Action Briefing in Chicago later that year).

So, if a contractor has less than 7 percent of IWDs employed in one or more job groups, what actions must the contractor undertake as a means to reach the 7 percent utilization goal? The regulations (at 41 CFR §60-741.45(f)) state that the contractor must develop “action-oriented programs” which may include modification of personnel processes and/or outreach and recruitment, Fox said.

What is an “Effectiveness Review”? Under both the revised VEVRAA and Section 503 regulations (at 41 CFR §60-300.44(f)(3) and 41 CFR §60-741.44(f)(3)), contractors must undertake an annual, written self-evaluation of their effectiveness at outreach and recruiting. The “effectiveness review” requirement is different and apart from the employment utilization goal for IWDs and the hiring benchmark for protected veterans, Fox pointed out.

When a contractor reaches its placement goals under the EO 11246 regulations, the contractor has no other related obligations, but under the VEVRAA and Section 503 regulations, once a contractor sets the benchmark/reaches the utilization goal, it is still required to do an effectiveness review, he said.

For the effectiveness review, the contractor must evaluate each outreach and recruitment effort it has undertaken in the previous twelve months. Among the criteria used for review, contractors must include the data collected pursuant to part 44(k) of the regulations for the current year and the two most recent previous years. Specifically, part 44 (k) requires contractors to collect data on the:

  • 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.

If the contractor concludes that the totality of its efforts was not effective, it must implement the alternative actions listed at part 44 (f)(1) or (f)(2) of the regulations. [Note that (f)(1) incorporates all the efforts listed in (f)(2)].

Contractors should not wait to do an annual review, Chambers advised, but rather, should do quarterly reviews in order to track progress and show the OFCCP that the contractor is making an effort to meet its obligations. In audits, the OFCCP will be looking to see if the contractor is trying, she noted.

Separate transactions. While the 7 percent utilization goal under Section 503 helps inform whether a contractor’s outreach is effective, the utilization goal is a separate transaction from the effectiveness review, Fox emphasized. He also pointed out that, while the part 44(k) data metrics are a required tool for the effectiveness review, these data metrics are not part of the Section 503 utilization analysis.

If a contractor’s employment of IWDs is 7 percent or greater in each job group, the contractor must still engage in outreach and recruitment efforts, but is not required to engage in the specific types of outreach and recruitment actions set forth in 41 CFR §60-741.44(f)(1) or (f)(2). In other words, the OFCCP won’t tell a contractor how to get to the 7 percent utilization goal, unless the contractor fails to meet the goal; in that event, the contractor has to pick among the actions listed in part 44(f)(2), Fox said. If the contractor still doesn’t meet the goal, it must simply continue more outreach and recruitment as specified in part 44(f)(2). Therefore, the regulations require contractors to engage in outreach and recruitment regardless of whether they have reached the utilization goal.

In a similar vein, the hiring benchmark for protected veterans helps inform whether a contractor’s outreach is effective. The effectiveness review is where the benchmark is relevant, Fox explained, because contractors can use it to assess their outreach and recruitment efforts. The required use of the part 44(k) data metrics tool means that a contractor must compare its protected veteran applicant percentage to the hiring benchmark to assess whether its outreach is sufficient. If a contractor’s hiring rate for protected veterans meets the benchmark set for each establishment, the contractor must still engage in outreach and recruitment efforts, but is not required to engage in the specific types of outreach and recruitment actions set forth in 41 CFR §60-300.44(f)(1) or (f)(2).

The regulatory requirement that contractors must continue to engage in outreach and recruitment regardless of whether they reach the utilization goal under Section 503 or met the hiring benchmark under VEVRAA is “absolutely the purest form of affirmative action,” Fox remarked.

VEVRAA requires job “listing” not “posting”. The job listing obligation of the revised VEVRAA regulations (at 41 CFR §60-300.5(a)) is not included the Section 503 regulations. The VEVRAA statute, as amended by the Jobs for Veterans Act of 2002, requires covered contractors to list all employment openings—for jobs lasting longer than three days and not involving an executive or senior management position—with “the appropriate” employment service delivery system (ESDS) as specified in the regulations.

It is important to note that regulations require contractors to “list” the jobs, rather than “post” the jobs, both Fox and Chambers stated, adding that this was another area where some blogs have been inaccurate. A “posting” requirement does not exist in the VEVRAA regulation, Chambers observed. In order to meet the requirements of the revised VEVRAA regulations, contractors must prove the jobs were listed with the state workforce agency or delivery system so that protected veterans get priority referrals, Fox added.

The presenters. Fox is the President and a founder of Fox, Wang & Morgan P.C. in Los Gatos, California. He leads large and complex litigation matters in state and federal courts, in cases involving wage-hour and discrimination class actions, trade secret claims, employment contract disputes, 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.

Chambers is the Vice President of Compliance & Partnerships at DirectEmployers Association in Indianapolis, Indiana. She leads the Association’s compliance initiatives, oversees the creation of strategic partnerships with a multitude of organizations that allow DirectEmployers membership to share their job opportunities with job seekers, and manages the relationship with the National Association of State Workforce Agencies (NASWA) which includes the joint-initiative, National Labor Exchange (NLx). In addition, she is the Vice Chair of the Indiana Industry Liaison Group, and serves as Co-Chair of the DirectEmployers Association Compliance Advisory Council and the National Labor Exchange (NLx) Operations Steering Committees.

NELI’s Thirty-Third Annual Affirmative Action Briefing was held in Chicago on October 29-30, 2015. 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.