Justin A. Chiarodo and Stephanie M. Harden
Two recent regulatory actions by the Department of Labor will impose significant new affirmative action and data collection requirements on federal contractors and subcontractors. The final rules will impact many federal prime and subcontracts performed in the United States and warrant close attention by contractors of all sizes. This alert highlights key provisions in those rules, which are presently set to go into effect on March 24, 2014.
Overview and Application
On September 24, 2013, the Department of Labor published two final rules on new affirmative action obligations for federal contractors and subcontractors. These new rules make changes to the regulations implementing Section 503 of the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 793 (2006), and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA), 38 U.S.C. § 4212 (2006). Section 503 prohibits federal contractors and subcontractors from employment discrimination against individuals with disabilities, and the VEVRAA prohibits such discrimination against protected veterans. Both laws require federal contractors and subcontractors to take affirmative action to recruit, hire, promote, and retain covered individuals, and the new final rules strengthen these affirmative action requirements. The final rule for Section 503 also makes changes to the nondiscrimination provisions of the regulations to bring them into compliance with the Americans with Disabilities Act Amendments Act of 2008, Pub. L. No. 110-325, 122 Stat. 3553 (2008). The requirements of these rules are in addition to those of the Americans with Disabilities Act of 1990, 42 U.S.C. §12101 (2006), and state laws.
The Section 503 regulations apply to all federal contracts and subcontracts of $10,000 or more, and the VEVRAA regulations apply to all federal contracts and subcontracts of $100,000 or more. Both laws only apply to work performed within the United States. In addition, covered contractors with fifty or more employees and federal contracts or subcontracts above a certain threshold ($50,000 for Section 503 and $100,000 for the VEVRAA) are required under both laws to prepare, implement, and enforce an affirmative action program.
The following are a few of the key provisions of the new regulations:
The Section 503 Final Rule establishes a nationwide 7 percent utilization goal for qualified Individuals with Disabilities (IWDs). Contractors are to apply this utilization goal to each of their job groups, or to their entire workforce if the contractor has 100 or fewer employees. Although failure to meet a utilization goal by itself will not be a violation of the regulations, if a contractor fails to meet the utilization goal for one or more job groups (or the workforce as a whole, for small contractors), the contractor is required to take steps to determine whether and where impediments to equal employment exist. For example, contractors who do not meet the utilization goal must conduct certain assessments of their personnel processes and outreach efforts, and then develop and execute action-oriented programs to correct any identified problem areas.
The final rule for the VEVRAA functions somewhat differently. Rather than establishing a utilization “goal,” the VEVRAA regulations set forth a benchmark of 8 percent (or contractors can determine their own benchmark using certain data). In contrast to a goal—for which action is required if the goal is not met—a benchmark is simply a yardstick against which contractors can measure the success of their efforts to recruit and employ qualified protected veterans. Failure to meet the benchmark is not a violation of the VEVRAA. However, contractors are still required to assess their affirmative action program against this benchmark.
The new rules also impose new data collection requirements. Under both rules, contractors must document and update annually several quantitative comparisons for the number of covered individuals who apply for jobs and the number of covered individuals that they hire. For example, contractors must document the total number of applicants for employment compared to the number of applicants who are known IWDs or protected veterans. Contractors also must document the total number of job openings and the number of jobs filled, as well as the number of IWDs and protected veterans hired. The purpose of these data collection requirements is to assist contractors in measuring the effectiveness of their outreach and recruitment efforts. The new rules require that the data be maintained for three years to allow for trend-spotting.
Invitation to Self-Identify
Both final rules also update the requirements for inviting individuals to self-identify as a protected veteran or IWD to require that such invitations be made at the pre-offer stage, in addition to the existing self-identification requirement at the post-offer stage of the application process. The pre-offer invitation may be included in the contractors’ application materials for a position, but must be separate from the application itself. The new regulations also require that contractors invite their employees to self-identify as a protected veteran or IWD every five years. For the invitations to self-identify pursuant to Section 503, contractors must use certain language prescribed by the Office of Federal Contract Compliance Programs (OFCCP). The final rule for the VEVRAA offers sample invitations to self-identify that contractors may use.
Among other changes, the rules also update the language that must be used when incorporating equal opportunity clauses into a subcontract, and also require that contractors send written notification of their affirmative action policies to subcontractors and request their cooperation. The new regulations also require contractors to state in solicitations and advertisements that they are an equal opportunity employer of IWDs and protected veterans.
The final rule for the VEVRAA can be found at 78 Fed. Reg. 58,613 (Sept. 24, 2013), and the final rule for Section 503 can be found at 78 Fed. Reg. 58,681 (Sept. 24, 2013).
Lawsuit Challenging Section 503 Rule Change
Highlighting the controversy surrounding the new rules, a national trade association of construction contractors recently filed suit in the U.S. District Court for the District of Columbia challenging the new regulations implementing Section 503. The lawsuit challenges the new regulations’ application to construction firms, and in particular emphasizes the difficulty in meeting the data collection and analysis requirements in the construction industry. The suit seeks to strike down the Section 503 regulations because they allegedly exceed OFCCP’s statutory authority, represent an irrational policy reversal, and are overly burdensome on construction contractors.