New Rules for Federal Contractor Hiring Practices

Federal contractors are up in arms about two new controversial final rules that require them to pay closer attention to their recruitment and hiring practices. Contractors say the cost and unintended consequences of compliance with the rules is overly burdensome.

The Office of Federal Contract Compliance Programs—the Labor Department division responsible for ensuring that federal contractors comply with Equal Employment Opportunity laws—finalized rules in August that require federal contractors to heed an exhaustive list of obligations to ensure compliance with non-discrimination and affirmative action requirements regarding veterans and individuals with disabilities.

Critics of the rules, however, say the costs outweigh the benefits and the reporting requirements are onerous. “These rules will force federal contractors to spend an estimated $6 billion a year to produce reams of new paperwork,” Stephen Sandherr, chief executive officer of the Associated General Contractors of America, said in a statement.

“Given the lack of justification for these new measures,” Sandherr added, “we will closely review all appropriate legal options available to protect employers—who have already made sure veterans and the disabled are well represented in the workforce—from billions in unneeded new regulatory costs.”

One of the rules revises Section 503 of the Rehabilitation Act to broaden the definition of who qualifies as a person with a disability, effectively increasing the number of disabled individuals who are covered by the OFCCP's mandate.

A provision of that rule also requires federal contractors and sub-contractors to set a 7 percent utilization goal for individuals with disabilities for each job group—such as managers, professionals, or laborers—regardless of the type of job, the geographical location of the facility, or actual applicant pool. Contractors with less than 100 employees may apply this 7 percent utilization goal across their entire workforce rather than by each job group.

Such a utilization goal could be difficult to reach in certain job groups, however, particularly those that “require more manual labor, or where there may not be as many qualified individuals with disabilities who have the skills to perform particular jobs,” says Rebecca Springer, counsel at law firm Crowell & Moring.

The record keeping and analytical requirements of that mandate will add a complex series of compliance tasks for both federal contractors and subcontractors. Government contractors will have to track those efforts within each job group and evaluate and disclose how they are performing. “It puts a significant burden on contractors,” says Robert Smith, a partner in the labor and employment practice of law firm Morgan Lewis.

Not all prescriptive requirements included in the proposed rules made it into the final rules. One provision that was dropped would have required contractors to meet a secondary hiring sub-goal of 2 percent of individuals with “severe disabilities,” such as complete blindness or deafness, paralysis, epilepsy, and psychiatric disabilities.

The final rules also removed a requirement that contractors establish “linkage agreements,” such as with their local State Vocational Rehabilitation Agency office or a local Employment Network organization.  

Self-Identification Requirement

Another controversial provision that did make it into the final rules requires contractors to invite job applicants to self-identify the existence of a disability before and after receiving an offer of employment. The invitation to self-identify a disability applies to all applicants, whether they qualify for the job or not.  

The legal risk posed to contractors by this requirement is that a candidate who discloses their disabled status but who doesn't get interviewed or otherwise does not receive a position, could file a claim with the Equal Employment Opportunity Commission under the Americans with Disabilities Act, says Smith. “While the EEOC has stated that they would not file a claim under the ADAA relating to pre-employment inquiries, that would not prevent a unsuccessful candidate from doing so," he says. "I don't see any guarantee against that kind of a claim."

“These rules will force federal contractors to spend an estimated $6 billion a year to produce reams of new paperwork.”

—Stephen Sandherr,

Chief Executive Officer,

Associated General Contractors of America

Contractors also face a liability risk where an individual may be unwilling to report a disability, especially hidden ones like a psychiatric disability. “To truly try to get accurate information about who in your workforce is disabled will be difficult,” says Springer.

OFCCP said it will be creating a self-identification form to be used for soliciting such information, which the agency plans to make available on its Website. Government contractors will also be required to survey their entire workforce for disability status every five years. OFCCP also requires employers to “remind” employees to self-identify at least once during the five-year period.

VEVRAA Requirements

Another final rule issued by OFCCP implements revisions to the Vietnam Era Veterans' Readjustment Assistance Act (VEVRAA), setting stringent new benchmarks for hiring veterans. The rule requires for the first time that federal contractors set hiring benchmarks for veterans each year, based either on the national percentage of veterans in the workforce (currently 8 percent), or based on their own analysis of best available data, such as state-specific data or other factors.

The intent of the benchmark is to “provide a yardstick by which contractors can measure the success of their affirmative action effort,” says Naomi Levin, OFCCP branch chief for policy development and procedures.

“Failing to meet the benchmark is not a violation of the law and will not carry any penalties,” Levin adds. “However, failing to establish the benchmark or conduct the required analyses and assessments could be a violation of the law.” 

The benchmark does not require that every single outreach effort “always be a smashing success,” Levin says. “It's requiring that your overall efforts must, in fact, be successful.”

MAJOR PROVISIONS

The excerpt below from the OFCCP explains significant provisions in the final disabilities rule:

Establish, for the first time, a 7 percent workforce utilization goal for individuals with

disabilities. This goal is not a quota or a ceiling that limits or restricts the

employment of individuals with disabilities. Instead, the goal is a management tool

that informs decision making and provides real accountability. Failing to meet the

disability utilization goal, alone, is not a violation of the regulation and it will not lead

to a fine, penalty, or sanction. OFCCP is mindful that smaller contractors may find it

more difficult to attain the goal in each of their job groups. Therefore, the final rule

permits contractors with a total workforce of 100 or fewer employees to apply the 7

percent goal to their entire workforce, rather than to each job group.

Require contractors to invite applicants to voluntarily self-identify as an individual

with a disability at the pre-offer stage of the hiring process, in addition to the existing

requirement that contractors invite applicants to voluntarily self-identify after

receiving a job offer. The purpose of this data collection is to provide contractors

with useful information about the extent to which their outreach and recruitment

efforts are effectively reaching people with disabilities.

Require contractors to invite incumbent employees to voluntarily self-identify on a

regular basis. The status of employees may change and a regular invitation to self-identify provides employees a way to self- identify for the first time, or to change their previously reported status. Providing a regular invitation should contribute to increased self-identification rates. Improving data collection is important to assessing employment practices.

Require contractors to maintain several quantitative measurements and comparisons

for the number of individuals with disabilities who apply for jobs and the number of

individuals with disabilities they hire in order to create greater accountability for

employment decisions and practices. Having this data will enable contractors and

OFCCP to evaluate the effectiveness of contractors' outreach and recruitment efforts,

and examine hiring and selection processes related to individuals with disabilities.

Require prime contractors to include specific, mandated language in their sub-contracts in order to provide knowledge and increase compliance by alerting sub-contractors to their responsibilities as Federal contractors.

Implement changes necessitated by the passage of the ADA Amendments Act (ADAAA) of 2008 by revising the definition of “disability” and certain non-discrimination provisions of the implementing regulations.

Source: OFCCP.

“If the contractor determines that the totality of its efforts aren't effective, it must identify and implement different efforts,” she says. Contractors must further document these outreach and recruitment efforts and review them on an annual basis.

The final rules no longer allow contractors to simply reference the equal opportunity clause in their contracts, like they've always been required to do. “This may be very convenient and very simple to do, but it's not very helpful,” says Levin. “We have, in fact, gone to sub-contractors who never knew they were covered.”

As a result, the final rules now require contractors to not only cite the clause by reference, but also include specific language, prescribed by the final rules, and include it in bold type after the citation. Under Section 503, this provision applies to all government contracts and sub-contracts in excess of $10,000, whereas under VEVRAA it applies to all government contracts and sub-contracts in excess of $100,000.

“Contractors will have to revise all their sub-contractor or vendor agreements to put in this additional language,” says Springer.

Recordkeeping Requirements

Some of the more significant changes in the final rules apply to recordkeeping and documentation of specific metrics. Both final rules require “a lot more data collection and data analysis than was previously required under VEVRAA and Section 503 regulations,” says Springer.

Contractors must now maintain quantitative measurements related to their hiring practices of veterans and individuals with disabilities, including:

The number of job openings;

The number of job applicants who self-identified as disabled or veteran;

The total number applicants for all jobs;

The number of disabled or veteran applicants hired; and

The total number of applicants hired.

All contractors will have to change their applicant tracking systems to collect, solicit, and maintain veteran and disability status of all applicants, requiring a significant amount of time and costs to make those changes.

“In advance of the rules taking effect,” Springer says, “contractors are going to have to spend time figuring out how to revamp their systems and make sure all their policies and practices are in compliance.”

Once contractors have their applicant tracking and on-boarding systems up-to-date, however, the process should be “no more burdensome than their current obligations,” says Connie Bertram, a partner in the law firm Proskaeur and co-chair of the firm's labor and employment practice.

“A lot of these requirements are not new,” Bertram adds. “They're just an expansion of existing requirements.” 

The rules further establish that contractors must retain information relating to their affirmative action program and outreach efforts for three years, which allows contractors and OFCCP to evaluate the progress—or lack thereof—of recruitment efforts over time, Levin says, and to refine those efforts as needed. It will also allow for trending analysis to be conducted, she says.

The final rules will become effective 180 days after publication in the Federal Register. This waiting period “provides time for contractors to become familiar with the new rules,” says Levin. It also allows time for the OFCCP to provide technical education and assistance to contractors, she says.

Contractors should take the final rules as a warning that the OFCCP “intends to step up enforcement in these areas,” says Smith. “We're going to see a much more aggressive environment with respect to federal contractor compliance.”