• Revised Regulations Govern Employers with Federal Contracts or Subcontracts
  • May 2, 2003 | Author: Mary M. Krakow
  • Law Firm: Fredrikson & Byron, P.A. - Minneapolis Office
  • Two significant new requirements apply to many employers that have a contract or subcontract with the federal government. First, revised regulations redefine the components that federal non-construction contractors and subcontractors must include in their annual written affirmative action program ("AAP"). Second, the Office of Federal Contract Compliance Programs ("OFCCP") is conducting a biennial Equal Opportunity Survey ("EO Survey") of all federal nonconstruction contractors and subcontractors to obtain wage and other employment information. Failure to comply with the revised AAP requirements or to complete the required EO Survey could result in the OFCCP initiating a compliance evaluation and possibly legal action against the employer.

    Revised Regulations Govern AAP's for Minorities and Women

    Employers that have a nonconstruction contract or subcontract with the federal government have long been required to ensure that employees and applicants are treated without regard to race, color, religion, sex, or national origin. Employers with a federal nonconstruction contract or subcontract also have been required to take affirmative action to employ and advance in employment minorities, women, qualified individuals with disabilities, Vietnam era veterans and special disabled veterans. In addition, employers with 50 or more employees and a federal nonconstruction contract or subcontract of $50,000 or more also have been required to prepare and implement an annual written AAP.

    The OFCCP's revised regulations (41 C.F.R. Part 60-2) address this third requirement for federal nonconstruction contractors and subcontractors: preparation of the annual written AAP for women and minorities. In adopting the revised regulations, the OFCCP recognized that the previous regulations often resulted in a written document that complied with highly prescriptive standards but that may have resulted in only passive nondiscrimination by many federal contractors and subcontractors. According to the OFCCP, the revised regulations are designed to refocus the regulatory emphasis on a performance-based standard that causes federal contractors and subcontractors to effectively implement their affirmative action program into their overall management plan. In other words, the revised regulations are designed to require contractors and subcontractors to make their AAP a key component of their business processes.

    Who Must Have a Written AAP

    As under the previous regulations, employers with 50 or more employees (counting full-time, part-time, and temporary employees) and a federal contract or subcontract of $50,000 or more must prepare and implement a written AAP for each of their establishments. In addition, as before, any employer with 50 or more employees also must have a written AAP for each establishment if that employer

    • is a financial institution that is an issuing and paying agent for U.S. Savings Bonds or Notes;

    • serves as a depository of federal government funds in any amount;

    • has government bills of lading which in any 12-month period total or will likely total $50,000 or more; or

    • has an open-ended or indefinite quantity federal non-construction contract or subcontract that will total $50,000 or more in a 12-month period.

    The written AAP must be completed and implemented within 120 days of commencing a federal contract or subcontract and must be updated annually. The revised regulations apply to any AAP prepared on or after December 13, 2000.

    Requirements of a Written AAP for Women and Minorities

    The revised regulations require at least six quantitative components in each written AAP:

    • organizational profile or workforce analysis,

    • job group analysis,

    • placement of incumbents in job groups,

    • availability analysis,

    • comparing incumbency to availability, and

    • placement goals.

    The regulations provide detailed guidance regarding preparation of each of the aforementioned components.

    The object of the six quantitative components is to identify specific job groups where fewer minorities and/or women are employed than would reasonably be expected given the availability of qualified minorities and/or women in the applicable recruitment area or among the contractor's existing workforce for the specific job group. Where incumbency of minorities and/or women in a particular job group is less than the availability analysis indicates would reasonably be expected, the contractor must set a placement goal for that job group.

    The revised regulations specifically state that the placement goals are not quotas, which are expressly forbidden. Contractors must make all selection decisions in a nondiscriminatory manner and may not use a placement goal as a justification for selecting an individual based on race, color, religion, sex, or national origin.

    The revised regulations also require at least four additional components in each written AAP:

    • designation of responsibilities to an executive or "official" of the organization with the authority, resources, support of and access to top management to ensure the effective implementation of the AAP;

    • identification of problem areas, including in-depth analyses of the total employment process to determine whether and where impediments to equal employment opportunity exist;

    • development and execution of action-oriented programs designed to correct any identified problem areas; and

    • development and implementation of internal audit and reporting systems that periodically measure the effectiveness of the employer's total affirmative action program.

    The revised regulations provide minimum guidance for completion of these four additional components and leave much room for interpretation by both the individual contractor and the OFCCP, should the OFCCP conduct a compliance evaluation of the contractor.

    The Need to Protect Information from Discovery

    Because the four additional components of the AAP leave so much room for interpretation, particularly the tasks of identifying problem areas and performing the required in-depth analyses of the total employment process (including hiring and compensation analyses), contractors and subcontractors must carefully consider how they complete these steps and, once completed, what information is included in the AAP. This includes deciding such things as what documentation will be created and by whom, what measurement processes will be used, what standards for review will be used, and how and when management will be advised of the AAP's effectiveness and any recommendations for improvement.

    Any information that is created could be subject to discovery during litigation involving employment disputes or in an OFCCP compliance evaluation. This means that contractors and subcontractors should work closely with their employment counsel to conduct the required analyses necessary for preparation of the AAP to protect information under the attorney/client privilege whenever appropriate.


    The revised regulations also establish time limits that federal contractors and subcontractors must keep personnel and employment records. Contractors and subcontractors generally must preserve all personnel or employment records for not less than two years from the date the record is made or the personnel action taken, whichever is longer. Contractors and subcontractors with either

    • fewer than 150 employees or

    • a government contract of less than $150,000 must preserve all personnel or employment records for not less than one year.

    This includes records pertaining to hiring, job assignment, promotion, demotion, transfer, lay off or termination, rates of pay or other terms of compensation, and selection for training or apprenticeship. It also includes records relating to requests for reasonable accommodation, the results of any employee physical examination, job advertisements and postings, applications and resumes, tests and test results, and interview notes.

    Contractors or subcontractors that have received notice of the filing of a discrimination complaint, initiation of a compliance evaluation, or commencement of an enforcement action must preserve all relevant personnel and employment records until final disposition of action. This includes, for example, personnel and employment records for the particular employee making the complaint and all other employees holding positions similar to the one held or sought by the complainant and any unsuccessful candidates for the same position.

    The Equal Opportunity Survey ("EO Survey")

    In January of this year, the OFCCP notified approximately half of all federal nonconstruction contractors of the requirement to prepare and file an EO Survey. The deadline for completing and returning this year's Survey is May 31, 2001. Otherwise, contractors must return the Survey within 45 days of receipt. Those federal nonconstruction contractors who did not receive an EO Survey this year can expect to receive one some time in late 2001 or early 2002.

    The EO Survey is designed to provide the OFCCP compliance data that will allow it to identify those contractors that will receive further investigation, including any one of the four types of compliance evaluations performed by the OFCCP. The Survey requests data regarding personnel activities, pay practices, and affirmative action performance. This includes data regarding applicants, hires, promotions, termination, compensation, and tenure by race and gender.

    Contractors may submit their completed EO Survey in paper form via facsimile or U.S. Mail. The OFCCP encourages employers to submit their Survey via the Internet to more easily allow the OFCCP to access and process the information as they identify what contractors will be subject to further compliance evaluation.

    Contractors with questions regarding completion of their EO Survey or their affirmative action obligations, including preparation of a written AAP, are encouraged to contact their employment counsel or a technical consultant knowledgeable in the area of affirmative action.