OFCCP Versus Manheim Auctions Inc.—OFCCP's Jurisdiction Ruling Update

As an update to a previously reported litigation, the Office of Federal Contract Compliance Programs (OFCCP) recently debarred Manheim, Inc. from receiving government contracts or extensions of contracts until they are able to demonstrate compliance with affirmative action regulations. Under this unique ruling, Manheim is able to continue working on certain contracts and subcontracts specifically identified in the decree. The company is also able to request a compliance review to begin the process of being reinstated to receive new contracts once it develops affirmative action plans.

As background, Manheim created a subsidiary, MAGS, which held more than $100,000 in government contracts. At no time did MAGS exceed 50 employees, and when the OFCCP scheduled the company for a compliance review, they contested jurisdiction under the 50 employee rule. Because there were shared resources in the form of Board members and support services including payroll and accounting, OFCCP invoked the “single entity” tenet that the parent company and subsidiary should not be considered separate entities, and both are subject to OFCCP regulations.

The main takeaway for contractors is for those who are multi-location employers or owned by a holding company. If one location or subsidiary holds government contracts, the OFCCP will likely take the single entity position and assert all locations or companies fall under the regulations and are required to develop an AAP. Berkshire has observed this in recent audit requests from OFCCP and it seems to reflect an internal directive of the agency.

Berkshire will continue to monitor this situation and keep you abreast of any new developments. To learn more about this ruling, please contact Berkshire Associates at 800.882.8904 or email bai@berkshireassociates.com.