Berkshire is a human resources and technology firm specializing in affirmative action, pay equity, and applicant tracking.
If you’re struggling with OFCCP compliance, you aren’t alone.
The Office of Federal Contract Compliance Programs has stepped up enforcement in recent years, collecting record amounts of monetary settlements in 2019 and 2020. In fiscal year 2020, OFCCP collected $35.6 million from federal contractors, primarily remedies for race and sex discrimination in employment, predominantly in hiring and compensation - issues that were uncovered during audits.
Maintaining your contractual obligations can be challenging, but understanding the OFCCP’s goals and requirements can help you prepare for your audit and reduce your risk of costly settlements.
Hundreds of HR professionals at organizations like yours are preparing for an upcoming OFCCP audit. Here’s what you need to know about complying with OFCCP regulations at your organization.
The OFCCP is an agency within the U.S. Department of Labor. The OFCCP exists to ensure that qualifying federal contractors and subcontractors offer equal employment opportunities to all applicants and employees, regardless of personal identifying factors such as race, sex, disability or protected veteran status. The OFCCP monitors whether federal contractors are complying with their contractual affirmative action obligations. As an enforcement agency, it can check compliance through a compliance review process, otherwise known as an OFCCP audit.
Executive Order 11246 applies to federal contractors, subcontractors and federally assisted construction contractors and subcontractors with more than $10,000 in government contracts. The order prohibits discrimination in employment decisions on the basis of sex, sexual orientation, gender identity, race, color, religion or national origin. It also requires covered contractors to take affirmative action to ensure equal opportunity is provided in every aspect of employment. Covered supply and service contractors holding a contract of $50,000 or more must prepare a written annual affirmative action plan under this executive order.
In 2014, President Barack Obama issued Executive Order 13665, amending EO 11246 to prohibit contractors from discriminating against applicants and employees for asking about, discussing or disclosing their pay.
The Rehabilitation Act of 1973, Section 503, covers employers with federal contracts or subcontracts that exceed $15,000, including construction contractors. These contractors must ensure nondiscrimination in employment on the basis of disability and take affirmative action to hire, retain and promote individuals with disabilities. Covered contractors holding a contract of $50,000 or more must prepare a written annual affirmative action plan for individuals with disabilities.
The Vietnam Era Veterans’ Readjustment Assistance Act, or VEVRAA, requires federal contractors and subcontractors with contracts or subcontracts of $150,000 or more, including construction contractors, to ensure nondiscrimination in employment on the basis of protected veteran status and take affirmative action to employ and advance in employment disabled veterans, active-duty or wartime campaign badge veterans, Armed Forces Service Medal veterans and recently separated veterans (people discharged from the service in the past three years). Covered contractors holding a contract of $150,000 or more must prepare a written annual affirmative action plan for protected veterans.
The OFCCP neutrally selects a group of contractors for audit every year. Through its enforcement process, the agency checks to ensure that the selected contractor is fulfilling its contractual affirmative action program (AAP) obligations by preparing plans regularly, maintaining plan compliance with regulations, collecting the requisite data, and completing analyses of collected data on an annual basis. During an OFCCP review, the OFCCP also reviews whether a contractor has engaged in any discriminatory hiring, promotion, termination or pay practices by evaluating detailed personnel activity and compensation data about all employees covered by the affirmative action plan under review.
The agency also can accept and investigate complaints from applicants and employees of qualifying federal contractors if they think that the contractor has discriminated against them, failed to provide reasonable accommodation or otherwise failed to engage in appropriate affirmative action efforts as required by their contract.
When an OFCCP compliance audit uncovers evidence of discrimination, the agency recovers money from the contractor at fault to repay applicants and employees for missing back pay and salary adjustments. The agency can also require that contractors establish hiring goals as part of any resolution, and although infrequently used, can debar non-compliant contractors from current or future federal contracting work. The OFCCP recovered $35.6 million in 2020 and more than $116 million between October 2016 and September 2020, the most collected in any four-year period on record.
Qualifying federal contractors are required to maintain up-to-date AAPs and data regarding personnel decisions and other employment records. This data should be analyzed regularly to monitor for OFCCP compliance red flags.
Contractors of a certain size and contract level are obligated to create and maintain annual written AAPs. 41 CFR 60-2.1(b) states: “Each nonconstruction contractor must develop and maintain a written affirmative action program for each of its establishments if it has 50 or more employees.”
Further, 41 CFR 60-2.1(d) states: “Contractors subject to the affirmative action program requirements must develop and maintain a written affirmative action program for each of their establishments. Each employee in the contractor’s workforce must be included in an affirmative action program. Each employee must be included in the affirmative action program of the establishment at which he or she works.”
Following through on your affirmative action plan supports compliance with contractual obligations. A qualified consultant can help you develop an effective plan that you can submit with confidence when your scheduled audit comes around.
Covered federal contractors have detailed recordkeeping obligations and must perform annual analyses of their personnel activity, including applicant, hiring, promotions, terminations and compensation systems. Contractors also must evaluate their workforce representation against expected availability to determine if annual placement goals should be established. Specific analyses also must be completed to evaluate a contractor’s progress in meeting government-established utilization goals for individuals with disabilities and hiring benchmarks for protected veterans.
Companies may conduct the necessary analyses and reports internally, or they may seek outside assistance. If you have limited resources or knowledge of affirmative action and related regulations, our recommendation is to obtain guidance. Since these laws can be complex, expert interpretation is often needed.
There is currently a proposal at the Office of Management and Budget that, if approved, will require that contractors file an annual report to OFCCP certifying that the contractor prepares and maintains all required affirmative action plans. We expect that OFCCP may seek to finalize this proposal quickly, which means contractors may be required to certify compliance as early as 2021.
Dealing with regulations from the OFCCP can be intimidating, but there are several resources available to make fulfilling your contractual obligations more manageable and less stressful. You don’t have to do this alone. Here are some helpful resources:
Meeting OFCCP standards for data collection and analysis, as well as preparing for and passing your audit, are challenging prospects. But with the right team and expertise behind you, your organization can be prepared for any audits that come your way.