October 2010
Labor & Employment Law Alert


Pamela Ploor

Affirmative action is not just for traditional federal contractors anymore. Below are the top five significant and recent developments in this changing area:

1. “What Do You Mean We're Federal Contractors?” Companies that directly or indirectly sell services or goods or construct public works above a certain dollar threshold for the government are federal contractors. The agency that enforces federal laws regarding contractors — the Office of Federal Contract Compliance Programs (“OFCCP”) — is expanding its reach.
   
   Say what? You heard correctly. Although banks are covered if they issue and pay savings bonds or accept deposits of federal funds, OFCCP says accepting deposit insurance through the FDIC (or the credit union counterpart, NCUA) is a contract that subjects these financial institutions to its reach. The Wall Street Reform legislation creates “Offices of Inclusion” within various federal agencies, like the SEC, FDIC, and the Federal Reserve. These agencies will have a referral relationship with OFCCP, which entrenches the agency even more within the financial services industry.
   
   Hospitals are also in OFCCP’s sights. For example, according to OFCCP, hospitals are covered contractors if they contract with federal HMOs or are within a network of private health care providers under federal military health plans, like Tricare, or simply accept payments from the military health plan.
   
   Companies that concluded they were safe from OFCCP’s grasp need to shake off complacency and re-assess their situations.
   
   
2. Outreach, Outreach, Outreach. Contractors are obligated to engage in outreach efforts to expand the pool of qualified women, minorities, disabled persons, and veterans. OFCCP is looking at the quality and persistence of a contractor's efforts. Factors used in making a “good faith” determination include whether outreach adequately covers veterans and persons with disabilities (a current focus of OFCCP), whether a contractor monitors results and makes changes, and whether relationships are built with relevant outside organizations. Mailing the same 10 form letters year after year to organizations that don’t refer candidates and that don't know the contractor will no longer pass muster. Contractors will need to re-assess their outreach and how to do it effectively and efficiently while ensuring meaningful outreach occurs for veterans and disabled persons.
   
   
3. Numerical Goals for Disabled Persons and Veterans? Numerical goals for minorities: check. Numerical goals for women: check. Numerical goals for disabled persons and veterans: What? Yes, you read correctly. OFCCP is widely expected to issue proposed regulations in 2011 that will obligate contractors (including construction contractors) to set numerical goals and to analyze how they did in trying to meet those goals. As any contractor will tell you, much of the time-consuming recordkeeping and analysis associated with having affirmative action programs is a result of numerical goals. As a result, though self-identification is voluntary, contractors need to be aware of the percentage of veterans and disabled persons within their workforce and how they compare to qualified veterans and disabled persons in the applicable labor market.
   
   
4. OFCCP Cancelled its Compensation Guidelines, but Don't Party Yet. On August 4, 2010, OFCCP’s director announced OFCCP was rescinding its 2006 guidance on evaluating compensation systems and would publish new rules on analyzing federal contractors’ pay practices. While the cancellation is great news, the Obama administration is committed to the concept of pay equity and is pursuing it through various enforcement agencies, including OFCCP and EEOC. Contractors are obligated to analyze their compensation for discrimination each year, though it is a commonly overlooked part of a affirmative action plan. Time will tell what OFCCP proposes for its compensation guidance, but contractors should move their analyses of compensation from its perpetual spot at the bottom of the collective to-do list to a spot likely to get done (or at least considered). Various approaches and analyses are available to contractors. Contractors should include legal counsel in their analyses so the analyses of any problem areas remain privileged from the prying eyes of OFCCP.
   
   
5. The Compliance Snooze for Construction Contractors is Over. Construction contractors get less attention than non-construction contractors because they don’t prepare written affirmative action plans for women and minorities. Instead, they must engage in good faith efforts known as the “16 specifications” to meet goals for women and minorities. These goals and the “16 specifications” have not been amended in over 30 years. OFCCP has announced that in 2011, it will update and strengthen the affirmative action obligations on construction contractors. Construction contractors need to allocate resources to this compliance obligation so they are not caught unprepared when the tide turns and OFCCP issues new regulations.
   
   OFCCP’s 2010 budget increased more than $30,000,000 over 2009’s budget. OFCCP hired hundreds of new compliance officers. The agency is committed to greatly increasing the number of audits that include an on-site visit. The stakes have increased and contractors would do well to remember the old (and new) adages about preparation being everything and you snooze, you lose.

Advice for Employers

Employers that think they might be covered or are financial or health care institutions that are not certain of their coverage need to more closely consider their contacts and purchase orders with and reimbursement by the federal government and its first-tier contractors. Construction contractors should allocate time and resources to determine their coverage and if so, compliance with OFCCP’s requirements. Employers that are known government contractors should take their affirmative action plans off the shelf and re-assess their practices, procedures, and resources assigned to compliance with these obligations. Time is short, and a little work now may save a lot of work later.

If you have any questions about this alert or affirmative action in general, please contact Pam Ploor at (414) 277-5661 / , Ely Leichtling at (414) 277-5681 / , Adrianne Mazura at (312) 715-5213 / or your Quarles & Brady attorney.