Chapter 34: Federal contractors and affirmative action Skip to content Skip to footer


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Employers are required to abide by existing affirmative action programs, which are enforced by the U.S. Department of Labor, Office of Federal Contract Compliance Programs (OFCCP). Affirmative action obligations are imposed upon businesses providing goods or services to the federal government or functioning as subcontractors for those providing goods or services directly to the federal government. These obligations are set forth in:

  • Executive Order 11246
  • the Rehabilitation Act
  • the Vietnam Era Veterans’ Readjustment Assistance Act.

These laws not only prohibit discrimination by covered employers, but require them to make good-faith efforts to hire and advance minorities, women, individuals with disabilities, veterans with disabilities and Vietnam Era veterans, as well as other classes of veterans. The OFCCP considers the failure to make good faith efforts to comply with the law to be a violation warranting the imposition of penalties. Penalties for noncompliance can include cancellation of contracts and prohibition from further government business. The OFCCP can also pursue covered employers for back pay and reinstatement for individuals whom it deems to be victims of discrimination.

Who is covered

As a general rule, federal contractors and subcontractors with contracts totaling $10,000 or more are required to comply with certain aspects of the affirmative action laws.

Federal contractors and subcontractors with 50 or more employees and contracts over $50,000 or who have government bills of lading that can be expected to total at least $50,000 over a one-year period are also required to develop and implement written affirmative action plans. Additionally, institutions with 50 employees that serve as a depository of federal funds or that issue or pay on U.S. savings bonds and notes, regardless of the amount, must also have written affirmative action plans.

Executive Order 11246

The best-known affirmative action requirements are contained in Executive Order 11246. An employer’s obligations under the Order depend on whether it meets the $10,000 or $50,000 threshold. The first threshold primarily applies to employers holding a federal government contract in excess of $10,000 or multiple contracts in excess of $10,000 in the aggregate. An employer that supplies a service to a government agency and receives payment from the agency in excess of $10,000 is a contractor under the Order, even if the employer has not entered into any formal contract with the government.

Executive Order 11246 requires that employers meeting the $10,000 threshold refrain from discriminating on the basis of race, color, religion, sex or national origin. Such employers must also take affirmative action to ensure equal employment opportunities. This obligation to take affirmative action exists with regard to working conditions and facilities as well as to all employment decisions in the areas of hiring, terminations, training, promotions and compensation. All employees of a covered employer are protected regardless of whether they are actually working on a federal contract.

In addition to taking affirmative action in employment, each covered employer must take the following actions:

  • include an equal opportunity clause in all subcontracts and purchase orders of $10,000 or more, related to the carrying out of the government contract
  • include an equal opportunity statement in all solicitations and advertisements for employment
  • advise each labor union with which it has dealings of its affirmative action policies
  • furnish all information and reports required by the OFCCP and permit access by the OFCCP to books, records and accounts for purposes of investigation.

The Order’s most significant requirement applies only to contractors with 50 or more employees and with single contracts in excess of $50,000 and to institutions serving as depositories of federal funds or that issue or pay on U.S. savings bonds and notes and who have 50 or more employees. This higher threshold requires covered employers to develop and maintain written affirmative action plans.

Written affirmative action plans must be developed for each of the employer’s facilities regardless of whether each of the facilities has a direct federal contract. Each plan must assign responsibility and accountability for its implementation, identify problem areas relating to equal employment opportunity, provide for action-oriented programs to correct problem areas and develop and implement an auditing system to measure the plan’s effectiveness.

Plans also must include a number of quantitative analyses, including an organizational profile or workforce analysis (providing detailed information about the incumbent workforce), a job group analysis (whereby incumbent employees are broken down into job groups), an availability analysis (determining the statistical availability of minorities and females in each job group), an utilization analysis (comparing availability with the incumbent workforce) and the establishment of placement goals (where utilization in the workforce is significantly less than availability).

The Rehabilitation Act

Section 503 of the Rehabilitation Act prohibits employers with federal government contracts totaling $10,000 or more from discriminating against individuals with disabilities and further requires affirmative action to provide employment opportunities for such persons. Covered employers also must make a reasonable accommodation to the disabilities of individuals to the extent such actions do not cause an undue hardship or financial burden on the employer.

Employers required to have written affirmative action plans under the Executive Order are also required by this Act to prepare a written affirmative action program. The plan must include:

  • a policy statement
  • the publication and posting of notices regarding the contractor’s obligations
  • a plan for recruitment of individuals who are disabled
  • a plan for reviewing personnel processes to ensure that they provide for consideration of the job qualifications of applicants and employees with known disabilities
  • a plan for reviewing all job requirements to ensure that they are job-related
  • a procedure to guard against disability harassment
  • assignment of responsibility to a company official to implement the program and monitor its results.

Unlike Executive Order 11246, the Rehabilitation Act does not require that contractors perform workforce analyses or that they set specific goals or timetables regarding the hiring or advancement of individuals with disabilities. However, plans must be reviewed and updated annually.

Contractors must post an equal employment opportunity policy statement informing all applicants and employees of their rights under the Rehabilitation Act. Each covered contractor must ensure that applicants with disabilities and employees are informed of the contents of the policy statement.

When an employee with a known disability is having significant difficulty performing a job and it is reasonable to conclude that the performance problem may be related to the known disability, contractors are now required to inquire whether the performance problem has any connection to the employee’s disability. A second inquiry regarding needed accommodations must be made when the employee, in response to the initial inquiry, indicates his or her performance problem is connected to his or her disability.

Contractors must extend invitations to applicants with disabilities and employees to “self-identify” so they can benefit under the contractor’s affirmative action program. Generally, this invitation can be extended only after an offer of employment has been made. The invitation must inform the individual that the request to benefit under the contractor’s affirmative action program may be made immediately or at any time in the future. Contractors must maintain a separate file on individuals who have self-identified and provide the file to the OFCCP upon request.

Vietnam Era Veterans’ Readjustment Assistance Act

Coverage under the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) depends upon the date of the underlying federal contracts. For contracts entered into before December 1, 2003, if the contracts are $25,000 or more, then employers are required to take affirmative action as to the following:

  • special veterans with disabilities
  • Vietnam-era veterans
  • veterans discharged from active duty in the past year
  • veterans who served on active duty in a war, campaign or expedition for which a campaign badge has been authorized.

For contracts entered into after December 1, 2003, if the contracts are $100,000 or more, then employers are required to take affirmative action as to the following:

  • veterans with disabilities
  • veterans discharged from active duty within the past three years
  • veterans who received service medals for active duty in a military operation or campaign badges for a war, campaign or other expedition.

Under the OFCCP’s regulations, employers required to establish written affirmative action plans under the Executive Order must also adopt written plans under this Act. Such plans are virtually identical to those required for individuals with disabilities under the Rehabilitation Act. Affirmative action plans covering veterans are not required to contain workforce analyses, nor must they include any goals, but the plans must be reviewed and updated annually.

In addition to the above, employers covered by the Veterans’ Act must report to the local employment service all suitable employment openings not involving management employees or temporary (three days) employees that exist or arise during the performance of their government contract or subcontract. Job openings that are to be filled from the contractor’s existing work force are not required to be listed. Covered employers are required to file an annual report with the Department of Labor on Form VETS-100. The report contains information concerning incumbent and newly hired employees in the protected categories listed above. The categories change depending upon the date on which the underlying contracts were entered.

Ensuring compliance

The OFCCP reviews compliance with the three laws in two different ways:

  1. audits
  1. investigative complaints.

Audits

The most common method is by an audit. OFCCP audits can range from the simple compliance check (where minimal records are reviewed) to the desk audit (where more comprehensive documentation is reviewed) to focused reviews (where specific areas are reviewed in detail) to the full audit (where OFCCP investigators review documents on-site and interview managers and employees). Generally, contractors and subcontractors are selected for these audits based on a statistical review of employment activity or representation of minorities and women in the workforce. Companies who indicate that they are federal contractors on their EEO-1 reports are subject to selection. In conducting audits, the OFCCP can review all phases of the employer’s employment practices to determine if the affirmative action requirements of each of the three laws have been met. If deficiencies are noted during an audit, the OFCCP will notify the employer and request corrective action. The employer may be asked to sign a conciliation agreement if a number of serious problems are discovered.

Investigation of complaints

The second method of enforcement by the OFCCP is through the investigation of complaints filed with the agency. Complaints may raise individual or class claims of a violation and must be filed within 300 days of the suspected violation. The OFCCP will notify the employer of the complaint and provide it with a summary. If the complaint involves a possible Title VII violation, such as discrimination on the basis of sex, race or national origin, the OFCCP may refer the complaint to the EEOC.

The OFCCP’s investigation will usually consist of a request for relevant documentation and a statement of the employer’s position on the complaint, along with interviews of all relevant witnesses. Once it has reviewed the evidence, the OFCCP will issue a written determination stating whether or not cause exists to believe the complaint is true.

When the determination is in favor of the employer, the complainant may request reconsideration of the decision by the OFCCP Director within 30 days, which, if granted, can result in a reopening of the case. Usually, some specific error must be shown by the individual to warrant this action. If the determination goes against the employer, the OFCCP will usually offer a settlement. If refused by the employer, enforcement proceedings may be initiated.

Recordkeeping requirements

Covered contractors must retain all personnel or employment records for at least two years from their date of making or the personal action involved, whichever is later. However, contractors with fewer than 150 employees or that do not have a contract of at least $150,000 must retain such records for only one year. For those contractors who were subject to the affirmative action requirements during the preceding year, they must retain copies of their plans for both the current year and the preceding year.

Covered employees must permit the OFCCP access to relevant books and records during normal business hours. The OFCCP may require the employer to maintain employment or other records and to furnish, within reasonable limits, other information for review and analysis. For employers subject to the written affirmative action plan requirements, additional recordkeeping burdens arise due to the OFCCP’s need to review the employer’s compliance. In order for officials to conduct reviews, records of workforce analyses for minorities and women must be maintained. The employer’s current EEO-1 report and records used in compiling that report should also be maintained for inspection, as well as information on the supply and identity of successful and unsuccessful applicants for employment, details on the number of individuals of each race and sex who were considered for promotion and who were selected and similar information relating to both voluntary and involuntary terminations. The personnel and employment records to be retained include:

  • requests for reasonable accommodation
  • results of any physical examinations
  • job advertisements and postings
  • applications and resumes
  • tests and test results
  • interview notes
  • records pertaining to hiring, promotion, demotion, transfer, layoff or termination
  • records pertaining to rates of pay or other forms of compensation
  • records regarding selection for training or apprenticeship.

Covered contractors and subcontractors must also retain records for at least one year that relate to complaints filed by veterans with disabilities and Vietnam veterans. Individuals may be advised to voluntarily identify themselves as individuals with disabilities for purposes of affirmative action programs. Collected medical information must be kept in files separate from other employee records. Failure to maintain complete and accurate records is a violation of the Act.

Processing a complaint

When the OFCCP determines that an employer is violating one of the affirmative action laws, it can recommend to the U.S. Solicitor of Labor that enforcement proceedings be initiated. These proceedings are usually administrative in nature. Violation of a conciliation agreement, refusal to adopt and implement an acceptable affirmative action plan, refusal to provide access to records and documentation or refusal to permit an on-site review, are types of violations that will be quickly handled. The OFCCP has put a priority on cases involving evidence of systemic discrimination that is generally based on statistical inferences.

After reviewing the evidence in an enforcement proceeding, the administrative law judge (ALJ) will issue a written opinion stating whether the employer has violated the law as charged. If the decision is against the employer, the judge will recommend appropriate penalties. The judge’s decision will become final unless appealed within 30 days. If an appeal is taken, the Secretary of Labor will review the record and issue a final order. When a violation is found the Secretary will order compliance and impose penalties. Failure to comply with the Secretary’s order will result in the suspension or termination of any existing federal contracts and may result in an official bar from federal contracts. The Secretary’s final order may be reviewed in federal court under the Administrative Procedure Act. The Court’s review will be limited to a consideration of whether the action taken by the Secretary was “arbitrary and capricious” or wrong under the law.

Penalties for noncompliance

The penalties for violations of the affirmative action laws can be severe. They include:

  • preventing the employer from acquiring federal contracts (known as debarment)
  • blacklisting in the Federal Register so that other employers cannot do business with the offending employer in connection with federal work
  • awards of back pay and reinstatement to victims of discrimination in employment
  • suspension or cancellation of existing federal contracts
  • recommendations for civil actions by the EEOC or Justice Department or for criminal actions by the Justice Department.

If an employer is debarred or blacklisted, it can bring itself into compliance with the affirmative action laws and petition the Secretary for reinstatement as an eligible contractor.

Dealing with the OFCCP

When confronted with an audit or complaint investigation by the OFCCP, employers should keep in mind several points, including the following.

  • The OFCCP usually focuses on instances of system-wide or class discrimination. Investigators will give particular attention to cases involving discrimination against a class of people. These cases most often are developed in the areas of applications, promotions, wages and terminations through statistical use of the employer’s activity logs and personnel records. Employers are well-advised to monitor statistical patterns on an ongoing basis. Immediate corrective action can then be taken before the OFCCP does an audit or investigation.
  • Before submitting information for an OFCCP desk audit or in response to an OFCCP complaint, employers should contact their labor/employment attorney to review the information. Data that does not conform to OFCCP specifications or that does not fairly meet the OFCCP’s request for information can lead to an immediate initiation of enforcement proceedings.
  • Prior to on-site interviews, persons likely to be interviewed should be fully prepared by an attorney regarding the probable areas of inquiry.
  • During the course of the OFCCP’s investigation or audit, the employer should maintain a detailed log, showing:
    • the nature of all information supplied to the OFCCP
    • the content of all conversations with OFCCP agents
    • the time spent on on-site visits and interviews by OFCCP investigators
    • the identity, by name and job title, of all persons interviewed by OFCCP investigators
    • the duration of all such interviews.
  • Employers should avoid the temptation to resolve minor deficiencies as soon as they are raised by the OFCCP. This “nickel-and-dime” approach often leaves employers without negotiating leverage once the OFCCP gets to major issues like goals or class matters. An employer should inform the OFCCP that all suspected deficiencies should be presented to the employer in writing at the conclusion of the investigation or review. This approach will leave the employer in the best possible bargaining position. The employer will also have the benefit of having observed the OFCCP’s entire review so that it can accurately determine what matters seem of most importance.
  • Employers should document their positions by letter to the OFCCP on all important issues and disputes that arise during the course of the investigation or audit. Decisions on whether to pursue enforcement proceedings are made by attorneys in the office of the Solicitor of Labor, who will review the entire investigative file and not by the OFCCP. Employers will want their versions of the facts to be clearly stated in such files and employers should not assume that the OFCCP is going to do that for them.
  • The OFCCP will often demand a binding conciliation agreement from an employer to resolve deficiencies identified during an audit. Any such agreement should contain a definite expiration date, preferably one to two years from the date it is made and should limit reporting to a semi-annual basis if at all possible.

Enforcement

The U.S. Department of Labor, Office of Federal Contract Compliance Programs (OFCCP) is the federal agency responsible for enforcing these affirmative action laws. The requirements for affirmative action plans are set forth in regulations issued by the OFCCP.

Where to go for more information

Learn more about affirmative action requirements from a labor/employment attorney or at the Department of Labor’s website: