A company is subject to the regulations issued by the OFCCP if it has 50 or more employees and a federal contract or sub-contract valued at $50,000 or more. These potentially costly violations can be avoided by reviewing policies and updating them accordingly.
What is Executive Order 11246?
Executive Order 11246 prohibits federal contractors and sub-contractors who do over $10,000 in Government business in one year from discriminating in employment decisions. The Executive Order also requires companies with 50 or more employees and that (1) have federal contracts or subcontracts of $50,000 or more; or (2) have Government bills of lading which total more than $50,000 for a 12-month period; or (3) serve as a depository of Government funds in any amount; or (4) is a financial institution that pays or issues U.S. savings bonds and savings notes, to develop a written affirmative action program.
A written affirmative action program is a "set of specific and result-oriented procedures to which a contractor commits itself to apply every good faith effort" so as to help the contractor identify and analyze potential problems regarding the hiring and utilization of women and minorities in the workplace. 41CFR § 60-2.10. The OFCCP has established numerous specific requirements for affirmative action programs that are beyond the scope of this article.
Significant Changes Regarding Record-Keeping and Document Retention
The regulations impose new rules regarding record-retention. The regulations provide that any personnel or employment record made by the contractor be retained for at least two years from the date the record was made, or from the personnel action involved, whichever is later. 41 CFR § 60-1.12(a). If a company has less than 150 employees or does not have a Government contract of at least $150,000, personnel and employment records need to be maintained for a minimum of one year. 41 CFR §60-1.12(a).
Such records include, but are not limited to, records pertaining to hiring, assignment, promotion, demotion, transfer, lay off or termination, rates of pay or other terms of compensation, employer selection for training or apprenticeship, and other records having to do with requests for reasonable accommodation. Results of any physical examinations, job advertisements and postings, applications and resumes, tests and test results, and interview notes are also included.
When an employee is involuntarily terminated, the regulations require that the contractor keep the terminated employee's personnel records for at least two years. If a contractor receives notice that a discrimination complaint has been filed, that a compliance review has been initiated, or that an enforcement action has been commenced, the contractor must maintain all personnel records relevant to the complaint, until final disposition of the complaint, compliance evaluation, or enforcement action. Personnel records relevant to the complaint include records for the specific complainants and records for all other similarly situated employees.
If a federal contractor is required to maintain an annual affirmative action program, the regulations now require contractors to preserve their affirmative action program for the preceding year, as well as the current year. 41 CFR § 60-1.12(b) Thus, this requires the contractor to keep two affirmative action programs, one for the current program and the other for the prior year.
Failure to Preserve Records
Failure to preserve complete and accurate records as required by the regulations constitutes "noncompliance" with the contractor's obligations and could result in severe penalties, including bak pay and contract termination. 41 CFR § 60-1.12(c) The regulations create a rebuttable presumption regarding document destruction. Where the contractor has destroyed or failed to preserve records, there may be a presumption that the documents not maintained would have been unfavorable to the contractor. This presumption may be overcome where the contractor shows that the destruction or failure to preserve the records results from circumstances beyond the contractor's control.
General Enforcement: Compliance Review and Complaint Procedure
The new regulations also modify the way the OFCCP enforces regulation compliance. The OFCCP conducts compliance evaluations to investigate the employment practices of Government contractors. 41 CFR §60-1.20. This can include a compliance review in which a compliance officer examines affirmative action programs, personnel, payroll, and employment records, interviews employees, and investigates all aspects of employment practices. It can also include an off-site review of records, a compliance check, or a more focused review of a particular employment practice. A compliance officer can conduct a compliance check at any time, without necessarily initiating a formal audit. Contractors should ensure that their policies and programs are updated and in compliance with the regulations at all times.
During a compliance review or spot check, contractors must permit the inspection and copying of books, accounts, and records, including computerized records, that are relevant to the matter under investigation or to insure compliance with the Executive Order. The regulations specifically permit the investigating officer to take information made available during an on-site, off-site for further analysis, and possibly make this information available in response to a Freedom of Information Act request. 41 CFR §§60-1.20(f), (g). This raises significant privacy concerns that this information may be disclosed to the public or to third parties. Hence, a contractor should examine all documents and computerized data provided during a compliance review and be certain that all information is returned following the close of the compliance review.
When a compliance review indicates a material violation of the regulations, OFCCP may enter into a conciliation agreement with the contractor. The agreement must provide for such remedial action as may be necessary to correct the noted violations, including remedies such as back pay, retroactive seniority, job offers, promotions, or other relief. It may also include new training programs, special recruitment efforts, or other affirmative action measures. 41 CFR §60-1.33.
OFCCP may also refer matters to the Solicitor of Labor with a recommendation for the institution of administrative enforcement proceedings, either when violations have not been corrected through the conciliation process or when the OFCCP believes that more formal enforcement is appropriate. Where a contractor refuses to supply information for an investigation or allow OFCCP access to its premises for an on-site review, the OFCCP may immediately seek enforcement proceedings.
If conciliation is not reached, sanctions may be imposed. Under the former regulations, the OFCCP could cancel, terminate, or suspend present contracts, withhold progress payments, and/or debar an employer from future government contracts until it complied with the regulation. The new regulations impose a minimum six-month period during which time a debarred contractor cannot apply for reinstatement. 41 CFR § 60.127(b).
Conclusion
The new regulations have potentially costly implications for federal contractors and sub-contractors that are not in compliance with the regulations. Because the OFCCP has jurisdiction over nearly 22% of the total civilian workforce, there is a possibility that the regulations apply to your company. It is becoming more difficult to ensure compliance with these regulations. In light of the aggressive stance of the OFCCP, employers should review and update employment practices and policies.