Depending on the nature of your business (and your vacation plans), the summer may be a time when you are able to take a breather from many of the activities that are often concentrated at the end and beginning of the year. If you are in the enviable position to take a step back to review your general compliance efforts, do not forget an affirmative action compliance check-up. Many companies overlook affirmative action, either because they do not know it applies to them or because they believe it is something for which they create a plan once a year and then put on a shelf. Before you are surprised by either the federal government or one of your customers asking to conduct an audit or to certify your compliance, revisit your need to engage in affirmative action and, if you do, whether you are in compliance with the myriad of statutes, executive orders and regulations that apply. Particularly with the recent changes and additional regulation in the area of affirmative action—including proposed regulations that may require you to report certain "violations" of employment-related laws when bidding or working on certain government contracts or subcontracts—there has never been a better time to make sure your affirmative action house is in order.

One question I often get when talking with companies about affirmative action is, "what is the risk if we are not in full compliance?" In 2014, President Obama issued an Executive Order that changed my answer to this question somewhat.  The Executive Order requires, among other things, the reporting of violations of certain employment-related laws when seeking a federal contract or subcontract valued at more than $500,000 and every six months during the performance of the contract. These reports will be used in making the decision to award a contract, or to continue or discontinue a contract. The reporting requirements will not take effect until the Department of Labor issues regulations or guidelines to implement the Executive Order. On May 28, 2015, the Department of Labor brought this requirement closer to being a reality by publishing proposed guidelines. According to the proposed guidelines, the types of violations that must be reported include some situations that companies (and their lawyers) may not consider to be determinations that the company actually violated the law, such as determinations made by federal agencies prior to any hearing or a determination by an administrative law judge or court, and federal agency determinations that a company can challenge or appeal. Such determinations include show cause notices issued by the Office of Federal Contractor Compliance Programs, the agency that audits and evaluates affirmative action compliance.

These proposed guidelines, although not yet final or effective, add to the need to take inventory of your affirmative action compliance program to avoid a potential violation finding that will have to be reported. Not sure if you need to have such a program? You are not alone.  We work with many companies who have been surprised to learn that they met the definition of a "federal contractor" required to have an affirmative action program. Your company is a federal contactor that must maintain some form of a written affirmative action program if:  

  1. You have a contract with the federal government or a federal agency to provide goods or services and/or you have a contract to provide goods or services to a federal contractor and those goods or services are necessary for the federal contractor to complete its federal contract.[1] Note that the definition of a contract includes purchase orders, formal, written contracts and oral agreements. No formal document that uses the term "contract" or "agreement" is required. If you are currently supplying or have agreed to supply goods or services to the federal government or agency, you are a federal contractor. If you are currently supplying or have agreed to supply goods or services to a federal contractor that are necessary for a federal contract, you are a federal subcontractor. And, in addition:
    • At least one of the contracts described in 1 or 2 is valued at $50,000 or more (note that if all your contracts described in 1 or 2 are worth $10,000 combined, your company is still a federal contractor under some laws, but you do not need a detailed written affirmative action program); and
    • You have 50 or more employees. 
  2. You are a financial institution that serves as a depository of federal funds or that is authorized to issue federal savings bonds or savings notes. 

Before you conclude that your company does not meet these criteria, make sure you talk to your sales and/or contracts team—you may be surprised by how many times I talk to executives or human resources professionals who did not know such contracts exist. Look for terms in documents, such as "affirmative action" or "equal employment opportunity clauses," or citations to "41 C.F.R. § 60-____," "Executive Order 11246," "Section 503" or the "Vietnam Era Veterans Readjustment Act." If you are not sure, seek advice on whether your contracts are federal contracts or subcontracts.  

If you conclude that your company does meet these criteria—or already knew your company did—then seriously consider a compliance check-up. Here is a list of questions you may want to use as a start. If your responses to any of these questions are "No," "I do not know," "I am not sure," or "What do you mean?", a compliance check-up is needed.

  • Unless you are a construction contractor or otherwise meet an exemption, do you have a written affirmative action plan for minorities and females, with the accompanying analyses, that covers the current year (whether it be a calendar year, a fiscal year or any other 12 month period chosen)?
  • Are your positions grouped together in that plan in a way that allows for an accurate analysis of both your workforce demographics compared to availability and your compensation practices?
  • Do you have a current written affirmative action plan for individuals with disabilities and (if you have a federal contract valued at $100,000 or more) protected veterans?
  • Do you know and understand what your company has committed to in its plans and is your company meeting those commitments?
  • Have you updated your EEO policy, wherever it is published, since March 24, 2014? 
  • Do you have evidence that you have conducted an "audit" of your compliance efforts and determined whether changes may be helpful or needed?
  • Do you have accurate and up-to-date logs of your personnel changes, such as hiring/applicants, promotions and terminations?
  • Have you done a periodic (at least annual) disparity analysis using those logs?
  • Are your self-identification forms up-to-date for pre-offer, post-offer and current employee invitations to self-identify? (If you did not change them since March 2014, the answer to this question is automatically "no.")
  • Do you have or are you working on putting together documentation of your periodic review of the mental and physical requirements of your positions?
  • Do you have or are you working on putting together documentation of your periodic review of all your personnel processes?
  • Are you keeping track of the disabled and (if you have a federal contract valued at $100,000 or more) protected veteran status of your applicants and employees?
  • Have you prepared or are you working toward preparing the required data collections related to job openings, positions filled, and the disabled and (if you have a federal contract valued at $100,000 or more) protected veteran status of those who applied and were hired? 
  • Have you updated the Equal Employment Opportunity Clause language in your purchase orders and subcontracts since March 24, 2014?
  • Are you conducting and documenting the necessary outreach to recruitment sources for minorities, females, individuals with disabilities and (if you have a federal contract valued at $100,000 or more) protected veterans?
  • If you have a federal contract valued at $100,000 or more, are you sending out annual letters to the appropriate state employment practices agencies and listing all openings (with few exceptions provided by the regulations) with those agencies?
  • Do you know if you are required to pay and are you paying at least $10.10 per hour for hourly positions ($4.90 for tipped positions) working on any covered federal contract entered into, renewed or modified after Jan. 1, 2015?
  • If you take applications electronically, is a link to the "EEO is the Law" poster on the site where applications are accepted/stored?
  • If you have a federal contract valued at $500,000 or more and a portion of the work is performed oversees, do you have a compliant human trafficking policy/training program?

This list does not represent every step a federal contractor must take to be in compliance with its affirmative action requirements, but it addresses many of the items that are part of a current and compliant program. As you can see from this list, there is more to a compliant affirmative action program than preparing a plan annually and placing it on the shelf. The program must be ongoing and must adapt to information gathered as part of the logging, reporting and analyses. 

Even the most conscientious company can miss some of the required steps in a fully-compliant affirmative action program. Just as preventative check-ups with a doctor can avoid future medical costs, a preventative affirmative action compliance check-up can help you identify and address areas of improvement before they are discovered by the federal government or your customers, resulting in potential monetary and reputational costs for your company.