Introduction

On August 27, 2013, the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) published two final rules (Final Rules) revising the regulations that impose affirmative action obligations on federal contractors with respect to disabled individuals and military veterans. The Final Rules will be published in the Federal Register shortly and are effective 180 days after their publication. These Final Rules modify the regulations implementing Section 503 of the Rehabilitation Act of 1973 (Section 503) and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) and represent a significant change from current compliance obligations for federal contractors under Section 503 and VEVRAA. According to the Department of Labor’s press release announcing the Final Rules:

The Section 503 rule introduces a hiring goal for federal contractors and subcontractors that 7 percent of each job group in their workforce be qualified individuals with disabilities. The rule also details specific actions contractors must take in the areas of recruitment, training, record keeping and policy dissemination — similar to those that have long been required to promote workplace equality for women and minorities.

The VEVRAA rule provides contractors with a quantifiable metric to measure their success in recruiting and employing veterans by requiring contractors to annually adopt a benchmark either based on the national percentage of veterans in the workforce (currently 8 percent), or their own benchmark based on the best available data. The rule strengthens accountability and record-keeping requirements, enabling contractors to assess the effectiveness of their recruitment efforts. It also clarifies job listing and subcontract requirements to facilitate compliance.

Highlights of the Final Rules. Both rules establish hiring goals for qualified individuals, with the 503 Rule requiring contractors to establish a 7% utilization goal for disabled workers and the VEVRAA Rule requiring contractors to establish annual hiring benchmarks for protected veterans. Both require that a contractor document and update annually several quantitative comparisons for the number of qualified individuals who apply for jobs and the number of individuals with disabilities whom the contractor hires; maintain such data for three years to

be used to spot trends; and expand OFCCP’s access to these, and other, documents during compliance checks or focused reviews. Both Final Rules also require that contractors invite applicants to self-identify as individuals with disabilities or as veterans during both the pre-offer and post-offer phases of the application process. And both Final Rules require that specific language be used in subcontracts to alert subcontractors to these new responsibilities.

The Section 503 Final Rule.  Section 503 has long prohibited discrimination by federal contractors and subcontractors against individuals on the basis of disability and required affirmative action on behalf of qualified individuals with disabilities. The regulations implementing Section 503’s affirmative action obligations, however, generally have been far less demanding than the regulations governing compliance with Executive Order 11246, which imposes affirmative action obligations with respect to race and gender. The new Final Rule closed that gap in some respects, imposing a number of affirmative action obligations with respect to hiring individuals with disabilities:

  • „ Section 60-741.45 of the Final Rule establishes a nationwide 7% utilization goal for qualified individuals with disabilities. This goal will be applied to each contractor’s job groups unless the contractor has 100 or fewer employees, in which case the goal will be applied to the contractor’s entire workforce. OFCCP has made clear that this goal is an aspirational tool and does not constitute a quota (or a ceiling), stating in the Section 503 Final Rule Summary and Preamble that “[f]ailing to meet the disability utilization goal, alone, is not a violation of the regulation and it will not lead to a fine, penalty, or sanction.” That said, contractors who fail to meet the 7% goal may be subject to extra scrutiny during audits and compliance proceedings.
  • „ The Final Rule requires that contractors invite job applicants to “self-identify” as individuals with disabilities protected under Section 503. While the existing regulations require contractors to invite applicants to self-identify after they have received an offer, Section 60-741.42 now requires contractors to do so at the pre-offer stage. It also requires contractors to invite incumbent employees to self-identify at least once every five years using prescribed language, which OFCCP anticipates posting on its website. OFCCP also anticipates issuing a letter from the Equal Employment Opportunity Commission’s Office of Legal Counsel affirming OFCCP’s belief that these pre-offer invitations to self-identify violates the American with Disabilities Act (ADA), which was a concern raised by the contractor community during the Notices of Proposed Rulemaking issued on April 26, 2011, and December 9, 2011.
  • „ The Final Rule expands documentation requirements, requires that contractors provide OFCCP with access to documents for compliance and focused reviews, and permits OFCCP to extend the time for compliance evaluations. Section 60-741.45 requires that contractors document their annual assessment of efforts to achieve the 7% utilization goal in each job group, their annual evaluation of the effectiveness of their disability outreach efforts, and their implementation of internal audit and reporting systems to measure the effectiveness of their affirmative action programs. All of these documents must be retained for at least three years. The Final Rule also requires that contractors permit OFCCP access to these, and other, documents during compliance checks or focused reviews. In addition, Section 60-741.60 permits OFCCP to “extend the temporal scope of … desk audit[s] beyond that set forth in the scheduling letter if OFCCP deems it necessary to carry out its investigation of potential violations of this part.”
  • „ Section 60-741.2 of the Final Rule revises the definition of “disability” and other nondiscrimination provisions of Section 503 to comport with the standards set forth in the Americans with Disabilities Act Amendments Act of 2008 (ADAAA), and in so doing expands the definition of terms such as “major life activities,” “major bodily functions,” and identifies who is “regarded as” having a disability, and thus broadens Section 503’s protection.
  • „ The Final Rule mandates that prime contractors include in all subcontracts language that provides notice to their subcontractors of their affirmative action obligations as federal contractors.

The VEVRAA Final Rule. This statute requires federal contractors to engage in affirmative action efforts to hire and promote protected veterans, including disabled veterans, and makes it illegal to discriminate against protected veterans when making employment decisions. As with the Section 503 Final Rule, the new VEVRAA Rule imposes new affirmative action obligations on federal contractors.

  • „ Section 60-300.45 of the Final Rule requires that contractors establish annual hiring benchmarks for protected veterans. Contractors may establish a benchmark using one of two methods. They may use the national percentage of veterans in the civilian labor force. Currently 8%, this figure is published annually by the OFCCP. Alternatively, they may establish a benchmark based on data from the Bureau of Labor Statistics and Veterans’ Employment and Training Service/Employment and Training Administration tailored to their unique circumstances. The purpose of the benchmark is to establish a metric against which contractors (and OFCCP) can track progress. Failure to meet the benchmark will not by itself be a violation of the Rule.
  • „ As with the Section 503 Final Rule, the VEVRAA Final Rule expands documentation requirements, requires that contractors provide OFCCP with access to documents for compliance and focused reviews, and permits OFCCP to extend the time for these reviews. Contractors are required to document the hiring benchmarks that they establish each year, conduct an annual evaluation of the effectiveness of their outreach efforts, and document their implementation of an internal audit and reporting system to measure the effectiveness of their affirmative action programs. All of these documents must be retained for at least three years. As with Section 503, Sections 60-300.60(a)(3) and (a)(4) require contractors to permit OFCCP to access the documents pursuant to a compliance check or focused review. And, as with the Section 503 Final Rule, the VEVRAA Final Rule allows the OFCCP to extend the time needed for such reviews if it deems it necessary.
  • The VEVRAA Final Rule requires contractors to publish their job listings with the appropriate state employment service agency to make the job listings available to job seekers who are veterans. In particular, Section 60-300.5 requires contractors to provide job vacancy information to local employment service delivery systems (ESDS), or privately run services or exchanges in a format “which will allow that system to provide priority referral of veterans protected by VEVRAA for that job vacancy.”
  • „ The VEVRAA Final Rule requires that contractors invite applicants for employment to self-identify, both pre-offer and post-offer, as veterans protected under VEVRAA, and establishes additional “invitation to self-identify” requirements, including requiring self-identification at the time of hire and every five years. Section 60-300.42 requires contractors to invite applicants for employment to self-identify as protected veterans at both the pre-offer and post-offer stage of the hiring process. It does not, however, require that contractors affirmatively ask disabled veterans whether they require an accommodation. Instead, the Final Rule suggests that the contractor ask if a disabled veteran applicant requires an accommodation to perform the job for which they are applying, which is all that VEVRAA currently requires.
  • „ Revised Subcontract Clause Requirement: The Final Rule requires that prime contractors include clauses in their subcontracts to provide notice to their subcontractors of their affirmative action obligations as federal contractors. Notably, the Final Rule rescinds 41 CFR Part 60-250, which made VEVRAA applicable to all federal contracts and subcontracts of US$25,000 or more entered into before December 1, 2003. Under Part 60-300 of the Final Rule, VEVRAA requirements now apply to all federal contracts and subcontracts of US$100,000 or more.

Impact on Contractors. The Final Rules are expected to be published in the Federal Register soon and will become effective 180 days following publication. While contractors are not required to amend affirmative action plans that are in place on the effective date of the Final Rules, contractors must ensure that plans prepared or modified after the effective date comply with the Final Rules. Accordingly, contractors should be prepared to, among other things, develop and implement policies, procedures, and processes for (1) generating and retaining the documents and data required by the regulations; (2) meeting the percentage goals adopted by the new regulations, including developing plans and programs for recruiting, training, retraining, and promoting applicants and employees with qualifying disabilities and qualified veterans; (3) soliciting and collecting “self-identification” information from applicants and employees; and (4) providing job vacancy information to local ESDS or privately run services or exchanges.