In early February 2018, the US Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) sent 1,000 letters to federal contractors and subcontractors informing them that they have been identified for a potential compliance evaluation by the agency. The OFCCP’s letter, referred to as Corporate Scheduling Announcement Letter (CSAL) is intended to provide a federal contractor advance notice that it may be selected to undergo a compliance evaluation to determine whether the contractor is in compliance with the non-discrimination, affirmative action program, record keeping, and other obligations of executive orders and laws which may apply to federal contractors and subcontractors. The compliance evaluation includes a comprehensive review of the contractor’s affirmative action plans, personnel activity, and compensation for potential compliance concerns.

The receipt of the CSAL has left many commercial companies, whose primary customers are not the federal government, wondering – “are we really a government contractor subject to contractor-specific affirmative action requirements?” The answer could be a surprising “yes.”

This is because companies selling goods or services to the federal government or to a prime contractor – including “commercial off the shelf items” and commercial items – may become a “covered” federal contractor or subcontractor based on a very low dollar threshold of sales. Many commercial companies already have in place programs that would meet – possibly with some changes – the basic requirements of the federal laws, identified below, which apply to contractors and require non-discrimination in employment practices on the basis of race, color, religion, sex, sexual orientation, gender identity, national origin, protected veteran status or disability.

The more stringent requirements and compliance risks, however, are imposed based on sales rising to a slightly higher dollar threshold to trigger the obligation to implement affirmative action plans – a requirement that could extend beyond the specific corporate entity performing the federal work to the entire corporate family under OFCCP’s “single entity” test. A company may be considered a covered federal contractor or subcontractor, triggering the additional mandatory compliance with affirmative action plan requirements, if that company has 50 or more employees and a single federal contract (or subcontract) exceeding a certain threshold. The dollar threshold requirements for specific Affirmative Action programs are set forth below:

  • Executive Order 11246: Non-construction (supply and service) contractors (and subcontractors) with a contract of at least $50,000 (or with government bills of lading which in any 12-month period total, or can reasonably be expected to total $50,000 or more) must implement Affirmative Action plans for females and minorities.1
  • Vietnam Era Veterans Readjustment Assistance Act (VEVRAA): A contractor that has a government contract of $150,000 or more must take affirmative action to employ and advance in employment qualified protected veterans.2
  • Section 503 of the Rehabilitation Act: A contractor with a single government contract of $50,000 or more must develop a Section 503 Affirmative Action Plan, which promotes the employment and advancement in employment of individuals with disabilities.3

So what if your company has not had a sale in excess of the minimum thresholds of $50,000 to $150,000? That is not the end of the inquiry. The contract value is not always determined by actual sales under a specific contract, but the “final anticipated dollar value of the [contract] action, including the dollar value of all options.”4 In the case of a contract for indefinite quantities, then the dollar value may be dependent on whether the contract “establishes a maximum quantity of supplies or services to be acquired or establishes a ceiling price or establishes the final price to be based on future events.”5 In the case of blanket purchase agreements – which may not be typically viewed as binding until an order is placed – OFCCP has previously taken the position that the contract value is measured by the value of what the parties might "reasonably anticipate" to be furnished under the BPA. Assessing whether or not a contract triggers the above requirements also depends on assessing the contract terms and whether there are any applicable exemptions or exceptions (which are limited).

Although the DOL may not have time to audit all of the companies receiving a CSAL in 2018, companies receiving one may wish to consider if they meet the thresholds to be a covered federal contractor or subcontractor and whether any exemption might apply and, if these requirements apply, evaluate the extent to which their affirmative action plans and underlying personnel and compensation data are ready for audit. The OFCCP indicated that it will begin mailing formal letters to schedule audits on March 19, 2018 (and, of course, OFCCP could schedule an audit with any “covered” contractor regardless of whether it received a CSAL).