After more than two years of anticipation, the Office of Federal Contract Compliance Programs released its Final Rules updating the regulations implementing Section 503 of the Rehabilitation Act and Section 4212 of the Vietnam Era Veterans' Readjustment Assistance Act.

Effective 180 days after publication in the Federal Register (which as of this writing has not yet occurred), these regulations will fundamentally change federal contractors' Affirmative Action Plans, recordkeeping obligations, and overall regulatory compliance. Although not a comprehensive digest of the new regulations, we have outlined most of the significant changes below.

Section 503 Final Regulations

Section 503 requires federal contractors to take affirmative action to employ individuals with disabilities. The OFCCP has revised its regulations due to the perceived underrepresentation of individuals with disabilities in the workforce. The revised regulations are aimed at increasing recruitment and utilization of individuals with disabilities.

Creation of a National Utilization Goal of 7% for All Contractors. One of the most significant changes in the regulations is the creation of an "aspirational" utilization goal of 7% for all contractors. Contractors are now required to analyze their utilization of individuals with disabilities in the workforce, with the goal for all contractors set at 7%. To measure its success in employing individuals with disabilities, contractors must calculate the percentage of disabled individuals employed in each job group and compare this figure to the 7% utilization goal. A contractor must use the same job groups as already established for its Executive Order 11426 affirmative action program (AAP). If the contractor has a total workforce of 100 or fewer employees, the contractor does not have to analyze the utilization by job group and instead can apply the goal to its workforce as a whole.

The 7% goal is not a quota. However, if a contractor does not reach its 7% goal for any job group (or its entire workforce if a small employer), the contractor must make an assessment of whether and where impediments to equal employment exist. To determine whether such impediments exist, the contractor should assess the following: its personnel policies, the effectiveness of its outreach and recruitment efforts, the results of its affirmative action program audit and any other areas that might affect the success of the affirmative action program. For any problem areas identified, the contractor must develop and execute action-oriented programs to correct those areas.

Self-identification. The regulations require contractors to invite all applicants to voluntarily self-identify during the application process. This process is similar to the current obligation to gather information regarding race, ethnicity and gender. In this instance, however, contractors must use a form prescribed by the OFCCP, which has yet to be published. If an applicant opts not to self-identify, the regulations allow the contractor to make its own visual identification based on either clearly observed disabilities (i.e., an applicant who is blind) or disclosure by the applicant during the application process (i.e., when an applicant requests an accommodation during the hiring process). Many contractors have expressed concern about such a procedure in light of the prohibition on seeking information about disabilities during the applicant process under the Americans With Disabilities Act, as amended. The OFCCP addressed this concern by providing an opinion letter from the EEOC and requiring contractors to maintain the self-identification forms separate from other application records and personnel documents.

LINK to letter

In addition to the pre-hire stage, contractors must invite employees to voluntarily self-identify at the following times: (1) post-offer and prior to first day of work; (2) during the first plan year following the implementation of the regulations; and (3) every five years. During the interim years and on an annual basis, contractors must remind all employees that they can voluntarily update their disability status at any time.

Review of Job Qualifications & Personnel Policies. The final regulations declined to adopt the proposal that contractors be required to conduct a review of physical and mental job qualifications on an annual basis. Instead, the final regulations continue to require contractors to review this information "periodically".

The final regulations also declined to adopt a mandatory annual review of personnel policies. However, the final regulations do require a periodic review which must include: (1) ensuring that the contractor's personnel policies are careful, thorough, and systematic; (2) ensuring that these processes do not stereotype individuals with disabilities; and (3) designing procedures that facilitate a review of the implementation of these requirements.

Outreach & Recruitment. The final regulations continue to require that contractors take "appropriate outreach and positive recruitment activities". Contractors are not required to list all openings with the nearest One-Stop Career Center or to establish "linkage agreement" as originally proposed. In determining the best methods for outreach and recruitment, the regulations list several possibilities, including One-Stop Career Centers and American Job Centers, state mental health agencies and private recruitment sources. Importantly, the final regulations do not adopt the proposal that contractors collect, maintain and analyze information on the number of referrals it receives.

Self-Audits. Contractors have long been required to design and implement an audit and reporting system to measure the effectiveness of their affirmative action programs. The final regulations require contractors take several specific steps as part of this process: measure the effectiveness of its affirmative action program; indicate any need for remedial action; determine the degree to which the contractor's objectives have been attained; determine whether individuals with disabilities have had the opportunity to participate in all company professional and social activities; and measure the contractor's compliance with the affirmative action program's specific obligations. The contractor is required to documents the actions it takes to comply with the self-audit requirements and maintain these records for three years.

Reasonable Accommodation Procedures. The proposed regulations contained a requirement that contractors develop and implement written procedures for processing requests for reasonable accommodations. This was not included in the final regulations. Instead, the OFCCP notes that the use of reasonable accommodation procedures is a best practice "that may assist contractors in meeting their reasonable accommodation obligations." The final regulations contain a guide for developing reasonable accommodation procedures as Appendix B.

VEVRAA Final Regulations

VEVRAA requires federal contractors to take affirmative action to employ certain categories of veterans. The changes in the regulations are designed to "provide contractors with the tools needed to evaluate their own compliance and proactively identify and correct any deficiencies in their employment practices."

Annual Hiring Benchmarks (Up to 8% Per Establishment). One of the most significant changes in the regulations is the requirement that contractors adopt an annual benchmark for the hiring of protected veterans. Previously, contractors have only performed analytical measurements for females and minorities under Executive Order 11246. Contractors should note, however, this is a "hiring" benchmark, and not an "employment" benchmark. Meaning that, every year, OFCCP expects that a certain percentage of hires at each establishment to be protected veterans, as opposed to simply measuring the representation of protected veterans in the workforce as compared to the possible availability of protected veterans and then setting a goal only when necessary.

Contractors will have the option of using the national percentage of veterans in the civilian labor force, as updated annually, or developing their own measurement for effective recruitment and hiring of veterans. The current predetermined benchmark is 8%. To develop a customized benchmark, contractors must consider: (1) the average percentage of veterans in the civilian labor force in the states where the contractor is located over the preceding three years (to be published on OFCCP's website); (2) the number of veterans, over the previous four quarters, who were participants in the employment service delivery system in the state where the contractor is located (to be published on OFCCP's website); (3) the applicant ratio and hiring ratio for the previous year; (4) the contractor's assessments of the effectiveness of its external outreach and recruitment efforts; and (5) any other factors, including but not limited to, the nature of the contractor's job openings and/or location. The benchmark is applied on an establishment basis; it is not a quota, and compliance will be measured by documentation and maintenance of the required metrics.

Outreach & Recruitment. The regulations continue to require that contractors list all job openings with the state employment service delivery system (SEDS) and clearly specify that such postings must be made "in a manner and format permitted by the appropriate [SEDS]." Instead of requiring contractors to establish linkage agreements other specific resources for veteran referrals as initially proposed, however, the new regulations allow contractors to continue to make an individualized assessment regarding appropriate outreach. If a contractor determines that its outreach efforts were not effective, then it must implement additional efforts to fulfill its obligations, including suggested outreach efforts listed in the regulations.

Self-identification. OFCCP's final regulations require contractors to ask applicants to self-identify as a protected veteran. Applicants should not be asked to identify the specific category of protected veteran to which they belong; rather, they should only be indicating generally if they meet the criteria for one or more of the categories of protected veterans. Contractors may collect this information at the same time they solicit ethnicity, race, and gender information pursuant to EO 11246. Self-identification continues to be required for all employees, and employees must be provided the opportunity to identify the specific category of protected veteran for which they qualify. OFCCP has provided a sample form for these purposes.

Policies & Procedures. Contractors are still required to have an Affirmative Action policy statement, and OFCCP has added that it must indicate the top U.S. executive's support for the program. The OFCCP did not adopt its proposal that contractors conduct an annual review of its personnel processes. Instead, contractors must continue to "periodically" assess its personnel processes.

Other Miscellaneous Changes. Section 60-250 of the regulations is rescinded entirely. This section only covered contractors with contracts entered into prior to December 1, 2003. OFCCP determined that it was unlikely that any such contracts still exist and that these regulations were no longer necessary. However, to ensure that the veterans covered by those regulations are still protected, OFCCP added "JVA-protected veterans" to the category of veterans protected against non-discrimination.

Finally, OFCCP has eliminated the phrase "other protected veterans" and changed it to "active duty wartime or campaign badge veteran." Now, there are the following labels for the categories of protected veterans: (1) disabled veteran; (2) recently separated veteran; (3) active duty wartime or campaign badge veteran; and (4) Armed Forces service medal veteran.

Common Requirements for both Section 503 and VEVRAA

Quantitative Measures & Comparison. In addition to the annual hiring benchmarks, OFCCP requires contractors to maintain several sets of data to allow for "quantitative measurements and comparisons" to "determine the effectiveness of contractors' outreach and recruitment efforts." Contractors must perform this "data collection analysis" for both protected veterans and individuals with disabilities on an annual basis and maintain it for three years. For each protected group, the contractor must collect and analyze: (1) the number of applicants who are in the protected group; (2) the total number of job openings and total number of jobs filled; (3) the total number of applicants for all jobs; (4) the number of applicants in the protected group hired; and (5) the total number of applicants hired. OFCCP eliminated the proposed requirement that data on referrals also be collected and analyzed. Although these figures do not have to be provided to employees and applicants requesting to see the contractor's AAP, there is no such exemption for the annual benchmark or utilization analysis.

Also to be conducted annually is an assessment of contractors' outreach and recruitment efforts. Contractors must include the figures from the data collection analysis as part of this review. The regulations mandate that contractors document this evaluation, "including at a minimum the criteria it used to evaluate the effectiveness of each effort and the contractor's conclusion as to whether each effort was effective. . . . The contractor's conclusion as to the effectiveness of its outreach efforts must be reasonable as determined by OFCCP is light of these regulations."

Notices. Contractors must continue to post notices advising applicants and employees of their rights and contractors' obligations. The notice must be provided in an accessible format to applicants and employees who are disabled. For those employees who work offsite, "a contractor will satisfy its posting obligations by posting such notices in an electronic format, provided that the contractor provides computers that can access the electronic posting to such employees, or the contractor has actual knowledge that such employees otherwise are able to access the electronically posted notices." For contractors who use an electronic applicant process, they must notify their applicants electronically and store that notice conspicuously with, or as part of, the electronic application. Additionally, a contractor may have to provide a notice electronically as a form of reasonable accommodation for a disabled employee, even if the employee works at the contractor's physical location.

In addition to notifying employees, contractors must send written notification of company policy related to their affirmative action and non-discrimination efforts to all subcontractors, including subcontracting vendors and suppliers, requesting appropriate action on their part.

Recordkeeping. OFCCP heeded the uproar from the contractor community in response to its proposal to mandate a five-year recordkeeping period in some instances. The new regulations maintain the general two-year requirement, but carve out specific types of records that must be maintained for three years: (1) documents related to the assessment of external outreach and recruitment efforts; (2) the data collection analysis; and (3) annual hiring benchmarks and utilization analyses, and for protected veterans, the criteria used in setting the benchmark if the predetermined percentage is not used.

Required Language for Subcontracts. Contractors are not required to include the EEO clause verbatim in covered subcontracts as originally proposed. Instead, OFCCP has crafted specific language that must be used "to alert subcontractors to their responsibilities." Under VEVRRA, the contract must cite 41 C.F.R. § 60-300.5(a) and include in bold text:

This contractor and subcontractor shall abide by the requirements of 41 CFR 60-300.5(a). This regulation prohibits discrimination against qualified protected veterans and requires affirmative action by covered prime contractors and subcontractors to employ and advance in employment qualified protected veterans.

Under Section 503, the contract must cite 41 C.F.R. § 60-741.5(a) and include in bold text:

This contractor and subcontractor shall abide by the requirements of 41 CFR 60-741.5(a). This regulation prohibits discrimination against qualified individuals on the basis of disability, and requires affirmative action by covered prime contractors and subcontractors to employ and advance in employment qualified individuals with disabilities.

Note that this new language is required in all contracts and subcontractors entered into after the effective date of the regulations.

OFCCP Updates Federal Contractor Compliance Manual

In other, slightly less dramatic news, the OFCCP published a major update to the Federal Contract Compliance Manual. This Manual is a guide for Compliance Officers in conducting compliance evaluations and "does not establish substantive agency policy." It can be a useful resource for contractors in helping to prepare for and defend AAPs during such reviews. At 536 pages, it should make for fun reading!