Volume 38, Issue 6, June 2003


Federal Contracts
New Opportunities Bring Obligations

by David Barron

With America’s rebuilding and peacekeeping efforts continuing in Iraq, employers may find themselves with increased business opportunities. As is typical with the federal government, with these increased opportunities come added responsibilities. One of the main responsibilities that may come about is the need to comply with federal regulations governing affirmative action. Although in recent years there has been much publicity about the elimination of affirmative action at schools and universities, it is alive and well for federal contractors. 

Affirmative Action began in the 1960s as a result of Executive Order 11246, which was enacted by President Nixon. This executive order requires all federal government contractors to take certain steps not only to eliminate discrimination but also provide equal employment opportunity to all. Over the years, these requirements have evolved into numerous guidelines and regulations for federal contractors. Although these requirements are explained briefly below, the fundamental requirement for each federal contractor is to evaluate its employment decisions continually to ensure that both minorities and females are being provided equal employment opportunities. 

Who is Required to Comply with Affirmative Action Regulations?
According to Executive Order 11246, all federal contractors and subcontractors with government contracts exceeding $10,000 are prohibited from discriminating in employment decisions. Additionally, if a contractor or subcontractor has more than 50 employees and a federal contract or subcontract valued at more than $50,000, it must implement and maintain a written affirmative action program for all their establishments. These requirements apply to the organization as a whole, so if just one of a company’s divisions or facilities contracts with the government, then all of its locations are potentially subject to these requirements.

What are the Company’s Obligations?
All employers who are required to develop an affirmative action program must do so within 120 days after the start date of the government, and this program must be updated annually throughout the existence of the contract. Once the government contract has expired the contractor is no longer required to maintain an affirmative action program. 

In addition to creating and maintaining an affirmative action plan, a federal contractor must develop a record-retention program. All personnel and employment records made by the company must be kept for at least two years. Such records include those pertaining to hiring, assignment, promotion, demotion, transfer, termination, layoff, rates of pay, other terms of compensation, employees selected for training or apprenticeships and records dealing with requests for reasonable accommodations. 

The following is a list of factors a company should review when determining whether they are subject to affirmative action regulations: 

• Does the company have a contract with a federal agency for supplies or services?

• Does the company have a subcontract with a federal contractor for supplies or services that are necessary for the performance of a government contract?

• Does the value of the government contract exceed $10,000? If so, the company must take steps to avoid discriminatory practices. 

• Does the company have more than 50 employees and a government contract exceeding $50,000? If so, the company must implement and maintain a written affirmative action plan.

What Does an Affirmative Action Program Involve?
The goals of an affirmative action program are to make sure the company: 

• Recruits, hires, assigns, trains and compensates persons in all job categories based on job-related qualifications solely; 

• Bases employment decisions on the principle of equality in employment; 

• Ensures that promotion decisions are in agreement with principles of equal employment opportunity by imposing only valid requirements for promotion opportunities; and 

• Ensures that all personnel actions such as hires, terminations, compensation, benefits, transfers and layoffs will not be based on race, color, religion, sex, age, national origin, disability or military veteran status. 

To achieve these goals an employer must perform an extensive statistical analysis of its workforce annually. This workforce analysis is then compared to the availability of both minorities and females in the local community. Based upon this comparison, the company must establish goals related to hiring and other employment decisions for both minorities and females. The company must then take steps to meet the goals established in its affirmative action program.

Penalties for Non-Compliance
The Office of Contract Compliance Programs (OFCCP) is charged with the responsibility of ensuring that all federal contractors follow their affirmative action obligations. Periodically, the OFCCP will conduct audits of federal contractors to ensure they are in compliance with the law. If the OFCCP determines that a company has failed to implement an affirmative action program as required, or failed to satisfy the record-keeping requirements, then the OFFCP may impose sanctions. The sanctions may include cancellation, termination or suspension of federal contracts, the withholding of progress payments and a ban on future government contracts. The OFCCP may also seek back pay and other relief if it believes discrimination has occurred.

Taking the First Step
While this article provides a brief description of a federal contractor’s affirmative action obligations, the regulations are multifaceted and extremely detailed. If a company becomes a party to a federal contract, it must first determine whether it is obligated to create an affirmative action plan. Next, the company must determine its exact obligations and what steps it must take to ensure compliance with the law. For those employers choosing to create affirmative action plans in-house, there are several companies that provide training for human resources personnel and sell special software to aid in the process. Given the intricacies of affirmative action law, however, seeking and obtaining assistance from an employment lawyer or other affirmative action specialist may be the simplest and most cost-effective way to address these obligations. 

David Barron
is an attorney at Alaniz and Schraeder in Houston. He represents employers in employment-related matters.


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