By Brad Cave
Last week, the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) announced Final Rules that are intended to improve job opportunities for disabled workers and veterans. Whether the rules will accomplish that purpose is uncertain; what is clear is that the new rules greatly increase affirmative action requirements and burdens on federal contractors. Under the new regulations, federal contractors and subcontractors face significantly increased documentation, data collection, recordkeeping and hiring goals.
Key Provisions of New Disability and Veterans Regulations
On August 27, 2013, OFCCP released the content of its Final Rules that change the regulations implementing Section 503 of the Rehabilitation Act of 1973 and the Vietnam Era Veterans’ Readjustment Assistance Act as amended by the Jobs for Veterans Act of 2002 (VEVRAA). Section 503 of the Rehabilitation Act of 1973 prohibits discrimination in employment decisions against individuals with disabilities and requires federal contractors and subcontractors to take affirmative action to recruit, hire, promote and retain disabled workers. VEVRAA prohibits federal contractors and subcontractors from discriminating against protected veterans and requires affirmative action in employing these veterans. The key provisions of the Final Rules that change the regulations implementing these laws include:
- A 7% Utilization Goal for Qualified Individuals with a Disability. For the first time, contractors must strive to employ disabled workers at a level that reaches 7% of each job group. For contractors with 100 or fewer employees, the 7% goal applies to the contractor’s entire workforce, rather than each job group. OFCCP states that this is not a quota and failure to meet the disability utilization goal will not, by itself, constitute a violation of the regulation. However, OFCCP requires contractors to conduct an annual utilization analysis to find deficient areas and determine specific actions to rectify identified problems.
- Establishing Hiring Benchmarks for Veterans. Without setting a specific utilization goal for hiring veterans, OFCCP will require federal contractors to establish hiring benchmarks each year for protected veterans. Contractors may choose to use the national percentage of veterans in the civilian labor force, as updated annually by OFCCP (currently 8%), as a benchmark, or may establish their own benchmark using a combination of data from the Bureau of Labor Statistics, Veterans’ Employment and Training Service and the contractor’s unique hiring circumstances.
- Collect and Retain Comparison Data on Disabled and Veteran Applicants and Employees. Under the Final Rules, contractors must document quantitative comparisons of the number of disabled workers and veterans who applied for jobs and the number hired. The data must be compiled annually and retained by the contractor for three years in order to track trends and measure outreach efforts.
- Ask Applicants and Employees to Self-Identify as Individuals with a Disability and as a Veteran. The Final Rules mandate that employers invite applicants at both the pre-offer and post-offer stage to self-identify themselves as individuals with a disability and as veterans. The Final Rules further require that contractors invite their current employees to self-identify at least every five years. OFCCP offers sample self-identification language.
- Mandated Equal Opportunity Clause in Subcontracts. Under the Final Rules, contractors must include specific language to incorporate the equal opportunity clause into subcontracts so that subcontractors know their responsibilities as federal contractors.
- Provide OFCCP Access to Records. The Final Rules specify that contractors must allow OFCCP to review documents related to a focused review or compliance check either on-site or off-site, at OFCCP’s option. OFCCP can request that contractors reveal all formats in which they maintain records and then request the records in whatever format OFCCP chooses.
- Updates to Comply with the ADAAA. The Final Rule related to the disability regulations updates the regulations in light of the revised definition of “disability” and certain nondiscrimination provisions under the ADA Amendments Act of 2008 (ADAAA).
Federal contractors were critical of the many regulatory changes first proposed by the OFCCP in 2011. OFCCP received many comments in response to the proposed rules and made some modest improvements based on those comments. For example, the proposed rules sought to impose a five-year recordkeeping requirement. The Final Rules reduced that requirement to three years. The proposed disabilities rule sought to require contractors to review their physical and mental job qualifications on an annual basis while the Final Rule allows contractors to establish their own schedule for reviewing job qualifications. Despite these and other small revisions from the proposed to the final regulations, the Final Rules add significant burdens on contractors who must revamp their employment policies and documentation practices to comply with the new regulations.
So, Are You Sure You’re Not Disabled?
The new hiring quota for disabled individuals places employers in a very awkward position. For the first time, employers are required to ask and need to know whether applicants and employees consider themselves to be disabled. Under these rules, employers are expected to meet the 7% “goal” by workgroup. But some employees who meet the definition of disabled will not consider themselves to be disabled or be reluctant to disclose their status to their employer. The OFCCP recognized that a study has shown that only about 50% of those with disabilities are likely to self-identify. The OFCCP is not concerned about this high degree of inaccuracy. According to its preamble to the new rules, even inaccurate data which greatly underreports the number of disabled applicants and employees will still assist the contractor and the OFCCP to evaluate the contractor’s hiring and selection process! Stated differently, the OFCCP does not care if the data is faulty by as much as 50% as long as it has some data on which to base its enforcement decisions.
The OFCCP also suggested that employers should designate individuals as disabled, even if they decline to self-identify, where the disability is obvious or the employer knows about the disability. Of course, for years we have cautioned employers to never label an employee as disabled to avoid “regarded as” claims under the ADA. Now, employers who are federal contractors will have an incentive to identify employees as disabled to meet the goal, and have the OFCCP’s permission to do so. In an interesting twist, the OFCCP’s permission for employers to designate employees as disabled was explained in the preamble to the new rule, not in the new regulations. Since the preamble does not have the force and effect of law, the OFCCP’s permission is not likely to have much value as a defense to an employee’s allegation that the employer regarded them as disabled when the employer designates the employee for purposes of complying with this rule. While federal contractors may have little choice if a disabled employee declines to self-identify, it will continue to be very important for employers to keep all such designations strictly confidential and out of the hands of supervisors and managers.
Effective Date of the Disability and Veterans Affirmative Action Final Rules
The Final Rules become effective 180 days after they are officially published in the Federal Register which is expected to occur in the next two weeks. Consequently, contractors have about six months to get policies and procedures in place to comply with the new regulations. Contractors subject to written affirmative action plan requirements are allowed to continue with the plan they have in place on the effective date of the Final Rules. However, the next cycle of their affirmative action plan must be drafted to comply with the new regulations.
OFCCP will be hosting webinars on the new regulations. Information about the webinars and the Final Rules may be found on the OFCCP website: http://www.dol.gov/ofccp/.
Disclaimer:This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.