Confused or Overwhelmed About the New Obligations and Regulatory Activity Related to Federal Contractors? You Aren’t Alone.

The Office of Federal Contacts Compliance Programs (OFCCP) has been very busy changing the rules for federal contractors and subcontractors. There are 8 new developments from the second half of 2014 that all covered contractors should be aware of:

1. New scheduling letter released requiring submission of data regarding veterans, disabled persons, compensation, and other items not previously required.
2. New form for annual submissions about veterans to be used beginning in 2015 (replaces VETS-100A and VETS-100).
3. Proposed rule to prohibit federal contractors from discharging or discriminating against employees and job applicants for discussing, disclosing, or inquiring about compensation of themselves or others.
4. Proposed rule on the Fair Pay and Safe Workplaces Executive Order addressing 3 issues: (A) companies bidding for contracts in excess of $500,000 must disclose labor law violations in the past 3 years, which may be used against them during the bidding process; (B) companies with a federal contract in excess of $500,000 must make certain disclosures on employee pay stubs regarding hours and pay; and (C) restrictions on the use of pre-dispute arbitration agreements for contractors with a contract of more than $1 million.
5. Proposed rule to require an annual Equal Pay Report, with summary compensation data, be submitted by federal contractors with more than 100 employees.
6. Executive Order 13672 and Directive 2014-02 prohibiting discrimination against sexual orientation and gender identity for federal contractors subject to Executive Order 11246.
7. Proposed rule on federal contractor minimum wage—$10.10 per hour—for all federal contractor employees, beginning with contracts resulting from solicitations for contracts issued after January 1, 2015. A final rule is due to be published on October 7, 2014.
8. The benchmark for veterans hiring, required by amended VEVRAA rules, has been lowered from the initial proposal of 8% to 7.2%

1.     New desk audit scheduling letter
On October 2, 2014, the OFCCP issued a new scheduling letter to be used in desk audits beginning October 15, 2014. The new scheduling letter requires individual compensation data as of the date of the workforce analysis in the AAP (rather than aggregate, annualized compensation data). That compensation data must include columns for hours worked, incentive pay, merit increases, locality pay, and overtime. Second, contractors can no longer identify applicants and employees by “minority” and “non-minority” but must provide specific race or ethnicity information. Data must be provided electronically if it is maintained electronically. In addition, OFCCP will require submission of accommodation policies, assessment of personnel processes, and an assessment of physical and mental qualifications. The new scheduling letter also requires new data on veterans (benchmark information and documentation of required audits) and disabled individuals (utilization analysis and documentation of required audits).

2.     VETS-100A and VETS-100 replaced by VETS-4212 in 2015
On September 25, 2014, OFCCP announced that the VETS-100A and VETS-100 will be replaced in 2015 by a VETS-4212 Form. The requirement to report on categories of veterans will end, and contractors will only be required to report on aggregate numbers of “protected veterans” by EEO category.

3.     E.O. 13665 – Prohibiting discrimination for discussing compensation
On September 17, 2014, OFCCP issued a proposed rule implementing Executive Order 13665 prohibiting federal contractors from discharging or discriminating against employees and job applicants for discussing, disclosing, or inquiring about their own compensation or the compensation of another employee or applicant. The proposed rule mandates inclusion of the requirement in covered contracts. The proposed rule also requires that federal contractors incorporate the nondiscrimination provision into their existing employee manuals or handbooks, and disseminate the nondiscrimination provision to employees and to job applicants. There is an exception to the requirement where the employee or applicant makes the disclosure based on information obtained in the course of performing his or her essential job functions—e.g., payroll and human resources employees. Comments on the proposed rule are due by December 16, 2014.

4.     Proposed rule on Fair Pay and Safe Workplaces Executive Order
A proposed rule implementing the Fair Pay and Safe Workplaces executive order was issued September 17, 2014. The Fair Pay and Safe Workplaces Executive Order, issued July 31, 2014, has 3 parts. First, it requires any company bidding for a procurement contract of more than $500,000 to disclose labor law violations that occurred in the past three years. Violations are defined as “any administrative merits determination, arbitral award or decision, or civil judgment.” These violations include OSHA, FLSA, NLRB, OFCCP, federal equal employment (ADA, FMLA, Title VII, and ADEA), and equivalent state law violations. The contracting agency is instructed by the executive order to consider this information in awarding the contract. The contracting agency also must require contractors to update this information every 6 months. If new violations require any remedial measures or compliance assistance, the contracting agency can require such measures or assistance, or in extreme cases, termination or cancellation of the contract or an option on the contract or debarment. Contractors are further required to impose similar disclosure obligations on their subcontractors, where the subcontract is in excess of $500,000, and add language to covered subcontracts requiring disclosures of violations. This information as to subcontractors must be updated every 6 months. The Executive Order also mandates information sharing between executive agencies and labor agencies regarding federal contractors and subcontractors. The Department of Labor is directed to issue regulations to guide other agencies as to whether violations are serious (taking into account the number of employees affected, the severity of the risk or harm, and the amount of penalties), repeated (more than 1 violation of the same or a substantially similar requirement in the past 3 years), willful (knew of, showed reckless disregard for, or acted with plain indifference), or pervasive (depending on the number of violations and size of the entity). The Department of Labor has stated that single violations will not have a preclusive effect on procurement awards in most cases.

Second, the rule requires “paycheck transparency.” Contractors with a single contract for more than $500,000 must disclose—on each employee’s pay stub—hours worked, overtime hours, pay, and any additions or deductions from pay. Hours worked and overtime hours need not be included on pay stubs for FLSA-exempt employees, provided they are informed of this status. This requirement will be placed in all covered federal contracts and must be included in all covered subcontracts. Independent contractors must be informed in writing of their status as an independent contractor.

Third, contractors with a single contract for more than $1 million are restricted in their use of pre-dispute arbitration agreements. Covered contractors may only arbitrate claims arising under Title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment with the voluntary consent of employees or independent contractors and only after such disputes arise, except where (a) a collective bargaining agreement applies or (b) pre-existing agreements were in place before the executive order. This clause must also be included in federal contracts and covered subcontracts.

A proposed rule was issued on September 17, 2014. Comments on the proposed rule are due December 16, 2014.

5.     Proposed rule to require annual submission of compensation data
On August 6, 2014, OFCCP issued a proposed rule to require contractors with more than 100 employees and a contract of $50,000 or more to submit summary information on compensation. (See our previous post) Specifically, covered contractors would be required to submit total W-2 compensation for each EEO-1 job category for each race, ethnicity, and sex. Contractors would also be required to submit total hours and total numbers of employees by race, ethnicity, and sex. This data would be submitted electronically as a companion to the annual EEO-1 report by March 31st of each year (whereas the EEO-1 report will still be due September 30th) on year-end compensation data for the prior year. The information would then be shared publicly aggregated by industry. According to OFCCP, companies and their employees could use the publicly available data to benchmark their compensation against that of other companies in their industry. Comments on this proposed rule are due by November 6, 2014.

6.     E.O. 13672 and Directive 2014-02 – Gender identity and sexual orientation protected
Executive Order 13672, issued July 21, 2014, amends Executive Order 11246 with regard to any contracts entered into on or after implementing regulations are issued, and protects gender identity and sexual orientation (as new protected classes) from discrimination. Proposed rules should be issued later this month. However, OFCCP issued Directive 2014-02 on August 19, 2014, effective immediately, including gender identity and sexual orientation within its enforcement jurisdiction under protections against sex discrimination—but not adding them as categories for AAP statistical analysis.

7.     E.O. 13658 – Minimum wage changes
On June 17, 2014, the Department of Labor proposed rules for the minimum wage hike for federal contractors, imposed by a February 12, 2014 executive order (Executive Order 13658). (See our earlier blog post) Final rules will be published October 7, 2014. Of note, contractors must include a clause on the minimum wage in all covered subcontracts providing that “Executive Order 13658 – Establishing a Minimum Wage for Contractors, and its implementing regulations, including the applicable contract clause, are incorporated by reference into this contract as if fully set forth in this contract, [with a citation to a webpage that contains the contract clause in full, to the provision of the Code of Federal Regulations containing the contract clause set forth at Appendix A of the regulations, or to the provision of the FAR containing the contract clause promulgated by the FARC to implement this rule].” An additional requirement will be imposed by the final rules, requiring posting a notice to all employees of the minimum wage (the notice is forthcoming). The final rules make it clear that the minimum wage requirement applies to Davis-Bacon Act construction contracts, in addition to those contracts typically covered by rules for federal contractors—supply and service contracts.

8.     New benchmark figure for veterans hiring
The benchmark for veterans hiring, required by amended VEVRAA rules, has been lowered from the initial proposal of 8% to 7.2%. This figure will be updated annually.

With all of the different rules, coverage levels, and obligations, is your head spinning yet?

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