I am very excited to be teaming with DirectEmployers, Bill Warren and Candee Chambers, DE’s new Vice President of Compliance & Partnerships, and to be writing my first column for you. This November column is the first of 8 columns on OFCCP compliance I will write over the next year. Each quarter, I will write two columns and also present a webinar to DE Members on an OFCCP compliance topic. If you have ideas/issues you would like me to address in a column or in an upcoming Webinar, please let Candee know. I will write a December column, for example, and then host a 90-minute webinar on January 22, 2014 beginning at 2:00 p.m. EST (MARK YOUR CALENDARS NOW!)

FOCUS: My columns and the webinars will focus on popular OFCCP compliance problems and practical solutions to them. I will often offer a “Practice Tip.” My writing will be “down to earth” and specific. I will tell you to turn right, turn left, or to drive straight ahead. Candee and I will tailor my topics to supplement the OFCCP compliance services DirectEmployers Association daily supplies its members.

I want to start my relationship with you by clearing up an OFCCP compliance issue I see currently engulfed in confusion. Erroneous advice I see unfolding in ILG meetings and in Internet blogs across the country is also subsidizing the inherent complexity of OFCCP’s regulations. The compliance issue of interest today concerns WHEN a federal contractor MAY implement OFCCP’s new section 503 regulations and when it MUST do so. Many federal contractors want to roll out the new compliance obligations now. Some contractors are fearful they cannot “pop it all out of the oven” at the same time and would prefer to piecemeal roll-out portions of their total coming compliance solution. (This is the “Rome was not built in a day” crowd). Other contractors want to field test what they have designed and built (whether it be a Pre-Offer Self-Identification Form or a post-employment survey of disability, etc) fearful that they need/want a cure period to get it right before March 24, 2014. (This is the “I don’t want to have the Obamacare website sign-up roll-out problem” crowd).

Other contractors, by contrast, want to know THE LAST POSSIBLE DAY to which they may lawfully procrastinate compliance. While almost all federal contractors currently believe they can do those things necessary to comply between today and March 24, 2014 (the day OFCCP currently presumes its new Section 503/VEVRAA regulations will become legally effective (and OMB “paperwork” approved—and assuming no court enjoins them), a very small but growing number of contractors are fearful they cannot be ready a short four months from this week.

OFCCP’s Final Rules Created Three Different Compliance Dates in 2014

ASSUMING, again, that OFCCP’s Final regulations (i.e. “Rules”):

(1) Become legally effective March 24, 2014 (180 days after their September 24, 2013 publication date as OFCCP announced in both of its Preambles to both Final Rules), AND

(2) No court enjoins them (in whole or in part), AND

(3) OMB again approves all of the so-called “Subpart C” Affirmative Action “paperwork” compliance portions (as opposed to the changes to discrimination law portions of the Final Rules)…..

then three different “compliance dates” will spring up and confront covered federal contractors and covered federal subcontractors.

(NOTE: the ONLY (repeat ONLY) importance to attach to “Subpart C” requirements is that they are “paperwork” requirements which require OMB approval. Do NOT READ anything else into Subpart C requirements other than that they require OMB approval. Many speakers have overgeneralized, for example, and have erroneously said that because AAPs are within Subpart C (they are clearly “paperwork”) and because AAPs written before March 24, 2014 continue in force until the last day of their AAP year, that ALL Subpart C requirements are similarly “grandfathered” or are allowed to be “phased in” and contractors need not comply with any Subpart C requirement until the end of the AAP year. WRONG. As we will see below, OFCCP has “grandfathered” only the AAP BUT NO OTHER of the many Subpart C compliance requirements. Again, the importance of Subpart C is only that it is a nice index to all the “paperwork” requirements OMB must again approve (even though it has twice previously approved all those paperwork requirements—when OFCCP first proposed the Rules and then again just before OFCCP published it Rules in Final in September. But, OMB has to approve them one last time before the “paperwork” portions become what I call: “paperwork effective”).

Here are the three compliance dates, in general, and then I will tie these to specific compliance obligations the Final Rules create:

1) March 24, 2014: the date the Rules become legally and paper work effective and all compliance obligations become effective UNLESS,

2) There is a specific portion of the OFCCP Rule which defers (“grandfathers”) the compliance date to a later date (i.e. AAPs created before March 24, 2014: see specific discussion below of what OFCCP likes to refer to as the “phase-in” permission),

OR

3) The action giving rise to the compliance obligation does not first occur until some date after March 24, 2014 (i.e. perhaps you do not become a federal contractor until, let’s say June 2014, or perhaps you do not sign a “new” covered subcontract until September 17, 2014: see specific discussion below).

The “Phase In,” or “Grandfathering” Rule:

Let’s now understand that second date (relating to Section 503/VEVRAA AAPs you might have prepared before March 24, 2014 but their AAP year runs past and through March 24, 2014). OFCCP’s Final Rule is clear that only the “AAP” is allowed to remain in place for the duration of its AAP year.

I get there two ways. First let’s review OFCCP’s Preamble to OFCCP’s Section 503 Final Rule:

1) “Although the final rule becomes effective 180 days after publication, full compliance with the requirements of this final rule by current contractors will be phased in as follows: Current contractors subject to Subpart C of the existing 41 CFR part 60-741 regulations that have written affirmative action programs (AAP) prepared pursuant to those regulations in place on the effective date of the this final rule may maintain that AAP for the duration of their AAP year. Such contractors are required to update their affirmative action programs to come into compliance with the requirements of Subpart C of this final rule at the start of their next standard 12-month AAP review and updating cycle.“ Emphases added. See 78 Federal Register No. 185 at p. 58685 , middle column, middle, which is the “grandfathering” or “phase in” permission OFCCP accords contractors pursuant to their Section 503 AAPs.

So, OFCCP is permitting contractors to “phase in” only the AAP after the March 24, 2014 legally effective date of the new regs. Do you see any language permitting the grandfathering (or rather, “delay of implementation date”) or “phasing in” of either the pre-offer Self-Identification obligation, for example, or granting permission to delay the start date of any other Subpart C compliance obligation? No. That language is not in OFCCP’s Final Rule. Reading the permission to continue an AAP prepared before March 24, 2014 to also somehow apply to all other Affirmative Action paperwork obligations Subpart C contains is simply too broad and lacks any supporting language in the Preamble or Rules.

So, what that means is that contractors must implement ALL of the many other Subpart C compliance obligations on March 24, 2014 including:

• making the AAP available to employees/applicants
• undertaking the pre-and post-offer invitations to Self-Identify (as those applications and offers arise on or after March 24, 2014)
• undertaking the three Section 503-required surveys of employees (as those surveys/reminder arise on or after March 24, 2014)
• first year survey
• 5 year survey
• interim reminder to self-identify
• preparing AAPs (as AAPs pre-existing March 24, 2014 expire on or after March 24, 2014)
• deploying, in management’s discretion, any “voluntary affirmative action programs” for the disabled (there is no analog OFCCP “suggestion” for Protected Veterans)
• deploying and counting as disabled “Applicants” any Sheltered Workshop training, in which the contractor exercises its management discretion to participate, and leading to employment at the contractor’s establishment at full compensation

Practice Tip: If you are one of the contractors struggling to get your AAPs for the disabled and for Protected Veterans updated next year to the new Final Rule formats, you could simply create new Section 503 and/or VEVRAA AAPs under the old (current) OFCCP Rules as late as March 23, 2014 and delay upgrading your 503/VEVRAA AAPs until March 2015. It is not much of a savings of time and cost, but it does represent some savings. (And, of course, creating a current-style 503/VEVRAA AAP costs little and takes far less than an hour).

With that said, OFCCP could always choose not to enforce its Rules after March 24, 2014…but I do not see that written and I have not heard that OFCCP is even seriously considering any further delay of its Final Rules. So, don’t bank on that. But, if the contractor community got sufficiently confused by the stagger/grandfathering/phase in clause, or put up enough sustained resistance to implementation of the new Rules by March 24, 2014, I could see Pat Shiu pushing back the compliance deadline through non-enforcement. What’s another 6 months to her if there really is consternation out there about complying by March 2014?

Let’s remember, too, OMB needs to approve all the “paperwork” obligations which OFCCP has collected together in Subpart C. (If OMB approval does not occur before March 24, 2014, none of OFCCP’s new “paperwork” requirements will become “paperwork effective” even if otherwise “legally effective”. In the “real world,” if Pat Shiu wanted to delay the effective date of the new Rules, she would simply ask OMB to put her file at the bottom of the OMB in-box and she can then delay the paperwork implementation dates for many months while making it appear that OMB simply does not have enough manpower to muscle the paperwork through the approval desks.)

2) While the invitation to Self-Identify is a Subpart C requirement, that requirement is not only not “grandfathered” as noted above, it could NOT be “grandfathered” since the requirement only springs up for the first time on March 24, 2014. Thus, there is nothing “to grandfather” or phase in as to the Pre-Offer Self-Identification provision. Said another way, as to this new Pre-Offer Self-Identification requirement, the existing contractor stands in the same position as a new contractor which signs its first covered federal contract on March 24, 2014: it must comply with OFCCP’s rules unless there is a specific provision of the Rules deferring the effective date.

The “Corporate Transaction Giving Rise to Compliance Has Not Yet Occurred” Rule

Oh, this is a good one because you cannot figure out the answer to this compliance riddle unless you have actually read the Final Rules. Here’s the question: When must a covered federal contractor embed the new EEO clauses (which both of OFCCP’s Final Rules create) into their covered federal subcontracts? Said another way, does a covered federal contractor (or covered federal subcontractor) have an affirmative duty on March 24, 2014 to search out, find, retrieve and amend all of its covered federal subcontracts and brand them with the new Section 503 and VEVRAA EEO clauses?

SHORT ANWSWER: No.

LONGER ANSWER: If a covered federal contractor or subcontractor “modifies”, or “renews” or “extends” an existing covered federal subcontract ON OR AFTER March 24, 2014 [and assuming the OFCCP Final VEVRAA and Section 503 regulations become BOTH (a) “legally effective” (as expected) and (b) “paperwork effective”], THEN AND ONLY THEN must a federal contractor install the new Section 503 and VEVRAA EEO clauses in its covered federal subcontracts. But, a covered federal contractor or subcontractor DOES NOT have to automatically go back and universally embroider new EEO Clauses into its existing (or what OFCCP regulations and government contract law calls “original”) contracts.

HOW DO WE KNOW THIS?

The new Section 503/VEVRAA regs/Rules are written in parallel and impose the same requirements:

a. The regulation requiring covered federal contractors/subcontractors to embed the EEO Clauses in covered federal subcontracts is found in the “Equal Opportunity Clause” (oh, so that is where that requirement is hidden!) which each of the OFCCP regulations implementing VEVRAA/Section 503 require. See, 41 CFR Section 60-741.5 (a) (6) (Section 503) and 41 CFR Section 60-300-300.5 (a) (11) (VEVRAA).

b. Government contract law governs the amendment of “original” federal contracts and subcontracts. The technical legal question then becomes whether OFCCP’s Section 503/VEVRAA Final regulations automatically amend, by operation of law, the original covered federal contracts and covered subcontracts to require the prime contractor and covered subcontractors to amend their covered federal subcontracts to embed the new EEO Clauses. Happily, OFCCP has squarely anticipated and answered that question for contractors so you do not have to go ask federal government contract lawyers to opine.

c. See para (a) (first sentence) of each of the Final VEVRAA and Section 503 Rules. See, for example, the Section 503 version of the same wording found in OFCCP’s VEVRAA Final Rule (at 41 CFR Section 60-300.5 (a)):

41 CFR Section 60-741.5 Equal opportunity clause

(a) Government contracts. Each contracting agency and each contractor shall include the following equal opportunity clause in each of its covered Government contracts or subcontracts (and modifications, renewals, or extensions thereof if not included in the original contract) (emphases added):

6. The contractor will include the provisions of this clause in every subcontract or purchase order…so that such provisions will be binding upon each subcontractor or vendor. “ * * * ”

CONCLUSION: Federal contractors do not have to go back and locate all of their existing covered federal subcontracts and automatically amend them to embed the new EEO clauses which OFCCP’s Final (coming) Section 503/VEVRAA Rules will require. Rather, as covered federal contractors and federal subcontractors issue new (original) covered subcontracts, or “modify”, “renew” or “extend” existing covered federal subcontracts, they (the federal contractors and federal subcontractors issuing the revised subcontract) must THEN embed the new EEO Clauses in the covered federal subcontract once “modified”, “renewed” or “extended.”

d. Extra points: To help understand this compliance architecture, it helps to understand that in government contract law, a new contract is formed only when one signs a new (original) contract or original subcontract or “modifies,” “renews” or “extends” an original contract or subcontract. So, this “corporate transactions rule,” as I will call it, is another form of compliance obligation deferral or “phase in” rule.” This compliance obligation triggers, in this case, when there is a “new” contract (accomplished by either writing for the first time an “original” contract, or “modifying,” “renewing” or “extending” a covered federal subcontract and thus creating a “new” contract).

Practice Tip: Contact that portion of your company which signs/modifies/renews/and/or extends covered federal subcontracts and alert the senior manager of that work group to be on the lookout for any of these corporate signing events so you can “tattoo” the new EEO clauses into those new contracts. I usually find federal subcontracting responsibility to be in either the Legal Department, Purchasing, COO’s office; CFO’s office, Supply Chain Manager, and/or Sales Group.

May I “Jump Now In The Water”?

I promised above I would discuss what compliance obligations federal contractors/subcontractors MAY choose to exercise their management discretion to implement early (i.e. before March 24, 2014).

The short answers are:

1) All VEVRAA compliance obligations (there is no statute or regulation prohibiting any of the actions OFCCP’s Final VEVRAA Rule will require: Note: unlike the Final 503 Rule, the Final VEVRAA Rule does not require post-employment inquiries: see next paragraph); and

2) All Section 503 compliance obligations OTHER THAN two:

a. The Pre-Offer Invitation to Self-Identify Disability;
b. The Post-Employment Invitation to Self-Identify Disability

i. Note: There are 3 Post-Employment Invitations

1. First year (of contractor status) invitation
2. Five-year interval Invitation
3. Intervening (“Tweener”) Reminder

So, for example, what the above observations mean is that you could TODAY deploy a new Pre-Offer Self-Identification Invitation to Applicants asking them to voluntarily disclose whether they are a Protected Veteran (NOT what kind or kinds, exactly, of Protected Veteran they are…since that would require some Protected Veterans to answer that they are disabled). You COULD NOT, however, deploy the parallel Pre-Offer Self-Identification Invitation asking Applicants to voluntarily disclose their Disabled status.

So, why are the Invitation to Self-Identify permissions different as between VEVRAA and Section 503?

ANSWER: Both the Americans with Disabilities Act (see 42 U.S.C. §§ 12112 (d) (3) (1994)(codified as amended)) and Section 503 (see 41 CFR Section 60-741.42 (a) ) make pre-offer inquiries about disability or severity of disability unlawful and require that contractors justify post-employment inquiries about disability/severity of disability to be “job related and consistent with business necessity.” There is no analog prohibition on pre-offer inquiries of Protected Veterans pursuant to VEVRAA SO LONG AS the inquiry does not ask about disability. And, as noted immediately above, there are no post-employment inquiry obligations of Protected Veterans in OFCCPs’ Final Rule.

While it is a complicated discussion too long for this column, suffice it to say that there are great legal concerns about whether the ADA and Section 503 (as now amended by the ADA Amendments Act to make 503’s disability prohibitions parallel to the ADA’s prohibitions) will allow pre-offer inquiries. The ADA, for example, prohibits pre-offer inquiries:

“(2) Preemployment

(A) Prohibited examination or inquiry
Except as provided in paragraph (3), a covered entity shall not conduct a medical examination or make inquiries of a job applicant as to whether such applicant is an individual with a disability or as to the nature or severity of such disability. “(emphases added)”

The fact that OFCCP’s Final Rule requires contractors to make the pre-offer inquiries voluntary does not address the fact that the ADA prohibits “inquiries of a job applicant,” regardless whether the applicant chooses to voluntarily answer or not. The ADA stops all inquiries, unless otherwise permitted. (That is the longer discussion we will save for another column).

PRACTICE TIP: Think about whether it is practical for you to roll out any of your Final Rule compliance program now. OFCCP has not finalized any of the forms with mandated language the Final Rules require. The “EEO employer” preferred advertising legend also has not yet taken form. While OFCCP will not mandate that advertising, I have had clients come up with several different competing versions:

• EEO Employer/PV/Disabled
• EEO Employer
• EEO Employer/Protected Veteran/Disabled
• EEO Employer/Disabled /Protected Veteran

I think it is probably a little early to jump just yet into compliance four months ahead of schedule. Without the language of the OFCCP-mandated Pre-and Post-Offer Self-Identification forms for the Disabled, and given the need to later migrate Pre-Offer Self-Identification Invitation forms to also invite disclosure of Disability, I might not rush forward with all new systems just yet. Rather, I might more cautiously just get all of my systems and language ready, but keep my forms/language in a penultimate draft stage for a few more months.

Be careful out there! John

THIS COLUMN IS MEANT TO ASSIST IN A GENERAL UNDERSTANDING OF THE CURRENT LAW AND PRACTICE RELATING TO OFCCP. IT IS NOT TO BE REGARDED AS LEGAL ADVICE. COMPANIES OR INDIVIDUALS WITH PARTICULAR QUESTIONS SHOULD SEEK ADVICE OF COUNSEL.

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John C. Fox

President and Partner at Fox, Wang & Morgan P.C.

Mr. Fox has extensive trial experience, having spent more than 400 days in trial. Mr. Fox was also lead trial counsel in the first of the six wage-hour class actions known to have been tried in California and was lead trial counsel in what are believed to have been the two largest disability law suits in the United States. He is an across-the-board employment lawyer representing management nationwide.

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