June 26, 2009
The best laid schemes o’ mice an’ men gang aft agley (often go awry). - Robert Burns
The same is also often true when designing affirmative action plans required of federal contractors and subcontractors (collectively “contractors”).
Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and Section 402 of the Vietnam Era Veterans Readjustment Assistance Act of 1972 each impose non-discrimination and affirmative action obligations on certain holders of covered federal government contracts and their subcontractors.
For smaller government contracts and subcontracts (generally $10,000 - $49,999), these laws require non-discrimination and limited affirmative action practices, but no written affirmative action plan (AAP). In contrast, the requirement to implement and maintain a written AAP generally arises for:
Although this may seem straight forward, many contractors make common plan design mistakes when initially setting up their AAPs that end up costing their organizations later during compliance audits.
Not Enough “Family” Members
As a general rule, if a contractor has multiple related legal entities (e.g., parent or subsidiary companies) but only some are involved in the delivery of the federal contract or subcontract, the Office of Federal Contract Compliance Programs (OFCCP) has historically applied a “single entity” test to determine which companies in the “family” must have written AAPs.
In analyzing such issues, the OFCCP has generally used a five-factor “actual control” test as outlined in Liberty Mut. Ins. Co. v. Friedman. Under this approach, the OFCCP evaluates the ownership, management and operations of the separate legal entities to determine whether they are so intertwined that they should be treated as a single enterprise for purposes of OFCCP jurisdiction. The result is that unless the entities are legally and operationally distinct with respect to the day-to-day control of employees at all levels of an organization (e.g., finance, HR, marketing) and meet the other four parts of the five-factor test, once a legal entity within a family of companies is deemed to be a federal contractor or subcontractor, the OFCCP will typically take the position that all of the U.S. legal entities of that “family” must have written AAPs. This is the case even if only one legal entity actually holds and performs the federal contract or subcontract.
Not Enough Sites
With some limited exceptions, contractors are required to develop and maintain a written AAP for each of their establishments that has “50 or more employees” at such location. See 41 CFR 60-2.1(b)(1). For small “establishments” with fewer than 50 employees, contractors have a choice. They can include employees at a small establishment in an AAP that covers:
As an alternative approach, a contractor can design its AAPs based on functional or business units (i.e., by corporate operational boundaries instead of by establishment). However, to do so, a contractor is required to petition the OFCCP for advance approval. See 41 CFR 60.2.1(d)(4).
Not Enough Thought
Although the regulatory requirements summarized above provide a good start for considering where and how many AAPs to have, contractors are also well-advised to work with counsel to analyze the pros and cons of different design alternatives. For example:
For assistance preparing affirmative action plans, implementing data tracking and document retention programs that comply with OFCCP requirements, or preparing for or responding to an OFCCP audit, please contact any member of McGuireWoods’ Federal Contract Compliance Team within the Labor & Employment Group, including: