On Aug. 31, 2021, the Office of Management and Budget (OMB) approved the Office of Federal Contract Compliance Programs’ (OFCCP) request under the Paperwork Reduction Act for authority to require covered federal contractors and subcontractors to provide an annual certification of compliance with the agency’s affirmative action program (AAP) requirements.
This will be a significant new, annual compliance certification obligation — the first in OFCCP’s history. Until now, the OFCCP has not required annual reporting regarding the completion of AAPs. While OFCCP regulations address a certification requirement, it is expressly applicable only to “bidders or prospective contractors.” 41 C.F.R. § 60-1.7(b). Further, the FAR regulations cited by OFCCP in its original Supporting Statement expressly relate to bidders for prospective federal contracts. See FAR 52.212-3 and FAR 2.101.
OFCCP did not engage in rulemaking to impose this new certification obligation, but instead relied on its existing AAP regulations, which authorize the agency to require a “program summary”:
The affirmative action program must be summarized and updated annually. The program summary must be prepared in a format which will be prescribed by the Deputy Assistant Secretary and published in the Federal Register as a notice before becoming effective. Contractors and subcontractors must submit the program summary to OFCCP each year on the anniversary date of the affirmative action program. 41 C.F.R. § 60-2.31.
This obscure provision of the OFCCP regulations was added in the 1970s but the agency never previously implemented it. As discussed below, the timing of the new certification requirement is unclear. OFCCP’s Supporting Statement to OMB indicates that timing will be uniform for all existing federal contractors and subcontractors. This conflicts with the regulatory language quoted above, which indicates that the program summary would be submitted “to OFCCP each year on the anniversary date of the affirmative action program” (i.e., as AAP anniversary dates are not uniform and are set at the discretion of the contractor).
Unfortunately, at present, the specific timing of the new certification requirement is unclear. OFCCP explained in its updated Supporting Statement to OMB that “[e]xisting contractors will have at least 90 days to comply with the certification requirement once it takes effect. The effective date will be 90 days after OMB approves this collection.” OFCCP further noted that “[n]ew contractors and existing contractors who become subject to AAP requirements after the effective date will have 90 days to certify compliance after they have developed their AAP(s).” However, the updated Supporting Statement also indicated that the triggering action for the certification will be an email notice from OFCCP and/or a posting on the agency’s website:
OFCCP will send an email invitation to all contractors for which OFCCP has contact information, if the contractors are within OFCCP’s jurisdiction and they meet OFCCP’s AAP submission thresholds. The contractor will follow instructions in the email (and described generally below) to gain access. For the second path, the agency will post a notice on its website about the annual certification and the AAP submission requirements for scheduled contractors. The notice will contain AAP-VI registration instructions for contractors and subcontractors, in the event that OFCCP does not have a correct email address.
Further, it is clear that OFCCP intends the certification requirement to become an annual requirement for covered contractors, once operational. However, at present, it is unclear when certifications must be made in future years after the initial submission.
OFCCP may provide more information over the coming days about exactly when its AAP-VI portal will become active and when contractors will be required to certify compliance.
Certification Text, Due Process and Audit Selection
As for the text of the annual AAP certification, OFCCP has indicated that it will require a covered “entity” to attest one of the following:
1. “It has developed and maintained affirmative action programs at each establishment, as applicable, and/or for each functional or business unit. See 41 CFR Chapter 60.”
2. “It has been party to a qualifying federal contract or subcontract for 120 days or more and has not developed and maintained affirmative action programs at each establishment, as applicable. See 41 CFR Chapter 60.”
3. “It became a covered federal contractor or subcontractor within the past 120 days and therefore has not yet developed applicable affirmative action programs. See 41 CFR Chapter 60.”
The text of the certification uses the terms “developed” and “maintained.” However, OFCCP has not defined those terms, and the agency expressly declined to clarify them (or the scope of the factual basis for the certification) in response to public comments, including specific comments on this subject provided by McGuireWoods. Contractors are nonetheless not without recourse, as OFCCP may face significant due process challenges if it attempts to assert that a given certification is invalid based on its undefined terms. See, e.g., FABI Constr. Co. v. Sec’y of Labor, 508 F.3d 1077, 1088-89 (D.C. Cir. 2007).
Similarly, the certification does not alter OFCCP regulations governing AAPs, which do not require an AAP for “each establishment,” but only for each establishment of 50 or more employees after application of complex rules for allocating employees between and to AAPs. See 41 C.F.R. § 60-2.1(d). Contractors likely will have many questions, including whether they have an adequate basis for certification, and McGuireWoods stands ready to provide the legal assessment necessary to support good faith reliance on advice of counsel positions.
In addition, note that several AAP vendors submitted comments in support of the new certification requirements, but asked OFCCP to focus its audits on mid-sized and smaller contractors that may not be complying with the AAP requirements. Commentors also asked OFCCP to refrain from frequent audits of the same set of larger contractors. OFCCP did not completely agree with these suggestions but did indicate it would “use annual certification as an additional criterion for the scheduling process.” Also, per OFCCP, “[u]sing that criterion, contractors who fail to self-certify or who state that they have not developed an AAP as required by law would be more likely to be on the [audit selection] scheduling list than contractors that have self-certified.”
For additional information, see OFCCP’s Administrative Guide for the Verification Interface (AAP-VI) and OFCCP’s User Guide for the Verification Interface (AAP-VI).
Certification Scope and Jurisdiction
Notably, OFCCP’s User Guide has basic directions in Section 5 regarding AAP certification. The interface requires contractors to “[a]ffirm that the information you are submitting is true and accurate by selecting the checkbox for the Declaration Statement.” That statement, in turn, ominously provides:
“I certify that the information that has been provided as part of our Affirmative Action Plan (AAP) certification is true and correct to the best of my knowledge. I also understand that any attempt to refuse to submit an AAP certification, alteration or falsification of required records or information and any substantial or material violation may result in the institution of administrative or judicial enforcement proceedings…. I also understand that I will not be able to edit my Affirmative Action Plan after I click the submit button.”
In addition to likely questions about the scope of this certification (i.e., exactly what contractors must do to ensure they can certify in good faith that the AAP is “true and correct”), the new AAP verification requirement will likely produce a large number of jurisdictional disputes with OFCCP. The new requirement also has significant implications for non-contractors, whom the agency may later claim are subject to its jurisdiction.
- OFCCP has not stated how it will determine whether to expect a certification report from an entity. However, as it has historically done with respect to audit selection, it appears that OFCCP will identify expected federal contractors or subcontractors through EEO-1 reports and send notices to entities that fail to submit any certification.
- The use of EEO-1 reports is highly problematic, as McGuireWoods indicated in regulatory comments to OFCCP. This is because the EEO-1 instructions require parent corporations to submit EEO-1 reports for all of their majority-owned subsidiaries. The EEO-1 establishment report, in turn, contains a checkbox soliciting whether the establishment is a federal prime contractor or first-tier subcontractor.
- OFCCP generally assumes that every establishment associated through a common parent identifier with an establishment that checked the box as a federal contractor or first-tier subcontractor is subject to its jurisdiction. This, however, is a grossly inaccurate and overbroad assumption that often relates to complex legal determinations about the operational and other relationships between separate legal entities.
- When OFCCP used this EEO-1 approach to send out more than 50,000 EO surveys in the early 2000s, a large number of the responses indicated a lack of jurisdiction. Expect similar issues with this AAP compliance certification.
- Corporate families that include numerous entities will especially want to think through these issues well in advance of AAP verification. McGuireWoods has extensive experience with the many complex legal issues associated with OFCCP jurisdiction assessments and is happy to provide assistance.
For any questions about the new AAP certification requirements and how to plan for the same for your organization, please contact the authors of this article, your McGuireWoods contact, or a member of the firm’s affirmative action, labor and employment or federal contracting teams.