New OFCCP regulations set to begin in March 2014 - Part 1: Background information, which employers are covered, and challenges regarding disability AAPs

In September 2013, final regulations of the OFCCP were published regarding its enforcement of the Rehabilitation Act of 1973 and Vietnam Era Veterans Readjustment Act (VEVRA). In Part 1 of this series of posts, we'll zero in on those regulations regarding disabled applicants and employees under the Rehabilitation Act. Iowa employers should take special note that the acronym IWD, as used in these posts, does not stand for 'Iowa Workforce Development, but for individuals with disabilities.

Which Employers Need to Be Concerned About the New Disability AAP Regulations?

The OFCCP, the Office of Federal Contract Compliance Programs, is an office of the federal Department of Labor that primarily enforces three laws that prohibit discrimination and require affirmative action in employment: (1) E.O. 11246 (affirmative action is required based on race and sex, only, with broader non-discrimination prohibitions), the Rehabilitation Act, and VEVRA. Affirmative action requirements generally mean the employer must have a written affirmative action plan (AAP) that is updated annually and that includes the collection and analysis of employment data with quantifiable goals for achieving the underlying non-discrimination aim of the laws. These three laws and the OFCCP's jurisdiction extend only to employers who are collectively and colloquially known as 'federal government contractors.' Don't be fooled by that term, as it applies more broadly than it sounds. It includes subcontractors of federal government contractors, as well as financial institutions with depository insurance. Not included are organizations that only accept federal grant money and health care providers and hospitals who accept Medicaid and Medicare reimbursement. Usually, direct or prime federal government contractors know of their status and their AAP obligations. It is more difficult for subcontractors to know whether their business applies to a federal contract of their customers who happen to be federal government contractors. To see if your company might be subject to affirmative action requirements, and if your company might fall within the OFCCP's jurisdiction, you can begin your analysis on the DOL website. Due to the complexities of this area of the law, and its current state of flux, it is advisable to seek legal counsel from an attorney who practices in this area of employment law to determine whether you fall within the wide-ranging definition of a 'federal government contractor.'

Why Were These Regulations Changed?

The OFCCP was not satisfied with the progress of IWDs in employment in the United States, based on statistics provided by surveys and the OFCCP's own observations from the investigations of workplace complaints. Also, these regulations had not been changed since the 1970s, so the OFCCP rationalized that they were due for updating.

What are the Effective Dates for the New Disability AAP Requirements?

The new OFCCP regulations for the Rehabilitation Act take effect on March 24, 2014. That said, the OFCCP says it will provide a 'grace period' for the AAP obligations contained with one of the five subparts of these new regulations (i.e., 'Subpart C'). Specifically, if your AAP expires after March 24, 2014, then your next AAP must comply with the new regulations or include an explanation as to how you will be in compliance by the AAP that follows that one. For example, if your AAP is based on the calendar year, then your 2014 AAP is not expected to be in compliance with the new Rehabilitation Act regulations (because it will be finalized and issued before March 24, 2014), but your 2015 AAP must either comply or explain how you will be in compliance by the 2016 AAP.

What About the Construction Industry?

Many companies in the construction industry are covered by affirmative action laws and are within the OFCCP's jurisdiction, but this industry has historically been subjected to lesser affirmative action burdens than non-construction contractors. For example, the construction industry has been exempt from the data collection, data analysis, and goal setting provisions of affirmative action law due to the fluid and temporary nature of its workforce. The OFCCP did not continue that exemption, however, under the new Rehabilitation Act regulations. As you might imagine, the construction industry is not taking that lying down. On November 19, 2013, Associated Builders and Contractors (ABC), an industry group of primarily non-union construction contractors, filed a lawsuit seeking a legal declaration that the OFCCP's new disability regulations generally are arbitrary and capricious, exceed statutory authority, and do not comport with the case-by-case analysis disability law has always required for the consideration of disabled applicants and employees. ABC specifically complained that the new regulations do not continue the special considerations/exemptions from affirmative action requirements under which the construction industry has operated for four decades, do not consider that construction companies are often small and decentralized, and that affirmative action in construction jobs is especially difficult because the jobs are more hazardous and physical than jobs in any other industry. The lawsuit, filed with the federal District Court for the District of Columbia, also seeks an injunction to stop the new regulations. Because this lawsuit is proceeding in an expedited manner, a decision is expected in early 2014, and before the March 24, 2014 effective date of the new regulations.

Are the Regulations Certain to Become Effective?

If some of the arguments within ABC's lawsuit are successful, it may impact all federal government contractors, not just construction contractors. The health care industry is also challenging the OFCCP's application of new regulations to providers who care for federal government employees and TRICARE (veterans). On December 4, 2013, the Subcommittee on Workforce Protections of the House of Representatives held a hearing to examine these issues, with Republican Subcommittee members expressing their misgivings and OFCCP officials defending the new regulations. Despite various efforts to slow or stop these new regulations, until one is successful, all covered government contractors should take action to begin compliance efforts, or risk begin caught flat-footed if the challenges fail. If you determine you are a federal government contractor covered by the OFCCP's new regulations, we encourage you to look for Part 2 of this series of posts. There, we'll look at the key provisions of the new Disability AAP Requirements and what covered employers should do now to prepare for compliance.  

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

- Jill Jensen-Welch