Federal contractors and subcontractors will soon be subject to new regulations, which increase those contractors’ obligations to hire both veterans and individuals with disabilities (“IWDs”). On March 24, 2014, two final rules promulgated by the U.S. Department of Labor’s Office of Federal Contract Compliance Program (“OFCCP”) will go into effect. The veterans rule updates the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (“VEVRAA”), as amended by the Jobs for Veterans Act of 2002; the IWDs rule implements the nondiscrimination and affirmative action regulations of Section 503 of the Rehabilitation Act of 1973 (“Section 503”), which prohibits discrimination by covered federal contractors and subcontractors against individuals on the basis of disability, and requires affirmative action on behalf of qualified IWDs.

Vethireme.jpg The cornerstone of both rules is an adjustment to federal contractors’ and subcontractors’ affirmative action program requirements. As many contractors know, any contractor that meets the dollar threshold ($100,000 for VEVRAA and $50,000 for Section 503) and has 50 or more employees (“Covered Contractors”) is required to have an affirmative action plan (“AAP”). Pursuant to these new rules, Covered Contractors must now include in their AAPs a “hiring benchmark” for veterans and a “utilization goal” for IWDs. In other words, contractors must now set goals with respect to the number of veterans, and IWDs, they plan to hire for federal projects.

The veterans rule directs federal contractors to set this “hiring benchmark” in one of two ways. First, contractors can chose to set a hiring benchmark equal to the national percentage of veterans in the civilian labor force (currently, 8%). The OFCCP publishes this information, and updates it annually. Alternatively, a contractor may set a hiring benchmark by analyzing a combination of national, state and local data, including:

  • The average percentage of veterans in the civilian labor force in the state(s) where the contractor is located over the preceding three years, as calculated by the Bureau of Labor Statistics and published on the OFCCP website;
  • The number of veterans, over the previous four quarters, who were participants in the employment service delivery system in the state where the contractor is located, as tabulated by the Veterans’ Employment and Training Service and published on the OFCCP website;
  • The applicant ratio and hiring ratio for the previous year, based on the data collected by the contractor for its affirmative action plan data analyses;
  • The contractor’s recent assessments of the effectiveness of its external outreach and recruitment efforts; and
  • Other factors, including, but not limited to, the nature of the contractor’s job openings and/or its location, which would tend to affect the availability of qualified protected veterans.

While the second method is more complex, it could yield a significantly lower “benchmark” if the contractor is located in a low-veteran area. Contractors will have to determine which “benchmark” derivation system is best for them. Regardless of how it is derived, the hiring benchmark will be calculated using the percentage of veterans among the employer’s hires, as opposed to current workforce. The benchmark can be applied to affirmative action job groups, EEO-1 categories, or the overall workforce, at the contractor’s election.

The IWDs rule requires contractors to set goals relating to the hiring of IWDs. Here, however, the OFCCP has not left the determination of that benchmark up to the individual contractor, but, rather, has set a blanket 7% “utilization goal” for the employment of qualified IWDs for each of the job groups established in the contractor’s AAP. Utilization is to be measured by job group, with the same seven-percent goal applying for each job group without regard to any data regarding the availability of individuals with disabilities who are qualified for the relevant jobs in the relevant geographic area. Unlike the “hiring benchmarks” required by the veterans rule, the IWDs rule’s “utilization goal” relates to the contractor’s entire workforce, not just new hires.

Other notable effects of these new rules include: periodic reviews of personnel policies and physical/mental job qualifications; the obligation to offer job applicants the opportunity to self-identify as a veteran or IWD; additional internal and external affirmative action policy dissemination requirements; new responsibilities relating to training employees involved in the hiring and disciplinary process; added requirements concerning specific subcontract language relating to federal contractors’ affirmative action responsibilities; and increased obligations concerning the collection and analysis of data relating to the hiring, and employment of, veterans and IWDs. If you have specific questions relating to the obligations imposed by these new rules, contact a legal professional.

Michael H. Payne is the Chairman of the firm’s Federal Practice Group and, together with other experienced members of the group, frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues, and dispute resolution.

Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.