Thinking of becoming a Federal Contractor?

Thinking of becoming a Federal Contractor?

Consider these employment law requirements first.

Any business looking to become a federal contractor or subcontractor must take note of the employment law requirements associated with these contracts. There are three federal laws and their related regulations which prohibit federal contractors and subcontractors from employment discrimination. Anti-discrimination obligations are not unusual as most employers are subject to these same requirements under various other federal and state laws. What makes these three federal laws unique, is that they also require the contractor or subcontractor to engage in positive, results oriented actions to employ and advance the employment of qualified individuals in certain groups. This Affirmative Action Plan (AAP) is not required for employers under federal laws such as Title VII or Section 1981 and is unique to federal contractors and subcontractors. (States may have AAP requirements for state contractors and subcontractors).

These three laws are:

A contractor or subcontractors’ obligation under each of these laws depends on the dollar value of the contract and the type of federal contract.   To understand the full breadth of your obligation, consulting an experienced law firm is critical to avoid unnecessary costs in the future.

Planning for Affirmative Action Requirements

The burdens of complying with the laws affirmative action obligations can be costly. When budgeting for the costs for complying, contractors should consider the following costs when submitting their bids for federal government contracts including:

  • Designating or hiring personnel to:
  • maintain personnel data for annual reports to the federal government and to meet regulatory requirements;
  • ensure proper posting of notices;
  • draft appropriate job listings and job advertising;
  • engage in outreach and recruiting as required and document those efforts;
  • file appropriate reports; and
  • prepare files and records for periodic government compliance evaluations (audits).
  • Drafting or retaining a third-party consultant to draft written affirmative action program documents and analyze personnel data.

Federal contractors typically do not appreciate the significant consequences of the additional affirmative action contractual obligations. For example, employers often do not appreciate that they typically must have a high volume of federal contracts to reduce the marginal costs of affirmative action obligations and increase profits.

Importantly, the federal government conducts periodic audits of federal contractors and subcontractors to ensure compliance with their obligations. The Office of Federal Contract Compliance Programs (“OFCCP”), a federal agency within the Department of Labor (DOL), enforces the federal affirmative action laws and regulations. The consequences of non-compliance can be severe, even when no allegation of discrimination is alleged.  For example, if the federal government believes the contracted is not meeting its affirmative action obligations, sanctions may include:

  • Negotiating a settlement of discrimination and other alleged violations with OFCCP.
  • Litigation with OFCCP through an enforcement action.
  • Withholding progress payments on work completed by the contractor, if:
  • the employer violates a conciliation agreement and OFCCP debars the employer, or
  • there is an agency specific audit, for example, Department of Defense (DOD) withholds progress payments.
  • Preventing the contractor from bidding on other federal work.
  • Baring the contractor from obtaining future federal contracts.
  • As a result, the contractor could:
  • Be responsible for “make whole relief” for alleged victims of discrimination.
  • Lose opportunities to earn other income from the federal contracts and reduce the relative costs of affirmative action obligations.

Understanding what steps your business must take to meet its obligations under the various federal laws which apply to contractors and subcontractors first requires that you have documented and understand your current employment practices. Conducting an Employment Practice Audit with our firm is the first step to evaluating whether additional changes to your employment procedures and documents will be necessary before pursuing a federal contractor status. Once you have identified your current procedures, any additional steps, including the developed of a written Affirmative Action Plan (AAP) can be scoped and the additional costs associated with this work accurately reflected in the bid.

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