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Does Your Company Need an Affirmative Action Plan?

April 26, 2017

Executive Order (EO) 11246 prohibits federal contractors and subcontractors from discriminating against employees and applicants on the basis of race, color, religion, sex, sexual orientation, sexual identity, or national origin.  To ensure that obligation is met, certain contractors are required, by EO 11246 and related laws, to prepare and maintain an Affirmative Action Plan (AAP).  An AAP is a comprehensive, written self-auditing document that generally requires detailed and complex statistical analyses regarding the makeup of the contractor’s workforce and its efforts to proactively recruit, hire, train, and promote women, minorities, disabled individuals, and veterans to ensure that all such individuals have equal opportunities in employment. 

The costs and administrative requirements related to compliance with EO 11246 and related laws can be significant, particularly for those contractors required to maintain an AAP.  Federal contractors’ obligations under EO 11246 are enforced by the Office of Federal Contract Compliance Programs (“OFCCP”), which has the power to audit contractors’ AAPs at any time and “debar” non-compliant contractors from the federal procurement process, among other potential civil and monetary remedies.  However, not all federal contractors are required to comply with all of EO 11246’s regulatory requirements, including the AAP requirement.

As an initial matter, the “federal contractors” subject to EO 11246 include any company that:

(a) holds a single federal contract, subcontract or federally-assisted construction contract in excess of $10,000;

(b) has federal contracts or subcontracts that combined total in excess of $10,000 in any 12-month period; or

(c) holds government bills of lading, serves as a depository of federal funds, or is an issuing and paying agent for U.S. savings bonds and notes in any amount. 

Thus, threshold coverage under EO 11246 is quite broad; for example, the OFCCP takes the position that any financial institution that participates in deposit insurance programs under the FDIC or NCUA are within the scope of EO 11246. 

If a company falls within one of those three categories, it is covered by EO 11246’s (and similar laws’) anti-discrimination provisions, and its additional obligation to prepare an AAP is determined by the number and size of its federal contracts and its number of employees.  More specifically, AAP obligations are generally imposed on two types of federal contractors: (a) those with a single federal contract of $50,000 or more and 50 or more employees; and (b) those with a single federal contract of $100,000 or more, regardless of the number of employees.

If AAP obligations are triggered, among other comprehensive recordkeeping and administrative requirements, the contractor must prepare an AAP on an annual basis, which must include, among other things, a job group analysis, a demographic description of employees in various job groups, a determination of the availability of women and minorities in each job group in the particular locale and comparison against those employed with the contractor in that locale, future placement goals, and identification of “problem areas” serving as impediments to equal employment opportunity.  In addition, those contractors must submit to the federal government, on an annual basis, an EEO-1 Employer Information Report, in order to provide a count of their employees by job category and then by ethnicity, race, and gender.

Given the complexity of determining whether, and to what extent, a company is to be considered a “federal contractor” subject to AAP requirements, as well as the substantial costs, recordkeeping and administrative burdens, and risks associated with compliance, any company with questions or concerns regarding its potential obligations is encouraged to contact your employment and labor attorney.

Our Insights are published as a service to clients and friends. They are intended to be informational and do not constitute legal advice regarding any specific situation.