Transcript Who is a Federal Contractor?

This Employer Webinar Series program
is presented by Spencer Fane Britt & Browne LLP
in conjunction with United Benefit Advisors
This Employer Webinar Series program
is presented by Spencer Fane Britt & Browne LLP
in conjunction with United Benefit Advisors
Kansas City = Omaha = Overland Park
St. Louis = Jefferson City
www.spencerfane.com
www.ubabenefits.com
Do You Have an Affirmative Action
Plan? Maybe You Should.
Monica M. Fanning, Esq.
Agenda

Is Your Company a Covered Federal
Contractor/Sub-Contractor?

Overview of Affirmative Action Obligations

Office of Federal Contract Compliance Programs
(“OFCCP”) Audits

Consequences of Noncompliance
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Federal Contractor Affirmative
Action Obligations

Government contractors and subcontractors have
affirmative action obligations as a condition of
their government contracts:

Executive Order 11246 - Females and Minorities

Section 503 of the Rehabilitation Act- Qualified
Individuals With Disabilities

VEVRAA: Covered Veterans
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What is Affirmative Action (AA)?

Provides for equal employment and makes it
unlawful for federal contractors to discriminate
based on gender, race, religion, disability, or
veteran status.

Requires federal contractors to go beyond the
equal employment opportunity laws by actively
recruiting and providing outreach to women,
minorities, veterans and disabled individuals.
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Who is a Federal Contractor?

Federal contractor is any person who holds a
“government contract.”

-Service and Supply Contract: Agreement with
a federal agency or entity for “the purchase, sale
or use of personal property or nonpersonal
services.”

Personal property includes supplies and goods

Nonpersonal services includes utilities, construction,
transportation, research, insurance and fund depository
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Who is a Federal Contractor?
(Con’t)


Construction Contract: Any agreement to
provide construction services directly to any
department, agency, establishment, or
instrumentality of the executive branch of the
Federal Government.
Hiring Percentages for Female and
Minority-Owned businesses but no
requirement for written AAP
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Are Financial Institutions Federal
Contractors?

Yes, provided the financial institution employs
50 or more employees Company-wide, and

Participates in the Federal Deposit Insurance
Corporation (“FDIC”) or National Credit Union
Association (“NCUA”)

Federal Reserve Banks are not subject to OFCCP
jurisdiction
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Are Any Types of Contracts
Excluded?

Contracts involving work performed outside of
the U.S. (if employees performing the work were
not recruited in U.S.)

Contracts with State or local governments

Contracts with religious entities or religiously
affiliated education institutions

Contracts involving work on or near an Indian
reservation
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Issues to Consider in Determining
Federal Contractor Status

OFCCP broadly interprets its jurisdiction but there are a
few defenses against coverage that all federal contractors
should consider:

1.
Is the contract with a federal agency or entity?


2.
-Quasi-Governmental agencies [consult
usa.gov, “A-Z Index Dept./Agencies”]
Is the arrangement really a contract?

-Personal services is interpreted very narrowly-

employer/ employee relationship; government
has complete control
Grant
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Issues to Consider in Determining
Federal Contractor Status (Con’t)

What is the value of the contract?

Specific amount or open-ended

If open-ended, you must make a good faith estimate
of the amount likely to be received during a 12 month
period
-Based upon past purchasing history/price of goods/services

What is the duration of the contract?

Specific term or project/performance driven
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Who is a Federal Subcontractor?

Subcontractor has a direct contract with a federal
contractor

Subject of the contract is to provide goods or services
necessary to the performance of the prime
government contract

Perform an obligation of the federal contractor’s
prime government contract
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“Single-Entity” Test

Some businesses or organizations that do not
independently hold Federal contracts/subcontracts
may still be covered Federal Contractors if they are
considered a "single entity" with a related business
or organization that holds such contracts.

OFCCP uses a “Single Entity" test to determine
whether the businesses or organizations are so
closely related that they may constitute a single
entity for purposes of OFCCP jurisdiction.
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“Single-Entity” Test (Con’t)

Subsidiaries, Parent Corporations

-OFCCP Uses a 27 Point Test Focusing on
Related Interests:

Common Ownership

Common Directors and/or Officers

De Facto Exercise of Control

Unity of Personnel Policies Emanating From
Common Source

Dependency of Operations
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Coverage Executive Order 11246:
Females and Minority


Basic Coverage: Single government contract or
subcontract of $10,000 or more

Aggregate contracts

Open-ended contracts covered if reasonably expect
amount to exceed $10,000 in 12 month period
Obligation: Prohibits discrimination on the
basis of race, color, sex, religion or national
origin
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Coverage Executive Order 11246:
Females and Minority (Con’t)

Major Coverage: Single government contract or
subcontract of $50,000 or more

-Do not aggregate

50 or more employees Company wide

OFCCP requires written affirmative action plan;
use of E-Verify; and specific outreach to females
and minorities

Specific percentage hiring goals

120 days to prepare AAP after entering contract
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Coverage Thresholds: Section
503/Disabled Individuals


Basic Coverage: Single government contract or
subcontract of $10,000 or more

Aggregate contracts

Open-ended contracts covered if reasonably expect
amount to exceed $10,000 in 12 month period
Obligation: Prohibits discrimination on the
basis of disability
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Coverage Thresholds: Section
503/Disabled Individuals (Con’t)

Major Coverage: Single government contract
or subcontract of $50,000 or more

-Do not aggregate

50 or more employees

OFCCP requires written affirmative action plan;
and outreach to disabled individuals

No hiring percentage goals

Revised Regulations: Anticipated 7% goal
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Coverage Thresholds:
VEVRAA/Covered Veterans

Basic Coverage: Single government contract or
subcontract of $10,000 or more

-Open-ended contracts covered if reasonably expect to
exceed $10,000 in 12 month period

Obligation: Prohibits discrimination against
“covered veterans”; requires outreach

“Covered Veterans”: Armed Forces service
medal veterans, disabled veterans, recently
separate veterans and other protected veterans
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Coverage Thresholds:
VEVRAA/Covered Veterans (Con’t)

Major Coverage:
Single government
contract or subcontract of $100,000 or more

-Open ended contracts covered if reasonably expect
amount to exceed $100,000 in 12 month period

Obligation:
Written AAP; outreach; no
current hiring percentage goals

Revised Regulations: OFCCP/DOL expected to
include specific hiring percentage goals
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Health Care Providers

OFCCP attempted to expand jurisdiction

In past, Medicare and Medicaid are grants-not
government contracts

OFCCP asserts jurisdiction over HCP who
participate in TRICARE networks

Florida Hospital appeals-TRICARE federal
financial assistance like Medicare/Medicaid
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Health Care Providers (Con’t)

In December 2011, President Obama signed the
National Defense Authorization Act (NDAA);
Section 715 exempts TRICARE providers from
coverage as federal contractors

OFCCP announced last week during suspending
audits based solely on TRICARE/Rescinded
Directive 293 (participation in Medicare C and D
subjects HCP to OFCCP jurisdiction)
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Action Items

Did your Company check “yes” on Question 3 of
Section C of the EEO-1 Report?
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Action Items (Con’t)

Check to see whether your Company or any of
its related entities are listed in:

USAspending.gov
[most comprehensive]

governmentcontractswon.com

ccr.gov (central contractor registration)
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Action Items (Con’t)

Obtain copies of all of your federal contracts



Often a difficult task
Review duration and amount to determine AA
obligations
Train contracting personnel to review contracts
for the following phrases:


Affirmative Action
EO 11246, Sec. 503, VEVRAA
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OFCCP Audits

Receive a Notice of Desk Audit

Will be addressed to top Company official

Have 30 days to provide written AAP and other
required personnel data

No extensions of 30 day period
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OFCCP Audits (Con’t)

Focus on compensation

Outreach to veterans and disabled individuals

On-site visit: Review personnel files; FMLA
records; applicant logs; payroll information;
interview employees and managers
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Penalties for Non-Compliance

Conciliation Agreement (promise to
comply/keep better data)-must submit future
plans to OFCCP

Require Company to reimburse applicants who
were discriminated against; offer them positions

Require Company to remedy pay disparity
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Penalties for Non-Compliance
(Con’t)

Withhold payments until compliant

File suit on behalf of discriminated applicants or
employees

Cancellation of current government contracts

Debarment from future government contracts-list
on DOL’s website; very rare in past; more
common now
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Questions?
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THANK YOU!
If we can ever assist your organization with federal
contractor/affirmative action issues or any other legal
concerns, please give us a call.
Monica M. Fanning
[email protected]
(816) 474-8100
Copyright 2012
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Thank you for your participation in the Employer Webinar Series.
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To obtain a recording of this presentation, or to register for
future presentations, contact your local UBA Member Firm.
This Employer Webinar Series program
is presented by Spencer Fane Britt & Browne LLP
in conjunction with United Benefit Advisors
Kansas City = Omaha = Overland Park
St. Louis = Jefferson City
www.spencerfane.com
www.ubabenefits.com
32