This summer, Tufts Associated Health Plans Inc. agreed to pay more than $370,000 to settle allegations that it violated federal contract compliance regulations by retaliating against victims of discrimination.

The U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) had earlier accused the Massachusetts-based company of violating federal affirmative action requirements.

According to the OFCCP, in May 2009, Tufts agreed to hire minority workers as customer service representatives to settle a finding that its hiring practices discriminated against minorities. Less than a year after that agreement, one of the workers complained to the OFCCP that he had been terminated due to his race and retaliated against due to his status as a member of a protected class. The worker claimed that minorities recruited under the OFCCP-mandated affirmative action program were segregated from other employees. After an investigation, the office found that Tufts had retaliated against 12 class members.

Like Tufts, every company that contracts or subcontracts with the federal government for more than $10,000 is required to avoid discriminating against employees based on sex, race, color, religion, national origin, disability or status as a protected veteran. Nearly one-quarter of American workers are employed by a company that does business with the federal government, according to the Labor Department, so a significant number of companies come under the jurisdiction of the OFCCP.

The changing regulatory landscape has increased the pressure on contractors to comply with affirmative action requirements, as well as an aggressive enforcement agenda by the OFCCP. Since the National Equal Pay Task Force was introduced in 2010, the OFCCP has substantially increased the number of enforcement actions addressing pay discrimination, one of the areas targeted for enhanced review.

If companies with federal contracts or subcontracts are found to be non-compliant in regard to equal employment and affirmative action, they can face mandatory changes in their employment policies as well as bad publicity. In the worst-case scenario, they may even be barred from working with the government. The laws governing the affirmative action programs for contractors are lengthy and complicated, so companies need to spend significant time to ensure compliance.

Three Laws, Many Rules

The OFCCP enforces three laws, which together govern equal employment opportunities for persons employed by federal contractors. These laws ban discrimination and require federal contractors and subcontractors to take affirmative action to ensure that all individuals have an equal opportunity for employment. These laws are:

  1. Executive Order 11246. EO 11246 prohibits federal contractors and subcontractors and federally assisted construction contractors and subcontractors that generally have contracts that exceed $10,000 from discriminating in employment decisions on the basis of race, color, religion, sex or national origin. It also requires contractors to take affirmative action to ensure that equal opportunity is provided in every aspect of employment. Companies must also make good faith efforts to achieve the goals that the OFCCP sets for employing women and minorities in “all crafts and trades” in their area where the contracts are to be performed.
  2. Section 503 of the Rehabilitation Act of 1973. Section 503 requires affirmative action for qualified individuals with disabilities for all federal contracts over $10,000. It also stipulates that contractors and subcontractors who hold contracts over $50,000 and that have 50 or more employees must develop and maintain a written affirmative action program.
  3. The Vietnam Era Veterans Readjustment Assistance Act of 1974. This law requires affirmative action for all personnel practices regarding covered veterans on contracts of $100,000 or more. The law requires certain affirmative action steps for disabled veterans, Armed Forces service medal veterans, recently separated veterans, and other protected veterans who served during a war, a campaign, or an expedition for which a campaign badge was authorized. Covered contractors and subcontractors with 50 or more employees must develop and maintain a written affirmative action program.

To ensure compliance with all of its conditions, the OFCCP periodically audits the employment practices of contractors. During these evaluations, the OFCCP looks at virtually every aspect of the company’s employment practices, including recruitment, job placement, training, promotion, pay and termination. When the OFCCP identifies problems, it will recommend corrective action. Individual employees and organizations working on behalf of employees can also file complaints alleging violations.

If the OFCCP identifies a problem, it will normally enter into a “conciliation agreement” with the contractor. This can include back pay, job offers, seniority credit, promotions or other forms of relief for victims. Companies may also need to institute new training programs, special recruitment efforts or other actions.

If conciliation fails, the OFCCP will refer the case to the Office of the Solicitor for administrative enforcement hearings. If conciliation is not reached before or after the hearing, sanctions may be imposed. These can include cancelling, terminating, or suspending part or the entire contract. Contractors may also be debarred, making them ineligible for future government contracts. Cases also may be referred to the Department of Justice for judicial enforcement.

New Regulations

The OFCCP recently issued new regulations pertaining to disabled individuals and veterans. These new regulations go into effect March 24, 2014; however, for companies whose affirmative action plan cycle is already in place, the new regulations will only apply at the next cycle. The new regulations add a significant layer to the already complex world of federal affirmative action compliance. Specifically, the new regulations require contractors to aim for a 7 percent utilization goal for disabled employees and an 8 percent hiring benchmark for covered veterans. Neither of these goals are absolute requirements, but failure to meet them will make the OFCCP more likely to find a violation.

In order to ensure compliance with the regulations, companies that work with the federal government, or that work with companies that work for the government, need to take several steps.

  • Determine jurisdiction. In most cases, it’s obvious whether a company needs to comply with the affirmative action obligations required by the OFCCP. However, some cases are less clear-cut. Affirmative action provisions also vary for non-construction and construction contractors.
  • Work with attorneys. Ensuring compliance involves a dizzying set of rules, regulations and actions. Companies that fall under the jurisdiction of the OFCCP need to consult regularly with their in-house legal departments and outside counsel to be sure that they are taking all the correct actions.
  • Cooperate with HR. Since the OFCCP’s jurisdiction is closely tied to hiring, training, retention and promotion, HR should be involved at every step.
  • Train and train again. Anyone involved with hiring, training, promotion and firing should receive regular training so they understand the rules that govern their employment decisions. Companies should also formalize training programs for employees, so they understand what constitutes a harassment-free environment and what the company expects of its employees.
  • Document everything. The laws governing compliance for federal contractors require a hefty amount of paperwork and recordkeeping. When the OFCCP conducts an audit or an employee files a complaint, thorough paperwork can go a long way towards addressing any concerns and minimizing questions.
  • Set up referral programs. Employers are supposed to encourage minority and female workers to recruit other minorities and women. With a referral program, companies can further motivate employees to refer friends, family and acquaintances.
  • Review the new OFCCP regulations. Contractors should review the new regulations with legal counsel in order to be ready when their implementation is required.
  • Frequently evaluate processes and procedures. In addition to the required yearly updating of the written affirmative action program, companies should periodically review every aspect of their affirmative action and equal employment programs to identify and address any areas of concern.