Table of Contents

Table of Contents

Take care of your people and protect your business

Businesses with contracts or subcontracts with the U.S. government may be subject to special compliance requirements. The Office of Federal Contract Compliance Programs (OFCCP) is the agency responsible for ensuring compliance. When businesses violate requirements, they could be subject to harsh penalties. Read on to learn about the OFCCP, compliance requirements that may impact your business, and how to protect your company from noncompliance penalties.

What Is OFCCP Compliance?

The Office of Federal Contract Compliance (OFCCP) is a federal agency in the U.S. Department of Labor (DOL). The OFCCP is responsible for ensuring that those who do business with the federal government (federal contractors and subcontractors) comply with affirmative action requirements and don’t discriminate based on race, color, sex, sexual orientation, gender identity, religion, national origin, disability, or status as a protected veteran.

Compliance with the OFCCP means being compliant with the legal requirements they enforce. They include Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA). Each has unique criteria for determining which federal contractors and subcontractors are subject to its requirements. More details about these requirements can be found in the “Laws that Enforce OFCCP Compliance” section below.

Why Is OFCCP Compliance Important?

When businesses violate OFCCP compliance requirements, they could be subject to harsh penalties. Failure to maintain OFCCP-compliant business practices can result in consequences, such as:

  • Harsh sanctions. Contractors may have their contracts canceled, terminated, or suspended fully or in part. They may be debarred and declared ineligible for future government contracts. These consequences lead to lost revenue.
  • Penalties. Contractors and subcontractors may face monetary penalties ranging from thousands to millions of dollars. Between 2011 and 2021, the OFCCP obtained over $211 million in monetary relief for employees and job seekers who experienced discrimination. These penalties must be paid in 30 days or less from the settlement date. If your business struggles with cash flow, it could be difficult to come up with the money on such short notice.
  • Potential civil and criminal liabilities. Subcontractors may be held liable if being debarred causes the federal contractor to be in breach of their contract with the government. When serious violations occur, the Department of Justice (DOJ) may bring suit to enforce regulations or assure compliance. The DOJ can even bring federal criminal charges against the person certifying the data if they knowingly furnished false information to the DOL. Punishment for this offense is a fine and/or up to 5 years of imprisonment.
  • Audits. The OFCCP has neutral scheduling procedures for selecting federal contractors for compliance evaluations. If your company is selected, and the OFCCP finds initial evidence of potentially discriminatory practices during a desk audit, they may conduct an on-site review at your location. Any time spent tracking down all the documents required by an OFCCP auditor can lead to lost productivity.
  • Negative company reputation. Historically, the media has followed audit violation stories. The result is bad publicity about a company’s brand. When your employer brand has a negative perception, you may find it difficult to attract and retain talent. Your company could even lose out on business opportunities!

Requirements for OFCCP Compliance

Contractors must ensure equal employment opportunities for applicants and employees and take affirmative action in employment activities. While the requirements listed here are not exhaustive, they provide a general understanding of OFCCP compliance. You can find additional resources on the OFCCP Contractor Compliance Institute webpage. There are compliance assistance guides and online courses designed to educate and inform contractors of their legal obligations.

Affirmative Action Program (AAP)

Contractors that meet certain jurisdictional thresholds (read the “Laws that Enforce OFCCP Compliance” section below) are required to develop an Affirmative Action Program (AAP) for each of their establishments within 120 days of the commencement of the contract. AAPs are general activities contractors engage in to support equal employment opportunities. An Affirmative Action Plan (also an AAP) is the written documentation of these activities. Often, the terms “Affirmative Action Program” and “Affirmative Action Plan” are used interchangeably.

Employers should customize their AAPs for their organizational structure, geographic locations, policies, practices, programs, and data. This is where AAPs can get complex. Many employers opt to utilize an AAP vendor to support by compiling and maintaining AAPs. Some may even provide general compliance guidance or offer support during an audit by the OFCCP. A list of AAP vendors can be found on the Society for Human Resource Management (SHRM) website. Employers who are interested in developing their own AAPs can find sample AAPs on the OFCCP website.

Whether you develop your AAPs or use an AAP vendor, make sure the new reporting standards are met. In 2022, the OFCCP rolled out the Contractor Portal, the new Affirmative Action Program Verification Interface (AAP-VI). Contractors are required to use this platform to certify they are meeting compliance requirements by developing and maintaining annual AAPs. This portal is also used to upload AAPs during compliance evaluations. More information about the Contractor Portal can be found on the OFCCP website.

Once you have AAPs, it’s important to take affirmative action to remove barriers to equal employment opportunities. Just having an AAP is not enough. Employers must establish and document their good faith efforts to address and resolve any areas of underutilization that are uncovered. The OFCCP offers many best practices and resources to support these efforts. Be sure you advise your organization’s top management of your AAPs and their effectiveness, offer recommendations to improve, and take affirmative action. Those actions will be key in addressing any areas of underutilization. Then, revisit your AAPs annually to review progress and refine goals as needed.

Job Advertisements

Contractors must ensure their job advertisements are compliant. They must state that the contractor will consider all qualified applicants regardless of protected bases. For contractors only covered by Executive Order 11246, it is acceptable to use the phrase “Equal Opportunity Employer” or list out all the bases. However, for employers covered by Section 503 or VEVRAA, the tagline should always state “disability” and “vet.” For example, a contractor could satisfy all three laws by stating in job advertisements that “all qualified applicants will receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability, or status as a protected veteran.” It could also use the abbreviation “Equal Opportunity Employer – vets, disability” on job advertisement taglines. More information about this requirement is available in Chapter 2 of the Federal Contract Compliance Manual.

Self-Identification

Contractors are required to invite applying candidates to voluntarily self-identify after they meet the internet applicant requirements. This is called the pre-offer stage. They must also invite newly hired employees to voluntarily self-identify again. It’s usually included with the paperwork newly hired employees must complete. This is called the post-offer stage. Inviting candidates and employees to self-identify enables contractors to measure the effectiveness of their AAPs to ensure equal employment opportunities. Make sure you are collecting all relevant data points for the legal requirements your employer is subject to. The legal requirements of Executive Order 11246 (gender, race, and ethnicity), VEVRAA (veteran status), and Section 503 (disability status) should be considered. The OFCCP and the Equal Employment Opportunity Commission (EEOC) do not endorse any specific self-identification form for gender, race, and ethnicity. Section 503 does require employers to use the self‐identification of disability form. The OFCCP also provides a sample self-identification of veteran status form on its website.

As an ongoing practice, Section 503 requires that contractors invite employees to self-identify their disability status every five years. In addition, at least once during the years between these invitations, contractors must remind their employees that they may voluntarily update their disability status at any time. During this process, contractors can record data on employees who become disabled while employed, as well as those with existing disabilities who may feel more comfortable self-identifying once they have been employed for some time. This also allows contractors to monitor and improve their practices regarding placement, retention, and promotion.

Remember, self-identification is the most reliable and preferred method for compiling information about a person’s gender, race, and ethnicity. It is even required under OFCCP regulations! However, sometimes an employee chooses not to disclose this information. Regulations emphasize that contractors may not compel or coerce employees to self-identify. Self-identification must be voluntary. When employees decide not to disclose this information, the OFCCP permits employers to use post-employment records or visual observation to obtain this information. The OFCCP will not hold a contractor responsible if they made a reasonable effort to collect the information and had no other acceptable methods for obtaining it. Any self-identification information you do collect must be kept confidential.

Reasonable Accommodations

Contractors subject to Section 503 are required to make reasonable accommodations in the workplace when requested by qualified individuals with disabilities unless it causes the employer undue hardship. In assessing undue hardship, employers should refer to the Enforcement Guidance on Reasonable Accommodation and Undue Hardship under the ADA from the EEOC.

Whenever an employee with a known disability is having significant difficulty performing their job, and it is reasonable to conclude that the performance problem may be related to the disability, the contractor must confidentially notify the employee of the performance problem and inquire whether it is related to the employee’s disability. If the answer is yes, the contractor must also confidentially inquire whether the employee needs reasonable accommodation.

Contractors must ensure they are providing reasonable accommodations and engaging in an interactive process to determine what, if any, accommodation should be provided. The Reasonable Accommodation Resource Center (RARC) at the Civil Rights Center (CRC) provides useful guidance and information about reasonable accommodation and the interactive process. According to the OFCCP, contractors must also ensure they have reasonable accommodation policies and documentation of accommodation requests and their resolution. These documents may be evaluated during a compliance audit. Additional information about this requirement can be found in Chapter 1 of the Federal Contract Compliance Manual.

Internal Audit and Reporting System

Many employers use one or more information systems for HR. Some examples include a Human Resources Management System (HRMS), Human Resources Information System (HRIS), Human Capital Management (HCM), and an Applicant Tracking System (ATS). Regardless of the system used, the system should monitor all personnel activity (including applicants, hires, promotions, transfers, and terminations) and compensation at all levels to ensure that non-discriminatory practices have been followed.

The OFCCP suggests that reporting be performed periodically and reviewed by appropriate management to assure that the required data points are being tracked. These data points are essential for the creation and ongoing maintenance of your AAPs. They are also necessary if the OFCCP conducts a compliance audit.

Recordkeeping Requirements

The OFCCP has specific recordkeeping requirements for different types of contractors and records. In addition to ensuring that you are collecting required data points, you must retain those records. The retention period varies, but can be as long as three years. You can find detailed information on recordkeeping requirements for Executive Order 11246, Section 503, VEVRAA, Internet Applicants Recordkeeping Rule, Applicant Tracking Guide, and Applicant Tracking FAQs on the OFCCP website.

Posters and Notices

The OFCCP requires that contractors post the “Equal Employment Opportunity is the Law” and “Pay Transparency Nondiscrimination” posters. The Pay Transparency Nondiscrimination Provision must also be included in employee handbooks and manuals. Contractors must place the posters somewhere conspicuous for all applicants and employees. Contractors can post this either physically on the premises or electronically. You can find posters available for download in multiple languages on the OFCCP website. There are other poster requirements beyond the OFCCP’s requirements. A section dedicated to the special interest of federal contractors can be found on the DOL’s Workplace Posters webpage.

Laws that Enforce OFCCP Compliance

Three laws are enforced by the OFCCP. They include Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA). Each provides equal employment opportunity protections for American workers.

Executive Order 11246

Executive Order 11246 prohibits certain federal contractors and subcontractors from discriminating based on race, color, religion, sex, sexual orientation, gender identity, or national origin. They are also prohibited from discriminating against applicants or employees who inquire about, discuss or disclose their compensation or that of others, subject to certain limitations. Executive Order 11246 also requires that certain federal contractors and subcontractors take affirmative action to ensure equal employment opportunities. Specific jurisdictional thresholds for this executive order are as follows:

  • Federal contractors and subcontractors with contracts greater than $10,000 must adhere to the non-discrimination requirements listed above.
  • Federal contractors and subcontractors with 50 or more employees and a contract of $50,000 or more are required to have AAPs that ensure equal employment opportunity. In most cases, a written AAP must be developed for each establishment within 120 days from the start of the federal contract.

Section 503 of the Rehabilitation Act of 1973

Section 503 of the Rehabilitation Act of 1973 prohibits certain federal contractors and subcontractors from discriminating against individuals with disabilities. Some are also required to take affirmative action to recruit, hire, promote and retain these individuals. Specific jurisdiction thresholds under this law are as follows:

  • Federal contractors and subcontractors with a contract of more than $15,000 are prohibited from discriminating against individuals with a disability.
  • Federal contractors and subcontractors with 50 or more employees and a contract of $50,000 or more are required to have AAPs that ensure equal employment opportunities for individuals with disabilities.

Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA)

The Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) prohibits federal contractors and subcontractors from discriminating against protected veterans and requires employers to take affirmative action to recruit, hire, promote and retain these individuals. Specific jurisdiction thresholds under this law are as follows:

  • Federal contractors and subcontractors with a contract of $150,000 or more are prohibited from discriminating against protected veterans.
  • Federal contractors and subcontractors with 50 or more employees and a contract of $150,000 or more are required to have AAPs that ensure equal employment opportunities for protected veterans.

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Questions You’ve Asked Us About OFCCP Compliance

The OFCCP conducts different types of compliance reviews. These may include a desk audit, on-site review, and off-site analysis. A desk audit is performed by a compliance officer to review a contractor’s compliance with the affirmative action and equal opportunity obligations at a particular establishment. The procedures for a desk audit can be found in Chapter 1 of the Federal Contract Compliance Manual. You can also find a detailed description of what federal contractors can expect when interacting with the OFCCP on their website.
The Office of Federal Contract Compliance Programs (OFCCP) is responsible for the enforcement of federal equal opportunity laws applicable to federal contractors and subcontractors. They make sure employers comply with nondiscrimination laws as they conduct business with the federal government. In contrast, the Equal Employment Opportunity Commission (EEOC) enforces federal equal opportunity laws applicable to employers with at least 15 employees (20 employees in age discrimination cases). Both are responsible for enforcing nondiscrimination laws in the U.S. but one covers federal contractors and subcontractors while the other covers everything else.

Cynthia Ott, SPHR, SHRM-SCP has 15+ years of HR experience working within a variety of industries, including international, domestic, and multi-site management. As an HR subject-matter expert, her expertise is in both operational and strategic HR practices. She establishes and develops HR teams and infrastructure for companies to enhance operational performance, reduce cost, increase profitability, and support strategic direction. In her free time, she serves as an active member of several HR and leadership organizations and participates in philanthropic activities.

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