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Banking & Finance Law Report

Major Changes to Affirmative Action Requirements Become Effective March 24, 2014

Posted in Employment and Compensation Law, Other Articles

Financial institutions and other types of businesses that are covered by federal affirmative action obligations have some major changes for which to prepare. Financial institutions should be aware, both for themselves and their business clients, that the Office of Federal Contract Compliance Programs (OFCCP) has issued two new rules which take effect March 24, 2014. The new rules expand the affirmative action requirements for covered veterans and disabled persons.

For more than 30 years, regulations under the Vietnam Era Veterans Readjustment Assistance Act of 1974 (VEVRAA) and Section 503 of the Rehabilitation Act of 1973 have required covered employers to engage in good-faith efforts to recruit and employ covered veterans and disabled persons. The requirements include the obligation to invite applicants and employees to “self-identify” as a veteran or disabled person and to take additional affirmative action measures. Contractors with more than 50 employees and covered contracts that exceeded certain trigger limits also must prepare annual written affirmative action plans (AAPs) for veterans and disabled persons. However, until now, there was no obligation for employers to develop and retain hiring and other employment data or to set numeric goals for employment of veterans or disabled persons, as is required in the affirmative action rules for minorities and females.

The new rules require employers to gather and retain data showing the results of their recruiting and hiring efforts and to set numeric targets for hiring veterans and disabled persons. The new rules also include significant additional obligations for reviewing, analyzing and documenting good-faith efforts and results.

With only a few exceptions, the affirmative action obligations concerning veterans apply to employers with federal contracts and subcontracts that exceed $100,000 in value. The contract-triggering level for coverage under the rules concerning disabled persons is $10,000. If you have any question about whether your institution is covered by these laws, keep in mind that the net is cast quite widely. You are definitely covered if you are doing business with the federal government on contracts that exceed the trigger levels mentioned above. Insured financial institutions are covered.

The affirmative action laws also reach a business if it has covered subcontracts, and that definition is very broad. For example, if you manufacture widgets and they are being sold to another company, which in turn sells them to a third company that uses your widgets in connection with some federal contract down the chain, you may be covered.

Following is a summary of the major changes.

VEVRAA-Specific Targets

Covered contractors will be required to establish a target that 8% or more of new hires will be covered veterans. Contractors will be allowed to establish a different specific percentage target where they can justify doing so based on localized availability and hiring challenges. Changes have also been made to the requirement for listing job openings with the local state employment service so that veterans have a better chance at referral for openings.

Section 503-Specific Targets

Covered contractors will be required to establish a target of 7% disabled employees in each of the job groups established under their affirmative action plans (AAPs). Small contractors (fewer than 100 employees) can instead establish a target of 7% employment for disabled persons in their total workforce.

Changes Under Both Laws

Under both laws, contractors now must offer applicants the opportunity to self-identify as a covered veteran or disabled person before a job offer occurs. Under previous rules, employers could wait until post-job offer to extend the invitation. An invitation to self-identify must also be extended to all employees after a job offer and before beginning work. Both new rules have detailed requirements for collecting data that shows hiring and recruiting efforts and results. That data must be retained for three years. Both rules also include detailed requirements for an annual review and analysis of good faith recruiting efforts and results.

Timing

The rules take effect March 24, 2014. However, for employers with an annual AAP that already is in place on that date, the affirmative action obligations — including the numeric targets, data retention and analysis — will be enforced beginning with the contractor’s next affirmative action plan year.

Conclusion

Employers that have established networks already for recruiting and hiring veterans and disabled persons will have an easier time coming into compliance. However, many employers face a real challenge identifying and networking with recruiting sources able to refer qualified candidates for their businesses. All covered employers would be wise to become familiar with these new rules and to begin now to plan for improved networking and recruiting. Also, it would be wise to become familiar with the new requirements for data collection, retention, and analysis well before those obligations have to be incorporated into your next AAP.