On August 27, 2013, the U.S. Department of Labor announced new final regulations under the Vietnam Era Veterans Readjustment Assistance Act of 1974 (VEVRAA) and Section 503 of the Rehabilitation Act of 1973, two laws that impose nondiscrimination and affirmative action requirements on covered federal contractors. The new regulations expand existing recordkeeping, data-collection, and affirmative action requirements for contractors with respect to the hiring and employment of protected veterans and disabled workers and include, for the first time, numerical utilization goals for the employment of individuals with a disability and numerical benchmarks for the hiring of protected veterans. The new requirements regarding disabled workers are similar to existing requirements regarding the employment of women and minorities under Executive Order 11246. All three laws, VEVRAA, Section 503, and Executive Order 11246, are enforced by the Office of Federal Contract Compliance Programs (OFCCP), a division of the U.S. Department of Labor.

These regulations were first proposed in 2011, but were delayed in their final publication in response to public comments and other push-back by contractor groups. Their release at this time is viewed as an indication of an aggressive agenda on workers’ rights by newly appointed Secretary of Labor Thomas Perez. In its press release regarding the regulations, the Department explains that the rules are intended to reduce barriers to employment opportunities for protected veterans and individuals with a disability. Federal contractor groups have warned, however, that the new regulations will burden contractors with significant additional compliance costs.

Highlights of the New Regulations

Under the new disability rules, covered federal contractors must for the first time invite applicants to self-identify their disability status at the time of application and must prepare annual quantitative comparisons for the number of individuals with disabilities who apply for jobs and the number who are hired. Contractors must also collect, compile, and maintain additional records regarding outreach efforts and analyze the effectiveness of those efforts annually. The new veteran regulations require similar documentation, data collection, and analysis for protected veterans. Contractors must maintain the data and records regarding their hiring and outreach efforts for a period of three years.

Affirmative action plans for veterans must include a hiring “benchmark” for protected veterans, and those for disabled workers must include a utilization analysis for each job group. While the rules do not set quotas for employment of either protected group, they establish a utilization “goal” of seven percent for disabled workers and a hiring benchmark for protected veterans that initially is either eight percent or a different percentage calculated in light of several factors set forth in the new rules. Failure to reach these percentages does not establish a violation of the law, but may invite increased scrutiny of a contractor’s efforts with regard to recruitment and hiring. Noncompliance with the regulations can lead to withholding of contract payments and debarment from future contracting for up to three years.

Practical Implications

The new regulations become effective 180 days following their publication in the Federal Register, which is expected to occur by early September. Contractors with affirmative action plans in place on the effective date do not have to come into compliance with the new regulations until the anniversary date when their plans are due for renewal and updating. Nevertheless, given the extensive new recordkeeping burdens and the costs that are likely to be incurred in complying with the additional requirements, federal contractors covered by VEVRAA and Section 503 should review existing recruitment efforts, hiring practices, and affirmative action plans now and consider what changes will be necessary to comply with the new regulations.

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