On June 14, 2011, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) released a new directive to outline the process by which federal supply and service contractors can apply for Functional Affirmative Action Program (“FAAP”) agreements.

Background

Under Executive Order 11246, which prohibits federal contractors and federally-assisted construction contractors and subcontractors from discriminating in employment decisions on the basis of race, color, religion, sex, or national origin, any company with 50 or more employees and a federal contract of $50,000 or more is required to develop a written affirmative action program (“AAP”) for each of its establishments. OFCCP is responsible for enforcing this Order.

AAPs are designed to help contractors identify and analyze potential disparities related to the employment of women and minorities. Where disparities exist, contractors can use AAPs to articulate specific procedures they will follow and good faith efforts they will make to provide equal employment opportunities. FAAP agreements allow large contractors the flexibility to create AAPs by functional or business units rather than by individual establishments. For example, a company could develop an affirmative action program for all sales associates across multiple offices in different states as opposed to creating one for each work site.

Key Changes

In issuing its new directive, OFCCP made significant changes to the application and approval procedures for FAAP agreements. The new guidance rescinds a previous directive, Administrative Notice/Functional AAP, issued March 21, 2002, and ends a yearlong suspension in the acceptance of requests to develop or renew FAAP agreements while the program was under review.           

Most significantly, the new directive includes the requirement of written approval by the OFCCP director before contractors can begin developing FAAPs. This change eliminates the previous provision for automatic approval if OFCCP failed to act upon the request within 120 days. Also, the new directive provides for a shorter 3 year term for FAAP agreements at which point a renewal will have to be approved at time of application the OFCCP will review contractors. EEO violations from other local, state and federal agencies. In addition, the new directive provides the possibility of a compliance evaluation by OFCCP, should contractors fail to submit the required annual updates to their FAAP agreements.

Impact on Contractors

All contractors who currently have an approved FAAP agreement will be required to renew it in accordance with the new guidance. Contractors without these agreements should continue to maintain and develop establishment-based AAPs. Contractors considering whether to seek approval for a FAAP should carefully consider, in advance, the heightened OFCCP scrutiny of the Company and its compliance under the AAP. Regardless of whether contractors currently utilize FAAPs, those who do business with the government should be aware of the new directive, which can be found here.