DEPARTMENT OF LABOR
Employment Standards Administration, Office of Federal Contract Compliance Programs
41 CFR Parts 60-1, 60-60
RIN 1215-AA01 Government Contractors, Affirmative Action Requirements, Executive Order 11246
AGENCY: Office of Federal Contract Compliance Programs (OFCCP), ESA, Labor.
ACTION: Final rule.
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SUMMARY: The Office of Federal Contract Compliance Programs (OFCCP) is revising a limited number of the regulations to implement Executive Order 11246, as amended, which prohibits employment discrimination and establishes affirmative action requirements for nonexempt Federal contractors and subcontractors. The final rule revises the regulations relating to record retention, compliance monitoring, maintenance of nonsegregated facilities, and other aspects of enforcement. The revisions to the Executive Order implementing regulations effected by this final rule are expected to reduce the compliance burdens of covered contractors, and improve the efficiency of OFCCP in administering and enforcing the Executive Order.
EFFECTIVE DATE: September 18,1997.
FOR FURTHER INFORMATION CONTACT: Joe N. Kennedy, Deputy Director, Office of Federal Contract Compliance Programs, Room C-3325,200 Constitution Avenue, NW., Washington, DC 20210. Telephone 202-219-9475 (voice), 1-800-326-2577 (TDD). Copies of this final rule, including copies in alternate formats, may be obtained by calling 202-219-9430 (voice X, 1-800326-2577 (TDD). The alternate formats available are large print, an electronic file on computer disk and audiotape. The rule also is available on the Internet at http://www.dol.gov/dol/esa.
SUPPLEMENTARY INFORMATION:
I. Current Regulations and Rulemaking History
Executive Order 11246, as amended prohibits all nonexempt Government contractors and subcontractors, and federally assisted construction contractors and subcontractors, from discriminating in employment. The Executive Order also requires these contractors to take affirmative action to ensure that employees and applicants are treated without regard to race, color, religion, sex and national origin. OFCCP has been assigned responsibility for administering Executive Order 11246, and has published regulations implementing the Order at 41 CFR Ch. 60.
The Executive Order regulations have not undergone substantive revision since the 1970s. A final rule was published on December 30,1980 (45 FR 86215; corrected at 46 FR 7332, January 23,1981), but was stayed in accordance with Executive Order 12291 on January 28,1981 (46 FR 9084). This rule later was stayed indefinitely on August 25, 1981 (46 FR 42865), pending action on a notice of proposed rulemaking (NPRM) published on that same date (46 FR 42968; supplemented at 47 FR 17770, April 23,1982). Both the 1980 final rule and the 1981 NPP>M addressed the regulations contained in 41 CFR parts 60-1 and 60-60. No further action has been taken on the August 25,1981, proposal, or on the 1980 stayed final rule.
On May 21,1996, OFCCP published a proposed rule, 61 FR 25516, to revise specific regulations found at 41 CFR parts 60-1 and 60-60. The comment period closed on July 22,1996. A total of 32 comments was received from six contractors, six contractor associations, one consulting firm, one law firm, 13 civil rights and women's rights organizations, two Federal agencies, one local government agency, and one individual. All the comments were reviewed and carefully considered in the development of this final rule.
II. Overview of the Final Rule
The final rule, for the most part, adopts the revisions that were proposed in the May 21 NPRM. However, some of the proposed provisions have been modified in response to the public comments. The changes between the NPRM and the final rule are explained in detail in the Section-by-Section Analysis.
The final rule revises the regulations in 41 CFR part 60-1 in four areas: Record retention, compliance monitoring, maintenance of nonsegregated facilities, and enforcement procedures. In addition, to ensure consistency in the administration and enforcement of the Federal contract compliance laws, the final rule conforms several provisions in part 60-1 to parallel provisions in the regulations found at 41 CFR part 60741. The latter regulations implement section 503 of the Rehabilitation Act of 1973, as amended (29 U.S.C. 793), which also is administered by OFCCP. A final rule published on May 1, 1996, made comprehensive revisions to the Section 503 regulations (61 FR 19936). The conforming changes made by the final rule published today affect several definitions and some aspects of enforcement.
Further, the final rule deletes most of the existing provisions in 41 CFR part 60-60, which describe the procedures for conducting compliance reviews of nonconstruction (i.e., supply and service) contractors. A few substantive provisions in part 60-60, which are not contained elsewhere in the regulations, are being transferred to part 60-1. The transferred provisions primarily relate to the procedures for protecting confidential data, the time frames within which a contractor must submit its written affirmative action program (AAP) and supporting documentation, and authorization for nationwide AAP formats.
Finally, in order to avoid conflict, the final rule withdraws part 60-1 of the final rule which was published on December 30,1980, and subsequently suspended.
The discussion which follows identifies the significant comments received in response to the NPRM, provides OFCCP's responses to those comments, and explains any resulting changes to the proposed revisions.
Section-by-Section Analysis of Comments and Revisions
Section 60-1.3 Definitions
OFCCP proposed in the NPRM to add a definition for the new term "compliance evaluation." Additionally, OFCCP proposed to revise several definitions in the current regulations to make them consistent with definitions contained in the Section 503 implementing regulations. The Section 503 final rule published on May 1,1996, made changes to several terms and phrases that are common to both Executive Order 11246 and Section 503 of the Rehabilitation Act. Specifically, the Section 503 final rule revised the regulatory definitions of "contract," "Government contract," "subcontract," and "United States," and replaced the title "Director" with the new title, "Deputy Assistant Secretary for Federal Contract Compliance." In order to maintain consistency in its administration and enforcement of the Federal contract compliance laws, OFCCP proposed to make conforming changes to the definitions of those terms found in existing ¤ 60-1.3.
"Compliance Evaluation." Under the existing regulations, the "compliance review" is the primary method utilized to investigate contractor compliance with the requirements of the Executive Order. The current regulations prescribe a three-phase process for conducting compliance reviews: (1) An off-site or desk audit review of the contractor's written AAP and supporting documentation; (2) an on-site review of the contractor's employment policies and activities and investigation of any problem areas identified during the desk audit; and (3) where needed, an off-site analysis of data obtained during the onsite review. Under the current regulations, an on-site review is conducted at nearly every establishment selected for review, regardless of the results of the desk audit.
The existing "all or nothing" approach to compliance reviews is, in the view of OFCCP, too restrictive. OFCCP believes that more focused and streamlined procedures can be used to determine a contractor's compliance status, and that a Qexible approach to monitoring compliance would enable the agency to target its enforcement resources more efficiently.
The NPRM proposed to revise the compliance review provisions found in ¤ 60-1.20 to authorize the agency to utilize "compliance evaluations" to determine the compliance status of a contractor. The NPRM proposed to define the term "compliance evaluation" used in ¤ 601.20 (a) of the proposal as "any one or combination of actions OFCCP may take to examine a Federal contractor or subcontractor's compliance with one or more of the Executive Order 11246 requirements."
Two contractor associations mentioned the proposed definition of "compliance evaluation" in their comments. They asserted that the proposal was vague; that OFCCP had not adequately described how the compliance evaluation procedure would be implemented. These commenters also questioned whether the proposed review process for contractors would be streamlined, because the proposed definition indicated that OFCCP could take "any one or combination of actions" to determine whether a contractor maintained nondiscriminatory employment practices and fulfilled its affirmative action obligations.
The concerns raised by these commenters actually are more properly directed at proposed ¤ 60-1.20(a), which describes four examination procedures encompassed by the term "compliance evaluation," rather than to the language of the proposed definition. Accordingly, a response to these comments is provided below in the preamble discussion concerning ¤ 60-1.20 of the final rule.
The proposed definition of "compliance evaluation" is carried forward in this final rule without substantive change, although the wording has been revised slightly for clarity. OFCCP expects that the Qexible approach to compliance monitoring that is reflected in the term "compliance evaluation" will reduce compliance burdens for the contractors that satisfy their Executive Order obligations. OFCCP also believes this new approach will increase the efficiency of its enforcement program by allowing the agency to use its most comprehensive evaluation procedure-the compliance review-selectively. Further, a range of methods for evaluating contractor compliance will enable the agency to reach a greater percentage of its contractor universe than is reviewed currently.
"Contract. " The term "contract" is defined in the current regulations as "any Government contract or any federally assisted construction contract." The NPRM proposed to amend this definition to subsume the term "subcontractor." As was explained in the preamble to the NPRM, the revision would obviate the need to make a separate reference to "subcontract," each time "contract" is referenced, to demonstrate that a particular provision applies to both contracts and subcontracts.
One contractor association objected to the proposed definition of "contract." This commenter believed that the amended definition would expand the scope of the Executive Order's coverage and impose obligations upon subcontractors that currently do not exist. This commenter's concerns are unfounded. The Executive Order always has been applicable to agreements which fall within the regulatory definition of subcontractors. No substantive changes in the Executive Order's coverage were intended nor effected by the proposed change to the regulatory definition of contract.
Another commenter urged OFCCP to amend the definition to include "all federally assisted contracts and subcontracts," not just "federally assisted construction contracts and subcontracts." However, Section 301 of Executive Order 11246 expressly limits coverage of federally assisted contracts to agreements involving federally assisted construction.
The final rule amends the definition of "contract" to include "subcontract," as proposed in the NPRM. The term "subcontract" is referenced in the rule only when necessary to the context.
"Deputy Assistant Secretary. " The NPRM proposed to substitute the new title of "Deputy Assistant Secretary for Federal Contract Compliance Programs" for the title of "Director" in the current regulations, and to make the title change throughout the proposed rule. No comments were received on this proposal. The final rule adopts this title change as proposed, except that the word "Programs' has been dropped in order to more accurately reflect the title.
"Government Contract. " The regulations define "Government contract" as an agreement "for the furnishing of supplies or services or for the use of real or personal property, including lease arrangements." The NPRM proposed to revise this definition to clarify that contracts covered under Executive Order 11246 include those under which the Government is a seller of goods or services, as well as those in which it is a purchaser. The proposal substituted a reference to the contracts for the "purchase, sale or use of personal property or nonpersonal services" and a definition of the term "personal services" for the existing reference to the "furnishing" of goods or services, or for the use of real or personal property, including lease arrangements. Thus, the proposal provided, in relevant part, that a "Government contract" is "any agreement or modification thereof between any contracting agency and any person for the purchase, sale or use of personal property or nonpersonal services. "
Two commenters--a contractor association that represents small agricultural firms and a national law firm that counsels Government contractors on the requirements of the Executive Order and its implementing regulations--objected to the proposed clarification of the term "Government contract." Both argued that the proposed definition was too broad; that defining Government contract to include sales by the Government would extend the Executive Order's reach to activities that were not intended to be covered. The law firm was concerned that the revised definition of contract would expand the Executive Order's coverage to concessionaires and licensees that operate on Government lands under nonappropriated fund contracts. Specifically, this commenter was referring to those entities that contract with units of the Department of Defense called nonappropriated fund instrumentalities or "NAFls" to operate a wide range of food, retail, and recreational concessions at military installations. The commenter noted that concession contracts with NAFIs typically do not involve appropriated funds, and do not impose costs to the Government.
The law firm argued that Executive Order 11246 and its implementing regulations contemplated coverage of traditional procurement contracts and Government leasing of property, i.e., agreements that require the Government to expend appropriated funds. Thus, the law firm contended that OFCCP did not have the authority to define "Government contracts" so as to include the contracts of nonappropriated fund instrumentalities. Further, this commenter argued alternatively that nocost concession agreements with NAFls should not be covered under Executive Order 11246 because OFCCP would experience difficulty computing their dollar value for the purpose of determining whether the contract satisfied the dollar thresholds for basic coverage and for the written affirmative action program requirement. This commenter requested that OFCCP either modify the definition of "Government contract" or include an express exemption for concession contracts with nonappropriated fund instrumentalities.
The assertions of this commenter ignore the longstanding policy and practice of the agency to cover concession contracts with nonappropriated fund instrumentalities or NAFIs. OFCCP consistently has taken the position that contracts with nonappropriated fund instrumentalities of the Government, such as the Army and Air Force Exchange Service, are covered by Executive Order 11246, assuming the dollar volume thresholds are met. As instrumentalities of the United States, NAFls meet the definition of contracting agency under the regulation at 41 CFR 60-1.3. The fact that these contracts involve nonappropriated funds, rather than appropriated funds, is inconsequential. The Executive Order and implementing regulations do not distinguish between the source of the funds used to pay for the contract to determine coverage. Coverage under the Executive Order turns on the status of the parties and the nature of the agreement in issue.
OFCCP also disagrees with the commenter's contention that the decision cited in the NPRM's preamble Crown Central Petroleum Corp. v. Kleppe, 424 F. Supp. 744 (D. Md. 1976), was limited to lease coverage issues, and therefore, does not support the agency's position that "Government contract" covers sales by the Government. The plaintiff in Kleppe, the holder of an oil and gas lease from the Interior Department, argued that it did not have a Government contract because the financial benefit (cash {low) was toward the Government. In deciding that a lessee of an oil and gas lease was a "Government contractor," the court rejected the argument that the provisions of the Executive Order were limited to those situations in which the Government is the consumer of goods. Significantly, the court in Kleppe concluded that it would be an inconsistent application of the national policy to eliminate discrimination in employment to impose the Executive Order requirements on employers which had contracted to supply goods, services and leased property for use of the Government, but not to impose the requirements of the Order on employers which had contracted with the Government to receive from it goods, services and leased property to be used by the employer.
The commenter's alternative argument for exempting concession contracts with nonappropriated fund entities from the Executive Order is also unpersuasive. The regulatory provisions concerning contracts and subcontracts for indefinite quantities found in the current regulations at ¤ 60-1.5 would govern whether dollar thresholds are satisfied for coverage purposes.
The contractor association cited recipients of disaster relief insurance proceeds as an example of a situation that would be newly covered under the Executive Order as a result of the proposed amendment to the definition of "Government contract." Disaster relief programs such as crop insurance and flood insurance usually involve federal financial assistance. The only federally assisted contracts covered by the Executive Order are federally assisted construction contracts. This does not mean, of course, that the agency is taking a position here that all transactions involving Federal disaster relief are excluded from coverage. Rather, questions relating to coverage under the Executive Order necessarily are decided case by case, based on the particulars of the program and the nature of the agreement at issue.
"Rules, regulations and relevant orders of the Secretary of Labor. " A final rule published on May 3,1996 (61 FR 19982), relating to the establishment of the Administrative Review Board, amended the definition of "Secretary" to include a "designee" of the Secretary of Labor. Consequently, the definition of "rules, regulations and relevant orders of the Secretary of Labor" in the current regulations, which makes reference to the designee of the Secretary, is no longer necessary, and has been omitted in this final rule.
"Subcontract. " The definition of "subcontract" in the current regulations refers to agreements "for the furnishing of goods or services." The NPRM contained a proposal to revise this definition so that it would conform to the NPRM's definition of "Government contract." Accordingly, the proposal included a definition of "subcontract" that referenced agreements "for the purchase, sale, or use of personal property or nonpersonal services."
The contractor association which represents small agricultural firms objected to the proposal, contending that it would expand the scope of the Executive Order's coverage. The commenter said the proposed definition of "subcontract" would be particularly burdensome for companies in the agricultural industry, as the subcontracts for a producer of fruit products necessarily include growers, pickers, haulers, as well as fertilizers and pesticide applicators. This commenter raised a similar objection to the proposed definition of "contract." It appears that these comments were directed primarily at the "necessary to the performance" part of the existing regulatory definition of "subcontract," rather than the proposed "purchase, sale or use" language. As has been explained previously, the scope of coverage under the Executive Order has not been expanded. The existing definition of "subcontract" under the Executive Order regulations applies to agreements which are necessary to the performance of a Government contract, or under which part of the performance of the Government contract is assumed or undertaken.
The final rule adopts, without change, the definition of "subcontract" that was published in the NPRM.
"United States." The NPRM proposed to revise the definition of "United States," by deleting the references to Panama Canal Zone (which was ceded back to Panama under the terms of the Panama Canal Treaty), and by specifying the possessions and territories of the United States as: The Virgin Islands, the Commonwealth of Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and Wake Island. No comments were received on this proposed revision. The proposed definition of "United States" is adopted.
Section 60-1.8 Segregated Facilities
Section 60-1.8 of the current regulations prohibits the maintenance of segregated facilities (paragraph (a)) and requires contractors to certify that they are in compliance with that obligation (paragraph (b)). OFCCP proposed in the NPRM to conform paragraph (a) of ¤ 601.8 with the Executive Order's general nondiscrimination requirements by expanding the list of prohibited practices to include gender-based segregation, wlth the proviso that separate or single-user restrooms and necessary dressing or sleeping areas shall be provided to assure privacy between the sexes. Several stylistic changes to existing paragraph (a) also were proposed. In addition, the NPRM proposed to eliminate the written certification requirement in paragraph (b).
Nearly half of the commenters addressed the proposed changes concerning segregated facilities. Commenters representing the constituencies most directly affected by the regulations- minorities, women and Government contractors-all supported the proposed prohibition against gender-based segregated employee facilities. The women's rights groups, in particular, applauded the proposal. In their view, the proposed amendment recognizes that sexsegregation remains a problem in traditionally male workplaces.
The comment of the Equal Employment Opportunity Commission (EEOC) concerned the requirement that "separate or single-user restrooms, dressing or sleeping areas shall be provided to assure privacy between the sexes." EEOC suggested that we alert contractors that, under Title VII of the Civil Rights Act of 1964, as amended, it would be an unlawful employment practice for an employer to deny employment or to otherwise adversely affect the employment opportunities of an applicant or employee in order to avoid the cost of providing separate or single restroom or dressing facilities. Likewise, contractors are advised that the costs of providing such separate facilities would not be a defense to a charge of sex-based employment discrimination brought under the Executive Order.
Further, all but two comments expressed support for the elimination of the written certification requirement in paragraph (b). A women's rights organization and a local government entity objected to the proposal. The women's rights organization argued that retention of the written certification requirement would serve as a useful reminder of the new prohibition against sex-segregated employee facilities. This commenter suggested that the benefits of the notice-serving function of the certification outweighed any timesavings that would be realized by elimination of the requirement. The governmental entity similarly commented that requiring a contractor to certify that it maintains nonsegregated facilities reflected the essence of the Executive Order, but imposed only a minimal burden on contractors.
OFCCP agrees that contractors should be apprised of their obligation under the Executive Order regulations to ensure that employee facilities are not segregated on the basis of sex, except where it is necessary to safeguard privacy between men and women. The agency, however, is of the view that the prohibition against segregated facilities can be effectively enforced without the benefit of the written certification. Eliminating the certification will not, for example, affect the contractor's obligation to maintain facilities on a nonsegregated basis. In short, the written certification is a paperwork requirement that does not produce commensurate benefit, and its repeal is consistent with the Administration's regulatory reform initiative.
Another commenter asked that OFCCP clarify in the final rule that repeal of the written certification will not expose prime contractors to liability for the violations of the Executive Order committed by their subcontractors. OFCCP accepts the point that the repeal will not expose prime contractors to liability for violations committed by their subcontractors. However, it is not necessary to codify the point in the regulations. Under the existing regulations, prime contractors are not responsible for the compliance of their subcontractors with the requirements of the Order and regulations. Consequently, the certification of nonsegregated facilities has not, as the comment seems to suggest, served to shield prime contractors from liability for the noncompliance of their subcontractors. The certification merely has provided notice to the prime contractors of whether their subcontractors (in the latters' view at least) are complying with the nondiscrimination requirements of the order.
The final rule amends paragraph (a) and deletes paragraph (b) of ¤ 60-1.8 as was proposed in the NPRM.
Section 60-1.12 Record Retention Section 60-1.12 (a) General Requirements
The obligation to retain relevant employment records is implicit in some of the current regulatory requirements (e.g., those relating to maintaining data on applicants, hiring, transfers and promotions, and developing and updating written affirmative action programs). However, the regulations, with one exception, do not prescribe a record retention period. That exception is the requirement under the Uniform Guidelines on Employee Selection Procedures published at 41 CFR part 60-3 (hereinafter UGESP) to keep certain adverse impact data for two years after the adverse impact has been eliminated.
Paragraph (a) of the proposal would amend the record retention obligation in several ways. First, proposed paragraph (a) would make the record retention obligation applicable to any personnel or employment record made or maintained by the contractor and lists examples of the types of records that must be retained. Second, proposed paragraph (a) would establish the required record retention period as two years. The proposal would establish a oneyear record retention period for contractors that employ fewer than 150 employees or that do not have a Government contract of at least $150,000. Third, proposed paragraph (a) would provide that when a contractor has been notified that a complaint has been filed, a compliance evaluation has been initiated or an enforcement action has been commenced, the contractor shall preserve all relevant personnel records until the final disposition of the action.
Several of the commenters expressed views on proposed paragraph (a). The civil rights and women's rights organizations commended the proposal to make record retention requirements explicit. They viewed the addition of a record retention regulation as essential to effective enforcement and said it would ensure consistency with the regulations under Title VII and Section 503.
The contractor community opposed the record retention proposal. Two contractor associations asserted that proposed paragraph (a) was too broad. They claimed that the proposal would expand the scope of records subject to the reteption requirement, that is, the examples of records listed suggest that any document related to an employee or employment decision must be retained for two years. These commenters contended further that the proposed regulation would impose a considerable burden, particularly on the larger contractors that have employment related activities which might generate millions of records.
The concern that the proposal would oblige contractors to maintain records beyond current requirements is unfounded. The NPRM explained that the proposed record retention requirement (paragraph (a)) comports with the analogous record retention requirements under Title VII and the Americans with Disabilities Act (ADA). In addition, proposed paragraph (a) is consistent with the provisions adopted in the Section 503 final rule. The types of employment records covered by the record retention requirement, listed in proposed paragraph (a), include items not listed in the corresponding Title VII and ADA regulations. But, as EEOC noted in its comment, those additional items-the results of any physical examination, job advertisements and postings, applications and resumes, tests and test results, and interview notes-are examples of "any personnel or employment record made or kept," and, therefore, clearly fall within the coverage of the existing Title VII and ADA record retention rule.
Another contractor association contended that the proposed regulatory language was inadequate because it failed to answer contractors' recurrent questions embraced by record retention obligations under Executive Order 11246. This commenter argued that the regulations should include guidance on: (1) Who is an "applicant" for the purposes of the record retention requirement; and (2) whether and to what extent the record retention requirement applied when a contractor used electronic bulletin boards and the Internet as recruitment sources.
OFCCP has issued the following guidance on the meaning of the term "applicant":
The precise definition of the term 'applicant' depends upon la contractor'sl recruitment and selection procedures. The concept of an applicant is that of a person who has indicated an interest in being considered for hiring, promotion, or other employment opportunities. This interest might be expressed by completing an application form, or might be expressed orally, depending upon the lcontractor'sl practice. Question and Answer No. 15, Adoption of Questions and Answers to Clarify and Provide a Common Interpretation of the Uniform Guidelines on Employee Selection Procedures (44 FR 11996,11998 (March 2,1979)).
Accordingly, whether an individual will be considered an applicant turns on the employee selection procedures designed and utilized by the contractor. OFCCP is studying the range of ways contractors are utilizing electronic media in their employee selection processes and intends to issue guidance responding to questions most frequently asked by contractors regarding this issue.
Commenters from the contractor community criticized the two-year record retention period proposed for larger contractors. These commenters argued that it was inconsistent for OFCCP to impose a two-year retention period, when the retention period under Title VII is one-year. They argued that because OFCCP follows the principles developed under Title VII case law to enforce the Executive Order, the agency should adopt the EEOC rule. These same commenters said that OFCCP had underestimated the administrative and storage costs associated with maintaining an additional year of records.
These comments ignore the differences in the enforcement schemes of EEOC and OFCCP. Reviews of contractors' compliance with the Executive Order and regulations cover a two-year period. The policy and practice are to examine the contractor's personnel policies and activities for the two years preceding the initiation of the review, and to assess liability for discriminatory practices dating back two years. The two-year record retention period provides greater assurance that relevant records will be available during OFCCP compliance evaluations. In contrast, EEOC's enforcement of Title Vll is triggered exclusively by charges, which must be filed within 180 days (or, in deferral jurisdictions, 300 days) of an alleged violation. EEOC's one-year retention period is designed to ensure that relevant records are not discarded before the expiration of the complaint filing period.
Turning to the concern about the burdens on contractors, OFCCP believes that requiring larger contractors to retain records for an additional year will result in only a minimal increase in burden. As was noted in the preamble to the NPRM, many large employers and some smaller employers as well, are increasingly maintaining records electronically. In such instances, compliance with the record retention requirement will impose little or no additional burden. Moreover, the decision to establish a one-year record retention period for smaller contractors-the same period required by EEOC-is part of the agency's effort to maintain burdens associated with record keeping at a minimal level. The one-year rule also will accommodate those smaller contractors that are less likely to maintain electronic records.
Two contractor associations commented on the separate record retention requirements for larger and smaller contractors. One association questioned whether OFCCP had authority under the U.S. Constitution and Federal procurement laws to tie the record retention requirement to workforce and contract size. This comment overlooks the fact that size distinctions are common in regulatory schemes. Indeed, the existing Executive Order regulations provide different requirements for smaller contractors (e.g., those that employ fewer than 50 employees or do not have a contract of at least $50,000). Such contractors, for example, are exempted from the regulatory requirement to develop and maintain a written AAP.
The other contractor representative raised questions regarding the record retention obligations of contractors who are at or near the thresholds that trigger the different retention periods. Specifically, the commenter questioned what would happen if the employment levels or contract values exceed or fall below the 150 employees, $150,000 thresholds during the course of the contract. A change in status relating to either threshold would affect the record retention obligation. If the number of employees should fall below 150 or if the contractor no longer has a contract of at least $150,000, the contractor would not be required to retain employment records for two years. The requirement to keep records for two years would become effective again on the date that the contractor met the thresholds of 150 employees and a contract of $150,000. The record retention requirement, however, would not be applied retroactively, i.e., the change from one year to two years would be phased in day-by-day. But see the discussion regarding the obligation to maintain records once a compliance evaluation has commenced, which follows.
One commenter expressed disapproval of the requirement in proposed paragraph (a) that contractors retain all relevant records once a compliance evaluation has been initiated. This commenter contended that the requirement was burdensome and unfair to contractors, particularly because of the proposal to eliminate the provision in ¤ 6060.7, which allows the agency 60 days to complete a compliance review.
The purpose of this record retention requirement is to ensure that OFCCP can obtain all relevant documents during a compliance investigation or enforcement action. OFCCP appreciates the contractor's concerns about the timely completion of compliance evaluations, but disagrees with the assertion that the schedule has to be codified in the regulations. In the preamble discussion concerning ¤ 601.20 of the final rule, and again in the discussion regarding part 60-60 of the regulations, OFCCP explains that the agency's standards for timeliness and work schedules are not derived solely from the regulations. Therefore, there would be set time frames for completing compliance evaluations even if the regulatory orovisions were eliminated.
The finat rule adopts the record retention provisions proposed in the NPRM without change.
Section 60-1.12 (b) Affirmative Action Programs
Paragraph (b) of the proposal provides that a contractor establishment required to develop a written affirmative action program (AAP) shall maintain the AAP for the current year and preserve the AAP for the preceding year, together with the supporting documentation, including good faith efforts undertaken. Three commenters from the contractor community objected to proposed paragraph (b). They questioned the relevance of information contained in an expired AAP and expressed concern that OFCCP would examine the AAP for deficiencies. One of the commenters contended that the only possible reason OFCCP could have for requesting an AAP from the preceding year is to see if one exists. This commenter urged OFCCP to include a statement to that effect in the final regulation.
The written AAP serves dual purposes. The AAP is developed primarily to assist the contractor in monitoring its employment practices to ensure that they are nondiscriminatory and that affirmative action is taken to ensure equal employment opportunity. OFCCP also reviews and relies upon the AAP to determine whether the contractor is complying with the Executive Order and regulations. The contractor's affirmative action performance (e.g., personnel activity, goals progress and good faith efforts to meet goals) is examined for at least the last full AAP year. However, a compliance evaluation may be scheduled at any time during the year. If, at the time of the review, the contractor is six months or more into its current AAP year, OFCCP examines performance under both the current year and the prior year AAP. Accordingly, the requirement in proposed paragraph (b) that the contractor preserve the AAP for the previous year would ensure the availability of an AAP covering a full AAP year.
In addition, under the current regulations the AAP for the current year must contain a progress report on goals for the previous AAP year. Whether progress or little or no improvement was made in the goal areas, the AAP for the previous year should provide an explanation of the efforts undertaken and the results achieved. For example, the AAP and documentation of good faith efforts may describe the contractor's outreach and recruitment activities designed to increase its pool of female or minority applicants, or training programs instituted to enhance the skills and talents of incumbent employees with an eye to increasing the pool of those eligible for promotion. In other words the AAP from the previous year may contain information that would allow an evaluation of those commitments that are directly related to the performance of the contractor in the current year. In addition the affirmative action obligation is not a one year requirement. Rather, it is a continuing obligation and maintaining the AAPs in the fashion proposed in paragraph (b) enables OFCCP to assess the quality and effectiveness of the contractor's affirmative action commitments on a multi-year basis.
The regulation in proposed paragraph (b) is adopted without change.
Section 60-1.12 (c) Failure To Preserve Records
Paragraph (c) of the proposed rule provides that the failure to maintain and preserve the records as proposed in paragraphs (a) and (b) is a violation of Executive Order 11246. Additionally, paragraph (c) proposes that a contractor's failure to preserve required records or destruction of such records, may raise a presumption that the records, if available, would have been unfavorable to the contractor. Paragraph (c) of the proposed rule includes a proviso that the presumption shall not apply if the contractor demonstrates that the destruction or failure to preserve records resulted from circumstances beyond the contractor's control.
EEOC commented that its Compliance Manual limited application of the "adverse inference rule" to situations in which an employer acted with the intent to defeat the purposes of Title VII. The view of EEOC is that the proposal does not limit the adverse inference to instances of deliberate destruction with an intent to frustrate the purposes of the Executive Order.
OFCCP believes that clarification would be helpful. The adverse inference presumption in proposed paragraph (c) is not limited to situations in which the destruction or failure to preserve records may be attributed to the willful conduct of the contractor. The agency intends to invoke the presumption on a case-by-case basis as the circumstances : warrant. The proposed rule, in recognition of this discretionary approach, states that a presumption may arise if the contractor destroyed or failed to preserve records.
One commenter suggested that we amend the proposal to expressly provide a procedure that would permit the contractor to rebut the presumption that the records destroyed or not maintained were unfavorable. The suggested amendment is unnecessary. The presumption is rebuttable, and contractors will have a full opportunity to submit evidence to refute the inference.
Another commenter recommended that the final rule set forth the sanctions that may be imposed for violations of the record retention requirements. The sanctions described in ¤ 60-1.27 may be imposed for any violation of Executive Order 11246 or the implementing regulations, including ¤ 60-1.12. A separate sanction provision for violations of the record retention regulations, accordingly, is unnecessary.
The final rule adopts paragraph (c) of the proposal without change.
Section 60-1.12 (d) Effective Date
Paragraph (d) of the proposal provides that the contractor is obligated to preserve only those records which are created or kept on or after the effective date of this rule. No comments were received on this provision. The final rule adopts paragraph (d) as proposed.
Section 60-1.20 Compliance Evaluations
The compliance review is the primary method of evaluating a contractor's compliance with the Executive Order and regulations Paragraph (a) of the current ¤ 60-1.20 describes the purpose of the compliance review and provides that the review shall consist of a comprehensive analysis of each aspect of a contractor's employment practices, and where appropriate, include recommendations for appropriate sanctions.
The NPRM would amend paragraph (a) to authorize OFCCP to use a range of methods to revaluate a evaluate a contractor's compliance with the regulations. Specifically, paragraph (a) would provide that a compliance evaluation may consist of any one or a combination of the following: (1) A compliance review, (2) of off-site review of records, (3) a compliance check, and (4) a focused review.
Nearly all commenters addressed the proposed compliance evaluation regulation. The commenters from the women's rights and civil rights communities supported the proposal. They opined that the flexible approach of the proposal would improve the efficiency of OFCCP and permit the agency to target resources better. A contractor also supported proposed paragraph (a) and offered that it was a thoughtful proposal to streamline the compliance review process.
Some of the contractor associations favored the concept of having a range of evaluation methods to determine compliance with Executive Order 11246 and the regulations, but expressed reservations about various aspects of the proposed regulation. For example, one commenter questioned the off-site review of records, especially confidential data. Another questioned whether the "compliance check" would entail an on-site visit, off-site review of records, or both. Another commenter requested that the rule be clarified as to whether the additional options for evaluating compliance--the off-site review of records of records, the compliance check and the focused review--would constitute a complete evaluation. Specifically, this commenter wanted to know whether the current practice of reviewing a contractor no more frequently than once every 24 months would continue under the expanded system.
Three commenters from the contracto community objected outright to the proposed compliance evaluation regulation. One of the contractor associations contended that the proposed rule would give OFCCP unbridled authority to evaluate contractor compliance, and that contractors would be subjected to endless requests for information, data, and records if the rule were finalized. In addition, this commenter contended that contractors needed regulatory notice of how each type of compliance evaluation would be implemented. Similarly, another commenter argued that the procedures for each of the evaluation methods needed to be spelled out in the regulations with the same level of detail provided in the current regulations concerning the compliance review process. These commenters believed they should have the opportunity to comment upon a proposed regulation that specified, among other things, the number of evaluation methods the contractor could expect, the frequency of such evaluations, and the time frames for completing each method of evaluation.
OFCCP has made revisions in the final rule to provide more detail about the methods for evaluating contractor compliance. The revisions are explained below. Further, OFCCP agrees that contractors should be apprised of how the agency intends to implement the proposed compliance evaluation procedures. The agency disagrees, however, with the notion that the particulars of implementation must be included in the regulations.
The Federal Contract Compliance Manual (FCCM) contains the policy guidance interpreting the Executive Order and regulations, as well as agency instructions for implementing the regulatory provisions. OFCCP's Compliance Manual currently describes the procedures for conducting compliance reviews. The aspects of implementation addressed in the Manual include the time frames for conducting the review, how to open and close a review, and how frequently reviews should be conducted. The FCCM is the appropriate medium to specify the procedures for conducting the different types of compliance evaluations. The agency, therefore, declines to adopt the changes suggested by some of the commenters. The final rule adopts the compliance evaluation provisions of proposed paragraph (a). However, paragraph (a) of the final rule differs from the proposal by including expanded descriptions of the activities contemplated under each evaluation method. The final rule for example, clarifies that a compliance review is the same comprehensive examination of the contractor's employment practices that is prescribed by the current regulations. In addition, the description of the offsite review of records is revised in the final rule to explain that the scope of the examination would be substantially similar to the desk audit phase of the compliance review. Further, the final rule provides that the compliance check involves an on-site visit to an establishment to review the contractor's books and records for the purpose of determining whether: (1) Data and other information previously submitted by the contractor are accurate and complete; (2) the contractor has maintained records consistent with the requirements of ¤ 60-1.12; and/or (3) the contractor has developed an AAP consistent with the requirements of ¤ 60-1.40.
Contractor fears of repeated and unending evaluations are unfounded. OFCCP always has been sensitive to contractor concerns about the amount of time, money and personnel resources consumed by compliance reviews. Thus, the agency's practice normally has been to conduct a compliance review of a contractor no more frequently than once every two years. Additionally, the agency's Compliance Manual instructs the compliance officer to complete the compliance review within 60 days from the date the AAP is received. (See FCCM C204). The compliance officer must request an extension of time whenever it becomes apparent that the compliance review cannot be completed within the allotted time. (Id.)
OFCCP intends to continue to follow the currently prescribed time frames whenever the compliance review is the method used to evaluate a contractor's performance. The agency also intends to establish similar standards regarding the frequency and duration of the off-site review of records, the compliance check, and the focused review, to ensure that the compliance evaluations authorized by ¤ 60-1.20 are not overly intrusive. Finally, OFCCP will develop other policies and procedures for compliance officers to follow when implementing these new evaluation methods. That policy and procedural guidance will be incorporated in the Compliance Manual, and thereby made available to the public, before any of the new methods for evaluating contractor compliance are utilized.
Section 60-1 .20 (d) Preaward Compliance Evaluations
Section 60-1.20 (d) in the current regulations requires contracting agencies to obtain clearance from OFCCP prior to awarding Federal supply and service contracts of $1 million or more. The current regulations require OFCCP to conduct a preaward compliance review if the facility at which the contract will be performed has not undergone a compliance review within the preceding 12 months, and to provide its report of compliance within 30 days of receipt of the request from the contracting agency.
The NPRM would revise paragraph (d) of the current regulation to make the preaward compliance evaluation optional. Under paragraph (d) of the proposed rule, OFCCP would have 15 days to inform an awarding agency of its intentions to conduct a preaward compliance evaluation. The proposed rule would allow OFCCP an additional 20 days from the date of the notice of intention to conduct the preaward evaluation to provide the conclusions regarding compliance to the contracting agency. The proposed rule further provides that clearance shall be presumed if OFCCP does not give notice of its intention to conduct a preaward compliance evaluation or does not report its conclusions within the prescribed time periods.
Several comments urged that the proposal be revised. Women's rights and civil rights groups unanimously opposed the proposal to make preaward compliance evaluations optional. They contended that changing the preaward review from a mandatory function to a discretionary function would seriously diminish the effectiveness of a compliance procedure they viewed as an important enforcement tool. A few expressed the fear that preawards would be discontinued entirely if they were left to the discretion of the agency. As an alternative to making all preaward compliance evaluations optional, some commenters suggested that OFCCP could target its enforcement resources more efficiently by: (1) Raising the $1 million minimum threshold to reflect inflation over the last 25 years; and (2) expanding the 30-day time allowed to conduct preaward compliance evaluations.
Most of the comments from the contractor community on proposed paragraph (d) were supportive of the proposal to make preaward compliance evaluations optional. However, one contractor and the Department of Defense recommended that the agency eliminate preawards entirely, and adopt a post-award notification and postaward review procedure. Another contractor questioned the feasibility of the proposed time frames for conducting preaward compliance evaluations, noting that proposed paragraph (d) requires OFCCP to report its conclusions about compliance within 20 days, while proposed paragraph (e) would allow the contractor 15 days to submit an AAP.
The NPRM discusses the problems associated with the current preaward process at length, so that discussion will not be recounted here. (See 61 FR 25516,25519.) The NPRM explained that several models for modifying the preaward provisions were considered during the development of the proposal, including an increase in the dollar amount of the preaward contract threshold.
Upon reconsideration and in response to the comments, OFCCP has decided to maintain the current mandatory nature of preaward evaluations, but to raise the threshold trigger for the conduct of the preaward evaluation. Accordingly, the final rule requires that a preaward compliance evaluation of a prospective contractor be conducted when the amount of the contract is $10 million or more, and that a preaward evaluation of known prospective subcontractors be conducted when the amount of the subcontract is $10 million or more unless OFCCP has conducted an evaluation and found them to be in compliance with the Order within the preceding 24 months. These increases in contract amount and compliance history thresholds will reduce the number of preaward compliance evaluations OFCCP will need to conduct. A reduction in the number of preaward evaluations will permit OFCCP greater flexibility in targeting its enforcement resources. Continuing the requirement that the agency conduct preawards, albeit of a smaller universe, addresses the concerns of the civil rights and women's rights groups that a discretionary preaward evaluation process would seriously undermine the utility of preaward compliance evaluations as an enforcement tool. Under the final rule, the preaward evaluation process will remain a significant component of the Executive Order enforcement program by targeting those contractors who benefit most from taxpayers-funded Government contracts.
OFCCP also studied the option of eliminating the preaward provisions, and considered replacing preawards with postaward compliance evaluations. In OFCCP'S view, however, the preaward evaluation still has value as an enforcement tool. The final rule will retain the preaward clearance time frames contained in the proposal to ensure that the preaward evaluation process is conducted expeditiously. The reduction of the number of preaward evaluations which will be conducted under the final rule and the regulatory time frames for completing the evaluations, coupled with the administrative changes OFCCP is making to streamline the preaward clearance process, will significantly decrease the burden on contracting agencies of processing Executive Order preaward clearance requests during the procurement process.
As for the question regarding the compatibility of the time frames in paragraphs (d) and (e) of the proposal, the deadline for the submission of documents in proposed paragraph (e) would not apply to preaward compliance evaluations. Under the existing preaward procedures, the contractor is not asked to submit its AAP and support data for review. Currently, OFCCP either conducts an abbreviated desk audit or review of the AAP and support data on-site, or dispenses with review and analysis of the AAP and support data altogether. Contractors can expect that OFCCP will continue to adjust its compliance evaluation procedures to meet the preaward clearance time frames in paragraph (d).
The final rule revises paragraph (d) of ¤ 60-1.20 by requiring that a preaward compliance evaluation of a prospective contractor be conducted when the amount of the contract is $10 million or more and a preaward evaluation of its known first-tier prospective subcontractors be conducted when the amount of the subcontract is $10 million or more, unless OFCCP has conducted an evaluation and found them to be in compliance in the preceding 24 months. The final rule establishes time frames for OFCCP to inform the awarding agency of the necessity for conducting a preaward evaluation and for OFCCP to provide its conclusions about the contractor's compliance status.
Section 60-1.20 (e) Submission of Documents; Standard Affirmative Action Formats
Under ¤ 60-60.2, a contractor must submit its AAP and supporting documents to OFCCP within 30 days of a request. If the contractor fails to submit the documents within the prescribed time period, the enforcement procedures specified in ¤ 601.26 are applicable. The NPRM proposed to incorporate the provisions of ¤ 60-60.2 as a new paragraph (e) of ¤ 60-1.20, with one modification. Under proposed paragraph (e), the time for submission of an AAP and supporting documentation would be reduced from 30 days to 15 days.
Several comments on the proposed change in time frames were received. The commenters from the civil rights and women's rights communities supported the proposal. They viewed 15 days as more than adequate time to submit an AAP because, they argued, contractors are required to have an AAP in place as a condition of doing business with the Federal Government. These commenters believed the 15-day deadline would address the unacceptable (and unlawful) practice of contractors waiting until a compliance review has been scheduled before they develop an AAP.
The commenters from the contractor community objected to the proposal and strongly urged retention of the 30-day time frame for submission of the AAP and supporting data. One commenter observed that the 15-day requirement assumes that a contractor could simply pull the AAP out of a file, copy it, and send it to OFCCP. But, according to this commenter and others, an AAP is a fluid, evolutionary document rather than a static piece of paper. They asserted that the 15-day deadline ignored other realities of compliance reviews and how AAPs are developed and updated.
The commenters said that even where a detailed AAP has been developed contractors frequently use the 30 days provided under the current regulations to update the support data. They pointed out that a request for an AAP may require that the contractor submit data on personnel activity for the current goal year, which normally would be compiled and analyzed during the 30-day period. Further, the commenters identified several situations which might make it difficult for a contractor to meet the 15-day deadline. The request for the AAP might come when the company officials responsible for updating or reviewing the AAP are unavailable, or at the expiration of the AAP year and before the contractor has had an opportunity to review and analyze the current labor force statistics in order to update its AAP.
In recognition of the concerns of the contractors, OFCCP has decided not to adopt the 15-day deadline in the final regulation. The final rule retains the existing 30-day time frame for the submission of the AAP and support data. The current regulation at ¤ 60-60.3(a) states, in relevant part, that "Contractors may reach agreement with OFCCP on nationwide AAP formats or on frequency of updating statistics." OFCCP proposed also to incorporate this provision, without any changes, in new paragraph (e).
Two contractor associations and one contractor commented on this provision. All favored the inclusion of the provision in the final rule and viewed it as a change in agency policy on nationwide AAPs, which also are called standardized affirmative action formats or "SAAFs." Some officials in OFCCP had been critical of the nationwide AAP formats that had previously been negotiated and viewed them as impediments to effective enforcement of the Executive Order. In response to these agency concerns, a moratorium on new SAAF agreements was issued on December 16, 1994. That moratorium remains in effect today. Thus, the inclusion of the provision regarding nationwide AAP formats does not represent a change in agency policy. Rather, it preserves the status quo until OFCCP completes its evaluation of the concept.
The final rule adopts all the provisions proposed in paragraph (e) except the change proposed in the time frame for the submission of documents. The existing 30-day time frame for submitting the AAP and supporting documents is retained in the final regulation.
Section 60-1.20 (f) Confidentiality
The regulation at ¤ 60-60.3 provides that information made available during the onsite review may be taken off-site if the compliance officer finds that further analysis is required to make a determination of compliance. Section 6060.4 contains proced
