Government Contractor Compliance & Regulatory Update

Executive Order Addresses Federal Contractors’ Use of Foreign Workers

Quick Hit: On August 3, 2020, President Trump issued an “Executive Order on Aligning Federal Contracting and Hiring Practices With the Interests of American Workers” (the “Order”), which requires federal agencies to perform an internal audit of their contracting practices and the use of foreign workers by federal government contractors.  Further, the Order instructs the Secretaries of Labor and Homeland Security to ensure the employment of H-1B visa holders by contractors does not have “adverse effects” on United States workers.

More Detail: Within 45 days of the date of the Order (or by September 17, 2020), the Secretaries of Labor and Homeland Security are instructed to “take action, as appropriate and consistent with applicable law, to protect United States workers from any adverse effects on wages and working conditions caused by the employment of H-1B visa holders at job sites (including third-party job sites), including measures to ensure that all employers of H-1B visa holders, including secondary employers, adhere to the requirements of section 212(1) of the Immigration and Nationality Act (8 U.S.C. [§] 1182(n)(1)).”

Among other things, section 212(1) of the Immigration and Nationality Act requires employers, in applying to offer an H-1B visa, to state:

  • “the employer did not displace and will not displace a United States worker . . . employed by the employer within the period beginning 90 days before and ending 90 days after the date of filing of any visa petition supported by the application”;
  • the employer “has taken good faith steps to recruit, in the United States using procedures that meet industry-wide standards and offering compensation that is at least as great as that required to be offered to H-1B nonimmigrants . . . United States workers for the job for which the nonimmigrant or nonimmigrants is or are sought”; and
  • the employer “has offered the job to any United States worker who applies and is equally or better qualified for the job for which the nonimmigrant or nonimmigrants is or are sought.”

The Order directs that federal government agencies to conduct audits of their contracting practices for contracts awarded in fiscal years 2018 and 2019.  The head of the each agency is required, within 120 days of the Order (or by December 1, 2020), to “submit a report to the Director of the Office of Management and Budget summarizing the results of the [audit].”  If the audit reveals that corrective action is necessary, agency heads are required to “recommending, if necessary, corrective actions that may be taken by the agency and timeframes to implement such actions; and proposing any Presidential actions that may be appropriate.”  The head of each federal agency is directed to look at the following as part of the audit:

  • “whether contractors (including subcontractors) used temporary foreign labor for contracts performed in the United States, and, if so, the nature of the work performed by temporary foreign labor on such contracts; whether opportunities for United States workers were affected by such hiring; and any potential effects on the national security caused by such hiring”;
  • “whether contractors (including subcontractors) performed in foreign countries services previously performed in the United States, and, if so, whether opportunities for United States workers were affected by such offshoring”;
  • “any negative impact of contractors’ and subcontractors’ temporary foreign labor hiring practices . . . on the economy and efficiency of Federal procurement and on the national security”; and
  • “the employment policies of the agency to assess the agency’s compliance with Executive Order 11935 of September 2, 1976 (Citizenship Requirements for Federal Employment), and section 704 of the Consolidated Appropriations Act, 2020, Public Law 116-93.”

In remarks regarding the Order, President Trump stated “we’re finalizing H-1B regulations so that no American worker is replaced ever again.”  Secretary of Labor Scalia also spoke at the signing ceremony, indicating that Department of Labor and the Department of Homeland security will work together to investigate potential abuse of the H1-B program.  Specifically, Secretary Scalia remarked “[f]or more than 15 years, the Secretary of Labor has had the authority to initiate an investigation of abuse of H-1B program when he or she finds reasonable cause. . . .  That authority has never been used. . . . [We] signed a memo of understanding on Friday with the Department of Homeland Security . . . .  They’re going to now share information they have, which I can then use to bring cases.”

We will report any additional development related to the Order here.

Reminder: Contractors Must Implement New OFCCP Self-Identification Form by August 4, 2020

As we previously reported, on May 8, 2020 the OFCCP announced that the Office of Management and Budget approved its updated Disability Self-Identification Form (the “Form”).  The Form is available in multiple languages here.  OFCCP has also issued FAQs regarding the implementation of the Form.

The deadline for contractors to implement the Form into their applicant and employee systems and processes is August 4, 2020.  The Form permits contractors to modify it to include recordkeeping information, such as the employee’s job title and date of hire.

Revised OFCCP Disability Self-Identification Form Approved

As we previously reported, in October 2019 OFCCP announced that it had submitted a request to the Office of Management and Budget (“OMB”) for approval of proposed changes to its Voluntary Self-Identification of Disability Form.  On May 8, 2020 the agency announced that OMB approved its proposed changes to the form.  The updated form is now available here.  In announcing the form, OFCCP stated “[w]e believe that the updated form will increase the response rate of applicants and employees who choose to voluntarily self-identify their disability status.”

The deadline for contractors to implement the new form into their applicant and employee systems and processes is August 4, 2020.  Contractors are instructed to “continue use of the form approved by the OMB in 2017 until they have incorporated the revised form.”  That version of the form can be found here.

Like the version of the form proposed in October 2019, the approved form adds autoimmune disorders, depression/anxiety, cardiovascular/heart disease, and gastrointestinal disorders to its disability example list.  It also adds broad categories of disability, such as “psychiatric conditions”, to consolidate previously individually listed disabilities like bipolar disorder and major depression.

The new form also permits contractors to modify the form to include recordkeeping information, such as the employee’s job title and date of hire.

OFCCP’s Ombuds Service Now Open For Business

On May 6, 2020, OFCCP announced that its Ombuds Service is now available to the contractor community.  The agency initially announced its plan to create an Ombuds Service in the fall of 2018 as part of its overall initiative to increase efficiency and transparency.  In announcing the official launch, OFCCP stated the service “delivers an additional layer of certainty, efficiency, recognition, and transparency while preserving the typical principles of ombuds work.”  As described by OFCCP, “[t]he ombuds is an independent and neutral public official with the authority to both receive and informally address concerns and complaints about OFCCP policies, procedures, or actions.”

OFCCP has devoted an entire section of its website to the Ombuds Service.  On this dedicated website, stakeholders can find frequently asked questions regarding the Ombuds Service, the Ombuds Service Protocol, and an Ombuds Service Referral Form.

In this latest announcement, the agency states that the “architect and director of the program, Ombudsman Marcus Stergio welcomes referrals.”  The announcement also contains a link to Ombudsman Stergio’s contact information and asks stakeholders to “consider this an invitation to call or email him.”  The Ombuds Service website provides that “every effort is made to respond to inquiries within one business day.”

The Ombuds Service provides contractors with a forum to bring concerns about the agency and a process by which to address those concerns.  While the concept is commendable, time will tell whether the service will provide an effective method for contractors to raise and obtain resolution of legitimate concerns regarding their treatment by OFCCP.

OFCCP Lowers Veteran Hiring Benchmark Again

The Office of Federal Contract Compliance Programs (“OFCCP”) has released its 2020 Vietnam Era Veterans’ Readjustment Assistance Act (“VEVRAA”) benchmark.  Effective March 31, 2020, the new benchmark is 5.7%, a slight decrease from 2019’s 5.9% benchmark.  This is OFCCP’s sixth reduction of the benchmark, which has steadily declined since its inception in 2014.

The VEVRAA Benchmark is the figure which federal contractors must use to assess the effectiveness of their outreach programs for the hiring of veterans.  Contractors may either use OFCCP’s national benchmark, or establish their own benchmark using applicable statistics and other metrics set forth in OFCCP’s regulations (41 CFR § 60-300.45(b)(2)).

On a related matter, as previously reported, the Office of Management and Budget (“OMB”) recently approved VEVRAA focused review scheduling letters.  Therefore, OFCCP will now be able to begin scheduling VEVRAA focused reviews – compliance evaluations focused exclusively on compliance with OFCCP’s VEVRAA regulations – for the 500 contractors who were selected for such reviews in November 2019.

Meet OFCCP’s New Scheduling Letters, Same As The Old Scheduling Letters?

As faithful readers of this blog know, OFCCP proposed significant changes to its audit scheduling letters in April 2019, and then scaled back those changes in June 2019 revisions.  Now, close to a year after OFCCP commenced the process, the Office of Management and Budget (“OMB”) has approved revised scheduling letters – specifically, scheduling letters for compliance evaluations, compliance checks, and Section 503 and VEVRAA focused reviews.

But, what changes did OMB ultimately approve and what do those changes mean for contractors?  It turns out OMB approved very few changes to the scheduling letters.  In fact, the most notable feature of the new scheduling letters are the provisions OMB rejected.

The New Compliance Evaluation Scheduling Letter

  • Other than typographical changes, the changes in the new compliance evaluation scheduling letter are quite minimal. The two changes of practical consequence pertain to self-assessment processes, whereby the OFCCP will no longer require contractors to submit the specific dates on which they conducted such reviews.
    • Assessment of Personnel Processes: The requirement that contractors submit the date of their most recent and next scheduled assessment of personnel processes required under OFCCP’s Section 503 and VEVRAA regulations has been eliminated and, instead, contractors must provide a “description of the review.
    • Assessment of Physical and Mental Qualifications: The requirement that contractors provide the date of their most recent and next scheduled assessment of physical and mental job qualification standards has been eliminated.  Instead, the new letter requires that contractors provide “the schedule of the assessment.”
  • So What New Provisions Did OMB Reject? Among the provisions OFCCP proposed in June 2019 that are not included in the new scheduling letter are the following:
    • Subcontractor Names: The approved compliance evaluation scheduling letter does not contain the proposed requirement that contractors provide a “list of the subcontractor names and locations for the three most recently awarded subcontracts that have a total contract value of $150,000 or more, excluding those expiring within six months of the receipt of this letter.”
    • Internal Promotions: The approved compliance evaluation scheduling letter does not contain the proposed requirement that contractors provide, with regard to promotions, the “workforce representation of women and minorities in the job group from which the person(s) was promoted.”

The New Section 503 Focused Review Scheduling Letter  

  • Current AAP Year Utilization Analysis: In addition to providing “[t]he utilization analysis evaluating the representation of individuals with disabilities” in their prior AAP year, contractors are required to provide current year results if they receive the scheduling letter more than six months into their current AAP year.
  • Formation of Job Groups No Longer Required for Focused Reviews: The new Section 503 focused review scheduling letter does not require that contractors submit job group formation information.  The former version of the focused review scheduling letter required that contractors submit “formation of job groups (covering all jobs) consistent with criteria given in 41 CFR § 60-2.12.”  Although contractors are still required to submit their EO 11246 affirmative action program (“AAP”) during a focused review, the new letter makes clear “OFCCP will not conduct a review of the Executive Order 11246 AAP during a Section 503 focused review.  This AAP will only be used to help OFCCP understand the contractor’s organizational structure, confirm Section 503 job groups, and understand generally how the Section 503 compliance strategies fit with the contractor’s other affirmative action efforts.  OFCCP will not analyze data contained in the Executive Order 11246 AAP to look for discrimination based on sex or race and ethnicity.”
  • Documentation of Compliance With Audit And Reporting Systems No Longer Required: Under the former version of the letter, contractors were required to submit “[d]ocumentation of all actions taken to comply with the audit and reporting system requirements described in 41 CFR § 60-741.44(h).”  That requirement is removed from the new scheduling letter.
  • EEO-1 Reports No Longer Required: The new Section 503 focused review scheduling letter removes the requirement that contractors submit EEO-1 reports as part of the focused review process.
  • Assessment of Personnel Processes and Physical and Mental Qualifications: The new Section 503 focused review scheduling letter integrates the same changes to the assessment of personnel processes and physical and mental qualifications requirements as included in the new compliance evaluation scheduling letter, discussed above.
  • So What New Provisions Did OMB Reject? Among the provisions OFCCP proposed in June 2019 that are not included in the new scheduling letter are the following:
    • Employment Activity Data: The approved focused review scheduling letters do not contain the proposed requirement that contractors provide applicant and employee-level employment data for all applicants and employees covering the immediately preceding AAP year.
    • Compensation Data: The approved focused review scheduling letters do not contain the proposed requirement that contractors provide compensation data as required in the compliance evaluation scheduling letter.

The First VEVRAA Focused Review Scheduling Letter Is Now Approved

OMB approved a VEVRAA focused review scheduling letter, which is the first such scheduling letter approved by OMB.  The letter, while tailored to VEVRAA rather than Section 503, is nearly identical to the new Section 503 focused review scheduling letter.  With this letter now approved, the agency can now begin scheduling VEVRAA Focused Reviews.  In November 2019, OFCCP identified 500 contractors selected for such reviews.

Compliance Check Scheduling Letter Largely Unchanged

  • The newly approved compliance check letter is essentially unchanged from the prior version. Notably, the approved compliance check scheduling letter does not contain the proposed provision requiring contractors submit written AAPs prepared in accordance with EO 11246, Section 503, and VEVRAA.  Rather, the letter maintains the preexisting requirement that contractors provide AAP “results” for the preceding year.

OFCCP Addresses Data Security and FAAP Approvals In Light of the COVID-19 Pandemic

As we previously reported, OFCCP has already informed contractors that it “remains fully operational during the COVID-19 pandemic” and provided the contractor community with information regarding modifications to its operations consistent with current public health guidelines.  The agency also stated that it will coordinate with contractors who are experiencing challenges related to COVID-19 and provide reasonable extensions as needed.

OFCCP is continuing its operations despite the fact its personnel are teleworking from their homes.  This raised concerns about protections afforded to sensitive contractor data submitted during compliance evaluations.  To address these concerns, OFCCP has announced that it “remains committed to safeguarding any nonpublic, confidential, and sensitive data it receives from contractors.”  OFCCP suggests that contractors should not fear compliance officers accessing contractor information from their homes as, according to the agency, its policy “requires compliance officers to store information received from contractors on the agency’s secure network.  The network is only accessible using government-issued computers through the agency’s secure VPN. In addition, all compliance officers are required to complete annual training from DOL and OFCCP on safeguarding data.”  The agency further provides that contractors that are concerned about the safety of their data “also have the option of sending their date to OFCCP via their company’s secure data or email portals.”

OFCCP also announced that, while working remotely, the agency’s Functional Affirmative Action Program (“FAAP”) team is continuing to process FAAP requests and certifications.  FAAP contractors and contractors interested in entering into FAAP agreements can meet with the FAAP team via phone, WebEx and Skype.  This announcement further underscores OFCCP’s recent change from discouraging FAAPs, to actively encouraging contractors to enter into such agreements.

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Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

Not Even COVID-19 Will Stop OFCCP

On March 20, 2020, OFCCP made clear in an announcement to the contractor community that it will continue operations during the COVID-19 pandemic “while making adjustments to ensure all of its activities are consistent with current public health guidelines.”

Dispelling any thought that audit activities might cease during the pandemic and the turmoil it has unleashed on businesses, OFCCP made clear that it “will continue its compliance reviews, focused reviews, and complaint investigations, but in lieu of physical onsites, OFCCP will maximize use of every alternative resource available, such as WebEx, Skype, and phones to conduct interviews and complete our evaluations.”

OFCCP does recognize that the COVID-19 pandemic may pose challenges for contractors under audit.  To that end, it advises that “[i]f contractors are experiencing difficulty in having their employees accessible during a review or experiencing any other challenges related to the health crisis, OFCCP will remain flexible by coordinating with them and providing reasonable extensions where needed.”

OFCCP has also issued a memorandum announcing “a limited exemption” to the requirements of the laws the agency enforces for contracts entered into to provide Coronavirus relief.  The exemption will be effective for a period of three months, from March 17 to June 17, 2020, subject to extension.  The agency also published FAQs that clarify the scope of the exemption.  The FAQs make clear that this exemption applies narrowly and is available only to “new supply & service and construction contracts solely for the specific purpose of providing Coronavirus relief.”  The exemption will not apply to contractors who have preexisting contracts unrelated to coronavirus, even if the contractor also has a new contract to provide Coronavirus relief. Such contractors must continue to comply with the affirmative action requirements of the laws enforced by OFCCP.

OFCCP Launches Online Contractor Compliance Institute

On February 21, 2020, OFCCP launched an online training platform called the Contractor Compliance Institute (“CCI”). In announcing the release of CCI, the agency stated it “created the CCI curriculum specifically for federal contractors, furthering [OFCCP’s] commitment to provide meaningful compliance assistance.” Contractors can create a CCI account and register for free, on-demand courses.

Currently, only one course is being offered through the site—a two-hour training entitled “The Path to Compliance: Understanding Expectations to Governance.” The training provides a broad overview of OFCCP’s requirements and is made up of four modules. Two of the four modules cover the posting and notice requirements of the laws enforced by OFCCP. The remaining modules cover the OFCCP’s legal authority and OFCCP’s recordkeeping and applicant tracking requirements. Throughout the training, participants are encouraged to contact OFCCP’s toll-free help line with questions or requests for clarification regarding course content. OFCCP states the course is designed for compensation managers, hiring managers, human resources managers, front line supervisors/managers, and recruiters.

OFCCP has announced that it will be releasing additional resources through CCI, including trainings related to Section 503 Focused Reviews and Functional Affirmative Action Programs, and “interactive, online tools for employers and employees to know their rights and responsibilities under Federal employment laws.”

Director Leen Reveals New Directives Are In The Works At OFCCP-NILG Compensation Roundtable

On February 18, 2020, Proskauer attended a Compensation Roundtable held at the Department of Labor put on by the National Industry Liaison Group (NILG) in collaboration with OFCCP. Director Leen spoke at the event, taking the opportunity to address his recent nomination to serve as the Inspector General of the Office of Personnel Management. He shared that, despite the nomination, he has no plans to slow down his work at OFCCP and, if anything, is more motivated to make progress on several initiatives. Among those initiatives are two new directives—one addressing “mediation” and another on “efficiency.” Director Leen did not share specifics about the new directives. Director Leen also noted that in addition to Section 503 focused reviews which are underway and VEVRAA focused reviews which he predicted will commence shortly, the agency still plans to roll out other types of focused reviews, including one addressing promotions.

Proskauer will continue to monitor developments regarding these new directives and report them here.

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