Government Contractor Compliance & Regulatory Update

OFCCP Moves One Step Closer To AAP Verification

In a step toward implementation of OFCCP’s Affirmative Action Program (“AAP”) Verification Initiative, the Office of Management and Budget (OMB) approved an Affirmative Action Program Verification Interface (AAP-VI) that OFCCP developed for federal contractors to submit AAPs.

Although the verification program has not yet launched, and details are scarce, the OFCCP already has an AAP-VI website which promises the program is “Coming Soon” and explains that “Affirmative Action Program Verification Interface (AAP-VI) is a secure web based interface created to improve communication and the transfer of Affirmative Action Program data, between Federal Contractors and the Office of Federal Contract Compliance Programs.”

As previously reported, in furtherance of Directive 2018-07, on September 14, 2020, OFCCP published a notice soliciting comments concerning its proposal to obtain approval from the OMB to implement the AAP-VI.  The notice stated the AAP-VI would be used to assist with a yet-to-be-established AAP online certification process for federal contractors and provide a secure method for federal contractors to submit AAPs electronically to OFCCP when they are scheduled for a compliance evaluation.

Presently, federal contractors are only required to submit their AAPs via mail or email and are not required to certify annually to the OFCCP that their AAPs are compliant.  According to the OFCCP AAP-VI Federal Contractor User Guide, “[t]he AAP-VI system will be the primary source for entering, tracking and submitting [] Affirmative Action Programs for review by OFCCP.  AAP-VI will provide federal contractors a system to submit their Programs in a more efficient manner and provide visibility and reporting capabilities of the data submitted by the Programs.”

We are still awaiting further details from the OFCCP, we will continue to closely monitor and report on new developments.  In the meantime, additional information can be found in OFCCP’s AAP-VI Administrative Guide and OFCCP’s AAP-VI Federal Contractor User Guide.  Further, contractors should be getting ready for the launch of the verification interface by making sure their AAPs are prepared and ready for “prime time,” including ensuring they meet all of OFCCP’s requirements.

Federal Government Issues New Guidance on Vaccination Requirements for Contractors

As previously reported, the Biden Administration issued an executive order on September 9, 2021 setting forth new COVID-19 safety protocols for certain federal contractors (the “Executive Order”). The Safer Federal Workforce Task Force (the “Task Force”) is tasked with developing the COVID-19 safety requirements that covered contractors and subcontractors will be required to follow.

The Task Force has now released FAQs providing some information on what the forthcoming COVID-19 safety requirements for covered federal contractors and subcontractors will look like. Some of the key information disclosed in the FAQs is as follows:

  1. Remote Workers May Be Covered. As we previously reported, the new COVID-19 requirements will be imposed on contractors who enter into certain new contracts or contract-like instruments beginning October 15, 2021. While the precise requirements have yet to be issued, it appears – based on the requirements imposed on federal employees – covered contractors may be required to have covered employees vaccinated regardless of whether they work remotely.
  2. Disability and Religious Exceptions. Also gleaned from the federal employee guidance is that there will likely be “limited” exceptions from the vaccination requirements for “employees who communicate to the agency that they are not vaccinated against COVID-19 because of a disability or because of a sincerely held religious belief, practice, or observance.” The FAQs note the exception analysis is fact-specific and must be conducted on a case-by-case basis, but also indicate “[a]dditional guidance on legally required exceptions will be forthcoming.”
  3. Expanded Applicability of Vaccination Requirements. Notwithstanding the fact the Executive Order only imposes the new COVID-19 requirements on certain contractors based on the type and date of their federal government contracts, the FAQs state “[a]gencies are strongly encouraged to incorporate [employee] vaccination requirements into contracts that are not covered by [the] Executive Order… This might include, for example, incorporating vaccination requirements into contracts in advance of when they are otherwise required by the Executive Order or incorporating requirements into contracts that are not covered by the Executive Order, such as contracts under the Simplified Acquisition Threshold.” (emphasis added). Accordingly, contractors that thought they would not be covered by the COVID-19 safety requirements based on the types of contracts they have with the government – e.g., contracts solely for the provision of products – will need to check their new and renewed contracts after October 15, 2021 to determine whether the new requirements are incorporated.
  4. Additional Guidance for Onsite Contractor Employees. Prior to the time contractors are required to implement vaccination requirements, agencies must ask about the vaccination status of all “onsite” contractor employees and should provide all onsite contractor employees with a Certification of Vaccination form before they enter any federal building or worksite. Onsite contractor employees must attest to the truthfulness of their response regarding their vaccination status, and anyone who fails to respond will be treated as not fully vaccinated for purposes of safety protocols onsite. Onsite contractor employees who are not fully vaccinated and are not required to be vaccinated are required to demonstrate proof of a negative COVID-19 test, dated within the prior three days, in order to enter a federal building or worksite. Agencies may determine the type of tests they will permit, but the test must be FDA-authorized to detect current infection and indicate the date of the results. There is an exception for contractor employees who are “regularly tested pursuant to an agency testing program.” Such workers “do not need to provide proof of a negative COVID-19 test from no later than the previous 3 days prior to entry to a federal building unless required to by the agency testing program.”

Further guidance and details will be issued in the coming days and weeks. We will continue to report on developments as further information is released.

Government Contractor Employees To Be Subject To Mandatory Vaccine Requirements

On September 9, 2021, the Biden Administration announced a host of vaccine-related initiatives, reported on here. One of those initiatives is an Executive Order which requires contractors to implement the guidance to be published by the Safer Federal Workforce Task Force (the “Task Force”) in “any workplace locations (as specified by the Task Force Guidance) in which an individual is working on or in connection with a Federal Government contract or contract-like instrument.”  This guidance has yet to be issued, but will include mandatory vaccinations for covered workers.  It expands on the initiative announced in July that required vaccination or testing for government contractor employees working onsite at federal government facilities.  The new Task Force guidance is not expected to include a testing option.

The new requirement will apply to certain new contracts and contract extensions and renewals entered into on or after October 15, 2021.  The Executive Order explains that the requirement will apply to a new contract and contract-like instrument if:

(i)    it is a procurement contract or contract-like instrument for services, construction, or a leasehold interest in real property;
(ii)   it is a contract or contract-like instrument for services covered by the Service Contract Act, 41 U.S.C. 6701 et seq.;
(iii)  it is a contract or contract-like instrument for concessions, including any concessions contract excluded by Department of Labor regulations at 29 C.F.R. 4.133(b); or
(iv)   it is a contract or contract-like instrument entered into with the Federal Government in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.

Per the Executive Order, the new requirement will not apply to

(i)    grants;
(ii)   contracts, contract-like instruments, or agreements with Indian Tribes under the Indian Self-Determination and Education Assistance Act (Public Law 93-638), as amended;
(iii)  contracts or subcontracts whose value is equal to or less than the simplified acquisition threshold, as that term is defined in section 2.101 of the Federal Acquisition Regulation [generally $250,000];
(iv)   employees who perform work outside the United States or its outlying areas, as those terms are defined in section 2.101 of the Federal Acquisition Regulation; or
(v)    subcontracts solely for the provision of products.

We will report on new developments related to this initiative.

Subscribe to Proskauer’s Law and the Workplace blog to stay current on the latest Biden administration developments impacting your business. 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.

New Census Data Available for Development of AAPs

On September 3, 2021, OFCCP issued a notice requiring federal contractors to use the recently released 2014-2018 Equal Employment Opportunity Tabulation (“2018 EEO Tab”) to develop any Affirmative Action Programs (“AAPs”) that commence on or after January 1, 2022. The 2018 EEO Tab was released earlier this year by the U.S. Census Bureau. It replaces the 2006-2010 EEO Tabulation contractors have been using for AAP purposes.

Under OFCCP regulations, federal contractors are required to “use the most current and discrete statistical information available… includ[ing] census data” to conduct availability analyses, which determine the availability of qualified minorities and women for job openings. Determining availability is a key requirement of an AAP because it is used “to establish a benchmark against which the demographic composition of the contractor’s incumbent workforce can be compared in order to determine whether barriers to equal employment opportunity may exist within particular job groups.”

Although contractors must begin using the 2018 EEO Tab starting next year, they may begin using it in the development of their AAPs earlier if they so choose. The EEO Tab and additional information can be found on the Census Bureau’s website.

As always, we will continue to report on developments as further details emerge.

OFCCP to Reconsider Use of EEO -1 Component 2 Data

OFCCP announced on September 1, 2021 that it plans to rescind a November 2019 notice regarding EEO-1 Component 2 data. EEO-1 Component 2 data was required to be submitted in 2019, and consists of aggregated employee wage and hours worked data, categorized by EEO-1 classification, race, ethnicity, and sex. The 2019 notice provided OFCCP would not “request, accept, or use Component 2 data, as it [did] not expect to find significant utility in the data given limited resources and [the data’s] aggregated nature.”

Now, OFCCP has announced its 2019 decision was “premature and counter to the agency’s interests in ensuring pay equity.” As such, the agency intends to evaluate the Component 2 data’s utility in investigating potential pay discrimination, noting the data may offer “insight into pay disparities across industries and occupations and strengthen Federal efforts to combat pay discrimination.”

It is important to note that OFCCP has not stated definitively whether it will request, accept, or use Component 2 data in the future. The announcement only provides that OFCCP is reconsidering its November 2019 decision not to request, accept, or use the data.

One might wonder why, given that the EEOC elected not to renew the Component 2 aspect of the EEO-1 report, the OFCCP is reconsidering its prior determination regarding the data. Indeed, in every standard compliance evaluation, OFCCP receives far more detailed and useful contractor compensation data which it uses to assess pay equity. The answer may be that OFCCP does not intend to request such information from contractors in audits (which, unless the Component 2 report is reinstituted, would be beyond the proper temporal scope of any future audit), but rather intends to analyze the data submitted by employers in 2019 to assess and refine its audit practices and procedures. In its rescission notice, OFCCP states its review of the data “could improve OFCCP’s ability to efficiently and effectively investigate potential pay discrimination. Also, analyzing compensation data in conjunction with other available information, such as labor market survey data, could help OFCCP identify neutral criteria to select contractors for compliance evaluations.”

We will continue to monitor this matter and report on developments as new details emerge.

OFCCP Announces More Audits– Was Your Company Selected?

On September 1, 2021, OFCCP announced the release of a new Corporate Scheduling Announcement List (CSAL). The list consists of 400 federal construction contractors, federally assisted contractors and subcontractors.  Note that the list merely notifies these construction contractors that they will be audited in the future, which gives them time to prepare.

Construction contractors are advised to review the CSAL (available here) to see if they have been selected for an audit, and consult with counsel as necessary.

President Biden Requires Contractor Employees Be Fully Vaccinated (or Face Regular Testing)

On July 29, 2021, President Biden announced that “to help protect workers and their communities,” all employees of federal contractors working onsite at government facilities will be asked to “attest to their vaccination status.”  Those who do not attest to being fully vaccinated will be required to:  (1) wear a mask on the job; (2) physically distance from all other employees and visitors; (3) comply with a weekly or twice weekly testing requirement; and (4) be subject to restrictions on official travel.

Although the directive specifically applies to onsite contractors, all government contractors should take note of this development, as President Biden is instructing his team to apply these standards to “all federal contractors,” and stated that contractors wanting to do business with the federal government must “get [their] workers vaccinated.”

President Biden’s announcement comes on the heels of the CDC’s recent recommendation that both vaccinated and unvaccinated individuals wear masks in parts of the country where the rate of transmission of COVID-19 cases is substantial or high.  With vaccination rates decreasing and transmission rates of COVID-19 increasing, President Biden called on Americans to get vaccinated – if they haven’t been already – and is using the federal government’s authority over federal contractors to create conditions he hopes will encourage their workforces to get vaccinated.

In the wake of President Biden’s announcement, government contractors with onsite employees should take measures to ensure compliance with President Biden’s directive, and all government contractors should continue to monitor developments, as it appears they will soon be required to apply the same standards to all employees.

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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.

DOL Issues Proposed Rule on Raising Minimum Wage to $15 per Hour for Federal Contractor Employees

Quick Hit

On July 21, 2021, the Department of Labor (“DOL”) announced a proposed rule (the “Proposed Rule”) to implement President Biden’s Executive Order (the “Order”) requiring an increase of the minimum wage for certain employees of covered federal contractors and subcontractors to $15.00 per hour – except for tipped workers who must be paid $10.50 per hour – beginning January 30, 2022, with annual increases beginning in 2023 to account for inflation.  With some exceptions, the requirement will apply to new contracts issued on or after January 30, 2022, or existing contracts renewed or extended on or after that date.  The final rule will be issued by November 24, 2021.

Key Takeaways                                                                                 

Although the Proposed Rule is not final and may be subject to revisions, federal government contractors should begin to prepare for its implementation by (1) ensuring they properly understand who is covered; and (2) particularly where not all of their workforce will be covered, assessing how best to ensure accurate records and address the practical issues of potentially having two different payment structures for their employees.

More Detail

The Proposed Rule seeks to implement the Order’s requirement that workers on government contracts receive a minimum wage of at least $15 per hour.  The Proposed Rule requires the minimum wage for covered workers on covered “new contracts” to be increased to $15 per hour starting on January 30, 2022, and then to be assessed by DOL and potentially increased annually beginning January 1, 2023.  Any increases will be announced at least 90 days before the new rates take effect.  For covered tipped employees, the Proposed Rule would establish a minimum wage of $10.50 beginning January 30, 2022, and, in the event the new $15 minimum wage for non-tipped employees is increased, the minimum wage for tipped employees would increase to be 85 percent of the new rate until January 1, 2024, when tipped workers will be subject to the same minimum wage requirements as non-tipped employees.  Further, if the tips received by the tipped employees when combined with the minimum wage do not equal or exceed the standard minimum wage for non-tipped employees, the contractor must provide additional wages so that the tipped worker earns at least $15 per hour (or the new increased rate).

Under the Proposed Rule, any worker working on or in connection with a covered contract will be subject to the new minimum wage requirements.  This includes workers who are performing the specific services called for by the terms of the contract, as well as those performing “other duties necessary to the performance of the contract,” unless a specific exemption would apply.

The Proposed Rule requires the new minimum wage requirements apply to and be incorporated into all “new contracts” with government agencies beginning January 30, 2022.  The term “new contract” is not limited to contracts issued on or after January 30, 2022, but also includes any pre-existing contracts where such contracts are renewed or extended on or after that date, or where the government exercises an option to purchase additional supplies or services on or after January 30, 2022.

Notably, the Proposed Rule excludes contracts where the solicitation pre-dates January 30, 2022, and the contract is entered into between January 30, 2022 and March 30, 2022, but renewals, extensions and exercised options during this period appear to be subject to the new minimum wage requirement.

The minimum wage requirement will apply to a “new contract” requiring performance in whole or in part in the United States that is (i) a procurement contract for construction covered by the Davis-Bacon Act; (ii) a contract for services covered by the Service Contract Act; (iii) a contract for concessions, including any concessions contract excluded from coverage under the Service Contract Act by Department of Labor regulations at 29 CFR 4.133(b); or (iv) a contract entered into with the Federal Government in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.  Further, the minimum wage requirements will only apply where the wages of the workers under such contract are governed by the Fair Labor Standards Act, the Service Contract Act, or the Davis-Bacon Act.

The Proposed Rule does not apply to grants, employees who are exempt from the minimum wage requirements of the FLSA, student workers, and a limited number of other categories of workers.

Under the Proposed Rule, the DOL Wage and Hour Division would be responsible for enforcing the rule’s requirements.  DOL would accept complaints in either oral or written form, and could initiate investigations into violations as a result of such complaints or on its own initiative.  The Proposed Rule would also permit DOL to inspect relevant records and interview both the contractor and the contractors’ workers.  If a government contractor is found to have violated any of the regulations in the Proposed Rule, DOL would notify the contractor of the violation and request it be remedied.  If the contractor does not remedy the violation, DOL could require the contracting agency to withhold payments to the contractor and then transfer the withheld money to the eligible workers.  Contractors could also be subject to debarment proceedings.

Under the Proposed Rule, covered contractors and subcontractors would be required to include in any covered subcontracts a flow down provision requiring the lower-tier subcontractor to comply with the minimum wage requirements.  The Proposed Rule provides that irrespective of whether this clause is included in the subcontract, the prime contractor and any upper-tier subcontractor(s) will be responsible for compliance by any subcontractor or lower-tier covered subcontractor.

The Proposed Rule also includes the following requirements:

  • Wage payments to workers must be made no later than one pay period following the end of the regular pay period in which such wages were earned or accrued;
  • Contractors and subcontractors subject to the Order must maintain records containing information on each worker for a period of three years; and
  • The contractor must notify all workers performing work on or in connection with a covered contract of the applicable minimum wage rate under the Order.

DOL will accept comments on the Proposed Rule until August 21, 2021 before publishing its final version by November 24, 2021.

OFCCP Announces The First New Audits of the Biden Administration – Was Your Company On It?

On July 1, 2021, OFCCP announced the release of the first Corporate Scheduling Announcement List (CSAL). The list consists of 750 Supply and Service establishment-based full compliance reviews, Corporate Management Compliance Evaluations (CMCE), Functional Affirmative Action Program (FAAP) Reviews and University Reviews.  Note that the list merely notifies contractors that they will be audited in the future, which gives them time to prepare.

Contractors are advised to review the CSAL (available here) to see if they have been selected for an audit. If they have been selected, contractors should begin preparing for the type of audit for which they have been selected, and consult with counsel as necessary. One great way to start the process is to attend my panel presentation “You are on the CSAL- Don’t be Caught with your Pants Down!” at the National Industry Liaison Group conference virtually or in person in Nashville on August 1.  Details are available here.

President Biden Issues Executive Order Increasing Minimum Wage for Federal Contractor Employees to $15/Hour

On April 27, 2021, President Biden issued an Executive Order that will increase the minimum wage for certain employees of covered federal contractors and subcontractors to $15.00 per hour, with annual increases beginning in 2023 to account for inflation.  The Executive Order builds upon President Obama’s 2014 Executive Order requiring federal contractors to pay employees at least $10.10 per hour.  The White House expects that “hundreds of thousands of workers” will be affected by the Executive Order.  A White House statement on the Executive Order is available here.

The minimum wage increase does not apply immediately.  Rather, it will only apply to new or renewed contracts beginning January 30, 2022.  Specifically, the following types of contracts, so long as they are also governed by the Fair Labor Standards Act, Service Contract Act, or Davis-Bacon Act, will be subject to the new minimum wage: (1) procurement contracts for services or construction; (2) contracts for services covered by the Service Contract Act; (3) contracts for concessions; and (4) contracts that are both (a) entered into with the federal government in connection with federal property or lands and (b) related to offering services for federal employees, their dependents, or the general public.

The Executive Order also restores minimum wage protections for outfitters and guides operating on federal lands by revoking an exemption created by President Trump.  With regard to tipped workers, the Executive Order increases their minimum wage from $7.65 per hour to $10.50 per hour for new or renewed covered contracts beginning January 30, 2022.  The tipped wage will continue to increase each year until January 1, 2024, when it will be eliminated, and afterwards tipped employees will have to be paid the same minimum wage as other employees on federal contracts.  Further, the Executive Order ensures that individuals with disabilities will be paid the $15.00 minimum wage.  The Executive Order does not apply to agreements with Indian Tribes under the Indian Self-Determination and Education Assistance Act.

The Executive Order specifies that covered federal contracts will have to include a clause increasing the minimum wage, and contractors and any subcontractors will have to incorporate that clause into lower-tier subcontracts.  The Secretary of Labor must issue regulations by November 24, 2021 to implement the Executive Order.  The Secretary may provide, as appropriate, exclusions from the requirements of the Executive Order.

Contractors should evaluate their contracts and workforce to determine (1) which contracts subject to the Executive Order are up for renewal during the remainder of this year and after January 30, 2022 and (2) which job classifications in those contracts currently make below $15.00 per hour.  Contractors should also assess the extent to which wage increases will affect the pricing of their bids and may be considered a cost reimbursement under their respective contracts.

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