The revised regulations come at a time of increased OFCCP enforcement activity, making compliance all the more important.

The U.S. Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) recently announced two significant regulatory overhauls that will have a broad impact on the federal contractor community. OFCCP issued a Final Rule revising existing regulations under the Vietnam Era Veterans' Readjustment Assistance Act of 1974 (VEVRAA), which requires federal contractors and subcontractors covered by VEVRAA to take affirmative action to recruit, hire, and promote certain protected categories of veterans. OFCCP also issued a Final Rule revising regulations implementing Section 503 of the Rehabilitation Act of 1973. The changes are the first to VEVRAA and Section 503 regulations in nearly 30 years. Among the more significant changes discussed below, the revised regulations require contractors to establish annual hiring benchmarks for protected veterans and annual placement goals for individuals with disabilities; require contractors to invite applicants to voluntarily identify as a qualifying veteran or disabled individual at the pre-offer stage of the hiring process; impose stiffer data collection and record retention obligations; and implement more transparent language in job listings and contracts.

Key Changes to Veterans' Regulations

• Hiring Benchmarks: For the first time, contractors will be required to adopt an annual hiring benchmark for covered veterans. The benchmark must be based on: (1) the national percentage of veterans in the workforce (currently 8%); or (2) the contractor's own benchmark based on the best available data, utilizing five factors set forth in the regulations. Those factors are: (a) the average percentage of veterans in the civilian labor force over the past three years in the state where the contractor is located; (b) the number of veterans who participated in the employment service delivery system in the state where the contractor is located over the past four years; (c) the applicant and hiring ratios for the previous year; (d) the contractor's recent assessments of the effectiveness of its outreach and recruitment efforts; and (e) any other factors, such as the nature of the job or its location, that would affect the availability of qualified protected veterans.
• Voluntary Self-Identification: Contractors must invite applicants to voluntarily self-identify as a qualifying veteran at the pre-offer stage of the hiring process, in addition to the existing requirement that contractors invite applicants to voluntarily self-identify after receiving a job offer.
• Enhanced Recordkeeping: Under a new data collection analysis requirement, contractors must document and update annually the total number of applicants for employment and the number of applicants who are protected veterans; the total number of job openings and the number of jobs filled; and the total number of applicants hired and the number of applicants hired who are protected veterans. The Final Rule also implements a new three-year recordkeeping requirement for, among other things, documentation and assessment of external outreach and recruitment efforts, and records related to the hiring benchmark.
• Job Listings: Contractors are required to provide mandatory job listings with the appropriate employment service delivery system in any manner and format that the system requires.
• Document Production: The Final Rule requires contractors to allow on- or off-site access to documents during an OFCCP compliance review. Additionally, the Final Rule permits OFCCP to extend the length of desk audits beyond the time period initially set forth in the scheduling letter if OFCCP deems it necessary to fully carry out its investigation of potential violations.

Key Changes to Section 503 Regulations

• Annual Placement Goals: For the first time, contractors will be required to establish a job group-based 7% utilization goal for individuals with disabilities. As with affirmative action goals for women and minorities, these goals are aspirational, and are not quotas or set-asides.
• Voluntary Self-Identification: Contractors must invite applicants to voluntarily self-identify as an individual with a disability at the pre-offer stage of the hiring process, in addition to the existing requirement that contractors invite applicants to voluntarily self-identify after receiving a job offer. Contractors also are required to invite incumbent employees to voluntarily self-identify as disabled on a regular basis, and at least every five years.
• Enhanced Data Collection and Recordkeeping: Under a new data collection analysis requirement, contractors must document and update annually the total number of applicants for employment and the number of applicants who are protected veterans; the total number of job openings and the number of jobs filled; and the total number of applicants hired and the number of applicants hired who are protected veterans. These records must be kept for three years.
• Document Production: The Final Rule requires contractors to allow on- or off-site access to documents during an OFCCP compliance review. Additionally, the Final Rule permits OFCCP to extend the length of desk audits beyond the time period initially set forth in the scheduling letter if OFCCP deems it necessary to fully carry out its investigation of potential violations.

What Did Not Change

When OFCCP first proposed change to these regulations in 2009, the proposed changes were even broader. Areas in which contractors can (somewhat) breathe a sigh of relief include:

• "Linkage" Agreements: The Final Rules for both VEVRAA and Section 503 eliminate proposed provisions, which would have required contractors to enter into linkage agreements with at least three prescribed employment organizations to source potential veteran and disabled applicants. Instead, each Final Rule requires that contractors engage in "appropriate outreach and positive recruitment activities … that are reasonably designed to effectively recruit" protected veterans and individuals with disabilities.
• Applicant Accommodations: The Section 503 Final Rule does not include burdensome proposed requirements that would have required contractors to consider a job applicant who identified as having a disability for all available positions for which he or she may have been qualified in the event that the disabled applicant was not hired for the position to which he or she applied. The proposed rule also would have required contractors to document the reasons for rejecting individuals with disabilities for any vacancies for which they were considered and to explain the reasonable accommodations considered.

When Are the Revised Regulations Effective?

The Final Rules become effective 180 days after publication in the Federal Register, which is still pending. At that time, contractors will be required to comply with all elements of the Final Rules, with the exception of the new Affirmative Action Program requirements in the regulations. If the effective date falls in the middle of a contractor's AAP year, the contractor can delay its compliance with the new Affirmative Action Program requirements until the start of the next AAP cycle.

What Does This Mean for Employers?

Federal government contractors and subcontractors with a contract or subcontract in excess of $50,000 (Section 503) or $100,000 (VEVRAA) should begin preparing to implement the changes required by the revised regulations so that they are in compliance with the regulations when they are effective. These changes will not happen overnight: Compliance requires a carefully thought-out and effectively implemented recruitment, data collection and record retention program. In addition, the revised regulations come at a time of increased OFCCP enforcement activity, making compliance all the more important. Federal government contractors and subcontractors may wish to consult with legal counsel to assist in their efforts to comply with the revised regulations.

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