Veterans Rule Presents Many Data and Compliance Challenges

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“It already is hard to reconcile race and gender data; I suspect adding veteran status to that reconciliation process will not be seamless,” Alissa Horvitz, an attorney at Littler in Washington, D.C., told SHRM Online.

Discussing the Aug. 27, 2013, final rule on federal contractors’ affirmative action obligations to recruit and hire veterans, Horvitz noted that one challenge covered contractors will have is recruiting veterans and women at the same time. Although many veterans are black, they are less likely to be female, and recruiting veterans may make it difficult to hit the hiring goals for women under Executive Order 11246.

Even the Office of Federal Contract Compliance Programs (OFCCP) admitted as much, saying in a footnote in the final rule that 14.2 percent of people in the enlisted ranks are women and 85.8 percent are men. Horvitz said she thought OFCCP had given “short shrift” to this fact in its rule. Federal contractors that try their hardest to improve their recruitment of veterans have to keep an eye on the possible adverse impact on women, she explained.

Veterans Benchmark

To measure their success in recruiting and employing veterans, federal contractors are to annually adopt a benchmark based on either the national percentage of veterans in the workforce (currently 8 percent) or their own benchmark based on the best available data.

Horvitz said “most companies are going to opt for the 8 percent benchmark because the other formula is complicated and would require the contractor to invest time and money in the resources behind obtaining the data needed to run the calculations.”

She explained that the calculate-your-own benchmark requires that the employer know:

  • The average percentage of veterans in the civilian labor force in the state(s) where the contractor is located over the preceding three years, as calculated by the Bureau of Labor Statistics and published on the OFCCP website.
  • The number of veterans, over the previous four quarters, who were participants in the employment service delivery system in the state where the contractor is located, as tabulated by the Veterans’ Employment and Training Service and published on the OFCCP website.
  • The applicant ratio and hiring ratio for the previous year, based on the data collected by the contractor for its affirmative action plan data analyses.
  • The contractor’s recent assessments of the effectiveness of its external outreach and recruitment efforts.
  • Any other factors, including but not limited to the nature of the contractor’s job openings and/or its location, which would tend to affect the availability of qualified protected veterans.

“That is a lot to investigate and research, especially if you are a multistate government contractor,” Horvitz added. “It seems much simpler for everyone to aim for an 8 percent hiring goal across the workforce, at least for the next several years. Three or four years down the road, if OFCCP begins to take a very aggressive posture against employers whose otherwise good-faith efforts and outreach initiatives are being unfairly critiqued in audits, some employers may begin to weigh the options of running the calculations.”

Cindy Mattson, J.D., president and CEO of EEO Consultants in Miami Beach, Fla., noted, “Besides finding female veteran applicants, it will likely be difficult to find veterans with the requisite skills necessary for the job posted based on the companies’ individual industries since most federal contractor companies are not military in nature. One method contractors can take is to offer special on-the-job training, apprenticeships, mentoring, scholarships or internship programs specifically focused on veterans. Generally speaking, stakeholders likewise find veterans to be exceptional employees and easily ‘retrainable’ in new job skills and industries. Focus on recruitment efforts locally is generally the most impactful.”

EEO-Flow-Down Notice

Another potential fly in the ointment with the veterans rule “is the breadth of the EEO-flow-down notice to subcontractors, vendors and suppliers,” Horvitz said.

A new regulation requires contractors to send a written notice of the company’s affirmative action policy to all subcontractors, vendors and suppliers, requesting appropriate action.

“This annual notification became mandatory, and no longer is permissive,” Horvitz pointed out. And she indicated it could be quite problematic.

“Let’s say that I am a massive, multi-establishment hospital system, and I am an OFCCP-covered prime contractor because only one of my hundreds of research labs across my entire system has a $150,000 federal contract with the Department of Defense. I know what supplies that one lab buys. There are no subcontractors.

“But I receive reimbursement from Tricare,” Horvitz added. “To whom must I send this new mandatory notice? Every company, individual and independent contractor in the accounts payable ledger, who’s in the United States, who was paid $10,000 or more in aggregated amounts during the last 12 months? Am I supposed to have the e-mail addresses of all these vendors? Suppose I have the e-mail address of the accounts receivable department so I know where to send notice of my electronic payment. Will that suffice? Or does the notice have to go to the person responsible for EEOC compliance? What if I don’t know that person’s name or have an e-mail address?”

So many questions, and as of yet, so few answers. Horvitz concluded by saying she thought the OFCCP’s estimate that it would take 45 minutes to prepare the notification and send it to subcontractors, vendors and suppliers, including the time to correct undeliverable e-mail addresses from bounce backs is “grossly undervalued,” along with the OFCCP’s cost estimate.

“In my opinion, the task of identifying to whom the notice must be sent, and dealing with the consequences of sending it to thousands of suppliers and vendors that have absolutely nothing to do with any federal contract, will cause a backlash within the procurement department that will take longer than 45 minutes per year to resolve.

“I think hundreds of thousands of letter recipients are going to inundate the senders with requests for clarification as to their ‘covered’ subcontractor, vendor and supplier status, and suppliers and vendors are going to want the prime contractor to remove it from their subcontracts if they are not ‘covered.’ Likewise, there are going to be negotiations to try to remove it, if possible, from broad template language on the front end of new contracts that have these notice clauses,” Horvitz explained.

“If the way to avoid being inundated by questions from subcontractors and annual letter recipients is to engage in a careful identification of which vendors and suppliers fit into either of the two prongs of the OFCCP’s definition of a subcontractor, that exercise will take more than 45 minutes per year as well,” she concluded.

Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.


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