U.S. Department of Labor Issues Final Rule Implementing Executive Order 13658 (Minimum Wage for Certain Federal Contractors)
October 7, 2014
New York Labor and Employment Law Report
October 7, 2014
August 14, 2014
August 4, 2014
July 21, 2014
February 13, 2014
On February 12, 2014, President Obama signed an Executive Order requiring that all new federal contracts and subcontracts contain a clause specifying that the minimum wage to be paid to workers under those federal contracts and subcontracts must be at least $10.10 per hour beginning January 1, 2015. The federal contracts and subcontracts covered by this Executive Order include procurement contracts for services or construction and contracts for concessions. This new $10.10 minimum wage will also apply to disabled employees who are currently working under a special certificate issued by the Secretary of Labor permitting payment of less than the minimum wage. Beginning January 1, 2016, and annually thereafter, the minimum wage for federal contractors will be increased by the Secretary of Labor based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, and rounded to the nearest multiple of five cents. The Secretary of Labor is required to publish the new minimum wage at least 90 days before the new minimum wage is scheduled to take effect. For tipped employees, the hourly cash wage that must be paid by a federal contractor must be at least $4.90 beginning on January 1, 2015. In each subsequent year, the federal contractor minimum wage for tipped employees will be increased by 95 cents until it equals 70 percent of the federal contractor minimum wage in effect for non-tipped employees. If an employee’s tips, when added to the hourly wage, do not add up to the federal contractor minimum wage for non-tipped employees, the federal contractor will be required to supplement the employee's hourly wage to make up the difference. The Secretary of Labor is expected to issue regulations by October 1, 2014, to implement the provisions of the Executive Order.
November 19, 2013
The revised Regulations issued by the Department of Labor, Office of Federal Contract Compliance Programs (“OFCCP”), addressing affirmative action obligations applicable to disabled individuals under the Rehabilitation Act of 1973, as amended (“Section 503”), and to protected veterans pursuant to the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, as amended (“VEVRAA”), become effective March 24, 2014. Due to the numerous requirements in these new Regulations, contractors should start reviewing and implementing procedures to ensure compliance. Ten steps that covered contractors should implement by March 24, 2014 include:
October 17, 2012
The U.S. Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) has significantly increased its focus on employers’ compensation systems during scheduled affirmative action compliance audits. In fiscal year 2011, OFCCP had 27 compliance evaluations with pay provisions for alleged compensation disparities, totaling $1.06 million in monetary benefits. In 2010, OFCCP reached 10 settlements for alleged bias in compensation. These are significant increases from 2009 and 2008; only two findings of alleged compensation discrimination were found in 2009 and zero in 2008.
Under Executive Order 11246, Federal contractors are required to conduct self-audits of their pay systems to identify potential gender or race based disparities. If pay disparities are found, contractors are expected to correct the disparities prior to any potential government audit. In light of the OFCCP’s increased scrutiny of compensation systems, contractors need to protect themselves by collecting and storing detailed data on factors affecting employees’ pay, such as years of prior job experience, time at the company, time in the position, education, performance ratings, pay grade or level, and additional compensation (commissions, bonuses, incentives, overtime, etc.). Federal contractors should also be sure to preserve all salary records for employees, to allow for the creation of a salary history for individual employees. In addition, contractors should have written compensation guidelines, as well as defined polices influencing compensation, such as the impact of performance evaluations on compensation.
It is expected that OFCCP’s heightened focus on compensation will continue to grow. To avoid significant back pay awards based on perceived pay disparities due to race or gender, employers must be proactive in self-auditing their compensation practices and making appropriate adjustments prior to any government review.
May 29, 2012
Federal contractors may want to start preparing for proposed changes to the regulations issued by the U.S. Department of Labor, Office of Federal Contract Compliance Programs ("OFCCP"), in connection with federal contractors' affirmative action obligations. OFCCP expects to have new final regulations in place during 2012, which will increase federal contractors' obligations regarding veterans and disabled individuals, as well as modify the documentation required during compliance evaluations.
Proactive steps that covered employers should consider taking include:
The proposed Itemized Listing requires covered employers to provide the OFCCP with individualized compensation data for all employees, which will enable the OFCCP to run a variety of analyses. Covered employers should keep in mind that the OFCCP may not have appropriate measures to safeguard this sensitive data from Freedom of Information Act requests. Before submitting any compensation data, covered employers should take steps to protect such information.
January 9, 2012
The U.S. Department of Labor, Office of Federal Contract Compliance Programs ("OFCCP"), recently issued a proposal to revise the regulations applicable to Section 503 of the Rehabilitation Act of 1973, which requires Federal contractors to take affirmative action to hire, retain, and promote qualified individuals with disabilities. The proposed changes, if implemented, will substantially increase the obligations imposed on Federal contractors with respect to individuals with disabilities.
The OFCCP proposal includes the following requirements:
Comments on the proposed rule from interested parties may be submitted to the OFCCP on or before February 7, 2012. OFCCP anticipates a final rule will be published around Fall of 2012.
December 2, 2011
Recent complaints filed by the Office of Federal Contract Compliance Programs ("OFCCP") and the Equal Employment Opportunity Commission ("EEOC") against employers suggest that those federal agencies are aggressively pursuing allegations of discriminatory hiring practices.
On November 29, the OFCCP filed an administrative complaint against Cargill Meat Solutions, a federal contractor, alleging that the company violated Executive Order 11246, by favoring Asian and Pacific Islander applicants over applicants of other races and by favoring male applicants over female applicants. In the complaint, the OFCCP alleges that over 4,000 qualified applicants were unlawfully rejected based only on their race or sex. Significantly, the OFCCP seeks cancellation of the company's government contracts worth more than $550 million.
In the last several months, the EEOC has also filed two high-profile lawsuits against employers for alleged discriminatory hiring practices. In September, the EEOC filed a lawsuit against Bass Pro Shops in the U.S. District Court, District of Massachusetts, alleging that the company engaged in a pattern or practice of failing to hire African-American and Hispanic applicants. In the lawsuit, the EEOC alleges that managers made overt racist comments acknowledging the company's discriminatory hiring practices, and stated that African-American applicants did not fit their corporate profile.
In October, the EEOC filed a lawsuit against Texas Roadhouse in the U.S. District Court, Southern District of Texas, alleging that the company systematically failed to hire individuals over 40 years of age for "front of the house" positions. In the lawsuit, the EEOC alleges that only 1.9% of the "front of the house" employees are over 40 years of age (which the EEOC believes is a statistically significant disparity when compared to the general population, industry statistics, and the applicant pool) and that the company instructed managers to hire younger employees by emphasizing youth in its hiring training.
At this point, these enforcement actions by the OFCCP and EEOC have not resulted in any final determinations or judgments. Nevertheless, these enforcement actions serve as a useful reminder for employers of all sizes to continually monitor their hiring practices and periodically train managers who have hiring responsibilities to ensure compliance with federal, state, and local laws.
July 20, 2011
Federal contractors should be aware that the Office of Federal Contract Compliance Programs (OFCCP) recently issued a much anticipated directive impacting certain affirmative action programs. The new directive, which became effective on June 14, 2011, outlines the procedures for developing and maintaining a “Functional Affirmative Action Program” (FAAP). The directive ends OFCCP’s year-long moratorium on processing contractor requests to develop or renew FAAP agreements.
FAAPs are affirmative action programs covering a particular business function or business unit rather than covering a particular establishment or worksite. For example, covered contractors may develop an FAAP for all marketing associates across multiple offices in different states, instead of having to create affirmative action programs for each individual establishment where those associates work. Unlike establishment-based programs, covered contractors cannot implement FAAPs without first obtaining OFCCP approval and then entering into an agreement with the Agency.
The new directive makes what OFCCP considers to be “significant changes” to the FAAP approval and agreement processes. Under the directive, a contractor must obtain prior written approval from OFCCP before developing an FAAP. This terminates OFCCP’s past practice of allowing for automatic approval if the Agency failed to act on a contractor’s FAAP request within 120 days.
The directive also sets forth contractor eligibility requirements. Each business function or unit must meet the following criteria to be considered eligible for an FAAP:
In addition, FAAP agreements will now expire after three years, rather than five, and contractors could face compliance audits if they fail to submit an annual FAAP update.
In terms of practical guidance, the directive outlines the elements that must be included in an FAAP, the basic principles of FAAP agreements, and the procedures for requesting, modifying, updating, renewing, or terminating such agreements. Attachments to the directive provide a checklist of documents that must be submitted during the approval process and examples of how contractors may develop either an establishment-based affirmative action program or the alternative FAAP. OFCCP has also published a list of Frequently Asked Questions regarding FAAPs on its website.
Employers considering the use of FAAPs should carefully review the obligations and requirements imposed by the new directive. At the same time, employers with existing FAAPs should review the directive for guidance on renewing, modifying, or terminating such agreements.
December 2, 2010
Documentation of employment activities and workplace investigations is critical for all employers. Federal contractors subject to affirmative action compliance audits by the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) must be particularly diligent. The existence or absence of appropriate documentation during an OFCCP compliance audit often dictates the length and ultimate result of the audit.
Some of the records that are essential to the successful completion of an affirmative action audit are:
An employer that has not sufficiently documented its hiring and other personnel decisions can face serious problems during an audit, where it has the burden of explaining why particular decisions were made. If the employer does not have a system of recording and maintaining information about its hiring and other personnel decisions, it will be very difficult to recreate the decision-making process during the audit.
Not only must a federal contractor ensure that all personnel activity is documented in order to successfully navigate an audit, it must also take steps to maintain the documentation on a longer term basis. While OFCCP regulations require covered employers to maintain all applicable records for a minimum of two years, many federal and state record retention laws exceed that requirement. Federal and state statutes of limitations on bringing employment claims may also counsel in favor of retaining records for longer than the two year period required by OFCCP.
One record OFCCP will not review during new audits is the I-9 Form used by employers to verify the identity and U.S. employment eligibility of hired individuals. OFCCP Director Patricia Shiu recently announced that OFCCP will no longer inspect employers’ I-9 Forms during on-site compliance reviews. Director Shiu indicated that a new directive pertaining to I-9 inspections would soon be issued.