The Wait Is Over: OFCCP Issues New Directive On Functional Affirmative Action Programs

July 20, 2011

By: Tyler T. Hendry

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:

  • Currently exist and operate autonomously;
  • Have personnel practices or transactional activities (e.g., hires, promotions, terminations, compensation decisions) that are distinguishable from other parts of the contractor’s organization;
  • Include at least 50 employees;
  • Have its own managing official; and
  • Have the ability to track and maintain its own personnel activity.

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.