Category Archives: Affirmative Action

Watch Out! Audits of State of Minnesota Contractors Are Increasing

Audits of Minnesota contractors with affirmative action plans or equal pay certificates are on the rise.

In Minnesota, no department or agency of the state can accept any bid or proposal on a contract or agreement for goods and services in excess of $100,000 from any business having more than 40 full-time employees, unless the MDHR Commissioner has received an affirmative action plan (AAP) for that business for the employment of minority employees, women, and qualified disabled persons. Minn. Stat. § 363A.36, subd. 1. The department or agency also cannot execute any such contract or agreement until the AAP has been approved by the Minnesota Department of Human Rights (MDHR) and the business has been issued a Certificate of Compliance. Id. Certificates of Compliance are valid for a four-year period.

In 2015, the MDHR actively audited employers holding Certificates of Compliance. According to MDHR statistics posted on December 31, the MDHR issued over 350 audit letters to state contractors in 2015.

The MDHR also actively audited employers holding the relatively recent Equal Pay Certificates of Compliance. In 2014, Minnesota enacted a new statute requiring companies with 40 or more full-time employees executing a contract for goods or services with the state in excess of $500,000 to hold a current Equal Pay Certificate or certify in writing that it is exempt. Equal Pay Certificates are valid for a four-year period. Minn. Stat. § 363A.44, subd. 1. The MDHR has the authority to audit a covered contractor’s compliance with this requirement and may require the contractor to produce information with respect to (1) its number of male employees, (2) its number of female employees, (3) average annualized salaries, (4) performance payments, benefits, or other elements of compensation, (5) average length of service, and (6) other information as needed to determine compliance. Minn. Stat. § 363A.36, subd. 8. In 2015, the MDHR initiated 21 such audits.

Takeaway: Employers who are covered state contractors in Minnesota should be actively prepared to respond to a MDHR audit letter regarding its AAP and/or Equal Pay Certificate and should regularly be reviewing its programs to ensure ongoing good faith efforts to comply with these laws.

When Are Federal Contractors Required To Maintain Affirmative Action Plans?

Federal law requires certain employers who perform work on contracts and subcontracts with the United States government to maintain affirmative action plans. The rules for when affirmative action programs are required are different for construction and non-construction contractors. Here’s what employers need to know about when federal affirmative action requirements apply:

Construction Contractors: A construction contractor or subcontractor is required to maintain an affirmative action program if it holds any “Federal or federally assisted construction contract in excess of $10,000.” 41 C.F.R. § 60.4-1(a).

Non-construction Contractors: A non-construction contractor or subcontractor must an maintain affirmative action program if: (1) it has 50 or more employees; and (2) either (i) has a contract or subcontract with the government of $50,000 or more; (ii) has government bills of lading which in any 12-month period total or can reasonably be expected to total $50,000 or more; (iii) serves as a depository of government funds in any amount; or (iv) is a financial institution which is an issuing and paying agent for U.S. savings bonds and savings notes in any amount. 41 C.F.R. § 60-2.1(a).

Takeaway: Employers who do business with the federal government may be required to maintain affirmative action programs depending on the type of work they do and how much revenue is generated by the work performed. State laws may also impose similar requirements.

Supreme Court Affirms Michigan Constitutional Rejection of Affirmative Action

On April 22, 2014, the United States Supreme Court upheld the Michigan Constitutional amendment which  prohibits in part the use of raced-based preferences in the admissions process for State of Michigan universities.  Schuette v. Coalition to Defend Affirmative Action, No. 12-682 (Apr. 22, 2014).  The Michigan amendment also prohibited similar preferences by the State of Michigan in public employment, public education, or public contracting.  The Court reversed the 6th Circuit Court of Appeals which had concluded that the amendment violated the Equal Protection Clause of the federal Constitution.

The Michigan amendment had been approved by Michigan voters in 2006 following two prior Supreme Court opinions which analyzed the constitutionality of race-based admissions criteria at the University of Michigan.  In Gratz v. Bollinger, 539 U.S. 244 (2003), the Supreme Court held that the undergraduate admissions process violated the Equal Protection Clause, and in Grutter v. Bollinger, 539 U.S. 306 (2003), held that the law school’s admission process did not.

In Schuette, the Supreme Court did not analyze the constitutionality of race-conscious affirmative action admissions policies.  Instead, the Court determined whether the state constitutional amendment prohibiting such preferences was lawful.  A plurality of the Justices determined that the Michigan amendment was enforceable.  Justice Sotomayor, along with Justice Ginsburg, filed a dissenting opinion.

Takeaway:  This Supreme Court opinion did not hold that all affirmative action admission programs are unconstitutional, nor did it overrule any federal government contracting affirmative action obligations.  Instead, the Schuette Court determined that the citizens of a state may amend a state’s constitution to prohibit certain state-based affirmative action programs.  This decision may give rise to comparable efforts to amend constitutions in other states.

OFCCP Issues New Rules Regarding Veterans and Disabled Employees

In August 2013, the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) announced new rules applicable to government contractors.  The new rules modified certain regulations regarding the employment of persons subject to the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) and Section 503 of the Rehabilitation Act.  The OFCCP believed that such changes were necessary to respond to the agency’s assessment of disproportionately high unemployment for certain veterans and disabled persons.  These rule changes become effective March 24, 2014.

The new rules require government contractors and covered subcontractors to comply with new recordkeeping requirements, engage in particular outreach efforts, and set certain aspirational utilization goals.  For example, contractors and subcontractors must establish a utilization goal of 7% disabled employees in each job group.

To help contractors identify the significant changes in the regulations, the OFCCP has posted on its website side-by-side comparison charts regarding the final and prior rules.  The comparison chart regarding the VEVRAA changes can be found here.  The Section 503 chart is available here.

Takeaway:  Government contractors and covered subcontractors should familiarize themselves with these regulatory changes prior to their March 24, 2014 effective date.  While the regulations themselves are lengthy, the above-referenced comparison charts will help target the material new requirements.

Reminder – EEO-1 Reports are Due by September 30

The Equal Employment Opportunity Commission (EEOC) requires that the Employer Information Report (EEO-1 Report) must be filed by September 30, 2013.  Generally, all private employers who are subject to Title VII and have at least 100 employees must file this Report.  Additionally, private employers who have fewer than 100 employees, but are owned or affiliated with one or more other companies, or who have centralized control or management with other companies, such that the group of companies legally is a single enterprise and the enterprise employs at least 100 employees must also file an EEO-1 Report.  Most federal contractors and first-tier subcontractors are also required to file an EEO-1 Report.

The EEO-1 Report requires the disclosure of various types of company information, including federal contractor status, and employment data by job category, race/ethnicity, and gender.  The EEOC prefers that employers file the EEO-1 Report online using the EEOC’s website.  For more information, click here to access the EEOC’s website about EEO-1 Reports.

Takeaway:  It is important for employers covered by the EEO-1 Report filing requirement to pay close attention to the Report and provide accurate data to the EEOC by the September 30 deadline.  Employers who willfully submit false data on the EEO-1 Report are subject to criminal penalties, and those who fail to file are subject to potential legal action by the EEOC that may result in a court order mandating that the employer file a Report.  Moreover, because the Office of Federal Contract Compliance Programs (OFCCP) has increased its scrutiny of EEO-1 Reports while conducting compliance audits of federal contractors and subcontractors, it is more important than ever before that employers submit accurate data.

OFCCP Issues New Directive on Compensation Analysis

On February 28, 2013, the Office of Federal Contract Compliance Programs (OFCCP) rescinded its existing enforcement guidance on compensation standards and issued a new Directive 307 regarding investigation of compensation pay practices.  A copy of the Directive can be found here.

In releasing Directive 307, the OFCCP emphasized that it intends to address compensation issues on a case-by-case basis rather than using a rigid analytical approach.  The OFCCP states that it will review pay discrimination issues based on Title VII principles without relying on inflexible formulas.

Directive 307 will apply to all OFCCP compliance evaluations scheduled on or after February 28, 2013.  Desk audits will begin by conducting preliminary analysis on the compensation data obtained by the OFCCP pursuant to Item 11 of the Scheduling Letter.  Depending on the results of the preliminary analysis, the OFCCP may request individual level employee data from the contractor.

The OFCCP apparently intends to begin a compensation analysis by first comparing large groups of similarly situated employees to determine whether systemic discrimination exists.  The agency may then proceed to analyze a smaller unit or group of employees and, eventually, individual employee situations.  Each audit will be case specific.

Takeaway:  Affirmative action contractors or covered subcontractors should be aware that the OFCCP is taking a new approach to analyzing compensation practices and should anticipate higher agency focus on compensation compliance.

New Statute Provides for Voluntary Veteran’s Preference in Hiring and Promotion

A newly enacted Minnesota statute provides that a “private nonpublic employer” may grant a preference to veterans in hiring and promotion.  See S.F. No. 1599.  A preference may also be granted to the spouses of certain disabled veterans or the surviving spouse of a deceased veteran.  The term “veteran” under the statute includes those who are honorably separated from the armed forces and who have met certain active duty criteria.  The bill was cited as one of a number of measures to expand opportunities for veterans and address an extremely high unemployment rate for veterans.

Minnesota law has long required public employers to grant preferences to veterans in hiring and promotion and, with some exceptions, prohibits public employers from removing veterans from their positions except for incompetency or misconduct after a hearing.  See Minn. Stat. § 197.455.  The new law is permissive rather than mandatory for private employers, although all employers should continue to keep in mind any other obligations they may have, including those to rehire veterans under the Uniformed Services Employment and Reemployment Rights Act (“USERRA”).

The new law addresses hiring and promotion, but not removal from a position.  It expressly states that granting a preference will not violate local and state human rights laws.  That language should protect employers from claims that granting a preference in hiring or promotion constitutes gender or age discrimination under the Minnesota Human Rights Act.  The new law does not, however, expressly override other claims, including those under federal equal employment opportunity laws.  Whether it will be interpreted as precluding those claims is unclear at this point.  In the past, purely voluntary preferences, have been subject to challenge under Title VII and certain other federal laws, while several challenges to preferences granted as required under state veteran’s preference statutes have been rejected.

Takeaway: Public and private employers should be aware of the statutory protections and opportunities existing for veterans, including USERRA and the existing Minnesota Veteran’s Preference statute.  Private employers considering granting a preference to veterans in line with the new law, Minn. Stat. §197.4551, should make sure that the grant is also in compliance with any other obligations they may have, including obligations under collective bargaining agreements and federal law.

EEO-1 Reports Are Due September 30, 2012

The annual EEO-1 Report filing deadline is quickly approaching.  The EEO-1 Report is a compliance survey report mandated by federal statute and regulations.  It requires employers to categorize employment data by race/ethnicity, gender and job category and file a report with the United States Equal Employment Opportunity Commission (EEOC).  Most private employers who have 100 or more employees must file this report, along with private employers with fewer than 100 employees if the company is affiliated with another company and the entire enterprise employs a total of 100 or more employees.  Additionally, most federal government prime contractors or first-tier subcontractors with 50 or more employees and a contract worth $50,000 or more must also file the EEO-1 Report.  The filing deadline for the EEO-1 Report is September 30th.

Remember that is important to correctly answer the question on the EEO-1 Report about whether the employer is a federal government contractor.  Incorrectly answering this question may lead to an audit by the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) of the employer’s affirmative action program.

Takeaway:  Employers should take care to not only file the EEO-1 Report in a timely fashion, but to also carefully complete the Report so that it is accurate.  Inaccurate or incomplete reports may lead to further investigation by the EEOC or the OFCCP, which employers would be wise to avoid if possible.  More information about the EEO-1 filing requirements may be found on the EEOC’s website at www.eeoc.gov/employers/eeo1survey.

EEO-1 Reports Can Trigger OFCCP Audits

Private employers with 100 or more employees are required each year to file an EEO-1 report with the Equal Employment Opportunity Commission’s Joint Reporting Committee.  29 C.F.R. § 1602.07.  Related entities that constitute a single enterprise who together employ at least 100 employees are also required to file.  Generally, the form requires employers to provide summary data as to the gender and race of their workforce in ten broad job categories.

In addition to companies with 100 or more employees, all federal contractors or first-tier subcontractors with 50 or more employees and a single government contract of $50,000.00 or more are also required to file an EEO-1 report.  These are the same threshold number of employees and contract amount that triggers a contractor’s or subcontractor’s obligation to develop an affirmative action plan.  41 C.F.R. § 60-2.1.

Section C of the EEO-1 report form inquires as to whether an employer is such a government contractor or subcontractor in its question 3.  Employers who are contractors at these thresholds should answer the question by checking the “yes” box.  Many times, however, employers who are not government contractors or who do not meet these thresholds rush completion of the EEO-1 form and inaccurately answer this question in the affirmative.  Doing so tells the federal government that the company is a government contractor subject to affirmative action plan requirements.  It should not then be a surprise if the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) notifies the company that it is scheduling an audit of the company’s affirmative action program.

Takeaway:  To avoid miscommunicating government contractor status, employers should carefully complete the annual EEO-1 report.

Affirmative Action Requirements for State of Minnesota Contractors

Companies interested in doing business with the State of Minnesota should be aware that a state contract may trigger affirmative action obligations.

What Are the Requirements?

If a company has more than 40 full-time employees within the State of Minnesota and is pursuing a contract for goods and services in excess of $100,000.00, the company must produce to the contracting state agency a certificate of compliance which confirms the existence of the company’s affirmative action plan.  Minn. Stat. § 363A.36.  Similar to an affirmative action plan required when contracting with the federal government, a Minnesota plan regards the employment of racial minorities, women, and qualified disabled individuals.  To obtain the certificate of compliance, the company must first submit its affirmative action plan to the Minnesota Department of Human Rights for approval.  Certificates are valid for a period of two years.  Separate contracts of less than $100,000.00 are generally not aggregated to trigger the threshold amount.

What about companies who are headquartered outside the State of Minnesota who bid on state contracts?

Those companies must also obtain and submit a certificate of compliance if the contract value is in excess of $100,000.00 and the company has more than 40 full-time employees in the state where the company has its principal place of business.  Alternatively, the out-of-state company can certify that it is in compliance with federal affirmative action requirements.

Certain Minnesota cities and counties also have affirmative action plan requirements for contractors.  Minnesota companies seeking to do business with other state or local governments may face similar affirmative action plan requirements.

Takeaway:  Companies seeking to do business with the State of Minnesota or other governmental entities should look before they leap when entering into contracts that may trigger affirmative action requirements.

OFCCP Issues Proposed Revisions to Section 503 Regulations

On December 9, 2011, the Office of Federal Contract Compliance Programs (OFCCP) published a notice of proposed rulemaking regarding the disability discrimination regulations implementing Section 503 of the Rehabilitation Act.  The OFCCP is the branch of the U.S. Department of Labor which enforces affirmative action obligations for government contractors.

Seeking to strengthen employment opportunities for individuals with disabilities, the OFCCP is proposing several significant changes to the existing regulations.  If these proposed regulations are adopted, government contractors will have to:

  • Review their personnel procedures at least annually to make sure that their Section 503 obligations are being met.   
  • Use particular language developed by the OFCCP to invite applicants and employees to voluntarily self-identify whether or not they have a disability.
  • Include a rather lengthy Equal Employment Opportunity clause in every federal contract and subcontract.
  • Comply with particular job listing requirements and engage in specific outreach and recruitment efforts.
  • Issue written reasonable accommodation procedures.
  • Engage in increased data collection.
  • Modify compliance evaluation procedures.
  • Establish a national utilization goal of 7% individuals with disabilities for each job group.
  • Develop action steps for addressing any underutilization.
  • Implement specific training programs.
  • Maintain relevant records for five years.

These new obligations are anticipated to require covered contractors and subcontractors to spend significant additional time and resources on compliance efforts.  Whether these steps will result in increased opportunities for disabled workers is uncertain.

Public comments on the proposed revisions to the Section 503 regulations are being accepted until February 7, 2012.