The OFCCP has now released a total of seven (7) directives in 2018. With the intent of alleviating the gap between the agency's enforcement and the federal contractors' compliance obligations, the OFCCP held town hall and stakeholder meetings in the latter part of 2017 and in the first quarter of 2018. In those meetings, the OFCCP listened to, discussed with, and assured the federal contracting community of a more collaborative and transparent enforcement agency. Some of the directives released by the OFCCP in recent months contain actions to remedy the issues that were brought up in those meetings. Examples of these directives are the issuance of Pre-Determination Notices, the Rescission and/or Revision of Directive 307, and the Contractor Recognition Award.
As part of their continued effort to assist contractors with their compliance obligations, the OFCCP announced on September 11, 2018 a proposed Directive that will reduce the burden for those who are developing or wish to develop Functional Affirmation Action Plans (FAAPs). The proposed directive is now available for review and public comments thru November 13, 2018.
What is a FAAP?
Supply and service contractors may choose to develop Affirmative Action Programs (AAPs) based on their locations or establishments (41 CFR 60-2.1[b]) or based on the organization's business units or functions (41 CFR 60-2.1[d]). For some contractors, having function-based AAPs makes more sense, especially if each business unit within the organization truly functions independently from the rest. While location or establishment-based AAPs are horizontal in nature and can include employees across different business units, function-based AAPs are vertical in nature and include employees within the same business or functional unit with a determined "head," such as VP of Marketing or Manufacturing, an EVP for Business Technology, etc. Consequently, FAAP analytics are better aligned with each functional unit and, ultimately, with those who have "ownership" of the individuals within that unit.
According to the OFCCP, there are only seventy-one (71) current FAAP agreements, and an estimated two (2) agreements are terminated each year. If developing FAAPs makes more sense in the contractor's effective implementation of their affirmative action programs, why then aren't more contractors developing FAAPs? There are three (3) primary reasons: 1) not all organizations have large enough business units to justify the development of function-based AAPs, 2) the requirements for developing and maintaining FAAPs are too burdensome for contractors, and 3) aggregating all employees/transactions into fewer AAPs (typically an organization will have far fewer FAAPs than they will establishment-based AAPs), by definition, will increase the number of employees per plan and with it, legal exposure.
Not much that can be done about the first reason – slicing the workforce too thin results in useless AAP analytics, and the number of employees within a given business unit is directly related to the size of the organization and the number of different "functions." It is for this reason that we typically see FAAPs being used by medium-to-large contractors.
As for the overly burdensome requirements; there is plenty of room for improvements here. When one considers the additional effort required to develop FAAPs, it is easy to see that those can easily outweigh the benefits that the contractor might derive from better aligned FAAP analyses.
To start, a contractor cannot develop FAAPs without seeking approval from the OFCCP (establishment-based AAPs do not have this requirement). Together with the written request for approval, the contractor must include proof of federal contract, business structure, an organizational chart, employee counts, the rationale for the request to develop FAAPs, and a slew of other pieces of information. Under the current unrevised directive, any existing FAAP agreement must be modified every time the contractor reports 1 any business structure or function changes to its organization 2. Additionally, 120 days before the FAAP agreement expires, the contractor must submit a written notice to OFCCP certifying that there are no business or function changes to the organization, and that it be allowed to continue to develop FAAPs. While both the OFCCP and/or the contractor may choose to terminate the FAAP agreement, a 90-day termination notice must be submitted first by either party. A complete list of the requirements for developing, maintaining, and terminating FAAP agreements is available in the proposed FAAP directive.
Lastly, aggregating all employees/transactions into fewer AAPs can often lead to greater legal exposure. Where (perhaps) 200 employees and/or transactions (e.g., hires, promotions, terminations) might be included in an establishment-based AAP, now 2,000 might be included in a FAAP because there are fewer FAAPs covering the entire workforce. With the increased counts comes not only an increase in the ability to generate statistically-significant differences, it also increases the liability associated with those differences due to the larger number of "affected employees and/or applicants."
Proposed Changes in the FAAP Directive
The OFCCP acknowledges the fact that establishment-based AAPs do not always reflect how businesses operate, and hence, developing FAAPs is the better option for some contractors. As the agency encourages contractors to consider developing FAAPs for their organizations, it is also making an effort to lessen the burden on the requirements for approval.
Following are the proposed changes to the FAAP program:
- Extends the life of FAAP agreements from three (3) years to five (5) years.
- Eliminates the requirement for [at least] one compliance evaluation during the term of the agreement.
- Expands exemption period from 24 months to 36 months for FAAPs that underwent compliance evaluations.
- Eliminates the consideration of contractor's EEO compliance history during the request for approval process.
- Removes the three-year waiting period to re-apply for FAAP agreement after termination of previous agreement.
- Eliminates the annual requirement to modify the FAAP agreements.
These proposed changes will likely help eliminate some of the aforementioned burdens, but are they enough to encourage contractors to overlook the concerns and consider switching to function-based AAPs? Should the OFCCP consider eliminating the additional FAAP requirements altogether and simply allow contractors the freedom to choose the AAP structure that best fits their businesses?
1. The contractor is required to report to the OFCCP any structure changes to the organization.
2. Modifications to the FAAP agreement do not extend the term of the agreement (currently at 3 years).