Who Needs An AAP – FAQ
Under Executive Order 11246, when are Federal contractors and subcontractors required to develop a written affirmative action program (AAP)?
Each non-construction contractor/subcontractor with 50 or more employees is required to develop a written Affirmative Action Program (AAP) for each of its establishments within 120 days from the start of the Federal contract, if it:
- Has a Federal contract or subcontract of $50,000 or more;
- Has government bills of lading which in any 12-month period total, or can reasonably be expected to total, $50,000 or more;
- Serves as a depository of Federal funds in any amount; or
- Is a financial institution that is an issuing and paying agent for U.S. savings bonds and savings notes in any amount.
As a Prime Contractor, am I required to make sure that the vendors and suppliers with whom I am doing business develop a written AAP?
No. You are not required to ensure that your vendors and suppliers develop and maintain written AAPs. The regulations require that each contractor and subcontractor include the EO clause in each subcontract or purchase order. Whether a vendor or supplier is subject to the written AAP requirements, would depend on, among other things, whether the vendor or supplier has a subcontract that is necessary to the performance of the Government contract, the dollar value of any such subcontract, and the number of employees in the vendor’s or supplier’s workforce.
Are all construction contractors and subcontractors subject to the laws enforced by OFCCP?
All contractors and subcontractors who hold a Federal or federally-assisted construction contract in excess of $10,000 will be subject to regulatory requirements under one or more of the laws enforced by OFCCP depending upon the amount of the contract. Once it has been determined that a contractor or subcontractor is subject to OFCCP jurisdiction, the regulations implementing the civil rights requirements enforced by OFCCP apply to all of the contractor’s or subcontractor’s employees who are engaged in on site construction, including those construction employees who work on a non-Federal or non-federally assisted construction site.
We don’t do any government work here. Federal Government work is performed in some other division in another state. Are we subject to the equal employment laws enforced by OFCCP?
Yes. Generally speaking, once it has been determined that a business or organization is subject to the civil rights requirements enforced by OFCCP, all of the business’s or organization’s establishments or facilities will be subject to the same regulatory requirements, regardless of where the Federal contract is to be performed.
In addition, some businesses or organizations that do not independently hold Government contracts/subcontracts may still be covered under the laws enforced by OFCCP if they are considered a “single entity” with a related business or organization that holds such contracts. In such instances, OFCCP uses a “single entity” test to determine whether the businesses or organizations are so closely related that they may constitute a single entity for purposes of OFCCP jurisdiction. The test requires OFCCP to consider whether:
- The entities have common ownership;
- The entities have common directors and/or officers;
- One entity has de facto day-to-day control over the other through policies, management or supervision of the entity’s operations;
- The personnel policies of the entities emanate from a common or centralized source; and
- The operations of the entities are dependent on each other, e.g., services are provided principally for the benefit of one entity by another and/or both entities share management, offices, or other services.
The test focuses primarily on whether the ownership, management, and operations of the separate entities are, in fact, sufficiently interrelated to warrant treating them as an integrated enterprise or a single entity. A business or organization need not meet all five factors to be considered a single entity with a covered Federal contractor. However, there is growing recognition that centralized control over labor relations and personnel functions is the most important factor. By way of example, say that two entities are under common ownership, with a common board of directors, and have a central corporate office that determines and issues personnel policy for both entities, and generally manages most personnel-related issues for both entities. At the same time, the operations of the two entities are not particularly dependent on each other. Despite the fact that one of the factors did not apply, the four factors that did outweigh the one that did not, so that the two entities being analyzed will most likely be considered a single entity.
Our business operates as a fund depository, and an issuing and paying agent for U.S. Saving Bonds and savings notes; therefore, are we required to comply with the Affirmative Actions Program (AAP) obligations under Executive Order (E.O.) 11246, as amended, the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA), as amended, 38 U.S.C. 4212 and Section 503 of the Rehabilitation Act of 1973 (Section 503), as amended?
The E.O. 11246 implementing regulations at 41 CFR 60-1.40(a) and 60-2.1(b) state, in relevant part, that any nonconstruction (Supply and Service) contractor that serves as a depository of Government funds in any amount or a financial institution which is an issuing and paying agent for U.S. saving bonds and saving notes in any amount must develop an affirmative action program. To view the above regulation, click on http://www.dol.gov/dol/allcfr/ESA/Title_41/Part_60-1/41CFR60-1.40.htm.
Under Section 503, a Government contractor with 50 or more employees and a Government contract of $50,000 or more must develop a Section 503 affirmative action program. 41 CFR 60-741.40(a). The Section 503 regulations define a Government contract as “any agreement or modification thereof between any contracting agency and any person for the purchase, sale or use of personal property or nonpersonal services.” 41 CFR 60-741.2(i). The term “nonpersonal services” as used in this section includes fund depository. 41 CFR 60-741.2(i)(4). Thus, the agreement to serve as a Federal funds depository is a “Government contract.” To view the regulation, click on http://www.dol.gov/dol/allcfr/ESA/Title_41/Part_60-741/41CFR60-741.2.htm.
Under Section 503, however, all government contracts must meet the dollar threshold amount of $50,000 for coverage. Therefore, if you serve as a depository for Federal funds of $50,000 or more, or have an agreement valued at $50,000 or more to be an issuing and paying agent for savings bonds and notes, you would be obligated to develop and maintain a Section 503 affirmative action program.
The same holds true under VEVRAA as under Section 503 for any Government contractor with 50 or more employees and a contract of $50,000 or more to serve as a depository of Federal funds or as an issuing and paying agent for savings bonds and notes, if the Government contract was entered into before December 1, 2003. To view the regulation, click on http://www.dol.gov/dol/allcfr/ESA/Title_41/Part_60-250/41CFR60-250.40.htm.
However, the Jobs for Veterans Act (JVA) amended VEVRAA by raising the dollar threshold amount required for contract coverage to $100,000. The new threshold applies to contracts entered on or after December 1, 2003. Accordingly, if your business or organization became a fund depository or an issuing and paying agent for savings bonds and notes on or after December 1, 2003, it would also be subject to the written AAP requirement under VEVRAA if the contract is for $100,000 or more.
For your additional information, there is an interactive electronic tool called the Federal Contract Compliance Advisor, also referred to as Elaws Advisor, to assist Federal contractors and subcontractors in understanding basic coverage and the requirements for compliance with the laws administered by OFCCP. This electronic tool can be accessed at http://www.dol.gov/elaws/ofccp.htm. You may wish to consult the Elaws Advisor if you have additional questions about coverage.”
Is a hospital or other health care provider covered under the laws enforced by OFCCP as a result of the reimbursements it receives for medical services provided to Federal employees, retirees, or their dependents from a health insurance carrier that participates in the Federal Employee Health Benefits Program (FEHB)?
OFCCP’s policy is that the receipt of reimbursements from a health insurance carrier that provides a health benefits plan under the FEHB Program, for the medical services provided to Federal employees or their dependents, will not provide a basis for coverage of the hospital or other health care provider under the laws enforced by OFCCP. This policy is based on the decision of DOL’s Administrative Review Board (ARB) in OFCCP v. Bridgeport Hospital, ARB Case No. 00-234, (January 31, 2003), which involved the question of whether the hospital was covered under the laws enforced by OFCCP by virtue of its agreement with an insurance carrier that had contracted with the U.S. Office of Personnel Management (OPM) to provide Federal employees a fee-for-services health benefits insurance policy. The ARB determined that the reimbursement agreement did not provide a basis for coverage of the hospital under the laws enforced by OFCCP.
The decision in Bridgeport Hospital concerned only the contractual obligations assumed by an insurance carrier that has contracted to provide a fee-for-service health benefits plan to Federal employees; it does not address the contractual obligations assumed by providers of other types of plans under the FEHB Program, (e.g., a Health Maintenance Organization). Further, a hospital or health care provider may have other contracts that provide a basis for coverage under the laws enforced by OFCCP. For example, a hospital may be a covered contractor as a result of a contract with the Department of Veterans’ Affairs or the Department of Defense requiring the provision of medical services to active or retired military personnel. Likewise, a teaching hospital doing research for a university that has a contract with the Federal government may be a covered Federal contractor.
Is a financial institution that is covered by the Federal Deposit Insurance Corporation (FDIC) for insurance coverage subject to the Affirmative Actions Program (AAP) requirements under Executive Order 11246, as amended, the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA), as amended, 38 U.S.C. 4212 and Section 503 of the Rehabilitation Act of 1973 (Section 503), as amended?
Financial institutions with federal share and deposit insurance are considered to be government contractors within the meaning of the regulations implementing Executive Order 11246, as amended, the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA), as amended, 38 U.S.C. 4212 and Section 503 of the Rehabilitation Act of 1973 (Section 503), as amended. These three programs enforced by the OFCCP require equal employment opportunity by government contractors.
The implementing regulations for Executive Order 11246 (41 CFR 60-1.3), have consistently defined a government contract as any agreement or modification thereof between any contracting agency and any person for the purchase, sale or use of personal property or nonpersonal services. The term “nonpersonal services” as used in this section includes, but is not limited to, the following services: utilities, construction, transportation, research, insurance, and fund depository. This definition explicitly includes agreements for insurance. To review the definition, click on http://www.dol.gov/dol/allcfr/ESA/Title_41/Part_60-1/41CFR60-1.3.htm.
The implementing regulations for the VEVRAA and Section 503 programs, found at 41 CFR 60-250.2 ( http://www.dol.gov/dol/allcfr/ESA/Title_41/Part_60-250/41CFR60-250.2.htm ) and 60-741.2 ( http://www.dol.gov/dol/allcfr/ESA/Title_41/Part_60-741/41CFR60-741.2.htm) respectively, also define a government contract as any agreement or modification thereof between any contracting agency and any person for the purchase, sale or use of personal property or nonpersonal services. The term “nonpersonal services” as used in this section includes, but is not limited to, the following services: utilities, construction, transportation, research, insurance, and fund depository. This definition also explicitly includes agreements for insurance. Therefore, financial institutions with federal share and deposit insurance are considered to be government contractors.
For additional information, this position was addressed in the following preamble text to a 1996 VEVRAA proposed rule:
The purpose and application section of the 1980 final rule (Sec. 60-250.1) states that Part 60-250 applies to all Government contracts, “including Federal deposit and share insurance.” The preamble to the 1980 final rule (45 FR 86218) states that OFCCP believes that Federal deposit and share insurance are contracts within the meaning of Section 4212. In the course of preparing its 1996 final rule implementing Section 503, OFCCP conducted a careful and detailed reevaluation of its position in light of changes in some of the statutes affecting the financial industry. Based upon that review, OFCCP continues to believe in the soundness of its position. However, today’s proposal differs from the 1980 final rule in that it does not expressly state that the regulations cover Federal deposit and share insurance. The proposal does not otherwise make reference to the precise subject matter of particular types of covered contracts, and therefore OFCCP no longer considers it necessary to single out deposit and share insurance for express mention in the regulations. OFCCP wishes to reemphasize that it will continue to maintain its long-standing policy of imposing sanctions other than debarment of financial institutions from future deposit or share insurance, or cancellation, termination or suspension of a financial institution’s deposit or share insurance for violations of Section 4212.
To review the entire text of the 1996 VEVRAA proposed rule, click on http://www.dol.gov/esa/regs/fedreg/proposed/96_23638.htm.