Time for a Federal Contractor Reality Check

Q. I am thinking of bidding on some work for the federal government as a contractor, but the hoops seem to be large. Can you explain what I need to watch for?

A. The economic benefits of a federal contractor status can be significant. According to the Office of Management and Budget, the federal government awarded over $445 billion in contracts in the 2014 fiscal year. Along with the benefits of federal contractor status, however, comes the sometimes daunting task of navigating the specific legal requirements for federal contractor employers, some of the most significant of which are discussed below.

First, most federal contractors are subject to Executive Order (EO) 11246. EO 11246 prohibits federal contractors from discriminating against individuals in employment on the basis of race, color, religion, sex, sexual orientation, gender identity or national origin. A federal contractor is required to maintain an EO 11246 Affirmative Action Plan (AAP) if it employs 50 or more employees and holds a contract or subcontract of $50,000 or more. A contractor is required to maintain an AAP for each of its facilities, not just the facility where the government contract is performed.

Next, pursuant to Section 503 of the Rehabilitation Act of 1973, federal contractors are prohibited from discriminating against individuals with disabilities and must engage in affirmative action to employ and advance in employment-qualified individuals with disabilities. A federal contractor that employs 50 or more employees and holds a contract in excess of $50,000 is required to maintain a Section 503 AAP. Further, a federal contractor must invite each applicant and employee to self-identify as an individual with a disability.

Finally, Section 503 requires a contractor to document: 1) the number of applicants who self-identified or are otherwise known as individuals with disabilities; 2) the total number of job openings and total number of jobs filled; 3) the total number of applicants for all jobs; 4) the number of applicants with disabilities hired; and 5) the total number of applicants hired.

Similarly, federal contractors have obligations under the Vietnam Era Veteran’s Readjustment Assistance Act of 1974 (VEVRAA). VEVRAA prohibits discrimination against certain protected veterans and requires government contractors to take affirmative action to employ and advance employment-qualified protected veterans. A VEVRAA AAP is required for any contractor that employs 50 or more employees and holds a contract of $100,000 or more. A federal contractor must also notify the state employment service delivery system (ESDS) any time it is accepting applications for a job opening and provide the ESDS with the name and address of each hiring location within the state and the contact information for the official responsible for hiring at each location. VEVRAA also requires that a contractor provide applicants and employees with an invitation to self-identify as a protected veteran. Finally, a federal contractor is required to document the following annually: 1) the number of applicants who self-identified or are otherwise known as protected veterans; 2) the total number of job openings and total number of jobs filled; 3) the total number of applicants for all jobs; 4) the number of protected veteran applicants hired and 5) the total number of applicants hired.

Lastly, federal contractors have certain reporting requirements regarding their employment of women, minorities and protected veterans. Every federal contractor with 50 or more employees and a contract or subcontract over $50,000 must complete and submit an EEO-1 report annually to the Equal Employment Opportunity Commission. The EEO-1 report discloses information about the race/ethnicity and gender of the contractor’s workforce in 10 job categories at each hiring location. Federal contractors are also required to file a VETS-4212. The VETS-4212 reports the number of employees in a contractor’s workforces, by job category and hiring location, who are qualified covered veterans. Contractors are also required to report the number of new hires during the reporting period who are qualified covered veterans.

In summary, there can be many benefits of being a federal contractor. However, a federal contractor needs to put a compliance program in place and review annually to ensure that it is meeting all the legal obligations that come with being a federal contractor employer.

It is also important to note that these legal obligations apply to federal subcontractors, as well as federal prime contractors. Government audits of federal contractors are expensive and time consuming, and contractors lax on compliance run the unnecessary risk of disbarment. With proper planning and counsel, compliance is manageable and achievable.

Regan Dahle from Butzel Long contributed to this article. Contact her at 734-213-3268 or at dahle@butzel.com.