Background
OFCCP is responsible for ensuring that covered5 government contractors and their subcontractors6 comply with the legal requirement to take affirmative action and not discriminate on the basis of race, color, sex, sexual orientation, gender identity, religion, national origin, disability, or status as a protected veteran. The Executive Order and these statutes impose certain requirements such as preparing and maintaining affirmative action programs. DOL regulations applicable to the Executive Order and the two statutes authorize, when special circumstances are determined to exist and when it is in the national interest to do so (41 CFR Part 60-1.5(b))7 the making of the following exemptions:
(i) an agency or any person from requiring the inclusion of any or all of the equal opportunity clause in any specific contract or subcontract when he deems that special circumstances in the national interest so require, and
(ii) groups or categories of contracts or subcontracts of the same type where he finds it impracticable to act upon each request individually or where group exemptions will contribute to convenience in the administration of the order.
NIE impact
The OFCCP’s NIE applies to new contracts awarded by federal agencies between March 17, 2020 and June 17, 2020, to obtain COVID-19 relief related products, services and construction. As a result, the NIE will generally only affect companies that are not currently subject to the FAR clauses identified above because they are entering into new contracts with federal agencies, or subcontracts with prime contractors, in the prescribed period to provide supplies, services, or construction related to COVID-19 relief. The NIE memorandum provides that contracting officers are in the best position to determine which contracts should be subject to the exemption and waiver, and it contains specific language that contracting officers must include in newly awarded COVID 19 related contracts.
Contracts that are subject to the NIE are specifically exempted from certain obligations related to preparing and maintaining affirmative action program, posting requirements, solicitation/advertisement requirements, and mandatory job listing requirements under the Executive Order, and the equal opportunity regulations discussed above. However, while the NIE exempts new COVID-19 contractors from some statutory and regulatory obligations related to equal employment, it does not exempt them from all obligations, nor does it provide a blanket waiver against otherwise-prohibited discriminatory conduct.
Although the NIE applies to contracts to provide COVID-19 relief, contractors may still see the related FAR clauses appear in government solicitations and contracts. To the extent companies contracted with the federal government prior to the COVID-19 outbreak, they are likely already or should be compliant with the equal opportunity requirements under the FAR and applicable DOL regulations – even if the clauses are excluded under a new COVID-19 related contract. Companies that are new to federal contracting may seek to balance an interest in pushing back against these additional requirements with the need to close a deal quickly. Understanding the legal implications of the inclusion of these FAR clauses may help such a company make the business decision as to whether to negotiate with the contracting agency. It is important to note that full compliance with the applicable FAR clauses and related DOL regulations may not be either an easy or inexpensive task and more than one commercial business has turned away from a government contract opportunity after calculating the cost of compliance. As a result, the NIE has the appearance of a “carrot” to encourage businesses outside the customary government contracting community to enter into contracts and grants with the federal government to provide the COVID-19 related products and services desperately being sought.
Continuing equal opportunity requirements at federal, state and local governments levels
Additionally, even if the NIE applies to a specific government contract, contractors are not relieved of existing nondiscrimination and non-retaliation obligations imposed by other federal, state and local laws. Government contractors must not discriminate against any employee or applicant for employment because of race, color, religion, sex, sexual orientation, gender identity, national origin, disability, or protected veteran status. Government contractors remain prohibited from discriminating against applicants or employees because they inquire about, discuss, or disclose their compensation or that of others. Finally, contractors may not retaliate against applicants or employees for engaging in protected activities.
Accordingly, OFCCP will continue to accept and investigate complaints of discrimination and/or retaliation, and all government contractors must continue to allow OFCCP access to their premises and records, as necessary, to evaluate compliance with these laws. If OFCCP determines that a violation occurred, OFCCP has the right to seek remedies for such violations and may refer any such violations to DOL’s Office of the Solicitor for enforcement.
Takeaways
Businesses awarded new government contracts specifically for the provision of COVID-19 relief related products and services, which are subject to the NIE, must understand both the FAR and DOL regulatory requirements and the impact of the NIE on those requirements. On the one hand, total compliance has not been waived, and OFCCP may conduct a desk audit to ensure compliance. On the other hand, the NIE does waive certain requirements. However, businesses must not ignore their continuing requirements to comply with applicable equal opportunity laws found at 41 CFR Part 60. Failures in this area may result in liability for violations related to discriminatory conduct.
Reed Smith’s experienced attorneys are fully equipped to assist businesses that work with the federal government with understanding the impact that the NIE will have on their government contracts and subcontracts. They are available to answer questions that may arise as a result of the exclusions of certain equal opportunity provisions and the enduring applicability of others. Please contact the authors of this alert, or the Reed Smith lawyer with whom you frequently work, for more information.
Our Reed Smith Coronavirus team includes multidisciplinary lawyers from Asia, EME and the United States who stand ready to advise you on the issues above or others you may face related to COVID-19.
For more information on the legal and business implications of COVID-19, visit the Reed Smith Coronavirus (COVID-19) Resource Center or contact us at COVID-19@reedsmith.com
- Although the NIE was issued two months ago, we are publishing this alert now to address confusion that may persist regarding the impact of the NIE on businesses that contract with the federal government.
- Executive Order 11246 prohibits federal contractors and subcontractors from discriminating against employees on the basis of race, color, religion, gender, or national origin.
- Section 503 of the Rehabilitation Act of 1973 prohibits federal contractors and subcontractors from discriminating in employment against individuals with disabilities and requires employers take affirmative action to recruit, hire, promote, and retain these individuals.
- VEVRAA is a law that prohibits federal contractors and subcontractors from discriminating against veterans and requires employers take affirmative action to recruit, hire, promote, and retain these individuals.
- See e.g. 41 CFR Part 60-1.40 for the definition of a “covered’ contractor for the purpose of affirmative action programs.
- Note, the Executive Order, Section 503 and VEVRAA only apply to businesses that enter into contracts with federal agencies and, in some specific circumstances, businesses that provide construction services under federal grants and/or assistance agreements.
- OFCCP also has the ability to issue Directives such as the May 18, 2018 Directive (DIR) 2018-02, which extended a 2014 moratorium on enforcement of the affirmative obligations required of all TRICARE subcontractors. Unlike a NIE, a DIR is intended to provide guidance to OFCCP staff or federal contractors on enforcement and compliance policy or procedures. A DIR does not change the laws and regulations governing OFCCP’s programs and does not establish any legally enforceable rights or obligations. DIR 2018-02 and its applicability and effects may be the subject of a follow on alert.
Client Alert 2020-316
