Are you in Compliance With the Affirmative Action Plan Requirements?

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February 7, 2006

By federal law, certain employers are required to develop and maintain an affirmative action plan (AAP). The central premise underlying an AAP is that an employer’s workforce should reflect the gender, racial, and ethnic profile of the labor pools from which the employer recruits and selects. An AAP targets problem areas in the employer’s workforce, including hiring, compensation, promotion, and termination. Employers subject to the AAP requirements are contractors who employ 50 or more employees and who participate in a federal contract of $50,000.00 or more. The employer need not be the entity that directly contracts with the federal government. The term “contractor” includes subcontractors. A subcontractor may be subject to the AAP requirements even if the subcontractor is two or three levels removed from the primary contractor.
 
Employers with 50 or more employees are also subject to the AAP requirements if they serve as a depository of government funds; serve as a financial institution that is an issuing or paying agent for U.S. savings bonds or notes; have government bills of lading that total or can reasonably be expected to total $50,000.00 or more in any twelve month period; or have federally assisted construction contracts exceeding $10,000.00.
 
Employers often have difficulty correctly developing an AAP because of their complexity. Often an audit by the federal agency that enforces the AAP requirements, the Office of Federal Contract Compliance Programs (OFCCP), first brings omissions and errors to the employer’s attention. Changes to the federal compliance regulations have prompted increased investigation and enforcement actions by the OFCCP.
 
If violations are found, the employer can be banned from participation in any federal contract for goods or services. A federal contract or program with the employer, including those between financial institutions and the government, may be cancelled, terminated, or suspended in whole or in part. This can result in a substantial loss of profit for an employer.
 
There are a number of aspects to preparing a well-constructed AAP. Among others, they include preparation of an organizational profile and completion of employee workforce, job group, promotion, and termination analyses. Once developed, an AAP must be updated each year.
Please feel free to contact Sara Ackermann, the author of this article, or any of the attorneys in the Employment, Benefits & Labor Relations Practice Group of Ruder Ware in regard to developing or updating your AAP, or assisting you with a compliance audit by the OFCCP.

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