A Guide to Determining Covered Federal Government Contractor Status


The Issue: Having a federal government contract or subcontract can obligate a business to comply with substantial affirmative action obligations. Knowing whether such a contract triggers these obligations is critical and allows a business to properly evaluate the contract’s true benefits and burdens. A business should not learn of these obligations for the first time in a government audit that could result in significant financial costs. 

The Question: Do you need to comply with the affirmative action and specific antidiscrimination requirements that are imposed on covered federal government contractors?  

Determining If You Must Comply: The “50-50” Test

  • Does the company have more than 50 employees AND
  • A single contract worth at least $50,000 that is:
    • With the federal government directly; OR
    • With a federal government contractor to provide goods or services that are either “necessary” to the performance of the ultimate contract with the federal government or that fulfills a part of the direct contractor’s agreement with the federal government; OR
    • Are you part of a “single entity” that is a covered federal government contractor?

If you answer YES, then your company must comply with the following requirements:   

  • Affirmative action plans (AAPs)
  • Detailed recordkeeping
  • Posting and notice requirements
  • Submission to audits 

The Ramifications of Noncompliance:  Failure to prepare AAPs and keep detailed records can lead to significant back pay awards, notices of violations, years of federal government oversight, negative public press and possible disbarment. 

What You Should Do Now:

  • Determine if your company needs to comply.
  • Get into compliance before being audited.

 To read the Littler Report, please click here.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.