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.
Generally, federal contractors must develop a written affirmative action program for every physical location with 50 or more employees. Recognizing that the workforce is not always tied to an establishment, the Office of Federal Contract Compliance Programs (OFCCP) adopted regulations almost 20 years ago that permit contractors to adopt a Functional Affirmative Action Program (FAAP) based on functional operations instead of the establishments where employees are physically located. Contractors with clear functions or lines of business find that FAAPs make it easier to organize and analyze data, identify issues, establish clear lines of responsibility for implementing their affirmative action programs, and monitor progress towards goals. OFCCP recently issued a directive—which is open to public comment—revising its policies and procedures for requesting and maintaining FAAP agreements.
Other FAAP Benefits
Establishment-based affirmative action programs present significant challenges for employers with substantial numbers of remote employees, particularly when employees telework. A FAAP can represent a practical solution to such a challenge. For example, a contractor may have hundreds of salespeople working all over the country out of their homes. These salespeople may then report, in turn, to district or regional managers who also work out of their homes. An employer with establishment-based plans may have no choice but to include these hundreds of salespeople and their supervisors as an unwieldy addition to their headquarters' plan. By adopting a FAAP, the contractor could cover its sales force under a national FAAP (or, perhaps, several regional FAAP units) creating greater efficiency and better supporting meaningful affirmative action compliance.
Unfortunately, however, OFCCP has never been enthusiastic in its support of FAAPs. The regulation authorizing the use of FAAPs is very general in its language and has been implemented through directives outlining the procedures for obtaining approval of a FAAP.1 While establishment-based plans are reviewed by OFCCP only if the contractor is selected for an audit, FAAPs must be approved by OFCCP in advance and are then regularly audited. In addition, with every change in presidential administrations, OFCCP’s approach toward FAAPs fluctuates, with the agency sometimes more and sometimes less supportive of FAAP agreements.
In this context, OFCCP’s recently proposed FAAP Directive is an encouraging first step, but it is hoped that the final revisions will go even further in making FAAPs an attractive option for many more contractors.2
Importantly, the proposed revisions to the policies and procedures for requesting and maintaining FAAPs do not eliminate all of the requirements that contractors must meet before a FAAP agreement may be approved by the OFCCP director. However, the proposed revisions reflect OFCCP’s intention to decrease the regulatory burden, increase transparency, and ensure a consistent application of its policies and procedures. The most significant proposed revisions include:
- Increasing the agreement's effective period from three to five years;
- Eliminating the requirement that FAAP contractors undergo at least one compliance evaluation during the term of the agreement;
- Expanding the exemption period for FAAP units that have undergone a compliance evaluation from 24 months to 36 months from the date OFCCP closed the previous evaluation;
- Eliminating the consideration of a contractor's equal employment compliance history and whether a contractor is under a conciliation agreement with a reporting requirement when deciding whether to approve a FAAP request;
- Removing the three-year waiting period for reapplying for a FAAP following termination of an agreement;
- Eliminating the annual requirement for contractors to modify their FAAP agreements;
- Removing language permitting OFCCP to terminate a FAAP agreement where a contractor or any establishment or functional unit has been found in violation of the laws and regulations enforced by OFCCP; and
- Allowing administrative closure of an establishment-based compliance evaluation received during the 120-calendar-day FAAP implementation period.
Comments on these changes are due by November 13, 2018. Littler intends to file comments and is looking for feedback on the proposed revisions. Contractors interested in filing comments themselves are encouraged to do so.
Among the changes that we intend to propose are:
- Ending the requirement for advance approval of a FAAP and instead requiring only a filing of the contractor's FAAP structure. Whether that structure satisfies OFCCP’s requirements would then be tested during routine compliance reviews the same way that a contractor’s establishment-based structure is assessed.
- Incorporating the FAAP approval and review process into OFCCP’s rules so that contractors know they can rely on consistent treatment over time and will not be subject to a new set of requirements with every change in presidential administration.
There are positive and negatives to a FAAP agreement. Contractors utilizing the traditional establishment-based AAP structure contemplating requesting a FAAP agreement should carefully consider the implications for their companies.
1 The First FAAP Directive, Directive 254, was published in 2002. The Directive was last modified in 2016
2 According to OFCCP, 71 contractors currently have FAAP agreements. This is a very small percentage of the approximately 500,000 contractors.