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Contractors Rip New U.S. Hiring Rules

Friday, August 30, 2013

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Federal contractors are facing significant new mandates for hiring veterans and people with disabilities—rules that are not sitting well with a major construction organization.

The Associated General Contractors of America says the U.S. Labor Department's new hiring rules are unnecessary and will cost companies billions of dollars each year.

The Labor Department announced the new rules Tuesday (Aug. 27).

One rule updates requirements under the Vietnam Era Veterans' Readjustment Assistance Act of 1974; the other updates requirements under Section 503 of the Rehabilitation Act of 1973.

The rules prohibit federal contractors and subcontractors from employment discrimination against protected veterans and individuals with disabilities, respectively.


U.S. hiring goals established in 1976 are "inadequate for addressing the alarming rates of veterans' unemployment" in 2013, the Labor Department says.

For decades, these rules have required federal contractors and subcontractors to affirmatively recruit, hire, train and promote qualified veterans and people with disabilities.

'Best Possible Employees'

"In a competitive job market, employers need access to the best possible employees," Secretary of Labor Thomas E. Perez said in a statement.

Added Patricia A. Shiu, director of the department's Office of Federal Contract Compliance Programs (OFCCP): "Strengthening these regulations is an important step toward reducing barriers to real opportunities for veterans and individuals with disabilities."

Shiu said the rules would affect about 171,000 companies, mainly contractors with at least 50 employees and $50,000 in government contracts, The Huffington Post reported.

'Oppressive Employment Regulations'

AGC blasted the measures as soon as they were unveiled.

Federal data make it clear that the rules aren't needed, AGC CEO Stephen E. Sandherr said in a statement Tuesday.

"The administration's decision to finalize two new oppressive employment regulations for federal contractors forces us to object to measures whose goals we support and objectives our members already meet," Sandherr said.

The rules will force federal contractors to spend about $6 billion annually to "produce reams of new paperwork proving they are doing what the federal government already knows they are doing," Sandherr said, citing a 2012 analysis from Applied Economic Strategies LLC.

According to the OFCCP, the rules are "economically significant": Each will have an annual effect on the economy of $100 million or more.

Associated General Contractors of America

Stephen Sandherr, CEO of AGC, says the new rules lack justification and will force "billions in unneeded new regulatory costs."

The office estimates first-year costs for the disability rule at $349,510,926 to $659,877,833 and first-year costs for the veterans' rule at $177,296,772 to $483,560,138, including one-time, recurring, capital start-up, operations and maintenance costs.

OFCCP puts recurring costs at $120,386,058 to $347,617,359 for the veterans' rule and $162,371,816 to $480,476,442 for the disability rule.

VEVRAA (Veterans) Rule

The veterans' rule "strengthens accountability and record-keeping requirements, enabling contractors to assess the effectiveness of their recruitment efforts," as well as clarifying job listing and subcontract requirements.

In a fact sheet, the OFCCP called the veterans' rules published in 1976 "inadequate for addressing the alarming rates of veterans' unemployment," adding that "increasing numbers of veterans are returning from duty in Iraq, Afghanistan, and other places around the world, and many face substantial obstacles in finding employment once they leave the military."

Soldiers pray in Afghanistan
Off the Base

Soldiers returning from Afghanistan and other deployments "face substantial obstacles in hiring," the U.S. says. AGC says veterans already receive favorable hiring treatment.

However, Sandherr, citing federal construction data, said that veterans of all ages were already more likely than non-veterans to be employed by construction firms.

The Final Rule requirements include:

  • Establishing annual hiring benchmarks for protected veterans equal to the national percentage of veterans in the civilian labor force (currently 8 percent);
  • Annually documenting and updating several comparisons for the number of veterans who apply for jobs and the number hired;
  • Inviting applicants to self-identify as protected veterans at the pre-offer and post-offer phases of the application process;
  • Using specific language when incorporating the equal opportunity clause into a subcontract by reference;
  • Providing job listing information so that the appropriate state or local job service can use the information to make listings available to job seekers; and
  • Allowing OFCCP to review documents related to a compliance check or focused review.

Section 503 (Disability) Rule

The Section 503 rule sets a hiring goal for federal contractors and subcontractors that 7 percent of each job group (or their entire workforce if 100 employees or less) be qualified individuals with disabilities. Similar to rules in place for women and minorities, the measure details actions contractors must take in recruiting, training, record keeping and policy dissemination.

"A substantial disparity in the unemployment rate of individuals with disabilities continues to persist despite years of technological advances that have made it possible for people with disabilities, sometimes severe, to apply for and successfully perform a broad array of jobs," the OFCCP stated in a fact sheet.

Rehabilitation Act
Department of Labor

The two new rules will become effective 180 days after being published in the Federal Register. AGC plans to review legal options for employers.

Citing data from the Bureau of Labor Statistics, the office said that the workforce participation rate in 2012 for working-age people with disabilities was 31.6 percent, compared to 76.5 percent for working-age individuals without disabilities.

Sandherr said people with disabilities were as likely to be employed in construction as people without disabilities, according to federal data.

Highlights of the Final Rule requirements include:

  • Analyzing and assessing problem areas annually, and establishing programs to address any identified problems;
  • Annually documenting and updating several comparisons for the number of individuals with disabilities who apply for jobs and the number hired;
  • Inviting applicants to self-identify as individuals with disabilities at the pre-offer and post-offer phases of the application process and invite employees to self-identify every five years;
  • Using specific language when incorporating the equal opportunity clause into a subcontract by reference;
  • Allowing OFCCP to review documents related to a compliance check or focused review; and
  • Implementing changes necessitated by the passage of the ADA Amendments Act of 2008 by revising the definition of "disability" and certain nondiscrimination provisions.

What's Next?

The rules become effective 180 days after their publication in the Federal Register. Current contractors with a written affirmative action program already in place will have additional time to comply.

The AGC, however, suggested that a fight may be ahead for the measures.

"Given the lack of justification for these new measures, we will closely review all appropriate legal options available to employers—who have already made sure veterans and the disabled are well represented in the workforce—from billions in unneeded new regulatory costs," said Sandherr.

The OFCCP will hold webinars on the Section 503 rule at 2 p.m. ET Friday (Aug. 30) and Sept. 18.

A webinar on the veterans' rule will take place at 2 p.m. ET Sept. 11. An earlier session was to be held Thursday (Aug. 29).


Tagged categories: Associated General Contractors; Contractors; Good Technical Practice; Government contracts; Laws and litigation; Subcontractors

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