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2016 Year in Review for Federal Contractors

Obama Administration ended the year 2016 with an aggressive regulatory environment. These new regulations are a significant concern for CEOs across the country. New regulations are expensive to implement in compliance, making the net cost to implement some to these regulations prohibitive for some companies.

The fact that many of these regulations have been fast-tracked through an approval process with little thought going into how the government will implement and test for compliance this year-end review, Career Resources, Inc. has summarized the most pertinent information that applied to federal contractors in 2016 and what to anticipate in 2017.

Revised EEO-1 Report

On January 29, 2016, the Equal Employment Opportunity Commission (EEOC) proposed a controversial revision to the EEO-1 Report. The revision would require employers to report to the federal government the number of hours worked and summary pay (grouped in “pay bands” established by the EEOC) broken down by gender, ethnicity, and race. In September, the EEOC issued a press release stating the revised EEO-1 reports would go into effect in March of 2018, much to the dismay of the contractor community.AdviceAlthough contractors may be dreading the burden that this revision will impose, they should brace themselves and prepare for the significant increase in hours it will take to collect the data and file the revised EEO-1 reports. In addition, contractors should ensure that their systems have the capability to generate this type of additional data.

Final Rule on Overtime Regulations

On May 18, 2016, President Barak Obama and Secretary Thomas Perez announced the publication of the Department of Labor’s (DOL) final rule on overtime regulations.

The final rule was set to go into effect on December 1, 2016, and would immediately impact over 4 million workers in its first year. While the President and advocates of the Final Rule praised the benefits the revised overtime regulations would have on the working middle class, it was clear there would also be a devastating impact on the economy and employers.

Updates

November 22, 2016 – A Texas federal judge put a halt to the DOL’s new overtime rule. The court’s decision was a relief to employers who were struggling to make necessary changes and bracing for the impact the rule would have on budgets and workplace flexibility.

December 1, 2016 – An appeal was filed by the DOL to the federal judge regarding the decision to block the overtime rule. The DOL has requested an expedited hearing, hoping to have the appeal heard prior to inauguration day on January 20. The odds of expediting the hearing or of the new administration supporting the Overtime Rule are slim, meaning we will likely see the end of the Overtime Rule as it is currently worded.

The halt on the final rule will allow the incoming Trump Administration more time to make changes, such as issuing a more reasonable salary threshold or possibly even eliminating the rule altogether. Employers are being advised to continue on the course of action they have already taken in terms of the final rule. For example:

  • If you have not already implemented changes, you may want to postpone reclassifying your employees and monitor the policy developments closely. Remember that, because of the recent injunction, employers do not have to implement changes by December 1, 2016.
  • If your company has already raised salaries to meet the proposed threshold, you might keep those in place to prepare for future changes.

Executive Orders Impacting Federal ContractorsExecutive Orders (EO) were a major focus of the Obama administration in 2016 EOs were issued, modified, and some even interrupted. With the high frequency of EOs and other regulation changes, it has been nearly impossible for federal contractors to keep up with the changes, not to mention trying to implement them.

Executive Order 13658 – The increase of minimum wage to $10.15 per hour went into effect on January 1, 2016; the minimum wage for federal contractors and subcontractors was increased by $.05 per hour. The minimum wage increased from $10.10 in 2015 to $10.15 in 2016. The minimum wage for tipped employees working under federal contracts has increased by $.95 per hour, from $4.90 in 2015 to $5.85 in 2016. This increase will continue annually. Beginning January 1, 2017, the minimum wage for federal contractors will be increased to $10.20 per hour, and covered tipped employees will be increased to $6.80 per hour.

Executive Order 13665 – The Pay Transparency final rule went into effect on January 11, 2016. EO 13665 prohibits federal contractors and subcontractors from discriminating against or terminating employees for discussing their pay or the pay of their coworkers and prohibits discrimination against applicants for discussing pay. Contractors are required to post the “EEO is the Law,” Poster Supplement, and the OFCCP’s Pay Transparency Policy Statement.

Executive Order 13706 – On Labor Day last year, President Obama signed an EO that will require paid sick leave for employees of federal contractors and subcontractors. EO 13706 requires certain employers who contract with the federal government to provide their employees with up to seven days of paid sick leave annually, including time off needed to care for a family member and absences resulting from sexual assault, domestic violence, and stalking.

Executive Order 13673 – Updates were made to the July 2014 Fair Pay and Safe Workplaces final rule, commonly referred to as the “blacklisting” rule. The rule currently consists of three components: a certification obligation, pay transparency, and a requirement for contractors to disclose labor violations and decisions of 14 federal workplace laws and state equivalents used in determining whether to award contracts or subcontracts valued at $500,000 or more.

October 24, 2016, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction preventing certain provisions of the regulations from going into effect.

On October 25, 2016, the Office of Federal Procurement Policy (OFPP), within the Office of Management and Budget (OMB), issued a memorandum to all senior procurement executives, directing agencies and federal chief acquisition officers to “take all steps necessary to ensure the enjoined sections, provisions, and clauses of the final rule is not implemented until further notice.”

Additional Updates

VEVRAA Annual Hiring Benchmark was lowered to 6.9%

Effective March 4, 2016, the OFCCP lowered the Vietnam Era Veterans” Readjustment Assistance Act (VEVRAA) benchmark for hiring protected veterans to 6.9%. The decreased benchmark is down slightly from the prior year’s benchmark of 7%.

New Development Regarding the 2016 Filing of VETS 4212 ReportsPer the Federal Acquisition Regulation (FAR), the threshold for the VEVRAA filing increased from $100,000 to $150,000 and went into effect with the filing of 2016 VETS 4212 reports.

OFCCP Sex Discrimination Guidelines updated on August 15, 2016, the Final Rule updating Sex Discrimination Guidelines went into effect. The Sex Discrimination Guidelines address issues such as sexual harassment, workplace accommodations for pregnant employees, compensation discrimination, protections for transgender workers, and more.  http://bit.ly/Update-Sex-Discrimination-Guidelines

Top New LawsuitsOFCCP Sues B&H Foto for DiscriminationOFCCP Sues Enterprise Rent–A–Car for DiscriminationOFCCP Sues Potomac Abatement for DiscriminationOFCCP Sues Silicon Valley Company Palantir Technologies for DiscriminationOFCCP Sues Analogic Corporation for Discrimination

Top SettlementsGordon Food Service Settles Hiring Discrimination Case with DOL-$1.85 MJennie–O Turkey Store Settles Hiring Discrimination Case with DOL-$492KAqualon Company Settles Hiring Discrimination Case with DOL-$175KNorfolk Southern Settles Hiring Discrimination Case with DOL-$492KColonial Parking Settles Hiring and Pay Discrimination Case with DOL-$250KHewlett–Packard Settles Hiring Discrimination Case with DOL- $750KGenlyte Thomas Group Settles Pay Discrimination Case with DOL- $275KTyson Foods Settles Hiring Discrimination Case with DOL-$1.6MChemonics International, Inc. Settles Hiring Discrimination Case with DOL- $482K

Director Shiu Steps Down

In late October, the Office of Federal Contract Compliance Programs (OFCCP) Director Patricia Shui announced, during an Equal Opportunity Commission (EEOC) meeting, she was ending her tenure as the Director of the OFCCP.  Director Shui stepped down on November 6, 2016, and shortly after, Thomas M. Dowd was named the Acting Director of the OFCCP in her place.

President-Elect Donald Trump & What to Expect Moving into 2017

At this point, what will happen in 2017 is speculation; while neither candidate spoke in-depth on specific contracting issues, Donald Trumps” victory will more than likely bring relief to federal contractors.

During his campaign, President-Elect Trump made a promise to get rid of “job-killing” regulations.  This will most likely lead to the reversal of many of the dozens of executive orders put in place by President Obama, EO’s’s that have been costly and burdensome for federal contractors. Federal contractors have consistently struggled to keep up with the stream of EO’s’s coming at them over the last eight years.

While there are clear signs that many of Obama’s EOs could soon be on the chopping block, some EO’s’s that have already passed the regulatory process may ultimately be modified or eliminated entirely. Despite any potential changes with regard to EOs, federal contractors must remember that compliance is still mandatory.

Upcoming Dates & Events:

  • January 1, 2017 – based on EO 13658, the minimum wage rate will increase to $10.20 per hour, and tipped employees must be paid a minimum wage of $6.80 per hour.
  • January 1, 2017 – EO 13706 for paid sick leave goes into effect for new contracts and replacements for expiring contracts with the Federal Government.
  • Expect a decision on the Overtime Rule in early 2017.
  • A new director will be chosen for the OFCCP in 2017.
  • Expect to see changes with the new presidential administration.
  • Revised EEO-1 reports will go into effect in March 2018.

Closing

With guaranteed changes on the horizon for 2017, it’s more important than ever for federal contractors to monitor the Trump Administration’s position on all of these new regulations. We anticipate 2017 to be a tumultuous year as many of these regulations either stay in force as is, are rewritten, or rescinded. We expect audits to be more unpredictable as the year progresses with less consistency between the Regions and District Offices. We encourage our clients to update their affirmative action plans and consult with CRI to ensure the compliance of federal regulations. If you need assistance with your affirmative action plans or obligations, you can contact Career Resources, Inc.

 

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