The Office of Federal Contract Compliance Programs has long held that a company without a federal contract can be a government contractor if it operates as a “single entity” with a subsidiary, parent or other entity that is a federal contractor. But a recent case expanded that principle to a situation in which neither entity was a federal contractor by itself.

In OFCCP v. Manheim Auctions, Inc., an Administrative Law Judge held that the two companies were sufficiently related to be a single entity, and therefore that their employees and federal contracts had to be aggregated for purposes of establishing coverage. Manheim Auctions, Inc., had 50 or more employees but no federal contracts. Its subsidiary, Manheim Auctions Government Services, LLC, had federal contracts worth $50,000 or more but fewer than 50 employees. Neither company thought it was a covered contractor because separately neither company met the jurisdictional requirements, but when treated as a single entity, the companies were covered.

Having been found to operate as a single entity, both companies are jointly and individually liable for meeting the affirmative action plan and recordkeeping requirements under Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and Vietnam Era Veterans’ Readjustment Assistance Act.