OFCCP’s New FAAP Directive Offers Alternatives (With Permission!)

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Effective December 17, 2012, the Office of Federal Contract Compliance Programs (OFCCP) issued a new Functional Affirmative Action Program (FAAP) Directive Number 305. The new directive outlines the application and approval procedures for FAAP agreements provided for in 41 CFR 60-2.1(d)(4). Directive Number 305 rescinds FAAP Directive Number 296, issued in 2011, and lifts the moratorium on the issuance and renewal of FAAP agreements.

A FAAP is an affirmative action program (AAP) that is structured and prepared based on a business function or business unit. The regulations at 41 CFR 60-2.1(d)(4) permit federal supply and service contractors to develop FAAPs as an alternative to AAPs based solely on individual establishment locations. Some organizations consider a FAAP structure more suitable for some or all of their employees in a contractor’s workforce.

A contractor’s workforce may have some or all business units that operate independently across functional units in the ordinary course of the organization’s business. For example, a contractor’s marketing department may operate autonomously across the company’s multi-establishment operations and may therefore consider a FAAP structure more appropriate for that segment of the company’s workforce. Contractors are permitted to elect to use a combination of both functional units and establishment-based AAPs. If some business units do not operate autonomously across the organization, the regulations permit contractors to maintain separate AAPs for each physical location of individual establishments with 50 or more employees.

Agreements reached with and approved by OFCCP that allow the use of functional or business unit affirmative action programs are known as FAAP agreements. The regulations do require that OFCCP’s director approve contractor requests for a FAAP agreement. Consequently, contractors should be mindful that in the absence of an approved FAAP agreement, they are required to develop, implement, and maintain separate AAPs based on physical establishments, not functional units.

Similar to the directive that it supersedes, Directive Number 305 makes it clear that approval of a FAAP agreement is not automatic. OFCCP will only approve FAAP agreements if the agency determines that the contractor’s proposed FAAPs, overall organizational structure, and compliance history (including any equal employment opportunity violations from other local, state, or federal government agencies) meet the criteria set forth in the directive. The new directive establishes standard application procedures that contractors must follow when requesting approval of FAAP agreements and lists the data and documents that a contractor must submit in order for OFCCP to evaluate whether an organization may use FAAPs.

FAAP agreements are valid for only three years from the date of approval. Contractors with FAAP agreements should pay attention to significant corporate changes such as mergers, acquisitions, or downsizing. These activities require the contractor to notify OFCCP of changes to its corporate structure. If the contractor fails to notify OFCCP of any such changes within 60 days of the changes, OFCCP may terminate the FAAP agreement. If OFCCP terminates a FAAP agreement, the contractor may not reapply for a FAAP agreement for a period of three years. During this period, the contractor would be required to prepare AAPs by physical establishments.

Many contractors may also be deterred from renewing a FAAP agreement because the new directive requires that a contractor undergo a compliance evaluation during the FAAP three-year term in order to be eligible for a renewal. Contractors with more than one functional unit are required to have at least two functional units undergo a compliance evaluation. OFCCP will continue to audit FAAPs by functional unit; however, OFCCP has retained authority to terminate the FAAP with written notice and a brief explanation of the reason for the termination. Sufficient reason to terminate a FAAP agreement may include a violation found during a compliance review (including recordkeeping violations).

Contractors should carefully consider the criteria and basic principles of FAAP agreements before deciding to seek approval for a FAAP agreement.

Cristina C. Pérez is Of Counsel with the San Francisco office of Ogletree Deakins.