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In a time of changing laws and a pervasive fear of OFCCP audits, it is always a good idea to make sure that people have a good understanding of the basics in compliance and how internal decisions affect Federal contractors. For decades contractors have told me that when it comes to affirmative action “A plan is a plan is a plan,” meaning they are basically cookie-cutter reports and all AAPs are basically the same. At the same time, contractors have always been anxious to get the annual plan(s) completed and placed on the shelf (or electronic folder) at the lowest cost possible so they can move on to other tasks. Well, as EEO/AA compliance experts, the OutSolve team can tell you with all certainty that a plan is not just a plan. Maybe it was ten or twenty years ago, but not anymore. The landscape has changed and the repercussions are far more significant not only from a time and effort perspective but from a dollars and cents angle as well.

Contractors need to make dozens of decisions when developing plans, many of which seem straightforward and benign. However, some of those decisions can put plan owners in an uncomfortable position when the results expose them to OFCCP scrutiny or adverse findings. One critical decision that contractors must make early in the process, and one that does not receive enough consideration, is to identify the number of plans to be developed and how employees will be allocated to said plans. This is a seemingly innocuous decision where contractors look at the regulations and usually make quick decisions that can later turn affirmative action compliance into a maze of red tape and OFCCP audits into a lengthy, and perhaps costly, negotiation.

Let’s take a look at the rules associated with plan structure in addition to the pros and cons of the most common scenarios.

The Regulations

The regulatory requirements associated with plan structure are by definition fairly simple, although the impact of those decisions is significant. An exception to simplicity would be corporate initiative employees and annotated reports, but we will hold off on that topic for another day.Here are the basics (to read the full text of the regulations you can go here):

  • All employees must be included in an affirmative action plan
  • Establishments with greater than 50 employees must have their own plan
  • Establishments under 50 employees have three (3) options:
    • Have their own plan
    • Be located in the plan of the official who oversees that establishment
    • Be located in the plan where the personnel decisions are made
  • If a contractor does not want to develop plans by their brick and mortar establishments, they can request approval from OFCCP to develop them by line of business under what are called Functional Affirmative Action Plans or “FAAPs”.
  • Contractors often ask about businesses under the corporate umbrella that do not participate in the fulfillment of a Federal prime contract or subcontract and if those businesses can be exempt from the affirmative action compliance requirements. Our response is usually “not very likely.” Obtaining these exemptions requires that contractors go through a process with the OFCCP to gain approval and there is no guarantee that they will be successful as OFCCP has broad jurisdiction based on the Executive Order. In fact OFCCP uses the language of “rare and compelling circumstances” in granting exemptions. Attached is the link to the details regarding facility waivers.

Strategies for Choosing an Affirmative Action Plan Structure

Contractors have a couple of straightforward questions when it comes to plan development. The main question being “What plan structure do I need to have?” I see this question as being broken down into a few subcomponents that I will detail here.

Component one – What do the regulations require and what does OFCCP expect?
Component two – What is everyone else doing? (common solutions)
Component three – How can I minimize risk (stay out of potential trouble)?

The answer to these questions is interesting because it falls into the old saying that “some things change and some things stay the same.”

For decades contractors have developed what are known as establishment plans. An establishment plan is an AAP that is created for one specific address (brick and mortar building). Contractors are required to create a separate AAP for each establishment that houses at least 50 employees and this has been the norm for years. Additionally, assignment of all the employees who do not work within a larger site falls into one of the categories defined above where they can have an independent AAP or roll into the plan of their manager or personnel authority.

A more recent option that emerged in the evolution of affirmative action planning is the invention of functional affirmative action plans or “FAAPs”. The creation of FAAPs provided contractors with a method of plan development that may better reflect how they recruit and retain their employees. A functional plan is a reporting structure that allows for reporting by a line of business that spans establishments in place of location by location reports. This format made a lot of sense for contractors because not only would the reporting better align with the business allowing for better engagement (a.k.a. buy-in) from leadership, but it could also result in the development and implementation of fewer plans meaning a shorter timeline for plan development and potentially lower costs.

While the options discussed above have been accepted as the standard for many years, there has been a recent change in philosophy. To answer the question regarding “What is everyone else doing?” as well as “How do I minimize risk?” – the answer is that in recent years many multiple-establishment contractors have felt compelled to adopt a more conservative strategy as a result of the current administration and their aggressive enforcement efforts during audits. Now that OFCCP is aggressively crunching the numbers looking for gaps in hiring and compensation, a strategy has evolved to provide the minimum amount of data to avoid scrutiny that could result in a claim of discrimination. This is not about cheating the system or what is called a “divide and hide” strategy, it’s simply about choosing the format that avoids taking an unnecessary risk. No one wants to give OFCCP the keys to the kingdom if they don’t have to. If a contractor is submitting an AAP in response to receipt of a scheduling letter, the latest strategy commonly used is to only provide the employee data that is specific to that address. If the historical strategy was to roll employees from smaller locations into the plan of their manager or personnel function, the strategy now is to keep them separate and to create plans for small locations, keeping them independent. While this strategy does not suit all contractors, nor does this article address the myriad of layers associated with assigning employees to plans (corporate initiative, telecommuting, mergers, etc.), it is intended to provide some core ideas for managing risk.

There is a potential negative impact on the strategy of keeping plans as small and decentralized as possible. The first is the cost and effort needed to develop and support a larger volume of plans. Typically, more reports mean more cost. The second issue is about results. If the affirmative action plans are decentralized to the smallest scale possible, how meaningful are the results? When AAPs are driven by numbers, and statistics are driven by sample size, then it is easy to come to the conclusion that deriving meaning from plans with small sample sizes becomes problematic.


While a contractor may deem it necessary to protect themselves from scrutiny, it creates a challenge when trying to develop a reasonable affirmative action plan implementation strategy. Contractors need any strategy that acts on results to be meaningful and defensible. So, where does that leave the contractor? One strategy to accomplish the goal of having compliant plans with minimal risk in addition to having a meaningful implementation strategy would be to develop two sets of analyses. One set of reports would be created to be compliant with the regulations and to respond to a desk audit, while the other would be to develop internal analyses that provide meaningful results allowing for an implementation strategy that would yield results. There is nothing wrong with developing alternate analyses to provide larger contractors with alternate views of the organization and contractors have been doing this for many years. However, contractors want to be cautious in their approach. If a contractor is conducting any analysis that could place them in jeopardy if the results were shared, they should be developed under privilege with oversight from counsel. This could keep the results from becoming the plaintiff’s Exhibit A in a complaint. Also, we have seen contractors “wing it” when it comes to creating a high volume of alternate analyses, including restructured job groups, placement goals, transactions and compensation, sometimes resulting in output that could be misinterpreted and incorrectly acted upon. It’s critical to have a plan when analyzing data. Make sure you are asking the right questions and leveraging experts to help create a path that will lead to not only compliance but real affirmative action.

Good luck out there!

Chris Lindholm
VP Compliance
OutSolve, LLC

This article is not intended as legal advice. For legal support please seek appropriate counsel. Copyright © OutSolve 2015



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