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What is a Federal Contractor?

Individuals or employers who enter into a contract with the United States (any department or agency) to perform a specific job, supply labor and materials, or for the sale of products and services, hold government bills of lading, serves as a depository of federal funds, or is an issuing or paying agents for U.S. savings bonds and notes, enters into a direct construction contract or a federally assisted construction contract. If a contractor is providing construction services on a contract in which a federal agency is not one of the contracting parties but the source of funds, then the contract is a federally assisted contract.

Federal Contractor or Subcontractor? Know the difference

What is a Subcontractor?

A company that does business with another company that holds direct contracts with the Federal Government.

Aren’t sure if you are a federal contractor or subcontractor? Take our 30-second quiz to check.

So why is it important to know if you are a Federal Contractor or Subcontractor?

If you are a Federal Contractor or Subcontractor you assume obligations under the Office of Federal Contract Compliance Programs (OFCCP). This includes being prohibited from discriminating on the basis of sex, race, color, national, origin, religion, disability, or status as a protected veteran. You must also take Affirmative Action to recruit and advance in employment individuals from groups that have traditionally been underrepresented and historically disadvantaged. You may additionally be subject to more obligations that are outlined below.

Please note, if you are a federal construction contractor there are some variations with the requirements under the regulations. Please check out our blogs focused on Compliance with OFCCP’s IWDs and Protected Veterans Requirements and OFCCP’s Construction Contractors Technical Assistance Guide.

Executive Order 11246

Executive Order 11246 applies to supply and service contractors and subcontractors, as well as construction contractors and subcontractors (although the obligations for construction entities are slightly different than supply and service).

Companies with federal contracts or subcontracts totaling more than $10,000 are subject to Executive Order 11246. Covered contractors with 50 or more employees and at least one government contract or subcontract of $50,000 or more must develop, maintain, and annually update a written affirmative action program (AAP) for minorities and females. More information can be found in OFCCP’s regulations at Title 41, Chapter 60, Parts 1 and 2.

Section 503

Section 503 of the Rehabilitation Act of 1973 (Section 503) addresses obligations with respect to individuals with disabilities. Section 503 applies to companies with federal contracts or subcontracts in excess of $15,000. Covered contractors with 50 or more employees and at least one government contract or subcontract of $50,000 or more must develop, maintain, and annually update a written AAP for individuals with disabilities. More information about Section 503 can be found in OFCCP’s regulations at Title 41, Chapter 60, Part 741.

VEVRAA

The Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA) addresses obligations with respect to veterans. VEVRAA applies to companies with a federal contract or subcontract of $150,000 or more. Covered contractors with 50 or more employees and at least one government contract or subcontract of $150,000 or more must develop, maintain, and annually update a written AAP for covered veterans. More information about VEVRAA can be found in OFCCP’s regulations at Title 41, Chapter 60, Part 300.

What happens next?

After a company determines it is a federal contractor and covered by Executive Order 11246, Section 503, and/or VEVRAA, the next step will be to get a handle on the specific obligations that exist and whether current processes need to be revised to meet those requirements. The OFCCP may conduct any one of or combination of the following investigative procedures from a compliance review, offsite review of records, compliance check and/or focused review. Compliance reviews can end in a number of ways, from a letter of no apparent violation, a conciliation agreement, or a consent decree. No matter how it turns out, the OFCCP has a policy to not revisit establishments within 24 months after the completion of a compliance evaluation.

Be aware that once a Scheduling Letter is issued, the contractor will be required to show compliance with all applicable regulations for 12-24 months back from the date of the letter. Federal contractors should be prepared for such requests and keep compliance information and documents up-to-date and readily available if and when a compliance review is initiated.

Keep in mind that being subject to a compliance evaluation is just one of the costs of doing business with the federal government. When you receive the scheduling letter, be sure to inform your highest-level executive. Also inform the mail room that any incoming correspondence from the Department of Labor should be directed to a single identified point of contact. The deadlines listed in the scheduling letter are tight and fairly inflexible.

Finally, don’t be afraid to ask for assistance. Consult with in-house counsel and determine whether hiring outside counsel would be advisable. Your local counsel should also be able to help you identify the personnel who needs to be advised of the audit.

If you need any outside assistance, Circa is here to help. Our proven solutions help you satisfy federal hiring requirements and guarantee OFCCP audit success. You can also check out our multitude of complimentary OFCCP resources including our What is OFCCP Compliance Whitepaper, Ask the Experts Forum, OFCCP Documentation Best Practices White Paper, and Live Webinars.

Author

Katie Saba
Product Marketing Manager
Circa
Katie Saba is a Product Marketing Manager at Circa. Based on her conversations and research, Katie produces webinars and writes articles on diversity and other employment-related topics to guide employers, employees and job seekers in their professional endeavors.

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