News & Articles

Human Resource Management
Published in the Rochester Business Journal
March 14, 2003
© 2003 HR Works, Inc.

Understanding Affirmative Action
By Candace Walters

As the U.S. Supreme Court prepares to consider the case brought by two white applicants against the University of Michigan -- whose admissions decisions, they claim, favor African-American students -- the private sector is lining up to offer its opinions on the nation’s affirmative action laws.

Eastman Kodak Co. and other Fortune 500 companies have been vocal in their support for university affirmative action policies, which, they say, are essential for preparing students adequately for success in a racially diverse work world.

What may be overlooked amid this high-level debate about the constitutionality of affirmative action is this: For any company seeking or fulfilling federal contracts, either as a prime contractor or subcontractor, simply understanding and complying with current laws governing affirmative action plans (AAPs) can be a major challenge.

With many companies gearing up to land or expand the lucrative federal contracts that accompany every military buildup, the urgency for clarity about current affirmative action laws continues to increase.

Following are some commonly asked questions about AAPs:

Q: What is an affirmative action plan?

A: An AAP is a written plan that employers doing business with the federal government –- be they contractors or subcontractors -- must prepare each year in order to remain in favorable standing. The regulations governing affirmative action -- set forth in Executive Order 11246 and administered by the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) -- mandate that such employers take constructive steps to avoid illegal discrimination. Those steps involve conducting diagnostic analyses on their current workforce and the previous AAP year’s employment activity (applicants, hires, promotions, terminations) to discover potential problems. If problem areas are identified, the contractor must implement programs to correct or eliminate them. This combination of diagnostic analyses and action-oriented programs is known as an affirmative action program.

An AAP is not simply a policy on equal employment opportunity, such as is found in most employee handbooks. An AAP is a detailed analysis of workforce utilization, and it includes both narrative and statistical analysis. Additionally, an AAP provides a commitment to eliminating discrimination in the workplace against individuals with disabilities and all covered veterans.

Q:Who needs an affirmative action plan?

A: A company is required to have a current AAP if it is a federal contractor or subcontractor with 50 or more employees AND:

• The company has a federal contract or subcontract worth $50,000 or more OR



• The company is a financial institution that is an issuing agent for U.S. Savings Bonds and Notes OR



• The company serves as a depository of government funds in any amount OR



• The company has government bills of lading that in any 12-month period total, or will likely total, $50,000 or more OR



• The company has an open-ended or indefinite quantity federal contract or subcontract that will total $50,000 or more.

Construction contractors are not required to develop written affirmative action programs. However, the OFCCP issues goals and specifies affirmative action that must be undertaken by federal and federally assisted construction contractors.

Q: What will happen to my company if we don’t prepare an AAP?

A: A contractor that fails to comply with the affirmative action provisions as set forth in Executive Order 11246 is in violation of its contract with the federal government. The OFCCP conducts compliance reviews to investigate the employment practices of government contractors. If a compliance review reveals problems, and conciliation is not reached, the OFCCP may impose sanctions, which could result in the contractor having its contracts canceled, terminated or suspended in whole or in part. The contractor may be debarred, or declared ineligible for future government contracts.

Q: As a federal contractor, is my company required to establish quotas?

A: No. Quotas are not part of an AAP and, in fact, are expressly forbidden. Based on the availability of qualified individuals, contractors are required to establish goals to reduce or overcome underutilization of women and minorities. These goals do not create set-asides for specific groups, nor are they designed to achieve proportional representation or equal results. Rather, the goal setting in an AAP is used to target and measure the effectiveness of affirmative action efforts.

Q: Our company completes an affirmative action plan in accordance with our annual plan year. Should we perform an analysis during any other specific times?

A: As part of agood-faith effort toward achieving affirmative action compliance, an employer should conduct an analysis halfway through the plan year, evaluating progress on current year’s goals. Midyear monitoring reports include progress toward goals as well as an adverse impact analysis of the company’s hire, promotion/transfer and termination activity to date. These analyses maintain the focus on implementing the affirmative action plan by monitoring current areas of underutilization for females and minorities and providing a status update as to how the company is progressing toward a well-represented workforce.

Q: What are the new rules regarding “functional AAPs”?

A: Before December 2000, employers with more than one geographic location were required to develop a separate AAP for each establishment. Contractors frequently disagreed with this requirement, arguing that it didn’t make sense to separate the workforce by location since people in one location often reported to a manager in another building or even in another state. In December 2000, the requirements were amended to allow contractors to seek approval to develop AAPs along functional or business lines, rather than by geographic location. In March 2002, guidance regarding these “functional AAPs” was issued, outlining the procedure for companies requesting this status.

A functional or business unit is a component of a company that operates somewhat autonomously. The March 2002 directive provides examples of facts that would allow the OFCCP to consider a business unit to be a functional unit for AAP purposes, such as:

• The component has its own managing official (executive in charge);



• The component has a separate listing on the company’s organizational chart;



• The component operates under separate cost centers; and/or



• The component has distinguishable personnel transactional activities that are separate from the company as a whole (e.g. applicant flow, hires, terminations, promotions).

Clearly, achieving compliance with current affirmative action regulations is a complex process and can be particularly puzzling to newly awarded contractors.

While the national debate over the constitutionality of affirmative action may be intriguing, contractors and subcontractors must not be distracted from the urgent business of fully understanding what the current law requires of them. Unless or until the Supreme Court issues a new ruling, Executive Order 11246 remains in force.

HR Works, Inc., is an HR management outsourcing and consulting firm serving more than 600 clients out of offices in Rochester, Buffalo and Philadelphia. HR Works provides part-time and interim HR managers, HR*Stars recruitment services, legally reviewed employee handbooks and supervisor manuals, employee benefit statements, affirmative action programs, compensation programs, training and more. HR Works also provides services through its allied offices in Syracuse and near Baltimore/Washington, D.C. To offer comments on this column, write walters@hrworks-inc.com.

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