What federal contractors need to know to be compliant
Affirmative Action Plans (AAPs) are a requirement for federal contractors who meet certain criteria, but putting these plans together can be a complex matter. Creating an accurate Affirmative Action Plan can not only fulfill the mandate of the Office of Federal Contract Compliance Programs (OFCCP), but give your organization an initial read on where its diversity isn’t matching up with your community’s demographics. In this guide from Employers Council, you’ll learn what an AAP is (and isn’t!), how the OFCCP enforces AAP compliance, how to create a high-fidelity plan, what to ask potential AAP outsourcing partners, and more.
An Affirmative Action Plan is a very specific type of data-driven document. The government requires certain federal contractors to create Affirmative Action Plans as a way to assess diversity within their workforce.
“An Affirmative Action Plan is an annual statistical report that looks at the organization’s demographics,” Alexandra (Alex) Bellanti, Employers Council Affirmative Action Planning Services Manager, said. “They use census codes and other statistical analyses to assess diversity within a particular workforce and make comparisons to the surroundings of the organization.”
Affirmative Action Plans don’t proscribe hiring efforts and aren’t legally related to affirmative action programs used for college admissions. Although Affirmative Action Plans might provide interesting workforce diversity data, they aren’t an equivalent of or a substitute for wider internal DEI programs.
“What the Affirmative Action Plan does is give you a tool to look at your workforce and say, ‘Do we have an issue here?’” Alex explained. “It doesn’t tell you why or the context.”
There are three different types of Affirmative Action Plans required of federal contractors, depending on contract size and number of employees:
Race & Gender Affirmative Action Plan
Under amended Executive Order 11246, this plan describes the organization’s affirmative action in regard to race, color, religion, sex, sexual orientation, gender identity, and/or national origin.
Veterans Affirmative Action Plan
Under the amended Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA), this plan describes the organization’s affirmative action toward protected veterans.
Disability Affirmative Action Plan
Under Section 503 of the Rehabilitation Act of 1973, this plan describes the organization’s affirmative action in employing individuals with disabilities.
“The standard rule of thumb is that if you have 50 employees and one federal contract worth more than $50,000, you need all three of these,” Alex explained.
Declaring your organization’s compliance to these laws is a relatively new process and fairly simple. Beginning in 2022, federal contractors are required to log onto the OFCCP’s contractor portal and certify they have complied with the office’s Affirmative Action Plan requirements. Beginning in 2023, contractors will also need to provide the month that their plan starts.
“All you do is you certify that you’ve done it,” Alex explained. “You’re not submitting any kind of documentation. You’re just clicking a button that says, under penalty of perjury, I promise that we have a compliant Affirmative Action Plan in place. [Certification is] not an onerous process.”
The OFCCP uses audits and resulting penalties — from compelling more frequent reporting to losing federal contracts — to enforce compliance. In the past, organizations were selected for audits through a random lottery, although Alex expects the portal may play a bigger role in auditing in the future. (Organizations who don’t certify compliance will most likely be first on the list for audits.)
Organizations who create and regularly update thorough Affirmative Action Plans can be confident they’ll sail through any audits with no threat of penalization.
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Affirmative Action Plan challenges federal contractors face
Although certifying compliance through the OFCCP portal is simple, creating an Affirmative Action Plan for the first time can be complex. A plan is only as good as the data that goes into it. It can be daunting to track demographic information for not just employees but all applicants you considered for every open position in a given year.
“Applicant tracking and data collection is always the hardest part — and getting the systems in place to do it!” Alex said.
Whether you use applicant tracking software or get tracking help through your payroll provider, the data has to come from somewhere.
“It’s a lot of information that you don’t normally track,” Alex explained, saying that applicant tracking is the top challenge for most organizations. “Your first-year plan is usually a little sparse in that area. We do what we can with what we’ve got, and then we work helping to get those systems into place.”
The calculations used to analyze your Affirmative Action Plan’s data are complicated and done with software created specifically for the job. Whether you are creating your plan in-house or choose to outsource, an experienced specialist is needed to make sure you are both inputting accurate data and interpreting the results correctly.
In addition to the plan’s statistical report, there are also pieces that require some organizational savvy as well: To begin with, you’ll need to assign an affirmative action officer to be your plan’s point person. Your plan also needs to include “active efforts,” or how you propose to address any indicators — such as areas where your organization’s diversity does not match up with your area’s census data, for example.
Some organizations don’t have the bandwidth or the background needed to problem-solve issues an Affirmative Action Plan might flag. This is when outsourcing Affirmative Action Plan creation can be a particularly useful workaround.
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Benefits of Affirmative Action Plans
There are many benefits to creating an accurate and thorough Affirmative Action Plan. “What it’s really good for is not getting in trouble with the federal government,” Alex said, laughing. Indeed, because an AAP is made to fulfill a federal contracting requirement, its biggest benefit is avoiding OFCCP penalties.
1. You don’t have to fear an audit
Even if you’re selected for an audit, you can be confident you’ll avoid major penalties if you’ve tracked the correct data, ran the right calculations, interpreted and responded to the results appropriately, and certified your compliance through the OFCCP portal.
2. You’ll know where to focus your diversity efforts
Affirmative Action Plans can show you exactly where your diversity efforts are falling short of your area’s demographics. Instead of going after vague, labor-intensive “more diversity” goals, you can tailor interventions to where you actually need improvement.
“You may have a relatively gender-diverse workforce, but maybe it’s not a racially diverse workforce,” Alex suggested. “Affirmative Action Plans can help us focus on what would really help increase our diversity.”
3. You can use the data to spur wider DEI initiatives
In fact, some organizations that aren’t federal contractors (or don’t meet the thresholds for Affirmative Action Plan requirements) still choose to create AAPs because the resulting information is so helpful to their DEI goals.
“If you want to do this as a kind of internal compliance, it’s available to you,” Alex said. “It will give you the same snapshot.” Alex said that organizations should be prepared to act on what they find out in an AAP. If you don’t address known discrepancies, you could be exposing yourself to legal liability down the road.
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Does your organization need to create an AAP?
Three types of OFCCP compliance reviews
OFCCP affirmative action compliance reviews, or audits, can be frustrating, and the paperwork can be time consuming.. Audits fall into three general categories:
AAP Desk Audit
This is the most common form of compliance review. “They will look at your plan and look at what you have done as far as your active efforts,” Alex said. “They’re going to ask you about specific data points. They like to interview employees and talk to people doing the hiring.”
AAP Corporate or Leadership Audit
This audit also looks at your leadership structures with an eye toward affirmative action.
AAP Compensation Audit
These audits examine the intersection of diversity and pay practices. “They are looking a little bit more into compensation lately,” Alex reported, saying that a recent OFCCP directive requires organizations to include a compensation analysis in their Affirmative Action Plans.
The OFCCP can decide to conduct any kind of audit, or combination of any or all three. Alex said each audit is different.
“I have yet to see a standard audit,” Alex said. “And they have a broad swath of information that they’re entitled to ask for.”
The most common penalties resulting from an audit are increased reporting requirements. When an audit uncovers issues, the OFCCP often requires organizations to update and submit their Affirmative Action Plan, or particular sets of data, quarterly instead of annually. Monetary penalties are rare, but are an option the OFCCP can use. So is revoking contracting eligibility.
“They can bar you from being a federal contractor,” Alex said, explaining that can be for a limited time period or for good. “I’ve never, ever seen it happen…that tends to be in situations where there is no plan, and they have no plans to make a plan.”
Organizations should also be aware that although the OFCCP can’t enforce laws outside their purview, if they see red flags in the course of an audit, they can refer issues to other agencies.
“While the OFCCP itself cannot, for example, enforce a pattern and practice discrimination case, they could refer it to the EEOC,” Alex explained. “If there are compensation issues, they can refer you to the Wage and Hour Division, or they can refer you to the IRS.”
Alex said the AAP audit process was designed to encourage organizations to create and use Affirmative Action Plans effectively. “If you’re willing to work with them, if you have a plan, the penalties tend to be manageable,” Alex said.
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The Affirmative Action Plan Process
Whether you create your own Affirmative Action Plan internally or hire outsourced help from a provider like Employers Council, the process has the same key steps:
1. Gather your data
As discussed in the section on AAP challenges, good data is the foundation of an accurate Affirmative Action Plan. If you are outsourcing your plan, your specialist should start by asking you a detailed set of questions about your data to determine what you have and what you still need to gather. You’ll need to include demographic information for everyone in your employ in the past year (current and former) and for every job applicant you considered.
2. Map your locations
One aspect of your Affirmative Action Plan compares your organization’s demographics against those of the surrounding area. The plan’s analysis will use census codes from your specific location.
“Every location you have that has more than 50 employees is a separate location that needs a separate plan,” Alex explained.
If you have a remote or hybrid workplace, remote workers are mapped under the offices their bosses are assigned to. You’ll determine how many locations/plans your organization needs and which employees and applicants map to those locations.
3. Determine your job groups
Affirmative Action Plans compare the diversity of employees and applicants in similar job groups. These job groups are sometimes categorized using the same job codes as EEO-1 data collection, or they may use some slightly different groups, depending on the size of the organization. (EEO-1 is a separate workplace demographics federal requirement for private employers with more than 100 employees and, in general, federal contractors with more than 50 employees.) This step can take more time because every organization needs to make sure the job groups reflect the reality of their positions.
“We have a good amount of experience putting these groups together,” said Alex. “But you still need to look at it and tell me if it makes sense for your organization. The job grouping piece always tends to be something that takes some time to do.”
After these three steps, Employers Council consultants will have a first round of approvals with their clients to ensure the data, locations and job group information is accurate before beginning the Affirmative Action Plan analysis.
4. Conduct your analysis
Now comes the real meat of your plan: The analysis. Using Affirmative Action Plan software that takes all of your data into account, you’ll conduct several different analyses to see where your organization might need to improve diversity.
“The analysis may result in an indicator,” Alex said. “For some of the analysis, anything over a 2.0 standard deviation is what we’re looking for. That’s going to be considered statistically significant.”
“An availability analysis is where we look at whether or not your organization looks like the area from which you recruit,” Alex explained. “So if you’re in Denver, and you recruit from the Denver Metro area, what does that look like? That’s where those census codes come in.”
Impact Ratio Analysis
“Your impact ratio analysis is about how you’re hiring and what your personnel practices are,” Alex said. “How many minorities did you hire this year? Based on your availability rate, is that about where you should be?”
This analysis looks at an organization’s hires, promotions, and terminations over the previous year. And though this data is helpful, it does not provide context. “For example, if you had a lot of minorities exit your workforce, that may result in an indicator,” Alex said. Again, the Affirmative Action Plan doesn’t tell you why those exits took place, just if there is a statistically significant deviation.
As discussed, Affirmative Action Plans are now required to include a compensation analysis. This analysis is less detailed than a more thorough pay equity analysis that your organization may conduct for its own use. Alex said it’s important to remember that the compensation analysis in your Affirmative Action Plan is not covered by attorney-client privilege; it’s discoverable due to a new OFCCP directive.
“It’s not as deep as we would go with a pay equity analysis where we’re strictly focused on that,” Alex said. “We try to make it clear to clients that if there’s something you want to discuss in the context of pay equity, we recommend you do a full pay equity analysis, so that we can privilege those conversations.”
5. Determine your active efforts
Once you’ve run your analysis and know if you have any indicators, you can make a plan for how to address them.
“Let’s say you have an indicator for women, our consultants can talk you through different community organizations or job boards,” Alex said. “If you have questions, that’s part of what we offer with our service, that kind of support. We also give you a giant packet of best practices.”
Your plan isn’t complete without these active effort responses; if your organization is audited, they will want to know what you are doing to correct any diversity issues.
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What to expect during an Affirmative Action Plan audit
Most organizations aren’t surprised by an OFCCP audit because the agency releases a list of the companies they will be auditing every year around February. They used to generate the list randomly by drawing numbers.
“If your number came up two years in a row, it came up two years in a row,” Alex said, sharing that Employers Council usually only has two or three clients per year who are audited.
It is not as clear now how the OFCCP decides who will be audited, although, as stated earlier, Alex expects the certification portal to begin playing a bigger part in audit list creation. Regardless of how the OFCCP decides who to audit, the process for what happens during one remains the same:
“You can look and see if you’re on the list,” Alex said. “If you’re on it, you’re going to get a letter sometime that year. It could be tomorrow. It could be August. It could be any time.”
After you get the official audit letter, you have 30 days to respond to their request for documents, which usually includes a couple years worth of plans and data. After that, they will respond with any questions. For example, they might ask you to expand on your active efforts to alleviate any indicators. This communication is usually done over email, especially since the beginning of the pandemic. It can be a long process with weeks between communications.
“We’ve had a couple audits that have been going on for eight months, and every six weeks or so you get another request,” Alex shared.
Once your auditor has all the information they need, they’ll contact you in writing again to close the process.
“You’ll get a nice letter that says it’s over,” Alex said. “Any kind of penalty, extra reporting, or whatever you have to do, comes in that letter. They’ll also have a conference to talk you through what they found and any things they want you to work on. Or they’ll just say, ‘Good job!’”
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The cost of outsourcing an Affirmative Action Plan
Affirmative Action Plan creation is a more niche area of outsourced employment law services, but you do have options for outsourcing this time-consuming process.
A few law firms and some private attorneys offer AAP creation. They tend to charge by the hour, which can become expensive quickly.
Some employment firms will help you track your applicant and employee data but don’t actually run the AAP analysis for you. Some of the Affirmative Action Plan software companies will run the analysis, but not help you gather your data. If you feel confident your organization can accurately capture the right data or run a quality analysis, either of these solutions can be an option for you.
If you need help with everything, there are a handful of organizations, like Employers Council, who help with the entire Affirmative Action Plan creation process, from setting up systems for data collection to active efforts support to audit guidance.
The cost for outsourcing an Affirmative Action Plan depends on:
- Number of locations: Remember, each location with more than 50 employees will need its own plan.
- Number of employees: More employees equals more data, which takes more time to compile and scrub for accuracy.
The cost of not outsourcing your Affirmative Action Plan can be high. The drag on your own department’s time and resources can be intense, especially if this is the first time you’re tracking applicant data. An incomplete, inaccurate or absent Affirmative Action Plan can also result in a difficult audit, which takes time away from your department’s main goals and can lead to possible financial or loss-of-contract penalties.
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Four questions to ask third-party AAP providers
If you do decide to outsource your Affirmative Action Plan in full or part, you’ll need to thoroughly vet your third-party provider. Alex suggests asking any potential outsourcers these four questions to make sure they are a good fit for your Affirmative Action Plan needs.
What is your data scrub process? This is the most important discussion you’ll have with any potential Affirmative Action Plan creator. Your analysis will only be as accurate as the data you’re feeding it. Does your provider have experience reviewing and organizing data for AAPs and checking it for accuracy?
What kind of plan support do you offer? Besides the data review and analysis itself, does your provider offer any services to make the process itself easier and more effective? Can you call with questions when gathering and tracking data? Do they offer resources or ongoing help with your active efforts? Are they looking at the process holistically or just checking boxes?
Do you provide audit support? In other words, will you stand by your work? Will your provider walk you through an OFCCP audit? Will they help you collect the needed documents and respond to questions? Have they had experience guiding clients through audits before?
What can you do to help this process become easier year after year? Will they help you get systems in place to make employee and applicant demographic tracking easier and integrated into your workflow? Do they want to invest in a long-term working relationship with your organization?
Make sure your AAP outsourcing partner is experienced, competent and understands your organization’s values and goals before signing any contracts.
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5 reasons organizations choose Employers Council for Affirmative Action Plans
Affirmative Action Plans are one of the many legal services Employers Council offers. There are several ways Employers Council’s AAP outsourcing services differ from other providers’.
Experienced, invested team
Employers Council’s Affirmative Action team is staffed with specialists with years of experience. They come from a wide variety of backgrounds and have deep, firsthand knowledge of diverse industries.
“They’ve been doing this a long time, and they’ve seen a lot of things,” Alex said. Many specialists work with the same organizations year after year, so they develop real relationships with their clients.
“They’re very invested,” Alex said. “They want to make sure that everything is correct and well done.”
Throughout this guide, we’ve emphasized the importance of high quality data. You can’t get a precise Affirmative Action Plan without accurate data. Audits also go much faster when the source data is correct. Employers Council uses exact data as the foundation of all its Affirmative Action Plan services.
“We do a really deep data scrub,” Alex explained. “The majority of what my specialists spend their time on is data stripping and making sure that your data is as accurate as we can possibly get it.”
Ongoing, comprehensive service
One part of ensuring accurate data is helping organizations get the systems and internal knowledge in place for tracking and quality control. As part of their AAP services, Employers Council offers Affirmative Action Plan training for the organization’s employees and ongoing collaboration with those doing the data collection.
That service extends to the active efforts portion of the plan. If your analysis turns up indicators, Employers Council specialists will talk you through ways to respond. Clients have access to a large library of pre-vetted policies, EEO statements, posting taglines, best practices and more to reference as they work through their indicators.
“A lot of what we do is the ongoing ‘Hey, does this work?’ conversation,” Alex said. “‘Can I use this as a disposition code? Is this an okay tagline?’ You have constant availability for those questions; we don’t cut you off.”
Audit support included
One unique — and very important — service Employers Council offers is audit support, and it’s included in the pricing of your Affirmative Action Plan. Audit support is normally only offered as an additional, hourly fee service at other firms.
“As soon as you get that letter, we rerun everything, we make sure it all looks good, and we get all the reports together for you,” Alex explained. “We can help you with witness prep, talk through the questions they ask you, help with language, all that kind of stuff.”
Referrals to other Employers Council resources
The Affirmative Action Plan process can sometimes unearth more questions and organizational needs, including pay equity analyses, recruiting services, deeper DEI work, and/or training needs. Employers Council can help with it all. AAP specialists can connect you to the right teams and explain the benefits of membership, as well.
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