Regulations rushed into publication in the final days of the Clinton Administration may have widespread effect, notably on the thousands of firms that are contractors or sub-contractors to the Federal government. This article will discuss two that will have profound and immediate repercussions for companies that do business with the Federal government: new regulations from the Office of Federal Contract Compliance Programs (OFCCP) concerning affirmative action requirements, and new Federal Acquisition Regulations (FAR) requiring prospective contractors to certify their record of compliance with federal tax, environmental, and anti-discrimination laws.

Why "Midnight"?

Smarting from defeat at the polls, and realizing that a Republican administration could toss aside their efforts, in December 2000 and January 2001 outgoing Federal agency heads rushed to print an avalanche of new rules and regulations. Many had been under

consideration for years, but their authors realized that their time had run out, and it was imperative to publish or else abandon these initiatives. Not since President Carter left office in 1980 has there been such a large number of last-minute, or "midnight," regulations issued.

President George W. Bush's order to "stop the presses" on inauguration day -- January 20, 2001 -- prevented some regulations from being printed in the Federal Register and thus taking effect, but several significant new rules, or reinterpretations of existing rules, were published between certification of the election results and inauguration day. Some of these already have become effective, even as the Bush Administration is conducting a massive review to determine which of the rules currently on hold it will endorse and which it will reject.

Affirmative Action

A major overhaul of the Government's requirements concerning affirmative action programs mandated by Executive Order 11246 was published by the Office of Federal Contract Compliance Programs (OFCCP) on November 13 and took effect 30 days later. A significant new obligation that these regulations impose on Federal contractors is the preparation of an equal opportunity survey. This requires employers to provide the OFCCP with summary compensation data broken down according to race and gender -- statistical information that very likely will be used to show that employers are discriminating on the basis of race and gender in both hiring and promotion decisions.

The new regulations, which are the first major change since 1970, are designed in part to reduce paperwork and to improve the compliance evaluation process. The regulations do, in fact, streamline the obligation of federal contractors and subcontractors to maintain written affirmative action plans. OFCCP claims they have shifted their focus from line-by-line compliance with technical standards to the contractors' actual non-discrimination and affirmative action activities. The "workforce analysis" in the former regulations, which required a detailed job analysis that ran about 23 pages, is replaced by a simpler, one-page organizational profile. The "8-factor availability analysis," which requires contractors to compare the availability of minorities and women in each job group to the overall workforce, the unemployed workforce, skills, training availability, and four other factors, has been eliminated and replaced by two factors: external and internal availability. Small employers – those with 50 - 150 employees -- are permitted to use EEO-1 categories for their job groups rather than create particular job groups tailored to their organizations.

More troubling is the new equal opportunity survey requirement. OFCCP will group employees on the basis of their job levels or grades and their EEO-1 job categories. Within each group, it will then compare the median pay of females to that of males, and that of minority to non-minority employees. Time in grade will be analyzed within each sub-group to adjust for differences due to seniority. Employers are troubled that they will be required to prepare simplistic statistical analyses of compensation that will portray them in a false light; pay disparities that may be explained by factors such as performance may appear as race or sex discrimination using OFCCP's rules.

In-depth interviews will follow if disparities along race or sex lines are discovered. Some of the 7,000 employers who participated in a pilot pay survey have been the target of searching on-site reviews. OFCCP intends to include some 53,000 employers in the survey the first year.

Although OFCCP claims the new rules really don't represent a change, employers say the new obligation to break down compensation information according to race and gender will be extremely burdensome and problematic. A careful review of current pay practices certainly is indicated for the employer who wishes to minimize potential exposure under these new rules.

Government Contractors

An amendment to the Federal Acquisition Regulations (FAR) requires firms seeking government contracts to disclose their record of compliance for the past 3 years with non-procurement-related laws as a precondition to eligibility for government contracts. Like many rules of this nature, it seems rational on its face but will be exceedingly burdensome in practice, and ultimately may discourage many firms from seeking these contracts. This, in turn, will delay the procurement process, drive up costs for taxpayers, and potentially cause the economy to contract, as many firms who formerly provided goods and services to the government are ruled to be ineligible for future contracts.

This new set of rules requires prospective Federal contractors to supply detailed information concerning their firm's track record of compliance with tax, labor & employment, safety, environmental, antitrust, and consumer protection laws so that contract officers within the government can assess the firm's "record of integrity and business ethics." This includes records of any convictions or civil judgments rendered against the prospective contractor for offenses ranging from fraud in procuring contracts or tax evasion all the way to adverse OSHA decisions or EEOC discrimination determinations. This may strengthen the hand of plaintiffs' lawyers in extracting settlements from employers on dubious employment discrimination or consumer products safety claims, since settlements are not included among the list of reportable events. The new procurement regulations took effect January 19, 2001.