In December 2011, the United States Department of Labor announced a new plan that requires federal contractors and subcontractors to have disabled workers comprise a minimum of seven percent of their work force. The public comments period for this proposal expired on February 21, 2012, and the Office of Federal Contract Compliance Programs (OFCCP) is reviewing public reaction. Although the department says it would not be an explicit requirement, companies that do not meet this target could nevertheless be penalized with revoked contracts or could be barred from winning future contracts until they show they are taking steps to meet the target.
Current law encourages federal contractors to maintain a diverse work force but does not specify what percentage of jobs must go to disabled Americans. Section 503 of the Rehabilitation Act of 1973 contains an affirmative action plan, but it does not impose a quantitative objective. The OFCCP plan would be an update to Section 503 and would be the first to prescribe a minimum hiring target. The seven percent goal would apply to contractors that have 50 or more employees and a contract of $50,000 or more. This new initiative could affect a large number of firms in the health-care, construction, information-technology, and defense industries. In the aggregate, approximately 200,000 companies with combined generated income of $700 billion in federal contracts. Some examples include Lockheed Martin Corporation, Northrop Grumman Corporation, The Boeing Company, General Electric Company, and Pfizer, Inc.
Imposing a Burdensome Quota and Creating a catch-22 of Potential Liability
The seven percent target would apply to a contractor’s work force as well as subsets of workers based on factors such as their job description and wage rates. The OFCCP’s subset requirement aims to prevent employers from unfairly steering disabled workers to lower-paying jobs. The OFCCP is also considering requiring that two percent of contractors’ work forces be comprised of severely disabled workers, such as those with total deafness, blindness, or missing extremities.
This target, or non-mandatory goal with severe repercussions, not only creates hiring classifications, but also instructs employers where and how to distribute their labor force. To illustrate, a company with 50 employees would need to employ at least 4 disabled employees to comply with the new target.
The Americans with Disabilities Act (ADA) defines disability as “a physical or mental impairment that substantially limits one or more of their major life activities.” This definition is very broad and includes conditions ranging from blindness to the less apparent asthma, diabetes, and mental illness. The new proposal does not include a specific list. Without a specific list, it’s difficult to ensure compliance with the proposed regulation.
Here’s where it gets really interesting. Compliance with the proposed regulation puts employers in a vulnerable position, i.e. in violation of another employment regulation. Employers “shall not make inquiries of an employee as to whether such employee is an individual with a disability or as to the nature or severity of the disability, unless such examination or inquiry is shown to be job-related and consistent with business necessity.” For the full text, click here.
Under the new plan, employers would have to ask about disabilities, classify employees as disabled and non-disabled, and would potentially need to make classifications within the subset of disabled workers—to determine whether the employee is disabled or severely disabled. Assuming all other hiring factors are equal, does an employer select a candidate based on the severity of the disability?
Furthermore, many employees and candidates are hesitant to reveal that they have a disability or would require an accommodation from their employer. Therefore, an employer may lose “credit” for the hire. Or, an employee may falsely claim to have a disability to be more attractive for the employer’s “quota” and prevent a candidate who truly could benefit from the hiring program from finding a job.
The Department of Labor estimates that 79.2% of working-age people with functional disabilities are out of the labor force entirely, compared with 30.5% of people without disabilities. Of the people who are still in the labor force but are unemployed, 12.9% are disabled while the unemployment rate for non-disabled workers is 8.7%. Disability advocates argue that advances in technology allow employers to easily make accommodations for disabled workers
Additional Considerations and Complications
There are other complications to consider. There would be additional overhead expenses such as paperwork to track employees, process data, and report on compliance efforts, as well as potential increases in accommodation costs. There would additional legal expenses due to added challenges in employment regulation compliance. There is also a concern that requiring contractors to make inquiries about disabilities would lead to an increase in lawsuits from people alleging their disclosures were actually used against them. But the largest threat at this point is uncertainty. The OFCCP maintains that it is not yet a requirement, but nevertheless threatens to revoke current contracts and deny future contracts.
Other Unanswered Questions
Is the employer penalized if no disabled persons apply for a position? What if a company already meets the seven percent target? What if a company already meets the seven percent target but employees have chosen to keep their condition private? If the size of a contractor’s labor force is fixed, what if there are no available positions for new employees, disabled or non-disabled? What if there are no reasonable accommodations that can be made for a prospective employee for particular job function?
Over 400 comments were submitted thus far, some in favor, some opposed. It is too early to determine what new regulations will be instituted. Some employers, particularly small businesses, may determine that complying with new regulations will be overly burdensome or too expensive for their business’ limited resources. They may simply stop bidding for government contracts. If many companies respond in this way, the market forces will ultimately dictate how actively the government enforces the new regulations.
Stay tuned for updates on this proposed regulation. If you’d like to learn more about employment regulations or you have any additional comments about this post, please comment below, contact us, or check out our free, confidential Q & A service.
Thanks to Danielle Flatt for her help with this post.