Navigating OFCCP Changes: Insights on Compliance Post-EO 14173

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Lauren Hicks: This is Lauren Hicks, a shareholder in Ogletree’s Indianapolis office. I’m joined today by my colleague Scott Kelly, a shareholder in the Birmingham office. We are members of the OFCCP Compliance Government Contracting and Reporting Group. This is to provide an update to federal contractors regarding the current status with OFCCP. Which, Scott, has been in a tremendous state of flux since President Trump’s inauguration.

Scott Kelly: I think that’s probably the understatement of the week. It seems like the last two weeks have been quite busy for a lot of different people. But federal contractors were certainly caught in a lot of this uncertainty when he issued an executive order, 14173, the Ending Illegal Discrimination and Restoring Merit-Based Opportunities executive order that immediately revoked Executive Order 11246, which all federal contractors know is the law requiring federal contractors and subcontractors to take affirmative action and nondiscrimination obligation for women and minorities.

Now, in that executive order, the 14173, President Trump is giving federal contractors and subcontractors 90 days to continue to comply with, I think the quote was “the regulatory scheme” of Executive Order 11246. My calculation is that’s 90 days from the date of the order. Gut-check me on this, I’ve seen it a couple different days, and I think this day is very important because you don’t want to have any of your 11246 in place one day too late. But I have it as April 21st. Did I do my math right there?

Lauren Hicks: I think your math is right. It certainly would not hurt to have it all unwound maybe by April 20th, since it is elective to continue the compliance and some of the untangling will be required.

Scott Kelly: I know that there is the elective or voluntary compliance until then. I’m reading that as a little bit more of get it all unwound by April 21st, not necessarily continue in earnest with some of the things that you were doing. But every organization might have a different approach to that.

As far as getting it all unwound, it is not an easy lift in my mind. I was describing it as 11246 has a lot of tentacles that wrap around organizations. They’re pretty embedded in systems and processes, and a whole host of things.

What types of things do people need to be thinking about, Lauren, as they unwind 11246?

Lauren Hicks: I think you’re absolutely right, Scott. I think the intention behind the 90 days is to ensure that an employer is not breaking the law a couple days after this executive order. Because to your point, the tentacles of 11246 are relatively broad and really built into a lot of systems.

For instance, contractors may have to consider removing references to the executive order and its regulations in statements, policies, some forms, notices, and other documents. They’re certainly going to have to update their postings, your career website, possibly the way you do self-identification, especially for applicants which is a little bit of a separate issue from incumbent employees. Incumbent employees are different because the EEO-1 reporting requires self-identification just like 11246 did. However, applicants do not fall within the scope of that EEO-1 report. There’s very much an individualized assessment that will need to occur regarding how to move forward with applicant self-IDs.

I don’t think we said at the beginning of this podcast, which is a flow-over from a prior podcast, that 11246 being revoked did not impact requirements related to protected veterans or individuals with disabilities. All of these requirements that we are discussing here with the unwinding exclude those classes. The compliance obligations for those two remain in effect as they were prior, and you still have to continue with those self-ID obligations for those particular classes. There will be considerable impact on the talent acquisition process, the way maybe your recruiting functions work, or through outreach and assess certain things.

Then a contractor might have affirmative action language in various policies. Their tagline might need to be revised in a variety of ways. The tagline is something that goes on job postings that says something to the effect of, “We’re an equal opportunity employer,” and it might have affirmative action employer in there as well electively. A lot of employers did that. It may have a number of protected classes listed out that employers may want to revisit in light of the changes made by this administration.

Then, Scott, the other substantial change that will occur is there is a flow-down clause. Again, there’s one for each of 11246, VEVRAA, and 503. VEVRAA and 503 are unimpacted by the new executive order. But the flow-down for 11246, we anticipate getting language changes from the government. Then, of course, contractors themselves will have to make adjustments within their clauses with their subcontractors, vendors, suppliers, et cetera.

Scott Kelly: It sounds like lots to do before April 21. I guess we also need to be considering the state affirmative action and reporting obligations that are out there. I know the last time I looked at this, and this by no means is an exhaustive list, but I believe Arizona, California, Connecticut, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and Wisconsin all have on their books state affirmative action requirements. I think some of those pertain to only doing construction business with the government, so this by no means is a one-size-fits-all type of approach.

But I think not a real hard prediction to make is that we’re going to see maybe where the federal government is not acting on affirmative action, we might see these states that already have laws on the books start enforcing them more vigorously. Then would you be surprised if we saw some other states that I didn’t read out get into the fray here?

Lauren Hicks: I would call that an inevitability. I will also note that some of the states may have to reassess their programs because a lot of them are built on the foundation of 11246.

Scott Kelly: Yeah, absolutely. That’s another thing we will be keeping our eyes on for you all. Look for updates either on our Insight page on ogletree.com, or perhaps when we some of those updates we’ll report podcasts like this in the future to address some of the changes that might be coming out of different states.

We heard from the Acting Secretary of Labor, I believe it was a week ago. He issued an order. What did that order say and what has happened since then, Lauren? Catch us up.

Lauren Hicks: The order came out and ordered OFCCP to cease and desist all Executive Order 11246-related enforcement. OFCCP was required to issue notices of the closure of 11246 portions of its audits and investigations no later than January 31st, which was a couple of days ago. Then also, to note that the Section 503 and VEVRAA enforcement is currently held in abeyance. Lots of questions on what that means. It just means on hold. We don’t know for what period of time, Scott.

But the letters did go out on Friday to the employers. It simply reads, “The United States Department of Labor’s Office of Federal Contract Compliance Programs, OFCCP, recently scheduled a compliance evaluation at your establishment,” and then it will cite the address. “On January 21st, 2025, President Donald J. Trump issued an executive order entitled Ending Illegal Discrimination and Restoring Merit-Based Opportunity that revoked Executive Order 11246. Due to this revocation, the Executive Order 11246 component of this review has been closed by OFCCP. The 503 and VEVRAA components of the review are being held in abeyance until further notice.”

Something that I found curious and interesting is that that same notice was sent even for complaint investigations that were under either 503 or VEVRAA, or both, but did not have a 11246 component. But it just noted that they, too, are held in abeyance.

Otherwise, Scott, the agency has gone out of its way to note that the 503 and VEVRAA compliance obligations remain in effect. Those are not in abeyance. Is that right?

Scott Kelly: Yeah, Lauren, that’s right. Section 503 and VEVRAA obligations do remain in effect. That would mean that the annual affirmative action requirements under both of those programs are still in effect. In addition to that, you’ve got the analysis that’s required under the Individuals with Disabilities AAP. But you’ve got outreach and recruitment responsibilities and obligations to comply with. You’ve got record-keeping obligations to comply with for veterans and individuals with disabilities. There’s job listing, some people call it posting, but it’s really a job listing requirement that is under VEVRAA that you’re going to need to comply with.

Still, a lot to do for those in the federal contracting compliance world that have these cover contracts with VEVRAA and individual with disability obligations. I would say that because a lot of the things we see in the new executive order from President Trump, the Ending Illegal Discrimination executive order, I see some new obligations for federal contractors and for grant recipients. The good news is, for all, is that it doesn’t seem like, for some of those requirements, there’s going to be a contract threshold that you need to be worried about, like we’ve all been worried about, whether some of these regs, 11246 regs, or even VEVRAA and 503 regs have applied to your organization.

But I do think for these AAP requirements, keep in mind the threshold. We’ve got the $50,000 contract threshold for Section 503 compliance. Then you’ve got a higher threshold of $150,000 for VEVRAA. That might be something that all federal contractors could consider taking a look at as they’re figuring out what obligations they have moving forward.

What’s going to happen to OFCCP, Lauren? Do you have any forecasting or crystalballing that you can do for us there?

Lauren Hicks: I certainly wish I had more information about what happens with OFCCP. There’s a lot of unknown at the moment. I used to work for the agency myself. It’s an organization that I know has been thrown into a lot of chaos in the last couple of weeks.

But they do now have a new acting director, Scott, who is also now the Deputy Director of Policy. His name is Michael Schloss. A little bit of background on him. Just that his background seems to be more as a benefits lawyer. He doesn’t seemingly, at least on what’s publicly available, have a lot of experience with the OFCCP space or federal contractor compliance. But he’s only been in this position for a few days, so we don’t know what comes next.

Will the agency issue new guidance under the executive order? We would expect there to be some regulations that would roll out. But we also expect guidance on a number of things that are really unknown right now. For example, will OFCCP even continue to engage their VEVRAA and 503 audits? Seemingly yes, but as we noted they are in abeyance at the moment, and we don’t know when those will resume. Will they be making revisions to the compliance evaluation scheduling letter? Certainly, they will have to, to remove the 11246 portions.

Then there’s some other informal guidance we might expect. We don’t know what happens with OFCCP’s Contractor Portal, which, generally speaking, we would have expected a required certification around the end of June or early July 2025, but we do not know if that will be required again this year. Or if OFCCP is continuing audits, will they continue working their way down the most recent CSAL?

There’s a lot we don’t know. Certainly, they could, Scott, pivot and return to what we might call very focused reviews. They could either continue doing the two components together, for veterans and individuals with disabilities, just like in a normal audit that would have also contained 11246. Or they might pivot, as they did in the first Trump Administration, and separate those out and do what they would call focused reviews. Your audit would have only one law that they would investigate at a pretty deep level. That could be either a 503-specific or a veteran-specific investigation. We don’t know yet what’s coming with that.

I know there’s some talk, Scott, that maybe the agency could be used for other political purposes that are more in alignment with this administration. What do you think about that?

Scott Kelly: Well, I think we could look to past practice, perhaps, as a potential clue. There was an executive order issued by President Trump in his first term nearing the very end. In September 2020, he issued a Divisive Concepts executive order about race and sex stereotyping. As part of that, directed OFCCP to set up a hotline for employees and stakeholders anywhere to call and report on federal contractors that were violating the executive order. Now that executive order, for the record, did get preliminary enjoined by a California federal district court between, I don’t want to quote the exact day, but it was towards the end of December 2020. A lot of that, the hotlines, I don’t know if they did receive complaints, what came of those, or what went with them. I believe the director at the time also sent a couple of large employers some letters inquiring about some of the DEI practices that those employers had engaged in.

I would suggest that that would not be too far afield to predict that if the agency continues, that it might be a mechanism or a place to receive such complaints and to help monitor the practices of federal contractors and subcontracts to ensure that they aren’t engaging in any type of DEI programming that would violate the anti-discrimination statutes. That’s part of President Trump’s new executive order on Ending Illegal Discrimination, where federal contractors and subcontractors are going to have to affirmatively certify that they don’t engage in any such programming. It’ll be interesting.

It’ll also be interesting to see if the agency continues to use, as part of one of its, I always called its enforcement sticks, was its broad use of media and the press when it was announcing either lawsuits or settlements with contractors, and how that might be used as part of the efforts. It’s no secret this administration is not a fan of DEI and the “anti-woke agenda.”

It’ll be interesting to see. I guess just more time will have to pass. I know you and I are going to be watching this as we have for the last two weeks, with open eyes and trying to find any little bit of nuggets of information out there that we can. We’ll keep doing that and pass that along to our listeners. We hope that we’ll have more information to share with you very soon. Thank y’all very much.

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