With the EEO-1 and VETS-4212 filing seasons just weeks away, federal contractor employers need to be paying closer attention to the way their organization files those reports, keeping in mind the impact it could have on their affirmative action efforts.
The EEO-1 reports are primarily administered by the Equal Employment Opportunity Commission (EEOC), and the VETS-4212 report is administered by the Department of Labor’s Veterans’ Employment and Training Service (DOL-VETS), but their data can and is often used by another agency within DOL, the Office of Federal Contract Compliance Programs (OFCCP).
A certain “disconnect” should exist between EEO-1, VETS-4212, and AAP reporting structures and resulting reports; that is nothing new. The “rules” for defining reporting locations, as well as who must be included in which reports, differ from one reporting scheme to the next, so it should be rare for them all to line up with matching counts. Accordingly, many employers see them as completely disconnected when they are not.
Understanding the differences between these various federal EEO reporting obligations is more important than ever for federal contractor employers because “mistakes” here can now lead to more than a slap on the wrist. Not because anyone added fines or jail time to the remedies for non-compliance, though, but because it could trigger an OFCCP audit.
Below we will take a look at the current reporting requirements and the differences between them that are important to keep in mind, especially when/if a certain federal law enforcement agency starts asking questions.
Then we’ll examine how the OFCCP is actually using this data in their various enforcement efforts and consider the extent to which you may or may not want to change your various filing strategies.
The State of Play
We will assume that your organization has multiple locations, sufficient headcounts and sufficient federal contract dollars to qualify as a “federal contractor.” As such your organization is required to prepare annual affirmative action plans (AAPs) and file annual EEO-1 and VETS-4212 reports.
If you are with a higher learning institution, this information can still be useful in your exercise of examining how your various reporting obligations may or may not interact.
EEO-1 Reporting
The reporting scheme for the EEO-1 has been “in flux” for the last several years. “Component 2” was briefly added for reporting total pay and hours worked using employers’ W-2 data. That required the EEOC to move the reporting period from the Fall of each year to the Spring of the following calendar year. Then Component 2 was suspended, but the reporting period was not moved back, so went back to filing the “old” EEO-1 reports on the “new” deadline.
Today there is word that Component 2 might be revived in the near future, yet the EEOC has moved the reporting period back to the Fall for the 2023 reporting cycle. So if a pay data component is eventually added back to the EEO-1 reports we may see another change to the reporting period. EEO-1 filing season is set to open on Halloween this year, but we don’t expect that to become permanent. Employers should have to pick a payroll end date between October 1 through December 31 as their “snapshot” date and report on all employees as of that date. Multiple-establishment employers will have to file what used to be referred to as a “Type 3” Headquarters Report, along with “Type 4” Establishment Reports for all physical work locations with 50 or more employees as of the snapshot date, and “Type 8” Establishment Reports for all locations with fewer than 50 employees.
Note that the EEOC has dropped the “type” designations for reports this year and refers to them now by their “name.”
Note also that the “Type 6” Establishment List, often referred to as the “state consolidated list,” has been discontinued by the EEOC.
VETS-4212 Reporting
The basic scheme for the VETS-4212 is pretty much the same as the EEO-1. Employers will have to choose a date between July 1 and August 31 as their “snapshot” date and report on their veteran demographics in each EEO-1 job category, as well as overall veteran hiring during year prior to the snapshot (reporting your Veteran hires by EEO-1 job category is actually optional). Contractors have until September 30 to finalize and file their reports.
Multi-establishment employers will have to file a “headquarters” report, and separate “establishment” reports for each physical work location with 50 or more employees. For any locations with fewer than 50 employees, employers retain the option to file separate “establishment” reports or a “consolidated” report covering all such locations in each state.
AAPs
Federal contractor employers set their own AAP start and end dates, so the “reporting period” and “snapshot” dates are specific to each contractor, not standardized like it is for EEO-1 and VETS-4212 reporting. Initial start dates for new contractors are constrained to the 120-day period following the execution of their first qualifying federal contract, but employers are allowed to “reset” their AAP start date after their first AAP cycle to better align with other business obligations if they need to (and many do).
Federal contractors are required to start with “location-based” AAPs for every location with 50 or more employees, much like the EEO-1 and VETS-4212. However, for any “under-50” locations, contractors have several options.[1]
Like both the EEO-1 and VETS-4212, contractors can prepare “small AAPs” covering each of their “under-50” locations if they wish. But they also have the option to “roll up” the employees at a smaller location to another, related, larger AAP location based on either the Human Resources function or the supervisory chain. And the OFCCP has been known to allow more creative solutions in certain circumstances, such as “district” or “regional” AAPs, as well as “campus” plans.
Commonalities
There are several commonalities between the three requirements. For instance:
- All three “define” the term “employee” by not defining the term at all, rather relying on “common law” definitions.
- All three apply to workers in the United States and its territories, including foreign workers on U.S. soil.
- Citizenship status has no bearing on whether or not employees are included.
But that is about where the similarities end.
Differences
Traditionally the EEO-1 and VETS-4212 reporting seasons were pretty well aligned. That changed for several years, but seems to be the case again now. Both will likely require contractors to choose a snapshot date between August 1 and September 30. However, contractors are not required to choose the same date for both. For AAPs, the snapshot date is almost entirely determined by each individual employer.
The EEO-1 now requires a report for every single physical work location, regardless of size. The VETS-4212 provides employers an option to report “under-50” locations in state-consolidated reports. And the OFCCP provides even more options for AAPs covering any “under-50” locations.
Both the EEO-1 and VETS-4212 require employers to indicate whether they are a “prime” federal contractor, a qualifying federal subcontractor (of any tier), or both. The VETS-4212 does not appear to limit subcontractor tiers, and AAPs certainly do not.
Interplay
Given the differences in reporting requirements, one should easily see why a federal contractor’s headcounts of employees should differ from report to report. So why should employers think more wholistically?
One big reason is the OFCCP’s AAP Verification Initiative (AAP-VI). The OFCCP really doesn’t have very good data on who is and is not a “federal contractor” in their jurisdiction, and they are working hard to change that by requiring contractors to “verify” and “certify” that their organization does in fact prepare AAPs as required.
However, the OFCCP wants contractors to answer that question on the establishment level, which poses a problem for the agency (and the contracting community). For that to work, the OFCCP needs to know your AAP reporting structure. Trouble is, they don’t have the authority to require federal contractors to provide that information.
So, contractors are required annually to log in to the OFCCP’s “Contractor Portal” where they will see a list of establishments that the OFCCP helpfully populated using (at the time) three-year-old EEO-1 data. And unless the contractor told the agency otherwise by editing and updating that establishment data (something the OFCCP can’t actually require them to do), then the agency would assume that the EEO-1 and AAP structures are the same.
That is an attempted end-run around the law and is 100% wrong of the OFCCP to do, but so far no one is stopping them. Most contractors chose to update the OFCCP’s establishment data as the agency hoped they would, and now most contractors’ EEO-1 data is directly tied to their AAPs in the sense that any differences between EEO-1 reports and AAPs will likely need to be explained.
The OFCCP is also desperately searching for employers that the agency has some reason to believe should be certifying their AAPs but are not. That information can come from about three primary and relatively “reliable” sources: the federal procurement database; contractor boxes checked (or not) on the EEO-1, and contractor boxes on the VETS-4212. Inconsistencies here are now red flags for the OFCCP and can and are being used to initiate an audit.
EEO-1 and VETS-4212 reporting can also blow up a “single entity test.” If your organization maintains two or more “legally separate entities,” we can guarantee you that a room full of lawyers somewhere worked very hard to establish the necessary distance between entities so that the potential liability of one does not spill over to another. And they will not be happy to find out that the way the HR function is filing some reports could undo their hard work when they least expect it.
Filing EEO-1 and VETS-4212 reports can get complicated when filing on behalf of several legally separate entities, but the tedious effort is necessary. Some will be juggling multiple federal employer identification numbers. If an employer misses one and fails to file the EEO-1 or VETS-4212, don’t panic because the remedy for that is to simply file the missing report(s) if the system is still accepting submissions, or to start filing immediately with the next reporting cycle.
But if you forget to certify the AAPs for one of your entities, the OFCCP will most likely schedule locations tied to those entities for audit as soon as possible.
To Synch or Not to Synch?
That is the question, isn’t it?
Life can be easier in an OFCCP audit when the EEO-1, VETS-4212, and AAP headcounts match, or are at least close. But that should rarely be the case and, frankly, it could be suspicious if these reports match too much! The EEO-1 and VETS-4212 reports can be matched much better, but AAPs have such different structural requirements that the larger and more complex an organization is, the more difficult it can be to match AAPs with EEO-1 and VETS reports. So how much you want your reports to match is part strategy, part judgement call.
The EEO-1 Component 2 report is expected to make a comeback, likely with revisions. What we don’t know is whether or not they will stick to the original “calendar year” earnings reporting scheme in which the prior calendar year payroll must be “closed out” prior to the snapshot. If so, the EEO-1 filing deadline will likely move back to the following Spring (for example, reporting 2023 data in the Spring of 2024).
Shifting an organization’s AAP start date is easy in the sense that contractors do not have to get permission from or even notify the OFCCP. But it does likely mean preparing AAPs twice in the same year since contractors cannot have AAPs that run longer than 12 months (the regulations do not, however, prohibit AAPs that run for shorter periods).
Aligning your AAP start date with your EEO-1 and VETS-4212 snapshots really requires a switch to using a December 31 snapshot date for all. Everyone has blanket “written approval” to use a December 31 snapshot for the EEO-1, and DOL-VETS allows anyone using a December 31 snapshot for EEO-1 reporting to use the same snapshot for the VETS-4212. The only question is whether or not you want to be engaging in your AAP preparation project around the New Year when there are so many other critical projects going on.
Matching Headcounts?
As noted above, an organization’s AAPs, EEO-1 reports, and VETS-4212 reports should almost never match because the underlying framework among the three is slightly different. That does not stop the OFCCP from questioning not just significant, but even minor differences among the reports as if they should match.
The OFCCP is actually comprised of some pretty smart people, though. They’re just not always able to be as articulate as others might want because they are federal government employees subject to a host of complicated restrictions. But the OFCCP doesn’t actually think these reports should match. They do, however, think that employers should be able to easily and readily explain differences and demonstrate that all of their employees are being captured appropriately in the various reports.
And the OFCCP unquestionably has the authority to verify that federal contractors are filing these reports as required (or in the case of AAPs, preparing them as required). But beyond evaluating the extent to which required AAP reports and analyses are “compliant,” the agency’s authority to evaluate whether or not EEO-1 or VETS-4212 reports are filed “correctly” is a bit of a grey area.
It might be unreasonable for the OFCCP to require all contractors in all audits to account for every little difference between their AAP Workforce or Job Group Analyses and their EEO-1 and VETS-4212 reports. But it isn’t unreasonable to ask contractors to demonstrate that they know why Joe was reported on the EEO-1 but does not show up in the AAP.
Much like demonstrating that the organization includes required language in contracts and purchase orders by providing the OFCCP with just a few examples of documents with the required language, contractors should be prepared to “map” a few employees through the various EEO reports to demonstrate that the organization is accounting for all its employees as required.
Consistency Is Now Key
Wondering whether or not you should “synch” your three reporting obligations, or worrying too much about differing headcounts should be secondary to making sure your reporting is consistent.
If an organization makes a mistake in filing their EEO-1 or VETS-4212 reports, the remedy for any violation there will be to start filing correctly on a going-forward basis. Accordingly, these reporting obligations are often considered to be “low-risk” from a legal risk mitigation standpoint. But the OFCCP has recently started targeting contractors that they have reason to believe should be certifying their AAPs under the new AAP Verification Initiative.
Would anyone like to guess where they get their information regarding which organizations are federal contractors to begin with? Beyond the Federal Procurement Database, the OFCCP has relatively free access to that data because they are the other half of the “Joint Reporting Committee” that administers the EEO-1 along with the EEOC. Access to VETS-4212 data might not be as breezy, but should be accessible to some degree from DOL-VETS, a “sister agency” within the Department of Labor.
And while that may be the OFCCP’s current audit-list-generating strategy, it is not the only one at their disposal.
Both the EEO-1 and VETS-4212 reports ask employers if they are federal contractors and, if so, whether they are prime contractors, subcontractors, or both. Checking these contractor boxes in the affirmative on one and in the negative on another is potentially a great way to signal to the OFCCP that the organization is unsure about its federal contractor status and therefore might be a “ripe” target for a compliance evaluation (audit).
AAP-VI “Strategy”
The OFCCP still does not have the authority to require contractors to provide detailed information about their AAP structures (unless they currently hold or are applying for a FAAP agreement). That includes a complete lack of authority to require contractors to correct any misperceptions the OFCCP might have and present to them regarding the contractor’s AAP structure, including editing and updating old EEO-1 data populated by the OFCCP in the Contractor Portal.
If your organization has not “taken ownership” of the OFCCP’s location data in the Contractor Portal by editing or updating that information, BCGi still recommends certifying AAP compliance by simply clicking into each “location” presented in the Portal, checking the appropriate box indicating that AAPs are prepared for that location “as applicable,” certify on your way out, and be done.
However, for various reasons many contractors did update their location information in the Contractor Portal and now arguably have an obligation to keep that information current as of each annual AAP-VI certification.
In the past, contractors might try to stay off the OFCCP’s “radar” by minimizing contact with the agency. Today, that script has flipped, at least for now. The best way to stay off the OFCCP’s radar is to put yourself on it by certifying your AAPs if that is what the agency is expecting. In other words, if the OFCCP has information that makes your organization look like a federal contractor, but you do not certify your AAPs, the agency is almost guaranteed to pay you a visit.
The same might go for an organization that the OFCCP didn’t know about or have reason to believe is a federal contractor, but does certify their AAPs. The agency has not officially integrated that into their previous audit selection processes, but that seems like a natural evolution of their current efforts. If there is reasonable doubt about your organization’s contractor status, it might be reasonable and potentially more advantageous to not certify.
If you need a legal opinion regarding your organization’s federal obligations, please seek the advice of legal counsel.
Moving Forward
Over the years EEO-1 and VETS-4212 reporting has become somewhat of a “set-it-and-forget-it” exercise. It’s still a “project” to get done, but the basic mechanics for compliance were likely set years ago and only reconsidered and/or changed in response to changes to the reporting requirements.
Now is the time for organizations to reconsider how they are filing EEO-1 and VETS-4212 reports with an eye toward how that might impact their affirmative action programs. In short, make sure that your EEO-1 and/or VETS-4212 reports don’t trigger an OFCCP investigation!
How that ultimately “looks” will be specific to each organization. If you need help, Biddle consultants are ready to take your call and help you figure it out.
And if you’re not ready to pull the trigger on a consulting contract but still have questions about this or any other federal EEO requirement, feel free to drop us a line at BCGi@Biddle.com and we’ll see what we can do.
Have questions?
A Biddle Consulting Group representative will be happy to discuss any questions you have about this or other AAP/EEO compliance concerns. Call us at (800) 999-0438 or send an email to staff@biddle.com.
[1] Fewer than 100 federal contractor employers hold “functional” affirmative action plan agreements (FAAPs) with the OFCCP. If you are one of those, you are largely spared here because the OFCCP is already intimately aware of your AAP structure and that it is vastly different than your EEO-1 and VETS-4212 reports.
