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Federal Contractor Requirements

Learn about obligations federal contractors have under Section 503 of the Rehabilitation Act, and strategies for meeting them. 

Federal contractors are individuals or employers who enter into a contract with the United States (any department or agency) to perform a specific job, supply labor and materials, or for the sale of products and services. A federal subcontractor is a company that does business with another company that holds direct contracts with the Federal Government.

As a part of doing business with the Federal Government, both federal contractors and subcontractors assume certain obligations. Specifically, they are prohibited from discriminating on the basis of sex, race, color, national origin, religion, disability or status as a protected veteran. They are also required to take affirmative action (e.g., proactive steps) to hire individuals from certain groups that have traditionally been discriminated against.

Three laws, all enforced by the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP), set forth these requirements:

Under these laws, every non-exempt government contract and subcontract must include Equal Employment Opportunity (EEO) clauses. These clauses specify the non-discrimination and affirmative action obligations each contractor or subcontractor assumes as a condition of its contract or subcontract.

It is important to note that affirmative action goes beyond equal employment opportunity and requires targeted outreach efforts to facilitate the recruiting, hiring, retaining and advancing of employees from diverse backgrounds. While federal contractors and subcontractors (and federal agencies) are required to take affirmative action, some employers voluntarily adopt affirmative action plans in an effort to create a more balanced workforce.

Disability-Related Requirements

While Executive Order 11246 addresses race, color, religion, sex, sexual orientation, gender identity or national origin, the other two laws enforced by OFCCP—Section 503 and VEVRAA—pertain to people with disabilities, either directly or indirectly.

Section 503 directly focuses specifically on people with disabilities, prohibiting employers with federal contracts (or subcontracts) from discriminating against applicants and employees with disabilities and requiring them to take affirmative steps to hire, retain and promote qualified individuals with disabilities. In 2014, updates to Section 503 strengthened its affirmative action requirements, creating, for the first time ever, a 7% representation goal. They also set a requirement that covered employers invite applicants and employees to self-identify as people with disabilities (applicants at both the pre- and post-offer stage and employees every five years).

VEVRAA has an indirect disability component in that it requires federal contractors and subcontractors to take affirmative action to employ and advance in employment specified categories of veterans—one of which is disabled veterans—and prohibits discrimination against such veterans. In 2014, updates to VEVRAA strengthened these affirmative action obligations, including a requirement that employers establish annual hiring benchmarks for protected veterans. These updates went into effect at the same time as updates to Section 503.

Given the updates to Section 503 and VEVRAA, it’s a good business practice for employers covered by those laws to ensure their workplace culture encourages self-identification.

Finding Job Candidates with Disabilities

Building relationships with state and local disability and workforce development service providers, such as state vocational rehabilitation agencies, American Job Centers, Centers for Independent Living (CILs) and other community-based organizations, can be beneficial for federal contractors seeking to proactively recruit people with disabilities and veterans in order to meet their goals under Section 503 and VEVRAA. These service providers can connect federal contractors with job seekers with disabilities directly or provide access to candidate databases. Since they have a strong local focus, they also can also assist in identifying and training individuals for specific workforce needs.

Relationships with service providers can be formed through formal partnerships (i.e., signed agreements outlining expectations from both parties) and/or informal interactions (i.e., ongoing contact regarding job openings and candidates). These organizations can help provide job candidates as well as supports that help bring people with disabilities on board—and ensure their success for years to come. For more information on state and local resources that can help federal contractors recruit and hire people with disabilities, visit Finding Candidates with Disabilities.

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