Office of Federal Contract Compliance Programs [07/20/2000]
Volume 65, Number 140, Page 45173-45180
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Part III
Department of Labor
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Office of Federal Contract Compliance Programs
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41 CFR Part 60-741
Affirmative Action and Nondiscrimination Obligations of Contractors and
Subcontractors Regarding Individuals With Disabilities; Separate
Facility Waivers; Final Rule
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DEPARTMENT OF LABOR
Office of Federal Contract Compliance Programs
41 CFR Part 60-741
RIN 1215-AA84
Affirmative Action and Nondiscrimination Obligations of
Contractors and Subcontractors Regarding Individuals With Disabilities;
Separate Facility Waivers
AGENCY: Office of Federal Contract Compliance Programs (OFCCP),
Employment Standards Administration, Labor.
ACTION: Final rule.
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SUMMARY: This rule amends the regulation that permits Federal
contractors to seek waivers from the requirements of Section 503 of the
Rehabilitation Act of 1973 for those facilities that are not connected
with the performance of a covered contract. Section 503 requires
Government contractors to take affirmative action to employ and advance
in employment qualified individuals with disabilities. The
Rehabilitation Act Amendments of 1992 expressly incorporated into
Section 503 the existing separate facility waiver regulation. The 1992
Amendments also required publication of regulations that list the
standards to be used for granting separate facility waivers and,
accordingly, this rule lists factors that will be considered when
determining whether to grant such waivers.
EFFECTIVE DATE: August 21, 2000.
FOR FURTHER INFORMATION CONTACT: James I. Melvin, Director, Division of
Policy, Planning and Program Development, Office of Federal Contract
Compliance Programs, Room N-3424, 200 Constitution Avenue, N.W.,
Washington, D.C. 20210. Telephone: (202) 693-0102 (voice), (202) 693-
1308 (TDD/TTY). Copies of this final rule in alternate formats may be
obtained by calling OFCCP at (202) 693-0119 (voice) or (202) 693-1308
(TDD/TTY). The alternate formats available are large print, electronic
file on computer disk and audio-tape. The final rule also is available
on the Internet at http://www.dol.gov/dol/esa.
SUPPLEMENTARY INFORMATION:
I. Background
Section 503 of the Rehabilitation Act of 1973, as amended, 29
U.S.C. 793 (Section 503 or the Act), requires parties holding Federal
Government contracts and subcontracts in excess of $10,000 to take
affirmative action to employ and advance in employment qualified
individuals with disabilities. OFCCP administers Section 503 and has
published implementing regulations at 41 CFR Part 60-741, 61 FR 19336
(May 1, 1996).
One provision in the regulations permits Federal contractors and
subcontractors to seek a waiver from the requirements of Section 503
for facilities that are not connected with the performance of a covered
contract or subcontract, that is, ``separate facilities.'' 41 CFR 60-
741.4(b)(3). The history of the Section 503 separate facility waiver
regulation was recounted in the notice of proposed rulemaking (NPRM),
61 FR 5902, 5902-03, published on February 14, 1996, and readers
interested in that background information may refer to that discussion.
Most importantly to this rulemaking is that the Rehabilitation Act
Amendments of 1992, Pub. L. 102-569, 106 Stat. 4344 (1992 Amendments),
revised Section 503 to provide that if an entity holds a covered
contract all its establishments and all its workforce are subject to
Section 503, absent the granting of a waiver. Section 505(b) of the
1992 Amendments (Waiver Amendment) expressly incorporated the existing
separate facility waiver regulation (with minor editorial changes) into
Section 503.
The text of the Waiver Amendment, as it appears at 29 U.S.C.
793(c)(2)(A)-(B), reads as follows:
(A) The Secretary of Labor may waive the requirements of the
affirmative action clause required by the regulations promulgated
under [Section 503(a)] with respect to any of a prime contractor's
or subcontractor's facilities that are found to be in all respects
separate and distinct from activities of the prime contractor or
subcontractor related to the performance of the contract or
subcontract, if the Secretary of Labor also finds that such a waiver
will not interfere with or impede the effectuation of this Act.
(B) Such waivers shall be considered only upon the request of
the contractor or subcontractor. The Secretary of Labor shall
promulgate regulations that set forth the standards used for
granting such a waiver.
The affirmative action clause referenced in the statute is
published at 41 CFR 60-741.5 and lists contractors' basic obligations
under Section 503, including the obligation to comply with the
regulations. Accordingly, a waiver of the affirmative action clause
exempts covered contractors from the obligation to comply with Section
503 and its implementing regulations.
The Amendment requires OFCCP to make two separate findings to
justify granting a waiver. As a threshold requirement, OFCCP must find
that the facility for which the waiver is sought is in all respects
separate and distinct from activities related to the performance of a
covered contract. If the facility satisfies this ``separate and
distinct'' requirement, OFCCP must additionally find that granting the
waiver will not interfere with or impede the effectuation of the Act.
On February 14, 1996, OFCCP issued a proposed rule, 61 FR 5902,
that set forth the standards that the agency would use to determine
whether to grant separate facility waivers. A notice correcting certain
technical errors in the NPRM was published on March 8, 1996, 61 FR
9532. The comment period ended April 15, 1996.
An individual Government contractor, an organization representing
Government contractors and an organization representing disability
rights agencies submitted comments. The submissions have been logged
into the record for this rulemaking as Comments 1, 2 and 3,
respectively, and they have been considered in the development of this
final rule. Below is a discussion of the comments (referenced as
``Com.'' or ``Coms.'') and an explanation of the changes made from the
proposed rule to this final rule. For an explanation of provisions
adopted unchanged from the proposed rule and on which no comments were
made, see the NPRM preamble.
II. Analysis of Public Comments and Revisions
General Issues Concerning Regulatory Approach
On May 1, 1996, a final rule was issued that comprehensively
revised the Section 503 regulations published at 41 CFR Part 60-741. 61
FR 19336. The revision continued the existing separate facility waiver
regulation without substantive change. 41 CFR 60-741.4(b)(3). Today's
final rule amends Sec. 60-741.4(b)(3).
The NPRM announced that the long-standing practice of interpreting
the separate facility waiver regulation narrowly so as to ``jealously
guard'' the granting of waivers would be continued. 61 FR 5903. One
commenter thought that the OFCCP position might be contrary to the
intent of Congress as expressed in the Waiver Amendment. (Com. 2.)
However, both the plain language of the amendment and its legislative
history militate against this conclusion.
As is noted above, the Waiver Amendment adopted the pre-existing
Section 503 separate facility waiver regulation, implicitly approving
of the narrow manner in which OFCCP had administered the regulation. In
addition,
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the Waiver Amendment is narrow on its face. The statute makes the
granting of separate facility waivers discretionary; the waiver ``may''
be granted if it is determined that the facility is qualified to
receive a waiver. Moreover, the legislative history of the 1992
Amendments indicates that the scope of coverage under Section 503 was
being clarified to parallel coverage under Executive Order 11246. S.
Rep. No. 357, 102d Cong., 2d Sess. 72, reprinted in 1992 U.S. Code
Cong. & Admin. News 3783. OFCCP traditionally has jealously guarded
separate facility waivers under the Executive Order as well. Finally, a
narrow construction of the waiver provision comports with the well
established rule of statutory interpretation that exceptions to
remedial statutes, such as the Rehabilitation Act, are strictly and
narrowly construed. Accordingly, OFCCP will continue its long-standing
practice of jealously guarding the granting of separate facility
waivers.
One commenter expressed general support for the proposed rule,
noting that it contained a ``number of safeguards which will help
ensure fair application of Section 503's very important mandate--to
foster equal employment opportunity for qualified individuals with
disabilities.'' (Com. 3.) This commenter supported, for example, the
concept of broad discretion in the agency to evaluate waiver requests.
Two commenters, however, felt that the proposal gave OFCCP too much
discretion in determining whether to grant or deny a waiver. (Coms. 1 &
2.) These commenters noted that the proposal's list of factors was non-
exhaustive and that other, unspecified, factors might be considered by
OFCCP. One commenter recognized that ``[i]t is acceptable to have tough
requirements for a waiver'' but thought that all standards should be
listed and that if the standards are satisfied ``then a waiver should
be granted as the rule and not as an exception.'' (Com. 1.)
The rule adopted today modifies the proposed rule to address the
suggestions of greater certainty as to the factors that will be
considered by the agency. The final rule replaces the word ``may'' in
the introductory language in paragraphs (b)(3)(ii) and (iii) with the
word ``shall'' to obligate the Deputy Assistant Secretary to consider
the factors listed under those two provisions.
However, deciding whether to grant a separate facility waiver
requires an individual, fact-based analysis, and this weighs against
adopting the rigid approach suggested by two of the commenters. Federal
contractors covered by Section 503 present a wide variety of
organizational structures and staffing patterns. Accordingly, a wide
range of possible relationships between a contractor's facilities also
exists. The relationships between facilities may take many forms, for
instance, two or more facilities might do exactly the same work, or one
facility may be a supplier of materials, a distributer of goods, a
provider of administrative support or management direction, or a source
of capital or equipment. Facilities also may be related due to staffing
patterns used by the contractor, such as, temporary reassignment or
detailing of employees from one facility to another, rotating workers
among facilities, and using one facility as a training ground for
eventual assignment at another facility.
Because of the wide range of relationships that might exist among
contractors' facilities, the rule must be flexible to enable the Deputy
Assistant Secretary to consider any additional, relevant facts in
determining whether a particular facility is separate and distinct in
``all'' respects and that a waiver will not interfere with or impede
effectuation of the Act. Consequently, the final rule adopts proposed
paragraphs (b)(3)(ii)(F) and (b)(3)(iii)(D), which authorize the Deputy
Assistant Secretary to consider additional factors when he or she deems
it necessary or appropriate.
Paragraph (b)(3)(i)
Proposed paragraph (b)(3)(i) listed the general standards that
would be required to obtain separate facility waivers. Subparagraphs
(b)(3)(i)(A) and (B) recited the two threshold requirements codified in
the statutory waiver amendment and present in the old regulation.
Paragraph (b)(3)(i) also specified that waivers only will be considered
by the Deputy Assistant Secretary upon the written request of a prime
contractor or subcontractor, and that the contractor or subcontractor
bears the burden of demonstrating that a waiver is appropriate.
No objections were raised regarding the language proposed in
paragraph (b)(3)(i) and one commenter expressed its approval of the
requirement that Federal contractors demonstrate their eligibility for
the waiver. (Com. 3.) The final rule adopts unchanged proposed
paragraph (b)(3)(i).
One commenter recommended that the rule also list the type of
documentation the contractor should submit with the request. (Com. 3.)
Given the variety of contractors subject to Section 503, however, OFCCP
neither wants to overly dictate the content of requests nor
unnecessarily constrain contractors in the manner in which they choose
to make their case that a waiver is appropriate. The waiver rule
clearly informs contractors that they have the burden of demonstrating
that a waiver is appropriate and sets forth the standards OFCCP will
use to evaluate their request. If contractors do not factually support
their requests, OFCCP may ask for additional details or deny the
requests. The final rule, therefore, does not specify the documents
needed to be submitted with waiver requests.
One commenter suggested that a provision be added to the rule to
require that OFCCP respond to a waiver request within a set period of
time. (Com. 2.) OFCCP considers setting an across-the-board regulatory
time limit in which to respond to waiver requests as inappropriately
restrictive given the individual nature of waiver determinations and
the multitude of organizational structures and staffing patterns that
may be involved. Before making a decision, the Deputy Assistant
Secretary may need to get more information from the contractor or
conduct an on-site investigation to verify that the facility is
separate and distinct in all respects. The fact-based nature of these
inquiries, and the possibility that more information may need to be
gathered, militates against setting a rigid deadline for responding to
waiver requests. Of course, OFCCP will respond as quickly as is
possible to requests for separate facility waivers.
Paragraph (b)(3)(ii)
Proposed paragraph (b)(3)(ii) listed factors to be considered to
determine whether the facility is separate and distinct in all respects
from activities related to the performance of a covered contract. The
factors focused on the activities and employees at the facility for
which the waiver is requested. No criticisms of these factors were
expressed in the comments. Indeed, the organization representing
Government contractors stated that it was in general agreement that the
factors listed in proposed paragraph (b)(3)(ii) were reasonable for
purposes of making a waiver determination. (Com. 2.) \1\ The final rule
adopts these factors.
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\1\ This commenter also expressed its belief that OFCCP
previously made decisions about whether to grant a separate facility
waiver using standards articulated in Ernst-Theodore Arndt, 52 Comp.
Gen. 145 (1972). That Comptroller General opinion, however,
addresses whether a parent company and its subsidiary are to be
considered a single entity for purposes of being covered by
Executive Order 11246. OFCCP has not previously used the parent-
subsidiary criteria to determine whether to grant separate facility
waivers because these inquiries examine different aspects of
business relationships for different purposes. The question of
whether a waiver is appropriate for facilities not connected to the
performance of Government contracts only arises if the facility is a
component of a covered entity.
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Another commenter suggested adding to the rule two factors
pertaining to the ``separate and distinct'' determination: (1) Whether
employees at facilities at which Government contract work is performed
are typically recruited for higher level positions at facilities
unrelated to the performance of a Government contract; and (2) whether
employees at facilities at which Government contract work is performed
are interchangeable with employees at facilities at which no such work
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is performed. (Com. 3.) This commenter reasoned that:
Many employers' operations are organized in such a way that
similar jobs are performed at multiple facilities (only some of
which happen to perform Government contract work). Such employers
may be tempted to relegate (either through transfer or original
placement) employees with disabilities to exempted facilities.
Similarly, employers may seek to avoid affirmative action
obligations by promoting employees with disabilities into jobs
stationed at these facilities.
The commenter believed that adoption of these factors into the
final rule could help to minimize these practices. OFCCP agrees with
this commenter and believes that these factors should be incorporated
into the final rule. It is important to note that limiting or
segregating qualified employees with disabilities to particular
facilities or jobs because of their disabilities would constitute
discrimination prohibited by Section 503. See, e.g., 41 CFR 60-
741.21(b).
OFCCP considers these suggested factors to be corollaries of the
proposed factors in (b)(3)(ii)(D) and (E), respectively, involving the
contractor's employee staffing patterns. The suggested factor
concerning recruitment into a facility unrelated to the performance of
a Government contract encompasses the example contained in the NPRM
preamble regarding subparagraph (D):
[I]f employees who work on a Federal contract at one facility
must, at some future time, work at another facility for which a
waiver is sought in order for them to advance in employment, the
facility for which a waiver is sought may be inexorably linked to
the employees working on the contract and, therefore, not ``separate
and distinct.''
61 FR 5904. To clarify the factor expressed in subparagraph (D), the
final rule incorporates the recommended element into the rule. Thus,
paragraph (b)(3)(ii)(D) of the final rule states that the Deputy
Assistant Secretary will consider whether working at the facility for
which a waiver is sought is a prerequisite for advancement in job
responsibility or pay and the extent to which employees at facilities
connected to a Government contract are recruited for positions at the
facility for which a waiver is sought. In determining whether a waiver
is appropriate given the totality of circumstances, the Deputy
Assistant Secretary will weigh the extent to which any recruitment
among the facilities occurs, including recruitment for details,
transfers or promotions.
OFCCP considers the suggested factor regarding the interchangeable
nature of employees as being within the scope of proposed subparagraph
(E), which addressed whether employees or applicants for employment at
the facility may perform work related to a Government contract at
another facility. To clarify subparagraph (E), the final rule
incorporates the recommended element into this subparagraph.
Accordingly, the final rule at paragraph (b)(3)(ii)(E) specifies that
the Deputy Assistant Secretary will consider whether employees or
applicants for employment at the facility may perform work related to a
Government contract at another facility and the extent to which
employees at the facility are interchangeable with employees at
facilities connected to a Government contract.
Paragraph (b)(3)(iii)
Proposed paragraph (b)(3)(iii)(A) indicated that OFCCP would
consider, when determining if granting a waiver will interfere with or
impede the effectuation of the Act, whether the waiver was being used
as a subterfuge to circumvent the contractor's obligations under the
Act or implementing regulations. The NPRM stated that OFCCP may
consider, for example, whether the contractor sought a waiver only
after learning that the facility at issue was being scheduled for a
Section 503 compliance review. 61 FR 5904. One commenter believed that
a waiver request made after a Section 503 complaint investigation or
compliance review is scheduled should not be considered as an attempt
at subterfuge, and claimed that the question of whether the facility is
separate and distinct is a jurisdictional issue that may be raised at
any time. (Com. 2.) OFCCP disagrees.
As is noted above, the statute provides that granting separate
facility waivers is discretionary. As long as an entity holds a covered
contract all its establishments are subject to Section 503, absent a
waiver being granted. A request for a waiver does not stay application
of the Section 503 obligations and does not have a retroactive effect.
The same commenter also asserted that it would be burdensome to
require contractors to request waivers for all facilities that
genuinely appear separate and distinct just to anticipate the
possibility that an OFCCP review might be scheduled. This argument
ignores the express intent of the 1992 Amendments; that all
establishments of a covered contractor are subject to Section 503
absent a waiver. Under Section 503, a Federal contractor's compliance
obligations begin when the contractor gains a covered contract, not
when it gets notice of an OFCCP review.
Compliance with Section 503, as it is with any law, cannot be
dependent upon the presence of a Government official at the entity's
doorstep. OFCCP relies in good measure upon the law-abiding nature of
Government contractors to comply with the Act and its implementing
regulations, and to provide equal employment opportunity for qualified
individuals with disabilities. To condone the filing of an application
for a separate facility waiver only after a complaint investigation or
compliance review has been scheduled may encourage contractors to
disregard their Section 503 obligations until OFCCP decides to
investigate compliance. The view of the agency, therefore, is that
whether the contractor requested a separate facility waiver only after
a Section 503 complaint investigation or compliance review has been
scheduled is a relevant factor to consider in determining if a waiver
should be granted.
It should also be noted that OFCCP's jurisdiction to investigate
Section 503 complaints that have been filed against a contractor prior
to its requesting a waiver is not dependent on the Deputy Assistant
Secretary's decision, favorable or unfavorable, to grant a waiver. A
waiver does not have a retroactive effect (i.e., a waiver does not
relieve a contractor from liability for a violation pre-dating the
granting of the waiver). A waiver is in effect only from the time it is
issued until the time it terminates. Accordingly, there is no basis for
suspending a complaint investigation pending a decision of whether to
grant a separate facility waiver.
Under factor (B), the NPRM explained that the results of any past
Section 503 complaint investigations or compliance reviews of the
facility at issue, or of other facilities of the contractor, may be
considered. 61 FR 5904. One commenter
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believed that complaints filed against facilities for which waivers
were not requested should be irrelevant. (Com. 2.) OFCCP disagrees.
Section 503 requires covered contractors to review their corporate-
wide employment policies and practices to ensure that there is no
discrimination and that affirmative action is taken to employ and
advance in employment qualified individuals with disabilities. If, for
example, corporate-wide policies have been found to discriminate
against qualified individuals with disabilities at other facilities,
such may also be the case at the facility for which the waiver is
requested. Significant compliance problems at other facilities of the
contractor may also indicate corporate-level disregard for the Section
503 nondiscrimination and affirmative action obligations. Granting a
separate facility waiver to a contractor with significant compliance
problems at other facilities may further impede effectuation of the Act
at the remaining covered facilities.
One commenter recommended that factor (B) be broadened expressly to
include consideration of the contractor's compliance with Titles I, II,
and III of the Americans with Disabilities Act of 1990 (ADA), which
prohibit discrimination on the basis of disability in employment,
public services and public accommodations, and with state and local
laws prohibiting disability discrimination in these areas. (Com. 3.)
The commenter considered this expansion necessary because OFCCP
investigates a relatively small percentage of covered contractors each
year. A contractor's compliance with other Federal, state or local laws
requiring equal opportunity for disabled persons may indicate whether
the general environment or atmosphere in the contractor's workplace
embraces equal employment opportunity for individuals with
disabilities.
It is current OFCCP practice during compliance reviews to ask the
Equal Employment Opportunity Commission (EEOC) and the state and local
Fair Employment Practices (FEP) agencies whether complaints have been
filed against the contractor and for any other information that may be
pertinent in assessing the contractor's equal employment opportunity
posture. See, e.g., OFCCP Federal Contract Compliance Manual, at 2B05.
Existing regulations provide for coordination with EEOC and any state
or local FEP agencies in the processing and resolution of complaints/
charges filed against Federal contractors that fall within the scope of
both Section 503 and the ADA. In certain instances, OFCCP acts as
EEOC's agent. See, e.g., 41 CFR 60-742.2(a) and (c), 60-742.5(a). See
also 41 CFR 60-741.1(c)(1) and (2) (describing the relationship of the
rules implementing Section 503 to other Federal, state or local laws
providing protections for the rights of individuals with disabilities).
Consequently, today's final rule broadens the types of laws that
might be considered under factor (B) to include any other Federal,
state or local law requiring equal opportunity for disabled persons.
The new language mirrors language in the Section 503 anti-retaliation
rule published at 41 CFR 60-741.69(a)(2) and (3). That rule prohibits
contractors, among other things, from retaliating against an individual
who has assisted or participated in any activity related to the
administration of, or opposed any practice made unlawful by, Section
503 or of ``any other Federal, State or local law requiring equal
opportunity for disabled persons.'' See also 41 CFR 60-741.44(a)(2)-
(3). The objective of this change to factor (B) is not to enforce the
other Federal, state or local laws, but to specify that, in determining
whether a waiver might interfere with or impede the effectuation of
Section 503, OFCCP will consider information regarding a contractor's
compliance with other disability-related laws.
Paragraph (b)(3)(iii)(C) focuses on the impact of granting a waiver
on OFCCP enforcement efforts. A number of examples were provided in the
NPRM preamble of the types of facts that might be considered under this
factor. 61 FR 5904. One commenter stated that two of those preamble
examples were irrelevant to a determination of whether a particular
facility is separate from another facility with a contract: (1) Whether
the waiver would simplify or complicate OFCCP's compliance review
activity; and (2) whether the contractor is a large employer in a small
town. (Com. 2.)
Considering whether granting a waiver would have an impact on
compliance review activity is necessary because the Act mandates that
waivers must not interfere with or impede the effectuation of the Act.
An adverse impact on OFCCP enforcement activity would impede OFCCP
administration of the Act. On the other hand, OFCCP acknowledges that
whether the facility for which the waiver is sought is the largest
employer in a small town would probably not be relevant to a separate
facility waiver determination. Accordingly, this latter criterion is
not codified in the final rule.
Another commenter suggested that the extent to which the facility
at issue employs, and is physically accessible to, persons with
disabilities is another factor relevant to the question of whether a
waiver might preclude effective enforcement of the Act. (Com. 3.) OFCCP
declines including this suggestion in the rule, but notes that the rule
does not prohibit contractors from including such information with
their waiver request as evidence, for example, that the waiver request
is not a subterfuge to avoid Section 503 obligations. Further, a
contractor's hiring of individuals with disabilities and maintaining an
accessible facility would not be a defense to an instance of unlawful
disability-based employment discrimination (e.g., in promotions or job
assignments, or in establishing rates of pay or fringe benefits). See
41 CFR 60-741.20. Consequently, OFCCP does not believe it is necessary
to include this suggested factor in the rule.
Paragraph (b)(3)(iv)
Proposed paragraph (b)(3)(iv) provided that waivers granted in
accordance with paragraph (b)(3) may be withdrawn by the Deputy
Assistant Secretary at any time when, in his or her judgment, such
action is necessary or appropriate to achieve the purposes of the Act.
Two commenters agreed that withdrawing a waiver would be appropriate if
circumstances changed and the contractor no longer satisfied the
requirements for a waiver. (Coms. 2 & 3.) One commenter opposed the
broadness of the discretion to withdraw a waiver. (Com. 2.) This
commenter was concerned, for instance, that such broad discretion would
make it difficult to determine when a waiver would remain in force.
Another commenter recommended that a waiver be effective for a specific
period, suggesting one or two years as suitable. (Com. 3.) This
commenter, however, also recommended that the contractor should have to
demonstrate its continuing eligibility throughout the period.
OFCCP agrees with the general thrust of the comments that the
regulation should describe more clearly the period a waiver will remain
in force. A number of the commenters' recommendations regarding the
duration and termination of separate facility waivers are reflected in
the final rule under new paragraph (b)(3)(v), which is described below.
The final rule replaces proposed paragraph (b)(3)(iv) to address
the comments that the rule assure that contractors granted separate
facility waivers satisfy the rule's requirements during the duration of
the waiver. Under paragraph (b)(3)(iv)(A),
[[Page 45178]]
contractors granted separate facility waivers must promptly inform
OFCCP of any changed circumstances that were not reflected in the
waiver requests. Changed circumstances include, for instance, the award
of additional Government contracts and changes in the allocation of
personnel to perform the Government contracts. To retain the waiver,
the contractor must demonstrate that despite any changed circumstances,
the facility remains in all respects separate and distinct and that
continuing the waiver will not interfere with or impede the
effectuation of the Act.
As one commenter recognized, the duty to demonstrate that the
contractor continues to be eligible for the waiver once the waiver has
been granted contemplates that OFCCP could investigate this issue
during the waiver period. (See Com. 3.) Accordingly, paragraph
(b)(3)(iv)(B) of the final rule clarifies that a contractor that has
been granted a separate facility waiver must permit OFCCP access to the
contractor's records and places of business (including the facility
granted a waiver and other facilities) for the purpose of investigating
whether the facility granted a waiver meets the standards and
requirements of the paragraph (b)(3). If an investigation reveals that
a waiver is inappropriate, the waiver will be terminated and the
facility must comply with Section 503 and the implementing regulations
as described in paragraph (b)(3)(v) below.
Paragraph (b)(3)(v)
In accordance with the comments described directly above (Coms. 2 &
3), new paragraph (b)(3)(v) provides contractors who have been granted
separate facility waivers with greater certainty as to the period the
waiver will remain in effect. Under paragraph (b)(3)(v)(A), a separate
facility waiver will terminate on one of three dates, as is described
in paragraphs (b)(3)(v)(A)(1) through (3), whichever is earliest.
Under paragraph (b)(3)(v)(A)(1), the waiver will end two years
after the date the waiver was granted. OFCCP believes that waivers for
a two-year period will meet contractors' needs to have greater
certainty as to the period of a waiver's effectiveness, as well as to
provide the agency with a reasonable time period in which to check the
appropriateness of continuing a waiver. (See Coms. 2 & 3.) Under the
rule, if a Government contractor wants a separate facility waiver to
continue beyond two years, the contractor would have to apply for
another waiver before the end of the initial two-year period even if
circumstances did not change. The request for another waiver must meet
the same standards as the original waiver request, including
demonstrating that the facility satisfies the rule.
Applying for another separate facility waiver before the end of the
initial two-year period will not stay the termination of a waiver. If
the Deputy Assistant Secretary does not act on a waiver renewal request
before the two-year termination date, the original waiver terminates at
the end of the two-year period. Absent a valid separate facility
waiver, the facility must comply with Section 503 and the implementing
regulations as described in paragraph (b)(3)(v)(B) below. If another
waiver is granted it will be subject to the same termination provisions
as the original waiver, including termination at least two years from
the date of approval. OFCCP intends to process separate facility waiver
renewal requests in a timely manner upon receipt.
Paragraph (b)(3)(v)(A)(2) provides that the waiver will terminate
before the two-year period when the facility performs any work that
directly supports or contributes to the satisfaction of the work
performed on a Government contract. Therefore, the waiver is
automatically terminated by operation of the regulation when the
facility gets a Government contract or performs work to satisfy a
Government contract. A facility that gets a Government contract or to
which Government contract work has been shifted by the contractor is
the ultimate ``changed circumstance.'' Such direct Government contract
performance by a facility so clearly defeats its eligibility for a
separate facility waiver that it is reasonable to terminate the waiver
without need for the contractor to first submit a report or for the
Deputy Assistant Secretary to issue a determination that ending the
waiver is appropriate. Direct Government contract performance requires
the contractor to comply with Section 503.
New paragraph (b)(3)(v)(A)(3) adopts a modified version of the
provision OFCCP originally proposed for paragraph (b)(3)(iv). Proposed
paragraph (b)(3)(iv) provided that waivers could be withdrawn by the
Deputy Assistant Secretary at any time when, in his or her judgment,
such action was necessary or appropriate to achieve the purposes of the
Act. The final rule addresses comments that the proposed rule gave
OFCCP too much discretion in withdrawing waivers. The language is
revised to indicate that a waiver may be terminated by the Deputy
Assistant Secretary before the two-year waiver period only when it is
determined that the separate facility waiver requirements are not being
met. Termination may be based on information from the contractor
regarding changed circumstances or contained in a request for another
waiver. Termination also may be based on any other relevant information
including, but not limited to, information from contracting agencies,
employees and job applicants, or from the results of an OFCCP
investigation.
To further clarify when a terminated waiver triggers compliance
obligations, the final rule adopts new paragraph (b)(3)(v)(B). This
provision specifies that contractors must meet the Section 503
obligations on the date of termination. The rule provides one exception
to this compliance deadline. If the written affirmative action program
(AAP) requirements published at 41 CFR 60-741.40 through 60-741.45 are
applicable to the facility the contractor must comply with these
requirements within 120 days of the termination of the waiver.
OFCCP believes that these compliance deadlines are reasonable.
Contractors whose separate facility waivers terminate under the rule
are on notice of their impending compliance responsibilities. These
contractors also are familiar with their Section 503 obligations
because they are required to comply at all their other facilities. The
120-day compliance deadline for preparing and maintaining an AAP at the
facility, if applicable, is the same time period allowed a newly
covered contractor to develop an AAP. See 41 CFR 60-741.40(b).
Paragraph (b)(3)(vi)
One commenter suggested that the rule specify that OFCCP will
impose sanctions against contractors that make fraudulent or misleading
waiver requests. (Com. 3.) OFCCP agrees. The NPRM stated that waivers
would be withdrawn if OFCCP discovered that the facts upon which it
relied in granting the waiver did not accurately or fully describe the
relationship between the facility and the contractor's activities
related to the performance of a contract. 61 FR 5904. Many Federal
programs explicitly prohibit fraudulent and false statements and
representations; indeed, the Federal Acquisition Regulations provide
that contractors may be debarred or suspended for such activity, see 48
CFR 9.406-2(a)(1), (a)(3); 9.407-2(a)(1), (a)(3). Certainly OFCCP
cannot countenance fraudulent and misleading waiver requests.
Otherwise, Government resources will be wasted, the ability of OFCCP to
consider legitimate requests from contractors will be hampered, and
[[Page 45179]]
the benefits of the program will be reduced.
Therefore, new paragraph (b)(3)(vi) expressly prohibits false or
fraudulent statements and representations under Sec. 60-741.4(b)(3).
This prohibition applies to all statements and representations made
under the separate facility waiver rule including, but not limited to,
waiver requests, reports of changed circumstances, and requests to
extend previously-granted waivers. False or fraudulent statements or
representations may subject a contractor to sanctions and penalties
under this part, as well as criminal prosecution under 18 U.S.C. 1001,
which makes it a crime for anyone to make such misrepresentations to
any department or agency of the U.S. Government. Of course, should
OFCCP discover that false or fraudulent statements or representations
were made in conjunction with a waiver request the request will also be
denied (or if previously granted, the waiver will be withdrawn).
III. Regulatory Analyses and Procedures
Executive Order 12866
The Secretary of Labor has determined that this final rule is not a
significant regulatory action as defined in Executive Order 12866, and
therefore a regulatory impact analysis is unnecessary.
Regulatory Flexibility Act
This final rule will not change existing equal employment
obligations for Federal contractors but will only clarify the standards
OFCCP uses for determining whether to grant separate facility waivers.
Consequently, under the Regulatory Flexibility Act, as amended, 5
U.S.C. 605(b), the Secretary of Labor certifies that this rule will not
have a significant economic impact on a substantial number of small
entities.
Unfunded Mandates Reform
Executive Order 12875--This final rule does not create an unfunded
Federal mandate upon any State, local or tribal government.
Unfunded Mandates Reform Act of 1995--This final rule does not
include any Federal mandate that may result in increased expenditures
by State, local, and tribal governments, in the aggregate, of $100
million or more, or increased expenditures by the private sector of
$100 million or more.
Executive Order 13132
These regulations have been reviewed in accordance with Executive
Order 13132 regarding Federalism. The order requires that agencies, to
the extent practicable and permitted by law: (1) Not promulgate any
regulation that has federalism implications, that imposes substantial
direct compliance costs on State and local governments, and that is not
required by statute; and (2) not promulgate any regulation that has
federalism implications and that preempts State law, unless specified
preconditions are met. Since this rule does not have federalism
implications, does not impose substantial direct costs on State and
local governments and does not preempt State law, it complies with the
principles of federalism and with Executive Order 13132.
Paperwork Reduction Act
This final rule does not contain substantive or material
modifications to previously approved information collection
requirements, but will only clarify existing standards for the granting
of separate facility waivers. In view of this fact, and because the
final rule does not change existing obligations for Federal
contractors, the rule creates no additional information collection
requirements above those in the current information collection requests
approved by the Office of Management and Budget under control numbers
1215-0072 (Supply and Service) and 1215-1063 (Construction).
List of Subjects in 41 CFR Part 60-741
Administrative practice and procedure, Civil rights, Employment,
Equal employment opportunity, Government contracts, Government
procurement, Individuals with disabilities, Investigations, Reporting
and recordkeeping requirements.
Signed at Washington, D.C. this 12th day of July 2000.
Alexis M. Herman,
Secretary of Labor.
Bernard E. Anderson,
Assistant Secretary for Employment Standards.
Shirley J. Wilcher,
Deputy Assistant Secretary for Federal Contract Compliance.
For the reasons set out in the preamble, 41 CFR part 60-741 is
amended as set forth below:
PART 60-741--AFFIRMATIVE ACTION AND NONDISCRIMINATION OBLIGATIONS
OF CONTRACTORS AND SUBCONTRACTORS REGARDING INDIVIDUALS WITH
DISABILITIES
1. The authority citation for part 60-741 continues to read as
follows:
Authority: 29 U.S.C. 706 and 793; and E.O. 11758 (3 CFR, 1971-
1975 Comp., p. 841).
2. In Sec. 60-741.4, paragraph (b)(3) is revised to read as
follows:
Sec. 60-741.4 Coverage and waivers.
* * * * *
(b) * * *
(3) Facilities not connected with contracts. (i) Upon the written
request of the contractor, the Deputy Assistant Secretary may waive the
requirements of the equal opportunity clause with respect to any of a
contractor's facilities if the Deputy Assistant Secretary finds that
the contractor has demonstrated that:
(A) The facility is in all respects separate and distinct from
activities of the contractor related to the performance of a contract;
and
(B) Such a waiver will not interfere with or impede the
effectuation of the act.
(ii) The Deputy Assistant Secretary's findings as to whether the
facility is separate and distinct in all respects from activities of
the contractor related to the performance of a contract shall include
consideration of the following factors:
(A) Whether any work at the facility directly or indirectly
supports or contributes to the satisfaction of the work performed on a
Government contract;
(B) The extent to which the facility benefits, directly or
indirectly, from a Government contract;
(C) Whether any costs associated with operating the facility are
charged to a Government contract;
(D) Whether working at the facility is a prerequisite for
advancement in job responsibility or pay, and the extent to which
employees at facilities connected to a Government contract are
recruited for positions at the facility;
(E) Whether employees or applicants for employment at the facility
may perform work related to a Government contract at another facility,
and the extent to which employees at the facility are interchangeable
with employees at facilities connected to a Government contract; and
(F) Such other factors that the Deputy Assistant Secretary deems
are necessary or appropriate for considering whether the facility is in
all respects separate and distinct from the activities of the
contractor related to the performance of a contract.
(iii) The Deputy Assistant Secretary's findings as to whether
granting a waiver will interfere with or impede the effectuation of the
act shall include consideration of the following factors:
(A) Whether the waiver will be used as a subterfuge to circumvent
the contractor's obligations under the act;
[[Page 45180]]
(B) The contractor's compliance with the act or any other Federal,
State or local law requiring equal opportunity for disabled persons;
(C) The impact of granting the waiver on OFCCP enforcement efforts;
and
(D) Such other factors that the Deputy Assistant Secretary deems
are necessary or appropriate for considering whether the granting of
the waiver would interfere with or impede the effectuation of the act.
(iv) A contractor granted a waiver under paragraph (b)(3) of this
section shall:
(A) Promptly inform the Deputy Assistant Secretary of any changed
circumstances not reflected in the contractor's waiver request; and
(B) Permit the Deputy Assistant Secretary access during normal
business hours to the contractor's places of business for the purpose
of investigating whether the facility granted a waiver meets the
standards and requirements of paragraph (b)(3) of this section, and for
inspecting and copying such books and accounts and records, including
computerized records, and other material as may be relevant to the
matter under investigation.
(v)(A) A waiver granted under paragraph (b)(3) of this section
shall terminate on one of the following dates, whichever is earliest:
(1) Two years after the date the waiver was granted.
(2) When the facility performs any work that directly supports or
contributes to the satisfaction of the work performed on a Government
contract.
(3) When the Deputy Assistant Secretary determines, based on
information provided by the contractor under this section or upon any
other relevant information, that the facility does not meet the
requirements of paragraph (b)(3) of this section.
(B) When a waiver terminates in accordance with paragraph
(b)(3)(v)(A) of this section the contractor shall ensure that the
facility complies with this part on the date of termination, except
that compliance with Secs. 60-741.40 through 60-741.45, if applicable,
must be attained within 120 days of such termination.
(vi) False or fraudulent statements or representations made by a
contractor under paragraph (b)(3) of this section are prohibited and
may subject the contractor to sanctions and penalties under this part
and criminal prosecution under 18 U.S.C. 1001.
[FR Doc. 00-18218 Filed 7-19-00; 8:45 am]
BILLING CODE 4510-45-P
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