OFCCP Entrepreneur Portal Single Entity Testing | Approximately
[author: Craig Leen]
Important to determine if your company should certify all of its entities
The OFCCP Entrepreneur Portal deadline is approaching. Covered federal contractors and subcontractors (collectively referred to as contractors) must certify whether they meet their requirement to develop and maintain annual Affirmative Action Programs (AAPs) by June 30, 2022. Specifically, contractors must certify whether they have developed and maintained a positive policy. action program for each establishment and/or functional unit, as the case may be.
But is it clear who should certify – and what you certify? If your organization is a federal contractor, you probably realize that you need to certify, but not everyone realizes that if their business is affiliated with other companies, those related parent companies, subsidiaries, and affiliates may also have need to certify under the single entity. Test.
What do you certify?
In DIR 2022-02, OFCCP clarified that when Covered Contractors use the OFCCP Contractor Portal to register and annually certify compliance with their AAP obligations, they are certifying that they have developed and maintained “comprehensive” PAAs. For more details on the components and obligations of the AAP, see generally 41 CFR part 60-2; 41 CFR part 60-300, subpart C; and 41 CFR Part 60-741, Subpart C. A great place to start is the OFCCP Supply and Service Technical Support Guide.1which describes the obligations of the AAP in detail useful here 1https://www.dol.gov/sites/dolgov/files/OFCCP/SupplyService/files/508_sstag_12032020.pdf
Some concern has been expressed that OFCCP’s reference to a “complete” PAA in DIR 2022-02 means the agency can challenge a certification when a technical deficiency in a substantially compliant PAA is later found. Hopefully this is not the case, as the best use and clear purpose of the contractor portal was to ensure good faith compliance with the AAP obligation in order to address a 2016 recommendation from the Government Accountability Office, and thus to increase positive action in the field of employment. One thing to note is that this clarification that a “full” AAP is required to certify compliance was not included in the information gathering request that was approved by the Office of Management and Budget under red tape reduction act. Nevertheless, it is generally best to try to comply with OFCCP guidelines to avoid problems in the future, and of course having a full PAA is the goal of compliance, so it is recommended to consult an attorney regarding the “full” AAP reference.
When you go to certify, you will be offered three possible options:
- The entity has developed and maintained positive action programs in each establishment, as the case may be, and/or for each functional unit;
- The entity was a party to an eligible federal contract or subcontract for 120 days or more and did not develop or maintain affirmative action programs at each facility, as applicable; or
- The entity has become a covered federal contractor or subcontractor within the last 120 days and therefore has not yet developed applicable affirmative action programs.
Assuming you have PAAs in place, you will most likely choose the first option. However, if you are a federal contractor with an establishment (for example, let’s call this establishment A) that has a federal contract that meets jurisdictional requirements, this does not mean that only Institution A is required to have a PAA. The OFCCP considers each business location to be subject to the AAP requirement, unless you have received a separate facility exemption waiver. Similarly, if you have a parent, subsidiary, or affiliate that could be considered a single entity with the contractor, their establishments may also be subject to the AAP requirement.
Single entity test
The OFCCP provides the following FAQs on the Entrepreneur Portal on its website:
If either of the two scenarios below are true, each independent subsidiary assumes federal contractor status, is subject to the jurisdiction of the OFCCP, and is required to prepare its own AAP and certify compliance.2
- The subsidiary holds its own covered federal contract(s), in which case it will remain subject to the jurisdiction of the OFCCP; or
- The subsidiary does not hold its own federal contract(s), but is so closely related to the parent company that it constitutes a single entity for purposes of OFCCP jurisdiction.
This scenario only focuses on the example of a parent company and its subsidiary, but the single entity problem arises with all the affiliates. Determining whether a subsidiary is a single entity with a federal contractor or not is a complicated matter. It is recommended that you seek legal counsel to determine the relationship between the entities and the parent company. It is also recommended that you request and receive this assessment in writing so that, if you are audited, you can demonstrate your due diligence if necessary.
Factors Used by OFCCP for Single Entity Determination
The OFCCP applies the following factors3, derived from case law, to determine whether a separate business or organization constitutes a single entity for the purposes of the jurisdiction of the OFCCP. The test requires the OFCCP to examine whether:
- Entities have a common property;
- The entities have common directors and/or managers;
- One entity exercises de facto day-to-day control over the other through the policies, management or oversight of the entity’s operations;
- The personnel policies of the entities emanate from a common or centralized source; and
- The operations of the entities are dependent on each other, for example services are provided primarily for the benefit of one entity by another and/or both entities share management, office space or other services.
As for the most important factor for OFCCP, the agency stated in Single Entity Testing FAQ #3 that “[t]Although no single criterion is determinative under the single entity test, it is increasingly recognized that centralized control of employment decisions is the most important factor. (quote omitted).
It is important to remember that if an entity is a covered contractor, all establishments must have affirmative action programs. There is a caveat to this, called the Separate Installation Exemption Waiver.
Separate Installation Exemption Waiver
The Separate Establishment Exemption Waiver was put in place during the George W. Bush administration and allows the Director of the OFCCP to exempt certain establishments or establishments from having to comply with the requirements of the AAP. Please note that such waivers are rare. It is recommended that you speak with legal counsel before requesting any of these waivers from the OFCCP.
Exemptions 60-1.5: Installations not linked to contracts.
The Director may exempt from the requirements of the equal opportunities clause any installation of the main contractor or sub-contractor which [the Director] is in all respects separate and distinct from the activities of the Project Manager or Subcontractor relating to the performance of the Contract or Subcontract, provided that [the Director] also finds that such an exemption will not interfere with or hinder the enforcement of the order.4
The OFCCP has implemented this provision by Directive 2002-015which provides the process and factors used by the Director of the OFCCP to determine whether to grant the waiver.
Affiliate Certification Options Not Covered
If you access the contractor portal and see entities or establishments that are not part of a single entity with the federal contractor and its establishments, it is recommended that you engage an attorney to determine the best way to proceed so that you certify correctly and that you do not certify incorrectly. for entities that are not a covered contractor and not a single entity with a covered contractor.
As a reminder, determining whether a company with a parent company and subsidiaries is a single entity is a complicated matter and companies must engage legal counsel before the June 30 deadline.