Part 2: Actions Federal Contractors and Grantees Should Take Now to Certify Their Federal Contracts & Grants

OutSolve has invited John C. Fox, Esq. as a guest blogger providing legal insights on EEO and compliance issues. The views expressed in his posts are his and do not reflect the viewpoint of OutSolve or its employees.

Welcome to Part 2! Building on the rock-solid foundation from Part 1 (check it out here), we’re now rolling up our sleeves to tackle the remaining must-do tasks. In this leg of the journey, we cover everything from fine-tuning your recruitment and retention data analytics to launching state-specific affirmative action plans that really hit the mark.  All this is designed to help your organization not just meet, but stay prepared for the constantly changing federal and state requirements. Let’s get to it! 

As a reminder, we covered action items 1-3 in Part 1 of this series. Numbers 4-8 are additional actions your organization might wish to undertake: 

1. Document the “legitimate non-discriminatory reasons” for the implementation and operation of your Employee Resource Groups” (“ERGs.”)
2. Do a “DEI Scrub” of your ERGs to make sure the writings concerning the ERG describe their nondiscriminatory purposes and implementation.
3. Keep your Nondiscrimination Firewall Protections. 
4. All state contractors now need to IMMEDIATELY identify all state Affirmative Action requirements which attach to their state contracts. Each state contractor needs to determine what state compliance requirements to which it is subject, including possibly the duty to create Affirmative Action Plans in a number of states modelled on or identical to Executive Order 11246’s former requirements.
   
   Legal Background: Nearly half of the states within the United States impose compliance obligations of various sorts on their state contractors. Historically, however, these state law Affirmative Action requirements were almost always of little interest or concern. This was because the state statutes almost invariably deferred to Executive Order 11246. They did so by exempting the contractor from the state law requirements if the state contractor were also a covered federal Government contractor or subcontractor. (That was a very frequent occurrence.)
   
   Practice Tip: In the absence of Executive Order 11246, each state contractor must now determine if it is covered by a state affirmative action requirement and develop a corresponding compliance plan to meet the requirements of state law. Universities and construction contractors please take special note of this heads-up Practice Tip.
   
   Your OutSolve representative can assist in navigating the complexities of state laws and their implications for compliance. 
5. Run data analytic statistics on the recruitment ROI from each of your company’s recruitment sources. This will create a quantitative database to justify continued recruitment at colleges and universities (and other recruitment sources), especially as to recruitment at HBCUs. Good ROI is a “legitimate non-discriminatory reason” to continue to recruit at HBCUs and all-women’s colleges and universities.
6. Undertake “Cohort Analyses” as a comprehensive and continuous HR “quality control check” of every major employment decision made. (If resources are lacking, you could undertake “Cohort Spot Checks.”) These Cohort Analyses would include, for example, reviews of every major employment system in your company that could lead to the advancement of employees through and up the organization. Please do not forget to include in your catalogue those decision-making systems which advance employees to training programs and assignment to upward mobility work, teams, and advisory panels, etc.  
7. Check your company’s Charitable Foundation (if you have one) Grant Award Rules. Are any grants awarded based on the race or color of the grant recipient? While the law is unsettled, it is more likely than not that the Civil Rights Act of 1866 (aka as 42 U.S.C. Section 1981, or just “Section 1981”) prohibits charitable grants based on a Protected Status.
   
   Congress passed Section 1981 on the heels of the Civil War almost 170 years ago to give Black Americans the legal authority to enter into and enforce “contracts” (of any type) in the same way as Whites. U.S. Supreme Court case law decisions subsequently expanded the definition of “race” as used in Section 1981 to include “color” and thus to also protect “Whites” and eventually “Hispanics” (under the ”color” rubric), but not women.
   
   However, corporate charitable foundations may be able to work around the legal restrictions on race and color-based discrimination federal law imposes. To do so, the corporate charitable foundation would have to be willing to award grants to those sponsoring social or cultural causes of interest to the foundation REGARDLESS of the race or color of the recipient grantee.
   
   For example, the grant could perhaps sponsor “affordable housing” and be given to an organization building homes for disadvantaged Black people, not “because” they are Black, but because they are income disadvantaged. The key would be to broaden the definition of “disadvantaged” (from being Black) to base the grant award on a nondiscriminatory basis, perhaps, income level, or prior life experience (drug rehabilitation, or incarceration transition, or domestic abuse survivor) and NOT awarded “because of” race or color. 
8. Check your company’s contracts with suppliers and vendors. Did your organization award any contracts based on the race or color of the supplier or vendor? It is clear that “Section 1981” prohibits all contracts based on a Protected Status. A number of major corporations in the United States have been surprised to find, when they specifically checked, that their procurement department may have gotten overly exuberant and awarded contracts based on race and color in the spirit of DEI. 

And that wraps up our deep dive into the second set of essential actions you should be taking! We've covered the nuts and bolts that will help you stay ready under the new administration’s playbook. If it feels like you're facing a mountain of tasks to climb with so much uncertainty in the mix...those feelings are valid.  

Contractors and non-contractors have work to do to ensure compliance.  Breaking the work into manageable chunks—just like we did with the two-part Punch List—makes the climb a lot less daunting. So, take a deep breath, grab a cup of coffee, and get ready to tackle these changes head-on.  

If you need company on your coffee break, or experts well-versed in these regulations, please contact OutSolve to get over these legal hurdles.  

Related Articles

• Part 1: Actions Federal Contractors and Grantees Should Take Now to Certify Their Federal Contracts & Grants
• Legal Alert: Federal Court Greenlights Trump Anti-DEI Contract and Grant Certifications: This is Now Real!
• Federal Judge Halts key parts of Trump's Anti-DEI executive orders

• Where Do Corporate Decision Makers Go Now Following the Revocation of EO 11246?

• Executive Order 11246: Affirmative Action Changes

• Webinar: Key Takeaways on DEI, Affirmative Action & Non-Discrimination

• Legal Alert: National Urban League v. Trump – What Employers Should Watch

• IN & OutSolve: What's Happening Around Rescission of EO 11246