On March 24, 2014, the Department of Labor’s revised Vietnam Era Veterans' Readjustment Assistance Act of 1974 (“VEVRAA”) regulations take effect. Among various changes to the existing rules found at 41 C.F.R. Part 60-300, including establishing veteran hiring benchmarks, posting open jobs, and collecting quantitative recruiting data, federal government contractors with covered prime contracts will now be required to implement specific, mandated flowdown language when incorporating VEVRAA’s equal opportunity clause; merely referencing the equal opportunity statues and regulations alone will no longer be sufficient.
The Final Rule modifies 41 C.F.R. § 60-300.5(d) to require that the following language be included, in bold text, in all covered contracts and subcontracts following the citation to 41 C.F.R. § 60.300.5(a):
This contractor and subcontractor shall abide by the requirements of 41 CFR 60-300.5(a). This regulation prohibits discrimination against qualified protected veterans, and requires affirmative action by covered prime contractors and subcontractors to employ and advance in employment qualified protected veterans.
Since the Department of Labor recognizes that federal contracts are required to contain multiple equal opportunity clauses pursuant to various provisions of 41 C.F.R., the Agency allows contractors to combine all of their required equal opportunity flowdowns into a single provision. The Agency’s VEVRAA Frequently Asked Questions website provides an example of such a combined clause:
This contractor and subcontractor shall abide by the requirements of 41 CFR §§ 60-1.4(a), 60-300.5(a) and 60-741.5(a). These regulations prohibit discrimination against qualified individuals based on their status as protected veterans or individuals with disabilities, and prohibit discrimination against all individuals based on their race, color, religion, sex, or national origin. Moreover, these regulations require that covered prime contractors and subcontractors take affirmative action to employ and advance in employment individuals without regard to race, color, religion, sex, national origin, protected veteran status or disability.
The Final Rule states that this new flowdown requirement applies to all covered contracts and subcontracts valued at or above $100,000 that are entered into after March 24, 2014, the effective date of the rule. However, the regulation does not automatically apply to existing contracts. It is not until a new contract has been issued or an existing contract has been modified – for any reason – that the contract then becomes a covered contract. For example, if a $100,000 contract exists on March 24, the requirement does not immediately take effect. But if that contract is modified on March 25 for any reason (e.g., solely to add funding), the contract is now a covered contract subject to the new VEVRAA regulations. Thus, contractors are not required to proactively implement the new subcontract clause prior to March 24, 2014. Instead, the clause must be incorporated into any new covered subcontract or subcontract modification issued after March 24, 2014.
While the regulations do not outline specific sanctions or penalties for contractors who fail to comply, the Department of Labor website notes that violations of VEVRAA may result in cancellation, suspension, or termination of contracts, withholding of progress payments, and debarment. The sanctions for violating a mere administrative provision of the statute are likely to be less severe than a substantive compliance violation, but could still potentially result in a contract breach allegation.
Finally, it is important to note that the VEVRAA statute and regulation expressly provide that the equal opportunity clause shall be considered to be a part of every applicable contract and subcontract, whether or not it is physically incorporated in such contract and whether or not there is a written contract between the agency and the contractor. Thus, to the extent that a contractor enters into Federal contracts, subcontracts, or associated modifications after March 24, 2014, the new flowdown requirements will apply regardless of whether they are properly incorporated.