When it comes to contracting for the federal government, small businesses have big opportunities. According to the U.S. Small Business Administration, over 25% of federal contracts went to small businesses — for a total of $90.7 billion.
A lot has been written about how to score a federal contract. But once your company does, working with the government isn’t as simple as signing a few papers and getting to work. There are myriad regulations your company must comply with to remain in good standing with the government and avoid being fined.
This blog post will help you understand some of your responsibilities as a company contracting with the government.
Determine Your Classification
Are you a federal contractor or a subcontractor?
Once you’ve landed a job as a federal contractor or subcontractor, it’s important to know how your company’s work is classified.
Federal Contractor Definition
The term ‘federal contractor’ refers to a person or company that has a prime contract with a contracting agency that is a “department, agency, establishment, or instrumentality in the executive branch of the Government, including any wholly owned Government corporation.” You can learn more about the definition of a federal contractor here.
This term is also often used to refer to federal subcontractors, which is further explained below.
Federal Subcontractor Definition
The term ‘federal subcontractor’ references a contract for supplies or services that:
- are necessary for the performance of the federal contract (or)
- assume the duties of the federal contract
This could include any supplier, distributor, vendor, or firm.
Learn how to correctly classify seven different types of workers with our simple guide.
Understand Which Rules Apply to Your Company
Here is an overview of some common regulations you’ll encounter as a federal contractor.
Executive Order 11246
This executive order applies to any company that is a federal contractor and receives over $10,000 in government business annually.
Applicable companies are not permitted to discriminate in employment decisions when it comes to race, class, color, sex, religion, gender identity, sexual orientation, or national origin. In order to prevent such discrimination, federal contractors are required to take affirmative action steps (outlined further below).
Additionally, under certain circumstances, both contractors and subcontractors are prohibited from taking action against employees who discuss the pay of their coworkers.
EEO — or Equal Employment Opportunity — requirements include a multitude of regulations involved in staying compliant as a federal contractor.
Many of the EEO requirements apply mostly to contractors and subcontractors with non-construction (supply and service) agreements.
Both Title VII of the Civil Rights Act of 1964 and Executive Order 11246 prohibit discrimination from both federal contractors and subcontractors.
Employment discrimination can take on many faces, and can be nuanced — even seemingly neutral hiring practices can sometimes be discriminatory in nature. If your company is considering implementing employment tests for potential hires, the DOL provides guidance for how to approach these tests in a non-discriminatory way.
Your company is likely also be required to include the EEO tagline to job postings, making it clear that your company will not discriminate. Here is an example of what that might look like: “Qualified applicants will receive consideration for employment without regard to race, color, religion, sex, national origin, sexual orientation, gender identity, disability, or protected veteran status.”
Develop an Affirmative Action Program
If your company has a qualifying federal contract or subcontract of $50,000 or more and has 50 or more employees, you are obligated to create an annual affirmative action program.
Sample affirmative action program reports such as this one include a range of research and analysis including an organization profile, job group analysis, placement goals, and identification of problem areas.
Post the Correct SignagePut up an EEO poster in a conspicuous place — that is, somewhere employees frequent or pass by often.
Some posters are mandatory for certain contractors; the OFCCP (or Office of Federal Compliance Programs) will review postings if you are audited. This example includes some of the necessary facets of information including protection for various groups including veterans, women, minorities, and those with disabilities.
File Annual Reports
If your company is eligible, you must annually submit the EEO-1 Report (also know as the Employer Identification Report) by the date established by the government.
This report covers the number of your employees as classified by race, ethnicity, and gender for nine different job categories. For employers with 100 or more employees, the report will also include pay data reporting and hours worked.
Required companies include:
- Federal contractors with 50+ employees with a contract, subcontract, or purchase order of $50,000 or more
- Private employers with 100+ employees that are subject to Title VII, regardless of whether they are federal contractors or subcontractors.
For some employers, E-Verify is required to ensure the employees you hire are verified as eligible for work within the U.S.
The Executive Order 12989 directs executive departments and agencies to require E-Verify from contractors with qualifying federal contracts. Those contractors must electronically verify employment authorization of:
1. All employees hired during the contract term (and)
2. All employees performing work in the U.S. on the contract
E-Verify is administered by the U.S. Department of Homeland Security, U.S. Citizenship and Immigration Services, Verification Division, and the Social Security Administration. You can learn more about E-Verify for federal contractors here.
(Take note: I-9 forms must still be completed as well.)
Keep Records and Prepare for Compliance Audits
As a federal contractor or subcontractor, you may become acquainted with the OFCCP. The OFCCP ensures that federal contractors and subcontractors are staying compliant with all the mandatory laws and regulations.
The DOL offers a fairly extensive list of records that must be maintained for OFCCP compliance, including:
- Job descriptions, postings, and advertisements
- Job offer records
- Applications and resumes
- Interview notes
- Tests and test results
- Personnel files
- Written employment policies and procedures
- Affirmative Action Plans for covered federal contractors and subcontractors
Read Up On Continual Changes
As you can imagine, keeping up with government regulation in the federal landscape is complicated and shifts continually, depending upon an administration’s priorities or new executive orders put in place.
For example, President Obama issued several executive orders in 2014 for federal contractors. The orders included a new required minimum wage for some federal contractors — those covered by the Service Contract Act or Davis-Bacon Act were primarily affected.
Be sure to stay up on the latest and sign up for updates from resources like the Department of Labor Newsletter to know what changes are coming around the bend.
Check In With Attorneys
Although this list of requirements feels long, it includes only some of the necessary steps you’ll take to stay compliant as a federal contractor. Regulations also vary greatly. Company size, value amount of the agreement, length of contract, industry, location — they all factor into which regulations you need to follow.
So it’s wise, and arguably necessary, to hire legal help to ensure you have all your bases covered. Luckily, there are law firms that specialize in federal contractor compliance and who know how to help companies just like yours.
See How Justworks Can Help
Justworks helps small and medium sized businesses access high-quality benefits, get HR support, and administer payroll.
We also help out with payroll taxes and forms. Our assistance can help you meet some of your federal contractor or subcontractor compliance requirements, like EEO-1 filings, I-9 forms, and poster compliance. If you’re interested in learning how else Justworks can help your company out, learn more here.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.