What Do You Think? – Are Credit Unions Federal Contractors?

Know Your Affirmative Action Obligations Under Executive Order 11246

This one is for the sake of all of our credit union readers out there, and of course anyone wishing to further their knowledge of the subject of federal compliance. Read this one thoroughly. It could mean avoiding heavy fines and penalties.

Affirmative Action Compliance
Many organizations are required to comply with preparing an Affirmative Action plan as a result of being a federal contractor. What is less commonly known is that Credit Unions can also be considered “federal contractors” as defined by the Office of Federal Compliance and Contracting Programs (OFCCP).

What does this mean for your Credit Union? That’s what this article aims to explain.

Background
Executive Order 11246, signed by President Lyndon Baines Johnson (LBJ) in 1965, is a series of regulations that prohibit federal contractors from discrimination on the basis of race, color, religion, sex and national origin. These regulations also require covered federal contractors to take affirmative action in employing minority group members and women, and to develop written affirmative action plans.

Under these regulations, non-construction (service and supply) contractors with 50 or more employees and government contracts of $50,000 or more are required to develop and implement a written affirmative action program (AAP) for each establishment.

What is an Affirmative Action Program?
An Affirmative Action Program is defined as “a set of specific and result-oriented procedures to which a contractor commits itself to apply every good faith effort.” Non-compliance with these regulations can result in having contracts cancelled, terminated or suspended, or the contractor may be debarred. Audits are also on the rise for compliance.

So What Does This Mean for Credit Unions?
You might be wondering how this applies to Credit Unions that don’t have “contracts” per se with the federal government.

According to the OFCCP, Executive Order 11246 has consistently defined a government contract as any agreement between any contracting agency for the purchase, sale or use of personal property or non-personal services. “Non-personal services” includes, among others, utilities, construction, transportation, research, agreements for insurance, and fund depository.

Financial institutions are covered under this Executive Order as federal contractors when possessing federal share and deposit insurance or are issuing and pay agents for U.S. savings bonds and savings notes. So in short, if a Credit Union has 50 or more employees and is insured by the NCUA with deposits insured through the NCUSIF, it is “covered” and must comply with the Affirmative Action regulations.

So What Happens Now?
If you discover that your Credit Union is covered under Affirmative Action regulations, the first step is to get compliant (otherwise you may face the penalties described earlier). This means providing equal opportunity for applicants and employees based on race, gender, national origin, color and religion…..AND developing a written affirmative action program (AAP), per the guidelines established by the OFCCP.

The AAP identifies those areas in the workforce that reflect under-utilization of women and minorities, or having fewer women or minorities in a particular job group than would reasonably be expected by their availability. Under-utilization is determined through a statistical analysis called a utilization analysis.

Based on this utilization analysis and the availability of qualified individuals, the Credit Union would establish goals to reduce or eliminate the under-utilization through the use of good faith efforts. Good faith efforts may include expanded recruitment efforts, training and other activities to increase the pool of qualified minority and female applicants.

In 2008 alone, the OFCCP collected more than $68 million in fines from employers that were not in compliance, so setting up your process and maintaining it annually is critical to prevent fines and penalties.

For more information on Affirmative Action regulations and what you need to do to comply, visit the OFCCP’s website at http://www.dol.gov/ofccp, or contact us at  877-753-0970 for assistance in helping you prepare your Affirmative Action Plan, set up the recordkeeping, and serve as a coach in preparation and guidance in complying with these and other HR related compliance regulations.

Additional Resources:

You may also be interested in these whitepapers on our website.

Handling Comp Time in Kentucky
Supply and Service Contractor Affirmative Action Checklist