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A Better Partnership


Mar 2006
March 15, 2006

Federal Affirmative Action Requirements for Financial Institutions


Warner Norcross & Judd LLP offers affirmative action plan preparation services to our financial institution clients. We prepare your affirmative action plan, provide you with tools to simplify record-keeping requirements and provide assistance in conducting the analysis that affirmative action plans require. Once you have a plan in place, we assist you each year to update the plan. We offer these services at a relatively low fixed price. For more information, contact Robert Chovanec:, 616.752.2120. More information about the assistance that we offer is included at "Part 3" of this Summary.

Virtually all banks and other financial institutions are required to comply with the federal government's affirmative action plan rules, because those rules cover a financial institution that has 50 or more employees and serves as a depository of federal government funds in any amount or is an issuing and paying agent for U.S. Savings Bonds and Notes.

The federal affirmative action plan requirements are enforced by the federal Office of Contract Compliance Programs. The rules require each covered employer to prepare an annual affirmative action plan that meets the OFCCP's requirements. Two plans are actually required: one covering women and minorities, and a second covering individuals with disabilities and certain Vietnam era and disabled veterans. The plan covering women and minorities must also include detailed statistical information, as described below.

An affirmative action plan for women and minorities must include an analysis of the "incumbency" of women and minorities in each of the employer's "job groups," compared to "availability." This is called an "availability analysis."

  • "Job Groups" are broad categories of the employer's workforce, such as "Officials and Managers" or "Professionals." An employer that has 150 or more employees is required to create more "job groups" to be sure that the groups are not too broad.

  • "Incumbency" refers to the number of women and minority employees in each job group.

  • "Availability" refers to an estimate of the number of women and minorities who are theoretically available in the employer's recruiting area for hire into each of its job groups.

The affirmative action plan must include the employer's availability analysis. It must also include goals to increase the number of minority and/or women employees in those job groups for which the availability analysis indicates that women and/or minorities may be underrepresented.

A covered employer is also required to conduct an annual "adverse impact" analysis, to determine whether its application, hiring, promotion and other employee selection systems may be discriminating against women and/or minorities. Once again, a statistical analysis is required. It must compare the hiring, promotion and termination rates for women and minorities to the same rates for male and nonminority employees. An adverse impact analysis must be conducted for each racial group identified by OFCCP regulations.

To assure that the adverse impact analysis can be done properly, each covered employer is required to keep track of the race and gender of each applicant, by inviting each applicant to "self-identify." This "applicant flow data" is used to conduct a hiring "adverse impact analysis." The OFCCP has recently changed its rules defining who is an "applicant" (and therefore, who must be invited to self-identify). The revised rules focus particularly on "internet applicants."

Finally, each covered employer is also required to conduct an annual compensation review to determine whether its compensation system may result in an adverse impact on women and/or minorities. Although the OFCCP has historically focused on compensation analyses only at large employers (by doing so-called "glass ceiling" reviews, for example), the agency has indicated that it will require more compensation analyses by smaller employers in the immediate future.

Part 1: Basic "Affirmative Action" Rules

Federal affirmative action requirements for covered employers are established principally by Executive Order 11246 (a Presidential Order), the federal Rehabilitation Act of 1973, and the Vietnam Era Veterans' Readjustment Assistance Act of 1974 and their regulations. Although these laws have different coverage rules, for practical purposes most companies do not adopt affirmative action plans unless they are required to do so under the standards set by Executive Order 11246.

  • Coverage. The affirmative action requirements apply to any financial institution that has 50 or more employees and serves as a depository of federal government funds in any amount or is an issuing and paying agent for U.S. Savings Bonds and Notes.

  • Enforcement. The requirements for written affirmative action plans are monitored and enforced by the federal Office of Contract Compliance Programs ("OFCCP"), which is an arm of the U.S. Department of Labor. The monitoring and enforcement mechanisms are:

    • Review of Form EEO-1. Virtually all financial institutions are required to file Form EEO-1 each year. Form EEO-1 discloses the composition of the employer's workforce by race and gender and also asks whether the employer has federal government contracts.

    • Compliance Reviews. The OFCCP selects audit targets by reviewing Forms EEO-1. Each year, OFCCP decides how many compliance reviews it will conduct and selects specific "audit targets" based on factors such as size, industry, number of establishments, EEO profile, and past history with the OFCCP. For more information on the OFCCP's audit selection process, see

    • Conciliation Agreements. The OFCCP demands that an audit target enter into a "Conciliation Agreement" when deficiencies are found upon audit. The Conciliation Agreement commits the company to correct the deficiencies, which may include significant back pay commitments.

    • Debarment Proceeding. This is an administrative proceeding against an audit target that refuses to adopt an affirmative action plan as required by OFCCP regulations or that refuses to enter into or violates a "Conciliation Agreement." A Debarment Proceeding can result in an order that prohibits government agencies from dealing with the debarred company.

    • Litigation. OFCCP may bring an administrative proceeding against an employer that is accused of unlawful discrimination in employee or applicant complaints to the OFCCP or as the result of information obtained in an OFCCP audit. If OFCCP finds unlawful discrimination, then it can make back pay awards and order the employer to hire or promote victims of the unlawful conduct. OFCCP may also refer complaints to the Equal Opportunity Commission for possible prosecution under Title VII of the Civil Rights Act of 1964 or other federal civil rights laws.

Part 2: What Is Required in an Affirmative Action Plan

Resources. In addition to reading this Summary, you should visit the OFCCP's Web site at There is a lot of resource material there, including a "model" affirmative action plan and links to the U.S. Census information necessary to complete an affirmative action program as required by the OFCCP. It is possible to do your own plan. There are also consultants who specialize in preparing plans and Web-based products that you can purchase. Alternatively, we can assist you in preparing your plan, as described in "Part 3" below.

Required Contents of Affirmative Action Plans. A covered federal government contractor must do a new affirmative action plan for each of its facilities each year. The plan need not be filed with the government but it must be furnished to the OFCCP upon request. The plan must include the following elements.

  • Organizational Analysis. This is an organization chart for each facility, showing each manager, the job title of each employee who reports to that manager, and the race and gender of each employee.

  • Job Group Analysis. This is a listing of all of the employer's departments and jobs within departments, the number of employees in each, their race and gender, and aggregation of specific jobs into "job groups" that have similar skills and lines of promotion. The OFCCP publishes several standard job groups for use by smaller employers. An employer that has 150 or more employees is supposed to create more job groups to accurately reflect different skill sets and "lines of progression," including "feeder groups" (other groups from which promotions to a group are customarily made).

  • Availability Analysis. This is a rather complicated statistical analysis that is intended to determine the percentage of females and minorities that are theoretically available to the employer from three sources:

    • Source 1: The percentage of females and minorities having the requisite skills and constituting part of the workforce in the employer's recruiting area for each job group. This data is available from the U.S. Census Bureau and state unemployment benefit administrative agencies.

    • Source 2: The percentage of female and minority employees who are already employed by the employer in feeder groups (that is, other job groups from which promotions have been or reasonably could be made).

    • Source 3: The percentage of female and minority students attending educational and training institutions located in the employer's "recruiting area" for each job group. These statistics are kept by the educational and training institutions.

An availability analysis requires judgment calls about all of the above, which must be made carefully and justified to the OFCCP if challenged. The OFCCP is much more likely to challenge data provided by an employer that has at least 150 employees.

  • Utilization Analysis. This is a comparison of the percentage of female and minority employees who are currently employed in each job group to the overall availability of female and minority employees, and a determination of whether there is underutilization in each job group -- that is, whether the percentage of female and minority employees is "less than would be expected" based on the "Availability Analysis."

  • Goals. These are specific hiring/promotion goals for each job group in which females or minorities are underutilized. They are designed to be sure that qualified females and minorities are considered in all hiring and promotion decisions.

  • Identification of Problem Areas. This is a review of all employment policies and practices, to determine whether there is discrimination or whether a practice might discriminate against or discourage available minority and/or women employees.

  • Responsibility and Implementation. This is a commitment of top management support for the affirmative action process and manager education and training, to be sure that managers who make hiring and promotion decisions are fully aware and supportive of the affirmative action plan.

  • Analysis of Employment Activity. This is an annual statistical analysis of hiring, firing, layoffs, promotions and transfers, to determine whether these processes are resulting in more, or fewer, women and minorities in each job group.

    • This analysis includes an "adverse impact analysis," which is a statistical analysis of the employer's hiring, firing and promotions during the past year, to determine whether an adverse impact may have occurred. To assist in conducting an "adverse impact analysis," the OFCCP requires each covered employer to keep an applicant flow log that identifies each applicant by position applied for, gender and race (to the extent that the employer is able to gather this information by inviting applicants to "self-identify"). An adverse impact analysis consists of a statistical comparison of the hiring rates for each gender and race and drawing conclusions about possible adverse impact. For more on the new "Internet applicants" and "self-identification" rules, see

    • This analysis also includes an obligation to examine the employer's compensation system annually, to assure that it is not having an adverse impact on minorities or women. In the past, the OFCCP has not required an extensive statistical review of compensation as part of the affirmative action plan process, except for large employers. Recently, however, the OFCCP has indicated that it intends to require smaller employers to conduct extensive (and burdensome) statistical analysis. See

Long-Term Results of Affirmative Action Plans. The OFCCP audits comparatively few employers each year. It focuses on employers that have at least 150 employees and multiple facilities, and employers with large government contracts, but it also sporadically audits smaller employers. If a covered employer does not have a plan or if its plan does not meet OFCCP requirements, then the OFCCP will demand a "conciliation agreement." Once an employer enters into a conciliation agreement and begins to do the required statistical analysis, the OFCCP may reaudit the employer, identify specific alleged victims of discrimination (especially from "applicant flow analysis"), and sue the employer on behalf of those individuals.

Conclusion. An employer should determine whether it may be covered by the OFCCP Federal Government Contractor Affirmative Action Plan Requirements, and at which facilities. In preparing the affirmative action plan, the employer should exercise great care not to make "admissions" or to use overly simplistic statistical analysis that may create an unjustified appearance of discrimination.

Part 3: Preparing an Affirmative Action Plan With Assistance From WNJ

What's Involved. We offer the following services with respect to affirmative action plans.

  • If you already have a plan, but are concerned that it does not meet OFCCP requirements, then we will review it and give you an initial reaction as to compliance.

  • If you do not have a plan but the time has come to adopt one, or if you would like to outsource plan preparation and automate the required statistical analysis, then we will prepare a plan for you, including all required statistical analysis and text.

    • The starting point is a conference to determine your job groups and locations, for affirmative action plan purposes. These determinations involve some judgment calls, and we will explain the factors that should go into those judgments and make recommendations.

    • Next, we will need an Excel spreadsheet with the employee data necessary to prepare the statistical portion of the plan. We will provide you with a template for the spreadsheet. You can use the template to paste in the relevant information from your HR information system.

    • Once we receive the spreadsheet, we will do the statistical analysis and send it to you in the form required for a plan, and we will also send you a draft of the text portions of the plan.

    • We will then meet with you to customize the text so that it contains the specific information about your workforce and employment policies that is required as part of a plan.

    • We will provide templates for the ongoing analysis required as part of a plan, including required procedures and logs for applicant flow and hiring, discharges, layoffs, transfers and promotions.

    • We will provide templates for your annual adverse impact analysis of hiring, discharges, layoffs, transfers and promotions, including guidance on the OFCCP's new Internet applicant rules.

    • We will advise you on the OFCCP's changing "compensation analysis" rules and work with you to determine how much analysis you should consider doing.

    • Finally, we will assist you in implementing the plan as required by OFCCP regulations.

  • Because a new plan is required each year, the plan statistical analysis, text, and "adverse impact analysis" must be updated each year. If you wish, we will assist you each year in doing so.

  • If you are audited, then we will assist you in the audit and in dealing with the OFCCP regarding any proposed "Conciliation Agreement."

Getting Started. If you would like to explore our possible role in your affirmative action plan system, call Robert Chovanec at 616.752.2120, or send an e-mail ( to schedule a preliminary discussion, at no charge.

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