[Federal Register Volume 65, Number 140 (Thursday, July 20, 2000)]
[Rules and Regulations]
[Pages 45174-45180]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18218]



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Part III





Department of Labor





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Office of Federal Contract Compliance Programs



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41 CFR Part 60-741



Affirmative Action and Nondiscrimination Obligations of Contractors and 
Subcontractors Regarding Individuals With Disabilities; Separate 
Facility Waivers; Final Rule

  Federal Register / Vol. 65, No. 140 / Thursday, July 20, 2000 / Rules 
and Regulations  

[[Page 45174]]


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DEPARTMENT OF LABOR

Office of Federal Contract Compliance Programs

41 CFR Part 60-741

RIN 1215-AA84


Affirmative Action and Nondiscrimination Obligations of 
Contractors and Subcontractors Regarding Individuals With Disabilities; 
Separate Facility Waivers

AGENCY: Office of Federal Contract Compliance Programs (OFCCP), 
Employment Standards Administration, Labor.

ACTION: Final rule.

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SUMMARY: This rule amends the regulation that permits Federal 
contractors to seek waivers from the requirements of Section 503 of the 
Rehabilitation Act of 1973 for those facilities that are not connected 
with the performance of a covered contract. Section 503 requires 
Government contractors to take affirmative action to employ and advance 
in employment qualified individuals with disabilities. The 
Rehabilitation Act Amendments of 1992 expressly incorporated into 
Section 503 the existing separate facility waiver regulation. The 1992 
Amendments also required publication of regulations that list the 
standards to be used for granting separate facility waivers and, 
accordingly, this rule lists factors that will be considered when 
determining whether to grant such waivers.

EFFECTIVE DATE: August 21, 2000.

FOR FURTHER INFORMATION CONTACT: James I. Melvin, Director, Division of 
Policy, Planning and Program Development, Office of Federal Contract 
Compliance Programs, Room N-3424, 200 Constitution Avenue, N.W., 
Washington, D.C. 20210. Telephone: (202) 693-0102 (voice), (202) 693-
1308 (TDD/TTY). Copies of this final rule in alternate formats may be 
obtained by calling OFCCP at (202) 693-0119 (voice) or (202) 693-1308 
(TDD/TTY). The alternate formats available are large print, electronic 
file on computer disk and audio-tape. The final rule also is available 
on the Internet at http://www.dol.gov/dol/esa.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 503 of the Rehabilitation Act of 1973, as amended, 29 
U.S.C. 793 (Section 503 or the Act), requires parties holding Federal 
Government contracts and subcontracts in excess of $10,000 to take 
affirmative action to employ and advance in employment qualified 
individuals with disabilities. OFCCP administers Section 503 and has 
published implementing regulations at 41 CFR Part 60-741, 61 FR 19336 
(May 1, 1996).
    One provision in the regulations permits Federal contractors and 
subcontractors to seek a waiver from the requirements of Section 503 
for facilities that are not connected with the performance of a covered 
contract or subcontract, that is, ``separate facilities.'' 41 CFR 60-
741.4(b)(3). The history of the Section 503 separate facility waiver 
regulation was recounted in the notice of proposed rulemaking (NPRM), 
61 FR 5902, 5902-03, published on February 14, 1996, and readers 
interested in that background information may refer to that discussion. 
Most importantly to this rulemaking is that the Rehabilitation Act 
Amendments of 1992, Pub. L. 102-569, 106 Stat. 4344 (1992 Amendments), 
revised Section 503 to provide that if an entity holds a covered 
contract all its establishments and all its workforce are subject to 
Section 503, absent the granting of a waiver. Section 505(b) of the 
1992 Amendments (Waiver Amendment) expressly incorporated the existing 
separate facility waiver regulation (with minor editorial changes) into 
Section 503.
    The text of the Waiver Amendment, as it appears at 29 U.S.C. 
793(c)(2)(A)-(B), reads as follows:

    (A) The Secretary of Labor may waive the requirements of the 
affirmative action clause required by the regulations promulgated 
under [Section 503(a)] with respect to any of a prime contractor's 
or subcontractor's facilities that are found to be in all respects 
separate and distinct from activities of the prime contractor or 
subcontractor related to the performance of the contract or 
subcontract, if the Secretary of Labor also finds that such a waiver 
will not interfere with or impede the effectuation of this Act.
    (B) Such waivers shall be considered only upon the request of 
the contractor or subcontractor. The Secretary of Labor shall 
promulgate regulations that set forth the standards used for 
granting such a waiver.

    The affirmative action clause referenced in the statute is 
published at 41 CFR 60-741.5 and lists contractors' basic obligations 
under Section 503, including the obligation to comply with the 
regulations. Accordingly, a waiver of the affirmative action clause 
exempts covered contractors from the obligation to comply with Section 
503 and its implementing regulations.
    The Amendment requires OFCCP to make two separate findings to 
justify granting a waiver. As a threshold requirement, OFCCP must find 
that the facility for which the waiver is sought is in all respects 
separate and distinct from activities related to the performance of a 
covered contract. If the facility satisfies this ``separate and 
distinct'' requirement, OFCCP must additionally find that granting the 
waiver will not interfere with or impede the effectuation of the Act.
    On February 14, 1996, OFCCP issued a proposed rule, 61 FR 5902, 
that set forth the standards that the agency would use to determine 
whether to grant separate facility waivers. A notice correcting certain 
technical errors in the NPRM was published on March 8, 1996, 61 FR 
9532. The comment period ended April 15, 1996.
    An individual Government contractor, an organization representing 
Government contractors and an organization representing disability 
rights agencies submitted comments. The submissions have been logged 
into the record for this rulemaking as Comments 1, 2 and 3, 
respectively, and they have been considered in the development of this 
final rule. Below is a discussion of the comments (referenced as 
``Com.'' or ``Coms.'') and an explanation of the changes made from the 
proposed rule to this final rule. For an explanation of provisions 
adopted unchanged from the proposed rule and on which no comments were 
made, see the NPRM preamble.

II. Analysis of Public Comments and Revisions

General Issues Concerning Regulatory Approach

    On May 1, 1996, a final rule was issued that comprehensively 
revised the Section 503 regulations published at 41 CFR Part 60-741. 61 
FR 19336. The revision continued the existing separate facility waiver 
regulation without substantive change. 41 CFR 60-741.4(b)(3). Today's 
final rule amends Sec. 60-741.4(b)(3).
    The NPRM announced that the long-standing practice of interpreting 
the separate facility waiver regulation narrowly so as to ``jealously 
guard'' the granting of waivers would be continued. 61 FR 5903. One 
commenter thought that the OFCCP position might be contrary to the 
intent of Congress as expressed in the Waiver Amendment. (Com. 2.) 
However, both the plain language of the amendment and its legislative 
history militate against this conclusion.
    As is noted above, the Waiver Amendment adopted the pre-existing 
Section 503 separate facility waiver regulation, implicitly approving 
of the narrow manner in which OFCCP had administered the regulation. In 
addition,

[[Page 45175]]

the Waiver Amendment is narrow on its face. The statute makes the 
granting of separate facility waivers discretionary; the waiver ``may'' 
be granted if it is determined that the facility is qualified to 
receive a waiver. Moreover, the legislative history of the 1992 
Amendments indicates that the scope of coverage under Section 503 was 
being clarified to parallel coverage under Executive Order 11246. S. 
Rep. No. 357, 102d Cong., 2d Sess. 72, reprinted in 1992 U.S. Code 
Cong. & Admin. News 3783. OFCCP traditionally has jealously guarded 
separate facility waivers under the Executive Order as well. Finally, a 
narrow construction of the waiver provision comports with the well 
established rule of statutory interpretation that exceptions to 
remedial statutes, such as the Rehabilitation Act, are strictly and 
narrowly construed. Accordingly, OFCCP will continue its long-standing 
practice of jealously guarding the granting of separate facility 
waivers.
    One commenter expressed general support for the proposed rule, 
noting that it contained a ``number of safeguards which will help 
ensure fair application of Section 503's very important mandate--to 
foster equal employment opportunity for qualified individuals with 
disabilities.'' (Com. 3.) This commenter supported, for example, the 
concept of broad discretion in the agency to evaluate waiver requests.
    Two commenters, however, felt that the proposal gave OFCCP too much 
discretion in determining whether to grant or deny a waiver. (Coms. 1 & 
2.) These commenters noted that the proposal's list of factors was non-
exhaustive and that other, unspecified, factors might be considered by 
OFCCP. One commenter recognized that ``[i]t is acceptable to have tough 
requirements for a waiver'' but thought that all standards should be 
listed and that if the standards are satisfied ``then a waiver should 
be granted as the rule and not as an exception.'' (Com. 1.)
    The rule adopted today modifies the proposed rule to address the 
suggestions of greater certainty as to the factors that will be 
considered by the agency. The final rule replaces the word ``may'' in 
the introductory language in paragraphs (b)(3)(ii) and (iii) with the 
word ``shall'' to obligate the Deputy Assistant Secretary to consider 
the factors listed under those two provisions.
    However, deciding whether to grant a separate facility waiver 
requires an individual, fact-based analysis, and this weighs against 
adopting the rigid approach suggested by two of the commenters. Federal 
contractors covered by Section 503 present a wide variety of 
organizational structures and staffing patterns. Accordingly, a wide 
range of possible relationships between a contractor's facilities also 
exists. The relationships between facilities may take many forms, for 
instance, two or more facilities might do exactly the same work, or one 
facility may be a supplier of materials, a distributer of goods, a 
provider of administrative support or management direction, or a source 
of capital or equipment. Facilities also may be related due to staffing 
patterns used by the contractor, such as, temporary reassignment or 
detailing of employees from one facility to another, rotating workers 
among facilities, and using one facility as a training ground for 
eventual assignment at another facility.
    Because of the wide range of relationships that might exist among 
contractors' facilities, the rule must be flexible to enable the Deputy 
Assistant Secretary to consider any additional, relevant facts in 
determining whether a particular facility is separate and distinct in 
``all'' respects and that a waiver will not interfere with or impede 
effectuation of the Act. Consequently, the final rule adopts proposed 
paragraphs (b)(3)(ii)(F) and (b)(3)(iii)(D), which authorize the Deputy 
Assistant Secretary to consider additional factors when he or she deems 
it necessary or appropriate.

Paragraph (b)(3)(i)

    Proposed paragraph (b)(3)(i) listed the general standards that 
would be required to obtain separate facility waivers. Subparagraphs 
(b)(3)(i)(A) and (B) recited the two threshold requirements codified in 
the statutory waiver amendment and present in the old regulation. 
Paragraph (b)(3)(i) also specified that waivers only will be considered 
by the Deputy Assistant Secretary upon the written request of a prime 
contractor or subcontractor, and that the contractor or subcontractor 
bears the burden of demonstrating that a waiver is appropriate.
    No objections were raised regarding the language proposed in 
paragraph (b)(3)(i) and one commenter expressed its approval of the 
requirement that Federal contractors demonstrate their eligibility for 
the waiver. (Com. 3.) The final rule adopts unchanged proposed 
paragraph (b)(3)(i).
    One commenter recommended that the rule also list the type of 
documentation the contractor should submit with the request. (Com. 3.) 
Given the variety of contractors subject to Section 503, however, OFCCP 
neither wants to overly dictate the content of requests nor 
unnecessarily constrain contractors in the manner in which they choose 
to make their case that a waiver is appropriate. The waiver rule 
clearly informs contractors that they have the burden of demonstrating 
that a waiver is appropriate and sets forth the standards OFCCP will 
use to evaluate their request. If contractors do not factually support 
their requests, OFCCP may ask for additional details or deny the 
requests. The final rule, therefore, does not specify the documents 
needed to be submitted with waiver requests.
    One commenter suggested that a provision be added to the rule to 
require that OFCCP respond to a waiver request within a set period of 
time. (Com. 2.) OFCCP considers setting an across-the-board regulatory 
time limit in which to respond to waiver requests as inappropriately 
restrictive given the individual nature of waiver determinations and 
the multitude of organizational structures and staffing patterns that 
may be involved. Before making a decision, the Deputy Assistant 
Secretary may need to get more information from the contractor or 
conduct an on-site investigation to verify that the facility is 
separate and distinct in all respects. The fact-based nature of these 
inquiries, and the possibility that more information may need to be 
gathered, militates against setting a rigid deadline for responding to 
waiver requests. Of course, OFCCP will respond as quickly as is 
possible to requests for separate facility waivers.

Paragraph (b)(3)(ii)

    Proposed paragraph (b)(3)(ii) listed factors to be considered to 
determine whether the facility is separate and distinct in all respects 
from activities related to the performance of a covered contract. The 
factors focused on the activities and employees at the facility for 
which the waiver is requested. No criticisms of these factors were 
expressed in the comments. Indeed, the organization representing 
Government contractors stated that it was in general agreement that the 
factors listed in proposed paragraph (b)(3)(ii) were reasonable for 
purposes of making a waiver determination. (Com. 2.) \1\ The final rule 
adopts these factors.
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    \1\ This commenter also expressed its belief that OFCCP 
previously made decisions about whether to grant a separate facility 
waiver using standards articulated in Ernst-Theodore Arndt, 52 Comp. 
Gen. 145 (1972). That Comptroller General opinion, however, 
addresses whether a parent company and its subsidiary are to be 
considered a single entity for purposes of being covered by 
Executive Order 11246. OFCCP has not previously used the parent-
subsidiary criteria to determine whether to grant separate facility 
waivers because these inquiries examine different aspects of 
business relationships for different purposes. The question of 
whether a waiver is appropriate for facilities not connected to the 
performance of Government contracts only arises if the facility is a 
component of a covered entity.

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    Another commenter suggested adding to the rule two factors 
pertaining to the ``separate and distinct'' determination: (1) Whether 
employees at facilities at which Government contract work is performed 
are typically recruited for higher level positions at facilities 
unrelated to the performance of a Government contract; and (2) whether 
employees at facilities at which Government contract work is performed 
are interchangeable with employees at facilities at which no such work 
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is performed. (Com. 3.) This commenter reasoned that:

    Many employers' operations are organized in such a way that 
similar jobs are performed at multiple facilities (only some of 
which happen to perform Government contract work). Such employers 
may be tempted to relegate (either through transfer or original 
placement) employees with disabilities to exempted facilities. 
Similarly, employers may seek to avoid affirmative action 
obligations by promoting employees with disabilities into jobs 
stationed at these facilities.

    The commenter believed that adoption of these factors into the 
final rule could help to minimize these practices. OFCCP agrees with 
this commenter and believes that these factors should be incorporated 
into the final rule. It is important to note that limiting or 
segregating qualified employees with disabilities to particular 
facilities or jobs because of their disabilities would constitute 
discrimination prohibited by Section 503. See, e.g., 41 CFR 60-
741.21(b).
    OFCCP considers these suggested factors to be corollaries of the 
proposed factors in (b)(3)(ii)(D) and (E), respectively, involving the 
contractor's employee staffing patterns. The suggested factor 
concerning recruitment into a facility unrelated to the performance of 
a Government contract encompasses the example contained in the NPRM 
preamble regarding subparagraph (D):

    [I]f employees who work on a Federal contract at one facility 
must, at some future time, work at another facility for which a 
waiver is sought in order for them to advance in employment, the 
facility for which a waiver is sought may be inexorably linked to 
the employees working on the contract and, therefore, not ``separate 
and distinct.''

61 FR 5904. To clarify the factor expressed in subparagraph (D), the 
final rule incorporates the recommended element into the rule. Thus, 
paragraph (b)(3)(ii)(D) of the final rule states that the Deputy 
Assistant Secretary will consider whether working at the facility for 
which a waiver is sought is a prerequisite for advancement in job 
responsibility or pay and the extent to which employees at facilities 
connected to a Government contract are recruited for positions at the 
facility for which a waiver is sought. In determining whether a waiver 
is appropriate given the totality of circumstances, the Deputy 
Assistant Secretary will weigh the extent to which any recruitment 
among the facilities occurs, including recruitment for details, 
transfers or promotions.
    OFCCP considers the suggested factor regarding the interchangeable 
nature of employees as being within the scope of proposed subparagraph 
(E), which addressed whether employees or applicants for employment at 
the facility may perform work related to a Government contract at 
another facility. To clarify subparagraph (E), the final rule 
incorporates the recommended element into this subparagraph. 
Accordingly, the final rule at paragraph (b)(3)(ii)(E) specifies that 
the Deputy Assistant Secretary will consider whether employees or 
applicants for employment at the facility may perform work related to a 
Government contract at another facility and the extent to which 
employees at the facility are interchangeable with employees at 
facilities connected to a Government contract.

Paragraph (b)(3)(iii)

    Proposed paragraph (b)(3)(iii)(A) indicated that OFCCP would 
consider, when determining if granting a waiver will interfere with or 
impede the effectuation of the Act, whether the waiver was being used 
as a subterfuge to circumvent the contractor's obligations under the 
Act or implementing regulations. The NPRM stated that OFCCP may 
consider, for example, whether the contractor sought a waiver only 
after learning that the facility at issue was being scheduled for a 
Section 503 compliance review. 61 FR 5904. One commenter believed that 
a waiver request made after a Section 503 complaint investigation or 
compliance review is scheduled should not be considered as an attempt 
at subterfuge, and claimed that the question of whether the facility is 
separate and distinct is a jurisdictional issue that may be raised at 
any time. (Com. 2.) OFCCP disagrees.
    As is noted above, the statute provides that granting separate 
facility waivers is discretionary. As long as an entity holds a covered 
contract all its establishments are subject to Section 503, absent a 
waiver being granted. A request for a waiver does not stay application 
of the Section 503 obligations and does not have a retroactive effect.
    The same commenter also asserted that it would be burdensome to 
require contractors to request waivers for all facilities that 
genuinely appear separate and distinct just to anticipate the 
possibility that an OFCCP review might be scheduled. This argument 
ignores the express intent of the 1992 Amendments; that all 
establishments of a covered contractor are subject to Section 503 
absent a waiver. Under Section 503, a Federal contractor's compliance 
obligations begin when the contractor gains a covered contract, not 
when it gets notice of an OFCCP review.
    Compliance with Section 503, as it is with any law, cannot be 
dependent upon the presence of a Government official at the entity's 
doorstep. OFCCP relies in good measure upon the law-abiding nature of 
Government contractors to comply with the Act and its implementing 
regulations, and to provide equal employment opportunity for qualified 
individuals with disabilities. To condone the filing of an application 
for a separate facility waiver only after a complaint investigation or 
compliance review has been scheduled may encourage contractors to 
disregard their Section 503 obligations until OFCCP decides to 
investigate compliance. The view of the agency, therefore, is that 
whether the contractor requested a separate facility waiver only after 
a Section 503 complaint investigation or compliance review has been 
scheduled is a relevant factor to consider in determining if a waiver 
should be granted.
    It should also be noted that OFCCP's jurisdiction to investigate 
Section 503 complaints that have been filed against a contractor prior 
to its requesting a waiver is not dependent on the Deputy Assistant 
Secretary's decision, favorable or unfavorable, to grant a waiver. A 
waiver does not have a retroactive effect (i.e., a waiver does not 
relieve a contractor from liability for a violation pre-dating the 
granting of the waiver). A waiver is in effect only from the time it is 
issued until the time it terminates. Accordingly, there is no basis for 
suspending a complaint investigation pending a decision of whether to 
grant a separate facility waiver.
    Under factor (B), the NPRM explained that the results of any past 
Section 503 complaint investigations or compliance reviews of the 
facility at issue, or of other facilities of the contractor, may be 
considered. 61 FR 5904. One commenter

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believed that complaints filed against facilities for which waivers 
were not requested should be irrelevant. (Com. 2.) OFCCP disagrees.
    Section 503 requires covered contractors to review their corporate-
wide employment policies and practices to ensure that there is no 
discrimination and that affirmative action is taken to employ and 
advance in employment qualified individuals with disabilities. If, for 
example, corporate-wide policies have been found to discriminate 
against qualified individuals with disabilities at other facilities, 
such may also be the case at the facility for which the waiver is 
requested. Significant compliance problems at other facilities of the 
contractor may also indicate corporate-level disregard for the Section 
503 nondiscrimination and affirmative action obligations. Granting a 
separate facility waiver to a contractor with significant compliance 
problems at other facilities may further impede effectuation of the Act 
at the remaining covered facilities.
    One commenter recommended that factor (B) be broadened expressly to 
include consideration of the contractor's compliance with Titles I, II, 
and III of the Americans with Disabilities Act of 1990 (ADA), which 
prohibit discrimination on the basis of disability in employment, 
public services and public accommodations, and with state and local 
laws prohibiting disability discrimination in these areas. (Com. 3.) 
The commenter considered this expansion necessary because OFCCP 
investigates a relatively small percentage of covered contractors each 
year. A contractor's compliance with other Federal, state or local laws 
requiring equal opportunity for disabled persons may indicate whether 
the general environment or atmosphere in the contractor's workplace 
embraces equal employment opportunity for individuals with 
disabilities.
    It is current OFCCP practice during compliance reviews to ask the 
Equal Employment Opportunity Commission (EEOC) and the state and local 
Fair Employment Practices (FEP) agencies whether complaints have been 
filed against the contractor and for any other information that may be 
pertinent in assessing the contractor's equal employment opportunity 
posture. See, e.g., OFCCP Federal Contract Compliance Manual, at 2B05. 
Existing regulations provide for coordination with EEOC and any state 
or local FEP agencies in the processing and resolution of complaints/
charges filed against Federal contractors that fall within the scope of 
both Section 503 and the ADA. In certain instances, OFCCP acts as 
EEOC's agent. See, e.g., 41 CFR 60-742.2(a) and (c), 60-742.5(a). See 
also 41 CFR 60-741.1(c)(1) and (2) (describing the relationship of the 
rules implementing Section 503 to other Federal, state or local laws 
providing protections for the rights of individuals with disabilities).
    Consequently, today's final rule broadens the types of laws that 
might be considered under factor (B) to include any other Federal, 
state or local law requiring equal opportunity for disabled persons. 
The new language mirrors language in the Section 503 anti-retaliation 
rule published at 41 CFR 60-741.69(a)(2) and (3). That rule prohibits 
contractors, among other things, from retaliating against an individual 
who has assisted or participated in any activity related to the 
administration of, or opposed any practice made unlawful by, Section 
503 or of ``any other Federal, State or local law requiring equal 
opportunity for disabled persons.'' See also 41 CFR 60-741.44(a)(2)-
(3). The objective of this change to factor (B) is not to enforce the 
other Federal, state or local laws, but to specify that, in determining 
whether a waiver might interfere with or impede the effectuation of 
Section 503, OFCCP will consider information regarding a contractor's 
compliance with other disability-related laws.
    Paragraph (b)(3)(iii)(C) focuses on the impact of granting a waiver 
on OFCCP enforcement efforts. A number of examples were provided in the 
NPRM preamble of the types of facts that might be considered under this 
factor. 61 FR 5904. One commenter stated that two of those preamble 
examples were irrelevant to a determination of whether a particular 
facility is separate from another facility with a contract: (1) Whether 
the waiver would simplify or complicate OFCCP's compliance review 
activity; and (2) whether the contractor is a large employer in a small 
town. (Com. 2.)
    Considering whether granting a waiver would have an impact on 
compliance review activity is necessary because the Act mandates that 
waivers must not interfere with or impede the effectuation of the Act. 
An adverse impact on OFCCP enforcement activity would impede OFCCP 
administration of the Act. On the other hand, OFCCP acknowledges that 
whether the facility for which the waiver is sought is the largest 
employer in a small town would probably not be relevant to a separate 
facility waiver determination. Accordingly, this latter criterion is 
not codified in the final rule.
    Another commenter suggested that the extent to which the facility 
at issue employs, and is physically accessible to, persons with 
disabilities is another factor relevant to the question of whether a 
waiver might preclude effective enforcement of the Act. (Com. 3.) OFCCP 
declines including this suggestion in the rule, but notes that the rule 
does not prohibit contractors from including such information with 
their waiver request as evidence, for example, that the waiver request 
is not a subterfuge to avoid Section 503 obligations. Further, a 
contractor's hiring of individuals with disabilities and maintaining an 
accessible facility would not be a defense to an instance of unlawful 
disability-based employment discrimination (e.g., in promotions or job 
assignments, or in establishing rates of pay or fringe benefits). See 
41 CFR 60-741.20. Consequently, OFCCP does not believe it is necessary 
to include this suggested factor in the rule.

Paragraph (b)(3)(iv)

    Proposed paragraph (b)(3)(iv) provided that waivers granted in 
accordance with paragraph (b)(3) may be withdrawn by the Deputy 
Assistant Secretary at any time when, in his or her judgment, such 
action is necessary or appropriate to achieve the purposes of the Act. 
Two commenters agreed that withdrawing a waiver would be appropriate if 
circumstances changed and the contractor no longer satisfied the 
requirements for a waiver. (Coms. 2 & 3.) One commenter opposed the 
broadness of the discretion to withdraw a waiver. (Com. 2.) This 
commenter was concerned, for instance, that such broad discretion would 
make it difficult to determine when a waiver would remain in force. 
Another commenter recommended that a waiver be effective for a specific 
period, suggesting one or two years as suitable. (Com. 3.) This 
commenter, however, also recommended that the contractor should have to 
demonstrate its continuing eligibility throughout the period.
    OFCCP agrees with the general thrust of the comments that the 
regulation should describe more clearly the period a waiver will remain 
in force. A number of the commenters' recommendations regarding the 
duration and termination of separate facility waivers are reflected in 
the final rule under new paragraph (b)(3)(v), which is described below.
    The final rule replaces proposed paragraph (b)(3)(iv) to address 
the comments that the rule assure that contractors granted separate 
facility waivers satisfy the rule's requirements during the duration of 
the waiver. Under paragraph (b)(3)(iv)(A),

[[Page 45178]]

contractors granted separate facility waivers must promptly inform 
OFCCP of any changed circumstances that were not reflected in the 
waiver requests. Changed circumstances include, for instance, the award 
of additional Government contracts and changes in the allocation of 
personnel to perform the Government contracts. To retain the waiver, 
the contractor must demonstrate that despite any changed circumstances, 
the facility remains in all respects separate and distinct and that 
continuing the waiver will not interfere with or impede the 
effectuation of the Act.
    As one commenter recognized, the duty to demonstrate that the 
contractor continues to be eligible for the waiver once the waiver has 
been granted contemplates that OFCCP could investigate this issue 
during the waiver period. (See Com. 3.) Accordingly, paragraph 
(b)(3)(iv)(B) of the final rule clarifies that a contractor that has 
been granted a separate facility waiver must permit OFCCP access to the 
contractor's records and places of business (including the facility 
granted a waiver and other facilities) for the purpose of investigating 
whether the facility granted a waiver meets the standards and 
requirements of the paragraph (b)(3). If an investigation reveals that 
a waiver is inappropriate, the waiver will be terminated and the 
facility must comply with Section 503 and the implementing regulations 
as described in paragraph (b)(3)(v) below.

Paragraph (b)(3)(v)

    In accordance with the comments described directly above (Coms. 2 & 
3), new paragraph (b)(3)(v) provides contractors who have been granted 
separate facility waivers with greater certainty as to the period the 
waiver will remain in effect. Under paragraph (b)(3)(v)(A), a separate 
facility waiver will terminate on one of three dates, as is described 
in paragraphs (b)(3)(v)(A)(1) through (3), whichever is earliest.
    Under paragraph (b)(3)(v)(A)(1), the waiver will end two years 
after the date the waiver was granted. OFCCP believes that waivers for 
a two-year period will meet contractors' needs to have greater 
certainty as to the period of a waiver's effectiveness, as well as to 
provide the agency with a reasonable time period in which to check the 
appropriateness of continuing a waiver. (See Coms. 2 & 3.) Under the 
rule, if a Government contractor wants a separate facility waiver to 
continue beyond two years, the contractor would have to apply for 
another waiver before the end of the initial two-year period even if 
circumstances did not change. The request for another waiver must meet 
the same standards as the original waiver request, including 
demonstrating that the facility satisfies the rule.
    Applying for another separate facility waiver before the end of the 
initial two-year period will not stay the termination of a waiver. If 
the Deputy Assistant Secretary does not act on a waiver renewal request 
before the two-year termination date, the original waiver terminates at 
the end of the two-year period. Absent a valid separate facility 
waiver, the facility must comply with Section 503 and the implementing 
regulations as described in paragraph (b)(3)(v)(B) below. If another 
waiver is granted it will be subject to the same termination provisions 
as the original waiver, including termination at least two years from 
the date of approval. OFCCP intends to process separate facility waiver 
renewal requests in a timely manner upon receipt.
    Paragraph (b)(3)(v)(A)(2) provides that the waiver will terminate 
before the two-year period when the facility performs any work that 
directly supports or contributes to the satisfaction of the work 
performed on a Government contract. Therefore, the waiver is 
automatically terminated by operation of the regulation when the 
facility gets a Government contract or performs work to satisfy a 
Government contract. A facility that gets a Government contract or to 
which Government contract work has been shifted by the contractor is 
the ultimate ``changed circumstance.'' Such direct Government contract 
performance by a facility so clearly defeats its eligibility for a 
separate facility waiver that it is reasonable to terminate the waiver 
without need for the contractor to first submit a report or for the 
Deputy Assistant Secretary to issue a determination that ending the 
waiver is appropriate. Direct Government contract performance requires 
the contractor to comply with Section 503.
    New paragraph (b)(3)(v)(A)(3) adopts a modified version of the 
provision OFCCP originally proposed for paragraph (b)(3)(iv). Proposed 
paragraph (b)(3)(iv) provided that waivers could be withdrawn by the 
Deputy Assistant Secretary at any time when, in his or her judgment, 
such action was necessary or appropriate to achieve the purposes of the 
Act. The final rule addresses comments that the proposed rule gave 
OFCCP too much discretion in withdrawing waivers. The language is 
revised to indicate that a waiver may be terminated by the Deputy 
Assistant Secretary before the two-year waiver period only when it is 
determined that the separate facility waiver requirements are not being 
met. Termination may be based on information from the contractor 
regarding changed circumstances or contained in a request for another 
waiver. Termination also may be based on any other relevant information 
including, but not limited to, information from contracting agencies, 
employees and job applicants, or from the results of an OFCCP 
investigation.
    To further clarify when a terminated waiver triggers compliance 
obligations, the final rule adopts new paragraph (b)(3)(v)(B). This 
provision specifies that contractors must meet the Section 503 
obligations on the date of termination. The rule provides one exception 
to this compliance deadline. If the written affirmative action program 
(AAP) requirements published at 41 CFR 60-741.40 through 60-741.45 are 
applicable to the facility the contractor must comply with these 
requirements within 120 days of the termination of the waiver.
    OFCCP believes that these compliance deadlines are reasonable. 
Contractors whose separate facility waivers terminate under the rule 
are on notice of their impending compliance responsibilities. These 
contractors also are familiar with their Section 503 obligations 
because they are required to comply at all their other facilities. The 
120-day compliance deadline for preparing and maintaining an AAP at the 
facility, if applicable, is the same time period allowed a newly 
covered contractor to develop an AAP. See 41 CFR 60-741.40(b).

Paragraph (b)(3)(vi)

    One commenter suggested that the rule specify that OFCCP will 
impose sanctions against contractors that make fraudulent or misleading 
waiver requests. (Com. 3.) OFCCP agrees. The NPRM stated that waivers 
would be withdrawn if OFCCP discovered that the facts upon which it 
relied in granting the waiver did not accurately or fully describe the 
relationship between the facility and the contractor's activities 
related to the performance of a contract. 61 FR 5904. Many Federal 
programs explicitly prohibit fraudulent and false statements and 
representations; indeed, the Federal Acquisition Regulations provide 
that contractors may be debarred or suspended for such activity, see 48 
CFR 9.406-2(a)(1), (a)(3); 9.407-2(a)(1), (a)(3). Certainly OFCCP 
cannot countenance fraudulent and misleading waiver requests. 
Otherwise, Government resources will be wasted, the ability of OFCCP to 
consider legitimate requests from contractors will be hampered, and

[[Page 45179]]

the benefits of the program will be reduced.
    Therefore, new paragraph (b)(3)(vi) expressly prohibits false or 
fraudulent statements and representations under Sec. 60-741.4(b)(3). 
This prohibition applies to all statements and representations made 
under the separate facility waiver rule including, but not limited to, 
waiver requests, reports of changed circumstances, and requests to 
extend previously-granted waivers. False or fraudulent statements or 
representations may subject a contractor to sanctions and penalties 
under this part, as well as criminal prosecution under 18 U.S.C. 1001, 
which makes it a crime for anyone to make such misrepresentations to 
any department or agency of the U.S. Government. Of course, should 
OFCCP discover that false or fraudulent statements or representations 
were made in conjunction with a waiver request the request will also be 
denied (or if previously granted, the waiver will be withdrawn).

III. Regulatory Analyses and Procedures

Executive Order 12866

    The Secretary of Labor has determined that this final rule is not a 
significant regulatory action as defined in Executive Order 12866, and 
therefore a regulatory impact analysis is unnecessary.

Regulatory Flexibility Act

    This final rule will not change existing equal employment 
obligations for Federal contractors but will only clarify the standards 
OFCCP uses for determining whether to grant separate facility waivers. 
Consequently, under the Regulatory Flexibility Act, as amended, 5 
U.S.C. 605(b), the Secretary of Labor certifies that this rule will not 
have a significant economic impact on a substantial number of small 
entities.

Unfunded Mandates Reform

    Executive Order 12875--This final rule does not create an unfunded 
Federal mandate upon any State, local or tribal government.
    Unfunded Mandates Reform Act of 1995--This final rule does not 
include any Federal mandate that may result in increased expenditures 
by State, local, and tribal governments, in the aggregate, of $100 
million or more, or increased expenditures by the private sector of 
$100 million or more.

Executive Order 13132

    These regulations have been reviewed in accordance with Executive 
Order 13132 regarding Federalism. The order requires that agencies, to 
the extent practicable and permitted by law: (1) Not promulgate any 
regulation that has federalism implications, that imposes substantial 
direct compliance costs on State and local governments, and that is not 
required by statute; and (2) not promulgate any regulation that has 
federalism implications and that preempts State law, unless specified 
preconditions are met. Since this rule does not have federalism 
implications, does not impose substantial direct costs on State and 
local governments and does not preempt State law, it complies with the 
principles of federalism and with Executive Order 13132.

Paperwork Reduction Act

    This final rule does not contain substantive or material 
modifications to previously approved information collection 
requirements, but will only clarify existing standards for the granting 
of separate facility waivers. In view of this fact, and because the 
final rule does not change existing obligations for Federal 
contractors, the rule creates no additional information collection 
requirements above those in the current information collection requests 
approved by the Office of Management and Budget under control numbers 
1215-0072 (Supply and Service) and 1215-1063 (Construction).

List of Subjects in 41 CFR Part 60-741

    Administrative practice and procedure, Civil rights, Employment, 
Equal employment opportunity, Government contracts, Government 
procurement, Individuals with disabilities, Investigations, Reporting 
and recordkeeping requirements.

    Signed at Washington, D.C. this 12th day of July 2000.
Alexis M. Herman,
Secretary of Labor.

Bernard E. Anderson,
Assistant Secretary for Employment Standards.

Shirley J. Wilcher,
Deputy Assistant Secretary for Federal Contract Compliance.

    For the reasons set out in the preamble, 41 CFR part 60-741 is 
amended as set forth below:

PART 60-741--AFFIRMATIVE ACTION AND NONDISCRIMINATION OBLIGATIONS 
OF CONTRACTORS AND SUBCONTRACTORS REGARDING INDIVIDUALS WITH 
DISABILITIES

    1. The authority citation for part 60-741 continues to read as 
follows:

    Authority: 29 U.S.C. 706 and 793; and E.O. 11758 (3 CFR, 1971-
1975 Comp., p. 841).

    2. In Sec. 60-741.4, paragraph (b)(3) is revised to read as 
follows:


Sec. 60-741.4  Coverage and waivers.

* * * * *
    (b) * * *
    (3) Facilities not connected with contracts. (i) Upon the written 
request of the contractor, the Deputy Assistant Secretary may waive the 
requirements of the equal opportunity clause with respect to any of a 
contractor's facilities if the Deputy Assistant Secretary finds that 
the contractor has demonstrated that:
    (A) The facility is in all respects separate and distinct from 
activities of the contractor related to the performance of a contract; 
and
    (B) Such a waiver will not interfere with or impede the 
effectuation of the act.
    (ii) The Deputy Assistant Secretary's findings as to whether the 
facility is separate and distinct in all respects from activities of 
the contractor related to the performance of a contract shall include 
consideration of the following factors:
    (A) Whether any work at the facility directly or indirectly 
supports or contributes to the satisfaction of the work performed on a 
Government contract;
    (B) The extent to which the facility benefits, directly or 
indirectly, from a Government contract;
    (C) Whether any costs associated with operating the facility are 
charged to a Government contract;
    (D) Whether working at the facility is a prerequisite for 
advancement in job responsibility or pay, and the extent to which 
employees at facilities connected to a Government contract are 
recruited for positions at the facility;
    (E) Whether employees or applicants for employment at the facility 
may perform work related to a Government contract at another facility, 
and the extent to which employees at the facility are interchangeable 
with employees at facilities connected to a Government contract; and
    (F) Such other factors that the Deputy Assistant Secretary deems 
are necessary or appropriate for considering whether the facility is in 
all respects separate and distinct from the activities of the 
contractor related to the performance of a contract.
    (iii) The Deputy Assistant Secretary's findings as to whether 
granting a waiver will interfere with or impede the effectuation of the 
act shall include consideration of the following factors:
    (A) Whether the waiver will be used as a subterfuge to circumvent 
the contractor's obligations under the act;

[[Page 45180]]

    (B) The contractor's compliance with the act or any other Federal, 
State or local law requiring equal opportunity for disabled persons;
    (C) The impact of granting the waiver on OFCCP enforcement efforts; 
and
    (D) Such other factors that the Deputy Assistant Secretary deems 
are necessary or appropriate for considering whether the granting of 
the waiver would interfere with or impede the effectuation of the act.
    (iv) A contractor granted a waiver under paragraph (b)(3) of this 
section shall:
    (A) Promptly inform the Deputy Assistant Secretary of any changed 
circumstances not reflected in the contractor's waiver request; and
    (B) Permit the Deputy Assistant Secretary access during normal 
business hours to the contractor's places of business for the purpose 
of investigating whether the facility granted a waiver meets the 
standards and requirements of paragraph (b)(3) of this section, and for 
inspecting and copying such books and accounts and records, including 
computerized records, and other material as may be relevant to the 
matter under investigation.
    (v)(A) A waiver granted under paragraph (b)(3) of this section 
shall terminate on one of the following dates, whichever is earliest:
    (1) Two years after the date the waiver was granted.
    (2) When the facility performs any work that directly supports or 
contributes to the satisfaction of the work performed on a Government 
contract.
    (3) When the Deputy Assistant Secretary determines, based on 
information provided by the contractor under this section or upon any 
other relevant information, that the facility does not meet the 
requirements of paragraph (b)(3) of this section.
    (B) When a waiver terminates in accordance with paragraph 
(b)(3)(v)(A) of this section the contractor shall ensure that the 
facility complies with this part on the date of termination, except 
that compliance with Secs. 60-741.40 through 60-741.45, if applicable, 
must be attained within 120 days of such termination.
    (vi) False or fraudulent statements or representations made by a 
contractor under paragraph (b)(3) of this section are prohibited and 
may subject the contractor to sanctions and penalties under this part 
and criminal prosecution under 18 U.S.C. 1001.

[FR Doc. 00-18218 Filed 7-19-00; 8:45 am]
BILLING CODE 4510-45-P