August 23, 2010
August 23, 2010
Surprise! Wall Street Reform Bill Contains Massive New Affirmative Action Requirements
Written by Wayne D. Landsverk
Miller Nash LLP,
Oregon and Washington Law Firm
With all the media attention given to the Dodd-Frank Wall Street Reform and Consumer Protection Act, there was almost no mention of a far-reaching provision (Section 342) that imposes new diversity requirements on businesses in or connected to the financial industry.
Section 342 requires that within six months of July 21, 2010, each of the following federal agencies establish its own Office of Minority and Women Inclusion (“OMWI”):
• Board of Governors of the Federal Reserve
• Comptroller of the Currency
• Consumer Financial Protection Bureau
• Department of the Treasury
• Federal Deposit Insurance Corporation
• Federal Housing Finance Agency
• Federal Reserve Regional Banks (12 separate banks)
• National Credit Union Administration
• Securities and Exchange Commission
The director of each OMWI is required by Section 342 to develop and implement his or her own standards and procedures “to ensure, to the maximum extent possible, the fair inclusion and utilization of minorities, women, and minority-owned and women-owned businesses in all business and activities of the agency at all levels, including in procurement, insurance, and all types of contracts.” (Emphasis added.) Contractors, in turn, will be required to provide a written statement that they—and their subcontractors—have fairly included women and minorities in their workforces. Each OMWI will also develop its own standards and procedures to determine “whether an agency contractor, and, as applicable, a subcontractor has failed to make a good faith effort to include minorities and women in its workforce.” And if the OMWI decides there has been such a failure, the director will have the ability to recommend that the agency terminate the contract; make a referral to the Office of Federal Contract Compliance Programs (“OFCCP”); or take other appropriate action.
To whom will these new provisions apply? Again, the language is breathtakingly broad:
“This section shall apply to all contracts of an agency for services of any kind, including the services of financial institutions, investment banking firms, mortgage banking firms, asset management firms, brokers, dealers, financial services entities, underwriters, accountants, investment consultants, and providers of legal services. The contracts referred to in this subsection include all contracts for all business and activities of an agency, at all levels, including contracts for the issuance or guarantee of any debt, equity, or security, the sale of assets, the management of the assets of the agency, the making of equity investments by the agency, and the implementation by the agency of programs to address economic recovery.”
The bottom line is that all contractors, subcontractors, and providers of any kind of service to the financial agencies listed above, regardless of size, will be subject to scrutiny of their “fair inclusion” practices by each of these agencies under its own particular rules and standards. For providers, contractors, and subcontractors covered by other affirmative action requirements, such as the OFCCP, the new oversight by the OMWIs will be an additional and potentially troublesome layer of rules and regulations.
During the six-month period before the OMWIs become operational and develop their own rules, businesses should review their existing contracts and subcontracts to determine whether they fall within the “fair inclusion” requirements of Section 342 and, if they do, consider what outreach and other diversity strategies they may wish to explore in preparation for the coming scrutiny.