Confusion About Applicability of Executive Orders

By Cris Naser

There has been a significant amount of confusion of late about the applicability of recent federal contractor executive orders, particularly the latest one concerning paid leave. The applicability of each executive order must be analyzed individually because each stems from one or more different laws with differing definitions of “federal contractor.”

Banks are most familiar with Executive Order 11246 mandating nondiscrimination and affirmative action for covered federal contractors. A bank is a federal contractor under EO 11246 if:

  1. It has a bona fide federal contract;
  2. It is a fund depository (i.e., typically involving Treasury Tax & Loan accounts); or
  3. If it processes U.S. savings bonds. In the past, it was the final prong – savings bonds – that made almost all banks federal contractors. However, that is no longer the case since savings bond processing is now conducted electronically through the Federal Reserve Board.

OFCCP has asserted in an FAQ on its website that deposit insurance is a federal contract, a position that is disputed by many. But, there is no mention of deposit insurance in OFCCP’s regulations.

If a new executive order amends EO 11246, as in the case of the executive order on pay transparency, banks will be covered if they meet one of the above three coverage prongs. Banks that are concerned that deposit insurance is a federal contract will have to make a strategic business decision about whether to comply with the requirements. OFCCP recently finalized the rule implementing the executive order on pay transparency.

With respect to the executive order mandating that federal contractors provide paid leave to their employees, the statutes on which it is based involve procurement contracts – deposit insurance is not a coverage prong here. Rather, its coverage follows the same structure as the earlier minimum wage EO that affects very few banks. Until we see both an implementing proposal and final rule from OFCCP, we will not be able to determine the coverage of the paid leave EO.