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elaws - employment laws assistance for workers and small businesses - Federal Contractor Compliance Advisor

Single Entity Five-Factor Test

A separate business or organization without Government contracts may be covered under the laws enforced by OFCCP based on an integrated relationship or "single entity" status with a Government contractor. OFCCP uses a five-factor test for determining whether such a relationship exists. The test requires OFCCP to consider whether:

  1. the entities have common ownership;
  2. the entities have common directors and/or officers;
  3. one entity has de facto day-to-day control over the other through policies, management or supervision of the entity's operations;
  4. the personnel polices of the entities emanate from a common or centralized source; and
  5. the operations of the entities are dependent on each other, e.g., services are provided principally for the benefit of one entity by another and/or both entities share management, offices, or other services.

The test focuses primarily on whether the ownership, management, and operations of the separate entities are, in fact, sufficiently interrelated to warrant treating them as an integrated enterprise or a single entity. A business or organization need not meet all five factors to be considered a single entity with a covered Federal contractor. However, there is growing recognition that centralized control over labor relations and personnel functions is the most important factor. By way of example, say that two entities are under common ownership, with a common board of directors, and have a central corporate office that determines and issues personnel policy for both entities, and generally manages most personnel-related issues for both entities. At the same time, the operations of the two entities are not particularly dependent on each other. Despite the fact that one of the factors did not apply, the four factors that did outweigh the one that did not, so that the two entities being analyzed will most likely be considered a single entity.

To assist you in your determination of whether your business or organization will be considered a single entity with a Federal contractor, OFCCP has developed a list of 27 questions to guide you in your analysis.

The standards described in the five-factor, single entity test do not generally apply to State or local governments. Rather, OFCCP regulations at 41 CFR Sec. 60-1.5(a)(4) provide that the requirements of Executive Order 11246 in any contract with a State or local government (or agency, instrumentality, or subdivision thereof) are not applicable to any agency, instrumentality, or subdivision thereof of that government which does not participate in or work on or under the contract or subcontract. In addition, State and local governments and their units, except for educational institutions and medical facilities, are exempt from the requirements of filing the annual compliance report provided for by 41 CFR Sec. 60-1.7(a) and maintaining a written affirmative action compliance program prescribed by 41 CFR Sec. 60-1.40 and 41 CFR Sec. 60-2. OFCCP regulations at 41 CFR Sec. 60-250.4(a)(4) and 41 CFR Sec. 60-741.4(a)(5) contain similar language regarding the applicability of VEVRAA and Section 503, respectively.

Based upon the above: