Federal Contractors Brace for OFCCP’s Ambitious Workplace Makeover

Businesses that enter into agreements with the Federal Government live in a very different world than those that do not. In addition to the non-discrimination obligations imposed by Title VII and state non-discrimination laws, they are required to take affirmative action to employ individuals in certain protected categories and in certain circumstances are required to develop written plans that set forth steps the company will take to satisfy the affirmative action goals. 

The Office of Federal Contract Compliance Programs (OFCCP) is the agency within the U.S. Department of Labor responsible for enforcing equal employment opportunity laws and affirmative action requirements against companies that do business with the federal executive agencies, either as a covered prime-contractor or a sub-contractor in both construction contracts and non-construction (referred to as “supply and service”) contracts.

During the Obama Administration, the OFCCP has transformed itself from a “toothless tiger” to the entity that is implementing and enforcing most of the Administration’s desired workplace policies that do not have the votes in Congress to be passed as laws of general applicability.

The OFCCP is imposing these policies on businesses as a condition of doing business with the Executive Branch. In fact, this current year the OFCCP has rolled out what several legal observers have called its most ambitious agenda since the agency was conceived. A number of initiatives went into effect on October 1, 2015. Others will go into effect next year.

The following is a list of some of the most significant OFCCP initiatives that contractors and subcontractors can expect to see in the final fourteen months of the Obama Administration:

1. New Affirmative Action coverage thresholds. The obligation of a contractor or subcontractor to have a written affirmative action plan generally is tied to the number of employees and the value of the contracts it holds. Executive Order 11246 and Section 503 of the Rehabilitation Act of 1973 require every supply and service contractor and subcontractor with 50 or more employees and a contract of $ 50,000 or more to have a written affirmative action plan for women and minorities and individuals with disabilities, respectively (construction contractor requirements are slightly different). Effective October 1, 2015, the coverage threshold for a written affirmative action plan for veterans under Section 4212 of VEVRAA has been increased to a contract of $150,000 or more (from $100,000 or more).
2. New federal minimum wage. Effective January 1, 2016, a new $10.15 per hour federal minimum wage will become applicable to all existing federal contracts and sub-contracts. A $10.10 hourly federal minimum wage became legally effective this year, but applied only to “new contracts.”
3. Order Requiring Paid Sick Leave for all Contractor Employees. The OFCCP has announced its intent to publish a final rule on or before September 30, 2016, requiring all federal contractors and sub-contractors to provide paid sick leave for their employees, effective January 1, 2017.  
4. LGBT Executive Order Rules. Effective January 1, 2015, Executive Order 11246 was amended to prohibit federal contractors and sub-contractors from discriminating in employment on the basis of sexual orientation and gender identity, in addition to race, sex, color, national origin, and religion. Interim rules are in the process of being drafted on implementation.
5. Executive Order 13673: Fair Pay and Safe Workplace requirements. Also known as the “bad actors reporting requirement,” this Order was signed on July 31, 2014. Proposed guidelines were published in May 2015, and final rules likely will go into effect in 2016. This Order requires any company bidding on a federal contract worth more than $500,000 to report all “employment law violations” during the previous three years and then update their status every six months.  Violations that must be disclosed include violations of Executive Order 11246, the FLSA, FMLA, OSHA, Title VII, ADEA, ADA, the NLRA, Davis Bacon Act, Service Contract Act, and all state law equivalents. These violations include administrative merits determinations (e.g. probable cause findings), arbitral awards, citations, and civil judgments. As currently proposed, this disclosure will not be private and will be subject to FOIA requests from any plaintiff’s attorney in employment litigation.
6. TRICARE fallout continues. Just as the NLRB has flexed its regulatory muscles in the non-unionized workplace, the OFCCP has expanded its reach in imposing affirmative action obligations on health care providers, hospitals, and clinics who are not otherwise federal contractors or subcontractors simply by virtue of their participation in the TRICARE program. Simply described, TRICARE is a health care program of the Department of Defense that provides civilian health benefits for military personnel and their dependents. A very large number of hospitals and clinics throughout the United States participate in this program. It has long been established that the receipt of Medicare and Medicaid reimbursements did not create a contract or sub-contract that subjected health care providers to the jurisdiction of the OFCCP and the affirmative action requirements of that agency. Health care providers that participated in TRICARE proceeded on the assumption that TRICARE reimbursements were treated like Medicare and Medicaid reimbursements, and many did not implement affirmative action plans if they did not otherwise have any federal contracts or subcontracts that met the threshold requirements.

In 2010, a federal administrative law judge held in a litigated case that health care providers that participated in the TRICARE program were subject to the affirmative action requirements of the OFCCP. The OFCCP immediately targeted these providers and issued notices of audits of their affirmative action plans (which often did not exist).  This tactic resulted in many providers entering into conciliation agreements and instituting affirmative action plans, rather than litigating the issue.  

In 2012, Congress passed legislation that was intended to insulate TRICARE providers from this requirement, but due to allegedly inartfully drafted language, the OFCCP claimed the legislation was inapplicable to most providers, and persisted in affirmative action audits. In 2014, the OFCCP announced a five-year moratorium on enforcement of affirmative action obligations as a result of TRICARE participation. The OFCCP has not altered its position. Unless Congress intervenes or a new Administration instructs the OFCCP to stand down, the moratorium will be lifted and audits may begin in 2018. Health care providers that participate in TRICARE are advised to plan and proceed accordingly.

Nyemaster Goode assists federal contractors and subcontractors in understanding and complying with their affirmative action obligations and the many expanding workplace regulations imposed by the federal government. We also have represented clients in audits conducted by the OFCCP. We will continue to monitor these significant developments.