Monthly Archives: October 2012

October 24, 2012

OFCCP / TRICARE Saga: Healthcare Provider NOT a “Subcontractor”

By Chris Chrisbens

In an opinion released October 23, the Department of Labor’s Administrative Review Board (ARB) ruled Florida Hospital of Orlando’s TRICARE network provider subcontract with Humana Military Healthcare Services (HMHS) is not a covered subcontract for purposes of federal affirmative action obligations.  OFCCP v. Fla. Hosp. of Orlando, DOL  ARB, No. 11-011. 

For now, it’s safe to say that subcontracts to be a TRICARE network provider do not, alone, impose federal affirmative action obligations.  However, contractual relationships with other federal agencies or subcontracts with other federal contractors may impose such obligations. 

A Long Road…

HMHS had a managed care support contract with the U.S. military healthcare program TRICARE, including an obligation to establish networks of independent healthcare providers. As with many other providers, HMHS entered into a subcontract with Florida Hospital designating it as a TRICARE network provider. 

In 2008, the Office of Federal Contract Compliance Programs (OFCCP) attempted to audit Florida Hospital for compliance with federal affirmative action laws, believing that its subcontract with HMHS qualified as a covered subcontract.  Florida Hospital disagreed and OFCCP brought an administrative action which resulted in a 2010 Administrative Law Judge (ALJ) ruling that the Florida Hospital’s subcontract was covered and imposed affirmative action obligations.  The ALJ also rejected Florida Hospital’s argument that TRICARE is a federal financial assistance program (such as Medicate Parts A and B) and, therefore, receipt of financial assistance does not trigger coverage. 

After Florida Hospital appealed to the ARB, Section 715 of the 2012 National Defense Authorization Act (NDAA) addressed the matter by amending TRICARE law to state:  “For the purpose of determining whether network providers under such provider agreements are subcontractors for purposes of the Federal Acquisition Regulation or any other law, a TRICARE managed care support contract that includes the requirement to establish … a network of providers may not be considered to be a contract for the performance of health care services or supplies on the basis of such requirement.”

Based on that language, the ARB ruled that Florida Hospital’s TRICARE subcontract was no longer a covered subcontract and OFCCP has no jurisdiction based on such a subcontract. 

What Now

It is seems unlikely OFCCP will challenge this ruling or attempt to continue TRICARE audits any time in the near future, which is good news for those like Florida Hospital whose TRICARE network provider subcontract is the ONLY basis for affirmative action obligations.  It also seems unlikely that the NDAA for 2013 will reverse course on the amendment to TRICARE law.  However, for those with other covered federal contracts or subcontracts, this ruling provides little solace. 

October 19, 2012

Settlement $weet $pot: OFCCP Alleges Hiring Discrimination

By Chris Chrisbens

Press releases out of the Office of Federal Contract Compliance Programs (OFCCP) during 2012 tell us the real OFCCP audit story:   the most effective step federal contractors could take to avoid OFCCP entanglement (and remain beyond the glare of future OFCCP press releases) is attention to applicant tracking and adverse impact in hiring. 

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The Settlements Say. . .

Well into 2012, OFCCP’s proposed affirmative action regulations for veterans and the disabled continue to absorb the attention of federal contractors . . . and their advisors.  Yet, no one can say whether the proposals will ever see the light of day.  Likewise, OFCCP has trumpeted compensation
disparity, but suffered a setback in the form of aNational Academy of Sciences report critical of its proposed compensation data collection tool. 

OFCCP’s 2012 press releases tell us where the money really is (and always has been):  alleged discrimination in hiring.  It’s an oft-repeated, and true, refrain that OFCCP’s bread and butter are settlements of these allegations.  Eight of its 9 press releases in 2012 announced settlement of hiring discrimination allegations.  OFCCP issued no press releases regarding any other type of settlement, mostly because they have been too few or relatively insignificant to warrant attention. 

While these settlements arose out of audits begun at least a couple years ago, do they tell us anything for today?  Of course: (1) when things aren’t going as planned…OFCCP goes to what it knows; and (2) diligent data collection, accurate applicant tracking, and through analysis of adverse impact remain essential to federal contractor defense of hiring allegations.  Several of settlements at least suggest that, while there may have been unlawful discrimination (which each contractor denied), an inability to effectively address adverse impact and defend hiring results may have been complicated by poor applicant tracking and a lack of information to explain hiring decisions. 

2012 Settlements

For instance, JacintoPort International, LLC paid $219,000 to settle allegations of race discrimination in hiring involving 48 African-American and 21 Caucasian applicants who were rejected for longshoreman positions.  JacintoPort agreed to “undertake extensive self-monitoring measures to ensure that all hiring practices fully comply with the law, including record-keeping requirements.”  OFCCP’s press release also noted it had “previously cited JacintoPort for…failing to implement an applicant tracking system for new hires, and to develop and execute action-oriented programs to recruit women and African-Americans.”   

NCS Pearson, Inc. agreed to pay $100,000 for alleged hiring discrimination against 67 Asian applicants for a software developer position, allegedly indicated by adverse impact of 3.87 standard deviations.  OFCCP in the conciliation agreement asserted that NCS Pearson failed to evaluate personnel activity to determine whether there were selection disparities, or to analyze its applicant data to measure
the impact of selection decisions on minorities and females.

FedEx paid $3 million to settle 22 lingering audits which, according to the OFCCP, “uncovered extensive violations of the executive order's record-keeping requirements.”

Baldor Electric Company paid $2 million to resolve allegations of race and gender hiring discrimination arising out of its applicant screening process affecting 795 women, African-Americans, Asian and Hispanic applicants who were rejected before the interview stage. Baldor agreed to “undertake extensive self-monitoring measures to ensure that all hiring practices fully comply with the law, including record-keeping requirements.”

Lund Boat Company and its parent, Brunswick Corporation, settled a complaint of hiring discrimination against females (4.80 standard deviations) alleging that Lund failed to keep an applicant log and retain all applications received; failed to maintain an accurate applicant flow log to
determine whether there are selection disparities; and failed to conduct adverse impact analyses.  In addition to paying $295,000 in back wages and interest, Lund “agreed to maintain and retain
required employment records, undertake extensive self-monitoring measures to ensure that all hiring practices fully comply with the law and submit detailed progress reports to OFCCP for the next two years.”

An OFCCP complaint against Meyer Tool, Inc. alleged that it failed to retain employment applications for the required two-year period, or to implement an applicant tracking system to determine selection disparities.  Meyer Tool , which had federal contracts of $300,000, paid $325,000 to settle hiring discrimination claims and agreed to “maintain employment records as required by law.” 

What to Do

These settlements suggest that OFCCP to some extent had these contractors over a barrel because of poor data collection and maintenance, leading to an inability to explain adverse impact and hiring
decisions.  How to avoid this situation?  You know the answer: 

– beef-up your applicant tracking system and use job requisition codes to track applicants to specific job openings;

– use descriptive, customized disposition codes that track the Internet Applicant Rule and explain when and why the job seeker fell out of the hiring process;

– train recruiting and hiring personnel in the consistent and uniform use of disposition codes;

– delve into statistically significant hiring disparities and be prepared to defend them based on documented hiring information.