Category Archives: Government Contracts

October 5, 2016

DOL Finalizes Paid Sick Leave Rule For Federal Contractors

By Mark Wiletsky6a013486823d73970c01b8d1dc5d4a970c

To implement President Obama’s September 2015 Executive Order, the U.S. Department of Labor (DOL) recently issued its final rule requiring certain federal contractors to provide up to seven days of paid sick leave per year to employees who work on covered contracts. Here are the essential requirements for contractors under this new rule.

Which Contractors and Employees Are Covered?

The final rule applies to new contracts with the federal government resulting from a solicitation that was issued, or contract that was awarded, on or after January 1, 2017. It includes contracts that are covered by the Davis-Bacon Act, the Service Contract Act, concessions contracts, and service contracts in connection with federal property or lands.

Not all employees of a federal contractor must be provided with this mandated paid sick time. Instead, employees must be allowed to accrue and use paid sick leave only while working on or in connection with a covered contract. Employees who perform work duties that are necessary to the performance of a covered contract but who are not directly engaged in performing the specific work called for by the contract, and who spend less than 20 percent of their work time in a particular workweek performing work in connection with such contracts, are exempt from the rule’s accrual requirements.

What Amount of Paid Sick Time Must Be Provided?

Contractors must allow employees to accrue one hour of paid sick leave for every 30 hours worked on or in connection with a covered contract, up to a maximum of 56 hours per year. In order to calculate that accrual, contractors may use an estimate of time their employees work in connected with (rather than on) a covered contract as long as the estimate is reasonable and based on verifiable information. As for employees for whom contractors are not required by law to keep records of hours worked, such as exempt employees under the Fair Labor Standards Act, it may be assumed that such employees work 40 hours each week.

If a contractor prefers not to calculate accrual amounts, the contractor may elect to provide an employee with at least 56 hours of paid sick leave at the beginning of each accrual year.

What If A Contractor Already Provides Paid Sick Time Off? 

A contractor’s existing paid time off (PTO) policy may fulfill the paid sick leave requirement as long as it provides employees with at least the same rights and benefits required under the final rule. In other words, if the contractor’s existing policy provides at least 56 hours of PTO that can be used for any purpose, the contractor does not have to provide separate paid sick leave, even if an employee chooses to use all of his or her PTO for vacation. However, if the contractor’s policy does not meet all of the requirements under the final rule, such as not permitting an employee to use paid time off for reasons related to domestic violence, sexual assault, or stalking, then the existing PTO policy would not comply. In such cases, the contractor would have to either amend its PTO policy to make it compliant, or separately provide paid sick leave for the additional purposes under the final rule.

How Does An Employee Use This Paid Sick Leave?

An employee may use paid sick leave in increments as little as one hour for absences resulting from any of the following:

  • the employee’s medical condition, illness or injury (physical or mental)
  • for the employee to obtain diagnosis, care, or preventive care from a health care provider for the above conditions
  • caring for the employee’s child, parent, spouse, domestic partner, or another individual in a close relationship with the employee (by blood or affinity) who has a medical condition, illness or injury (physical or mental) or the need to obtain diagnosis, care, or preventive care for the same
  • domestic violence, sexual assault, or stalking, that results in a medical condition, illness or injury (physical or mental), or causes the need to obtain additional counseling, seek relocation or assistance from a victim services organization, take legal action, or assist an individual in engaging in any of these activities.

An employee may request to use paid sick leave by a written or verbal request, at least seven calendar days in advance when the need for the leave is foreseeable. When not foreseeable, the request must be made as soon as is practicable. Contractors may limit the amount of paid sick leave that an employee uses only based on how much paid sick time the employee has available. Any denial of a request to use paid sick leave must be provided by the contractor to the employee in writing with an explanation of the denial. Operational need is not an acceptable reason to deny paid sick leave requests.

May Contractors Require Medical Certifications?

Contractors may require a medical certification only if the employee is absent for three or more consecutive full workdays. Contractors must inform employees that a medical certification will be required before he or she returns to work.

What About The Overlap With The FMLA?

Contractors must still comply fully with the federal Family and Medical Leave Act (FMLA) as well as state and local paid sick time laws. If an employee is eligible for time off under the FMLA, the contractor must meet FMLA requirements for notices and certifications, regardless of whether the employee is eligible to use accrued paid sick leave. The contractor may, however, run the paid sick leave concurrently with unpaid FMLA leave.

Must Unused Paid Sick Time Be Carried Over or Paid Out?

Contractors must carry over unused, accrued paid sick leave from one year to the next, but may limit the maximum amount of accrual at any point in time to 56 hours. Contractors are not required to pay employees for accrued, unused paid sick leave at the time of job separation, but keep in mind that state or local laws may mandate a different result if the organization uses PTO instead of sick time. However, if an employee has been rehired by the same contractor within 12 months after a job separation, the contractor must reinstate the employee’s accrued, unused paid sick leave, unless such amount was paid out upon separation. 

Preparing For January 2017

Employers who expect to seek or renew federal contracts on or after January 1, 2017 should review their existing sick leave and/or PTO policies to determine what changes may be required in order to comply with the new rule. The DOL provides many additional resources to explain the final rule, including a Fact Sheet, Overview of the Final Rule, and Frequently Asked Questions. Given the potential impact on contractors’ policies and how they are administered, we recommend taking steps now to determine how best to comply.

September 22, 2016

Minimum Wage For Federal Contractors Going Up In 2017

By Mark Wiletskyminimum wage increase ahead shutterstock_183525854

On January 1, 2017, the new minimum wage for employees working on covered federal contracts will be $10.20 per hour, up five cents from the current hourly minimum of $10.15. An even bigger increase will go into effect for tipped employees working on or in connection with covered contracts as the tipped-employee minimum cash wage goes up from $5.85 to $6.80 per hour.

Inflation-Based Increases

According to President Obama’s 2014 Executive Order establishing a minimum wage for employees working on federal contracts, and the Department of Labor’s (DOL’s) corresponding regulations, the annual minimum wage for non-tipped employees increases based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), as published by the Bureau of Labor Statistics, rounded to the nearest five cents. The annual percentage increase in the CPI-W over the past year was 0.287% which would raise the minimum wage rate to $10.18. Because the hourly rate must be rounded to the nearest multiple of five cents, the new rate beginning January 1, 2017 will be $10.20.

For tipped employees, the Executive Order requires that the minimum cash wage increase by $0.95 (or a lesser amount, if necessary) until it reaches 70% of the contractor minimum wage for non-tipped employees. For 2017, the hourly cash wage for tipped employees will go up by $0.95 cents to $6.80 per hour. Employers must remember that at all times, the amount of tips received by the employee must equal at least the difference between the cash wage paid and the Executive Order minimum wage. If the employee does not receive sufficient tips, the contractor must increase the cash wage paid so that the cash wage in combination with the tips received equals the Executive Order minimum wage.

Required Minimum Wage Notice

Covered federal contractors are required to inform all workers performing on or in connection with a covered contract of the applicable minimum wage rate under the Executive Order. The required notice may be met by posting the free poster on Federal Minimum Wage for Contractors provided on the Wage and Hour Division’s website. As with all employment law posters, this notice should be displayed in a conspicuous place at the worksite.

July 13, 2016

EEOC Revises Its Proposal To Collect Pay Data Through EEO-1 Report

By Cecilia Romero

6a013486823d73970c01b8d204e441970c-320wiOn July 13, 2016, the U.S. Equal Employment Opportunity Commission (EEOC) announced that it has revised its proposal to collect pay data from employers through the Employer Information Report (EEO-1). In response to over 300 comments received during an initial public comment period earlier this year, the EEOC is now proposing to push back the due date for the first EEO-1 report with pay data from September 30, 2017 to March 31, 2018. That new deadline would allow employers to use existing W-2 pay information calculated for the previous calendar year. The public now has a new 30-day comment period in which to submit comments on the revised proposal.

Purpose of EEOC’s Pay Data Rule 

The EEOC’s proposed rule would require larger employers to report the number of employees by race, gender, and ethnicity that are paid within each of 12 designated pay bands. This is the latest in numerous attempts by the EEOC and the Office of Federal Contract Compliance Programs (OFCCP) to collect pay information to identify pay disparities across industries and occupational categories. These federal agencies plan to use the pay data “to assess complaints of discrimination, focus agency investigations, and identify existing pay disparities that may warrant further examination.”

Employers Covered By The Proposed Pay Data Rule 

The reporting of pay data on the revised EEO-1 would apply to employers with 100 or more employees, including federal contractors. Federal contractors with 50-99 employees would still be required to file an EEO-1 report providing employee sex, race, and ethnicity by job category, as is currently required, but would not be required to report pay data. Employers not meeting either of those thresholds would not be covered by the new pay data rule.

Pay Bands For Proposed EEO-1 Reporting 

Under the EEOC’s pay data proposal, employers would collect W-2 income and hours-worked data within twelve distinct pay bands for each job category. Under its revised proposed rule, employers then would report the number of employees whose W-2 earnings for the prior twelve-month period fell within each pay band.

The proposed pay bands are based on those used by the Bureau of Labor Statistics in the Occupation Employment Statistics survey:

(1) $19,239 and under;

(2) $19,240 – $24,439;

(3) $24,440 – $30,679;

(4) $30,680 – $38,999;

(5) $39,000 – $49,919;

(6) $49,920 – $62,919;

(7) $62,920 – $80,079;

(8) $80,080 – $101,919;

(9) $101,920 – $128,959;

(10) $128,960 – $163,799;

(11) $163,800 – $207,999; and

(12) $208,000 and over.

Read more >>

June 15, 2016

OFCCP’s New Sex Discrimination Rule Expands Employee Protections Based on Pregnancy, Caregiver Status, and Gender Identity

Biggs_JBy Jude Biggs

This week, the OFCCP updated its sex discrimination guidelines on topics such as accommodations for pregnant workers, gender identity bias, pay discrimination, and family caregiving discrimination. Intended to align the OFCCP’s regulations with the current interpretation of Title VII’s prohibitions against sex discrimination, the new rule will require federal contractors to examine their employment practices, even those that are facially neutral, to make sure that they do not negatively affect their employees. The new rule takes effect on August 15, 2016.

Overview of New Sex Discrimination Rule

The existing OFCCP sex discrimination guidelines date back to the 1970s. The new rule is designed to meet the realities of today’s workplaces and workforces. Today, many more women work outside the home, and many have the financial responsibility for themselves and their families. Many women have children while employed and plan to continue work after giving birth to their children. Women sometimes are also the chief caregivers in their families. The updated regulations are meant to offer women and men fair access to jobs and fair treatment while employed.

The new rule defines sex discrimination to include discrimination on the basis of sex, pregnancy (which includes childbirth or related medical conditions), gender identity, transgender status and sex stereotyping. The rule specifies that contractors must provide accommodations for pregnancy and related conditions on the same terms as are provided to other employees who are similarly able or unable to perform their job duties. For example, contractors must provide extra bathroom breaks and light-duty assignments to an employee who needs such an accommodation due to pregnancy where the contractor provides similar accommodations to other workers with disabilities or occupational injuries.

The new rule also incorporates President Obama’s July 2014 Executive Order that prohibits federal contractors from discriminating on the basis of sexual orientation and gender identity. In addition, contractors that provide health care benefits must make that coverage available for transition-related services and must not otherwise discriminate in health benefits on the basis of gender identity or transgender status.

The rule prohibits pay discrimination based on sex. It recognizes the determination of “similarly situated” employees is case-specific and depends on a number of factors, such as tasks performed, skills, effort, levels of responsibility, working conditions, job difficulty, minimum qualifications, and other objective factors. Notably, the OFCCP rule says that employees can be “similarly situated” where they are comparable on some of the factors, but not all of them.

Unlawful compensation discrimination can result not only from unequal pay for equal work, but also from other employer decisions. Contractors may not grant or deny opportunities for overtime work, training, apprenticeships, better pay, or higher-paying positions or opportunities that may lead to higher-paying positions because of a worker’s sex. Employees may recover lost wages for discriminatory pay any time a contractor pays compensation that violates the rule, even if the decision to discriminate was made long before that payment.  Read more >>

June 18, 2014

Federal Contractors Facing $10.10 Minimum Wage Learn Specifics of Proposed Rule

Hvidston, BrynnBy Brynn Hvidston 

On June 12, 2014, the U.S. Department of Labor (DOL) issued its proposed rule to implement President Obama’s Executive Order 13658 which raises the minimum wage for workers on federal contracts to $10.10 per hour.  The Executive Order applies to new and replacement federal contracts that are awarded based on solicitations issued on or after January 1, 2015.  It also applies to contracts that are awarded on or after January 1, 2015 outside the solicitation process. 

Federal Contractor Minimum Wage Applies to Four Categories of Contracts 

Under the Executive Order, the new minimum wage for federal contractor employees reaches four major categories of federal contracts: 

  1. Procurement contracts for construction covered by the Davis-Bacon Act (DBA);
  2. Service contracts exceeding $2,500 that are subject to the Service Contract Act (SCA);
  3. Concessions contracts where the contractor uses federal property (e.g., land or facilities), such as operating restaurants, lodging and souvenir shops in national parks; and
  4. Contracts in connection with federal property or land and related to offering services for federal employees, their dependents or the general public, such as leasing space in a federal building to operate a child care center. 

The proposed rule makes clear that certain contractual arrangements are excluded from the new minimum wage requirement, namely (a) grants; (b) contracts with or grants to an Indian Tribe; (c) procurement contracts for construction that are not subject to the DBA (i.e., for less than $2,000); (d) any contract for services that are exempted from coverage under the SCA (e.g., contracts for public utility services); and (e) employment contracts providing direct services to a federal agency by an individual. 

Workers Entitled to the Federal Contractor Minimum Wage 

Federal contractors need to know which employees are entitled to the new $10.10 per hour minimum wage.  The proposed rule provides that workers who perform work on covered federal contracts will be entitled to the federal contractor minimum wage for all time spent working on covered contract work, provided their wages are governed by the Fair Labor Standards Act (FLSA), the DBA or the SCA.  In other words, it applies to employees who are entitled to either the FLSA minimum wage or prevailing wages under the DBA or SCA for all hours worked on covered federal contract projects.  The proposed rule also clarifies that the new minimum wage applies to FLSA-covered employees who provide support on DBA and SCA-covered contracts when such support is necessary to the performance of the contract.  

Contract Clauses, Annual Wage Setting Process and Enforcement 

The proposed rule sets forth the obligations that covered contractors and subcontractors will need to fulfill, such as including the minimum wage contract clause in lower-tiered subcontracts and required recordkeeping.  The rule also prohibits employers from retaliating against employees who exercise their rights to receive the federal contractor minimum wage and prohibits taking kickbacks from wages paid to employees on covered contract work.  

Each year, beginning January 1, 2016, the Secretary of Labor will evaluate whether the $10.10 per hour minimum wage rate for federal contract work should be revised.  Any new rate is to be published at least 90 days before it is to take effect. 

The DOL’s Wage and Hour Division (WHD) will utilize its enforcement mechanisms to handle any complaints of a violation of the Executive Order or its implementing regulations.  The WHD may conduct an investigation and pursue an informal complaint resolution.  It may also seek remedies for a violation, such as payment of back wages, as well as sanctions, such as debarment.  Administrative hearings may be used to resolve disputed cases. 

Interested Parties May Submit Comments 

Anyone interested in submitting comments to the DOL related to its proposed rule implementing the Executive Order establishing a federal contractor minimum wage may do so at http://www.regulations.gov.  Comments must be received on or before July 17, 2014.  The DOL states it will review the comments received and issue a final rule by October 1 of this year.  More information may be found at http://www.dol.gov/whd/flsa/nprm-eo13658.  We will keep you posted on any developments and the final rule as they become available.

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June 16, 2014

Sexual Orientation Discrimination By Federal Contractors To Be Prohibited, According to News Reports

Cave_BradBy Brad Cave 

Major news sources are reporting that President Barack Obama plans to issue an executive order prohibiting federal contractors from discriminating against employees based on sexual orientation and gender identity.  The specific details of the executive order have not been finalized and the signing date is not yet known.  The planned order was revealed by administration officials on Monday, June 16, 2014, just before the President attends a lesbian, gay, bisexual and transgender (LGBT) event sponsored by the Democratic National Committee in New York City on Tuesday. 

For twenty years, various federal lawmakers have introduced and tried to pass ENDA, the Employment Non-Discrimination Act, which would prohibit employment discrimination on the basis of sexual orientation by all employers with 15 or more employees.  The most recent ENDA bill passed in the Senate but is dead in the House, as House Speaker John Boehner reportedly has said he will not allow the bill to come to a vote.  Like it has done with its minimum wage and other pay initiatives that stalled in Congress, the White House is furthering its goals for U.S. workers outside the legislative process by issuing an executive order.  Although the executive order applies only to federal contractors, many of whom already have policies prohibiting discrimination based on sexual orientation, the prohibition for contractors on this basis is seen as a step toward protection for LGBT workers in all work contexts. 

Hearing word of the impending executive order, lawmakers and various groups appear to be urging the administration to include an exemption for religious reasons.  That is unlikely to happen with the executive order but until we see the final order, it is unclear if any federal contractors and subcontractors will be exempt.  We will keep you posted as this unfolds.

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October 28, 2013

E-Verify – Catching Up After the Government Shutdown

By Roger Tsai 

The early October shutdown of the federal government left many employers unable to verify employment eligibility through the government’s E-Verify system.  Employees were unable to resolve Tentative Nonconfirmations (TNCs) and deadlines were missed.  What do you do now that the government has reopened?  How do you catch up and remain compliant with your E-Verify obligations?  Here are tips based on information provided by the U.S. Citizenship and Immigration Services (USCIS). 

  • November 5th deadline for creating E-Verify case for employees hired during the shutdown.  If you hired employees during the government shutdown, you need to create an E-Verify case for each such employee no later than November 5, 2013.  If the system asks why the case is late because it was not entered within three days of the hire, select “Other” from the drop-down list and enter “federal government shutdown.” 
  • Initiate referral process now for employees who decided to contest TNC during shutdown.  If an employee decided to contest his or her TNC while the E-Verify system was unavailable, initiate the referral process in E-Verify now.
  • Add 12 business days for employees to resolve TNC.  If an employee had a TNC referred during the period of September 17 – 30, 2013, the deadline for the employee to contact the Social Security Administration or the Department of Homeland Security to resolve their case fell during the government shutdown.  These employees may add 12 federal business days to the date printed on the “Referral Letter” or “Referral Date Confirmation” to resolve their cases. 
  • Start a new case for any Final Nonconfirmations (FNCs) or No Shows that resulted because of the shutdown.  If an employee received a FNC or DHS No Show because of the government shutdown, you will need to close the case and select “The employee continues to work for the employer after receiving a Final Nonconfirmation (or No Show) result.”  Then enter a new case in E-Verify for that employee so that the employee has an opportunity to contest and resolve the TNC that led to the FNC result.
  • I-9 obligation not affected by the government shutdown.  Because I-9 forms do not require government input, I-9 requirements were not affected by the government shutdown.  You should have properly completed and retained a Form I-9 for every employee, even those hired during the shutdown. 

Employees may be confused about what to do with a TNC or FNC that was due to or affected by the government shutdown. Refer them to the Employee section of the E-Verify website or to E-Verify Customer Support.   Remember that employers may not take any adverse action against an employee because of a TNC and should not take any adverse action due to a FNC or No Show result caused by the shutdown.  By catching up with E-Verify obligations now, your employment eligibility compliance procedures should get back to normal within a few weeks.


Disclaimer:This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.


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September 3, 2013

OFCCP Announces New Veterans and Disability Regulations for Contractors

By Brad Cave 

OFCCP-logoLast week, the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) announced Final Rules that are intended to improve job opportunities for disabled workers and veterans.  Whether the rules will accomplish that purpose is uncertain; what is clear is that the new rules greatly increase affirmative action requirements and burdens on federal contractors.    Under the new regulations, federal contractors and subcontractors face significantly increased documentation, data collection, recordkeeping and hiring goals. 

Key Provisions of New Disability and Veterans Regulations 

On August 27, 2013, OFCCP released the content of its Final Rules that change the regulations implementing Section 503 of the Rehabilitation Act of 1973 and the Vietnam Era Veterans’ Readjustment Assistance Act as amended by the Jobs for Veterans Act of 2002 (VEVRAA).  Section 503 of the Rehabilitation Act of 1973 prohibits discrimination in employment decisions against individuals with disabilities and requires federal contractors and subcontractors to take affirmative action to recruit, hire, promote and retain disabled workers.  VEVRAA prohibits federal contractors and subcontractors from discriminating against protected veterans and requires affirmative action in employing these veterans.  The key provisions of the Final Rules that change the regulations implementing these laws include: 

  • A 7% Utilization Goal for Qualified Individuals with a Disability.  For the first time, contractors must strive to employ disabled workers at a level that reaches 7% of each job group.  For contractors with 100 or fewer employees, the 7% goal applies to the contractor’s entire workforce, rather than each job group.  OFCCP states that this is not a quota and failure to meet the disability utilization goal will not, by itself, constitute a violation of the regulation.  However, OFCCP requires contractors to conduct an annual utilization analysis to find deficient areas and determine specific actions to rectify identified problems.

 

  • Establishing Hiring Benchmarks for Veterans.  Without setting a specific utilization goal for hiring veterans, OFCCP will require federal contractors to establish hiring benchmarks each year for protected veterans.  Contractors may choose to use the national percentage of veterans in the civilian labor force, as updated annually by OFCCP (currently 8%), as a benchmark, or may establish their own benchmark using a combination of data from the Bureau of Labor Statistics, Veterans’ Employment and Training Service and the contractor’s unique hiring circumstances.

 

  • Collect and Retain Comparison Data on Disabled and Veteran Applicants and Employees.  Under the Final Rules, contractors must document quantitative comparisons of the number of disabled workers and veterans who applied for jobs and the number hired.  The data must be compiled annually and retained by the contractor for three years in order to track trends and measure outreach efforts.

 

  • Ask Applicants and Employees to Self-Identify as Individuals with a Disability and as a Veteran.  The Final Rules mandate that employers invite applicants at both the pre-offer and post-offer stage to self-identify themselves as individuals with a disability and as veterans.  The Final Rules further require that contractors invite their current employees to self-identify at least every five years.  OFCCP offers sample self-identification language.

 

  • Mandated Equal Opportunity Clause in Subcontracts.  Under the Final Rules, contractors must include specific language to incorporate the equal opportunity clause into subcontracts so that subcontractors know their responsibilities as federal contractors.

 

  • Provide OFCCP Access to Records.  The Final Rules specify that contractors must allow OFCCP to review documents related to a focused review or compliance check either on-site or off-site, at OFCCP’s option.  OFCCP can request that contractors reveal all formats in which they maintain records and then request the records in whatever format OFCCP chooses.

 

  • Updates to Comply with the ADAAA.  The  Final Rule related to the disability regulations updates the regulations in light of the revised definition of “disability” and certain nondiscrimination provisions under the ADA Amendments Act of 2008 (ADAAA).

 


Still Burdensome, But Some Proposals Slightly Watered Down  

Federal contractors were critical of the many regulatory changes first proposed by the OFCCP in 2011.  OFCCP received many comments in response to the proposed rules and made some modest improvements based on those comments.  For example, the proposed rules sought to impose a five-year recordkeeping requirement.  The Final Rules reduced that requirement to three years.  The proposed disabilities rule sought to require contractors to review their physical and mental job qualifications on an annual basis while the Final Rule allows contractors to establish their own schedule for reviewing job qualifications.  Despite these and other small revisions from the proposed to the final regulations, the Final Rules add significant burdens on contractors who must revamp their employment policies and documentation practices to comply with the new regulations.

So, Are You Sure You’re Not Disabled? 

The new hiring quota for disabled individuals places employers in a very awkward position.  For the first time, employers are required to ask and need to know whether applicants and employees consider themselves to be disabled.  Under these rules, employers are expected to meet the 7% “goal” by workgroup.  But some employees who meet the definition of disabled will not consider themselves to be disabled or be reluctant to disclose their status to their employer.  The OFCCP recognized that a study has shown that only about 50% of those with disabilities are likely to self-identify.  The OFCCP is not concerned about this high degree of inaccuracy.  According to its preamble to the new rules, even inaccurate data which greatly underreports the number of disabled applicants and employees will still assist the contractor and the OFCCP to evaluate the contractor’s hiring and selection process!  Stated differently, the OFCCP does not care if the data is faulty by as much as 50% as long as it has some data on which to base its enforcement decisions. 

The OFCCP also suggested that employers should designate individuals as disabled, even if they decline to self-identify, where the disability is obvious or the employer knows about the disability.  Of course, for years we have cautioned employers to never label an employee as disabled to avoid “regarded as” claims under the ADA.   Now, employers who are federal contractors will have an incentive to identify employees as disabled to meet the goal, and have the OFCCP’s permission to do so.  In an interesting twist, the OFCCP’s permission for employers to designate employees as disabled was explained in the preamble to the new rule, not in the new regulations.   Since the preamble does not have the force and effect of law, the OFCCP’s permission is not likely to have much value as a defense to an employee’s allegation that the employer regarded them as disabled when the employer designates the employee for purposes of complying with this rule.  While federal contractors may have little choice if a disabled employee declines to self-identify, it will continue to be very important for employers to keep all such designations strictly confidential and out of the hands of supervisors and managers. 

Effective Date of the Disability and Veterans Affirmative Action Final Rules 

The Final Rules become effective 180 days after they are officially published in the Federal Register which is expected to occur in the next two weeks.  Consequently, contractors have about six months to get policies and procedures in place to comply with the new regulations.  Contractors subject to written affirmative action plan requirements are allowed to continue with the plan they have in place on the effective date of the Final Rules.  However, the next cycle of their affirmative action plan must be drafted to comply with the new regulations. 

OFCCP will be hosting webinars on the new regulations.  Information about the webinars and the Final Rules may be found on the OFCCP website: http://www.dol.gov/ofccp/.


Disclaimer:This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.


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April 29, 2013

OFCCP Settles Alleged Systemic Discrimination Against…Males

By Chris Chrisbens

Occasionally, the question arises whether the Equal Employment Opportunity Commission (EEOC) and the Office of Federal Contract Compliance Programs (OFCCP) will pursue alleged discrimination against white males.  The OFCCP answered that question last Thursday announcing an audit settlement with federal contractor Goodwill Industries of Southern California alleging systemic discrimination against men.  OFCCP’s press release
states that “Goodwill’s hiring process favored female applicants for
entry-level positions as attendants at local donation centers, in part because
of perceptions that women have better customer service skills.” 

While denying discrimination, Goodwill agreed to pay $130,970 in back wages to 200 unsuccessful male applicants and to make 18 job offers to qualified men previously rejected. 

"Sex discrimination in the workplace can take many forms, and we are committed to fighting all of them," said OFCCP Director Patricia A. Shiu. "That means getting away from outdated notions about
what constitutes 'men's work' and what constitutes 'women's work.'”

For federal contractors it is especially important that they pay attention to statistically significant hiring disparities against both women and men, and are prepared to defend their hiring criteria as job-related and consistent with business necessity. In this case, Goodwill’s alleged belief that men were not as well-suited for customer service as women clearly did not pass muster. 

April 3, 2013

OFCCP Wins Again: Health Care Providers May Be “Subcontractors” with Affirmative Action Obligations

By  Chris Chrisbens 

In the latest decision in the ongoing battle between the Office of Federal Contract Compliance Programs (OFCCP) and health care providers, a U.S. district court ruled that certain health care providers may be “subcontractors” covered by federal affirmative action laws and regulations.  UPMC Braddock v. Harris.  In that case, UPMC Health Plan, a health maintenance organization (HMO), contracted with the U.S. Office of Personnel Management (OPM) to provide insurance coverage and HMO services to federal employees participating in the Federal Employees Health Benefits Program (FEHBP).  The HMO Health Plan then contracted with UPMC Braddock and two other hospitals to provide HMO medical services to covered federal employees.

Two Key Findings

Key to the court’s decision were two findings:  (1) the provision of medical services by the hospitals is a “nonpersonal service” within the definition of “subcontract” found in the affirmative action regulations; and (2) the HMO Health Plan’s contract with the federal government (OPM) obligated it to provide medical services, as opposed to only insurance coverage, which it provided through the hospitals.  Accordingly, the hospitals in the case qualified as “subcontractors” under both prongs of the definition:

Subcontract means any agreement or arrangement between a contractor and any person… :

(1) For the purchase, sale or use of personal property or nonpersonal services which, in whole or in part, is necessary to the performance of any one or more contracts; or

(2) Under which any portion of the contractor's obligation under any one or more contracts is performed, undertaken or assumed.

Although the Braddock case may be appealed, as it currently stands health care providers and insurers may have affirmative action obligations arising out of:

  • Any direct contracts with the federal government of $50,000 or more, such as contracts with the Veterans Administration, Health and Human Services (including Centers for Medicare and Medicaid Services), Department of Justice, and under the FEHBP;
  • Subcontracts of $50,000 or more as defined above, including those under FEHBP; or
  • Direct contracts and subcontracts under Medicare Parts C (Medicare Advantage) or D (prescription drug plans).  OFCCP concedes that Medicare reimbursements under Parts A and B are financial assistance rather than government contracts and thus are not subject to affirmative action obligations. 

Currently, healthcare providers who are network providers in TRICARE—a U.S. Department of Defense healthcare program for military personnel and their families – are not “subcontractors” pursuant to a 2012 amendment to the TRICARE program.  That could also change. 

As stated in OFCCP’s Directive 301, OFCCP takes a case-by-case approach to determining health care provider and insurer coverage.  However, OFCCP’s Directive 293 (although rescinded by Directive 301), still provides some useful insight into the OFCCP’s analysis.  The bottom line is OFCCP remains very interested in health care providers and insurers who therefore, must carefully analyze and understand their federal government contacts with the foregoing in mind.

 

Court Rejects Hospitals’ Arguments to Avoid Subcontractor Status

In Braddock, the UPMC hospitals made four arguments to counter their alleged status as “subcontractors” subject to affirmative action obligations.    First, they argued that the contract between OPM and the HMO Health Plan specifically excluded medical providers from the contract’s definition of “subcontractor,” and therefore, they were not “subcontractors” under the regulations.  To the contrary, the court found that because the parties had “no authority to define the contours of the equal opportunity laws governing federal procurement by devising their own meaning for the word ‘subcontractor,’ the definition of that word in the OPM/Health Plan contract has no effect on whether the hospitals lawfully may be regarded as government subcontractors and subject to the attendant legal obligations.”

The hospitals next argued that because the medical services they provided to federal employees are very personal in nature, rather than “nonpersonal services,” the first prong of the “subcontractor” definition was not met.  Because affirmative action regulations do not define the term “nonpersonal services,” the court turned to the definition found in the Federal Acquisition Regulations (which also apply to federal contractors and subcontractors), and which contain a “materially identical definition of ‘subcontract.’”  That regulation provides that a non-personal services contract focuses on the fact that the employees performing the contract are not subject to the “supervision and control usually prevailing in relationships between the Government and its employees."  It also explains that "[a] personal services contract is characterized by the employer-employee relationship it creates between the Government and the contractor's personnel.”  Under this generally-applicable standard, the court found that the hospitals’ services were non-personal because the employees performing them were not controlled by the government. 

The hospitals also argued that they were not “subcontractors” under either prong of the definition because:  (1) the medical services performed were not “necessary to the performance” of the HMO Health Plan’s contract with OPM; and (2) they had not “performed, undertaken or assumed” any of the HMO Health Plan’s obligations under the OPM contract.  These arguments turned on whether the OPM contract obligated the HMO Health Plan to provide only insurance coverage, medical services or both.  It was also based on the administrative ruling in OFCCP v. Bridgeport Hospital.  There it was held that because Blue Cross/Blue Shield (not an HMO) was obligated under its contract with OPM to provide only insurance coverage, the health care providers to which it provided reimbursement for services rendered to federal employees were not “subcontractors” because they provided nothing necessary to the performance of the OPM contract and likewise undertook no obligation of the Blue Cross OPM contract.  In contrast, in Braddock, the HMO Health Plan’s contract with OPM required it to put an HMO into operation, and otherwise provide specified medical services, which it accomplished via the hospitals.  Thus, unlike Blue Cross in the Bridgeport case, it was both an insurer and a medical services provider.  Thus, the UPMC hospitals both performed a service necessary to the OPM contract and undertook at least one of its obligations.

Finally, the hospitals made a contractual argument that because affirmative action obligations had not been incorporated into the hospitals’ contracts with the HMO Health Plan, they were not binding on the hospitals.  The court rejected that argument finding that such obligations were nonetheless incorporated into the contracts by operation of law because they express “a significant or deeply ingrained strand of public procurement policy.” 

Unless the UPMC hospitals are successful in an appeal, it appears likely that OFCCP will pursue compliance audits of health care providers as outlined above.