OFCCP News Roundup

The Latest Clash Regarding Jurisdiction Over Healthcare Providers

The OFCCP made its next move in the continuing battle over whether it has jurisdiction over health care providers. On Wednesday, April 25, 2012, the OFCCP rescinded Directive 293, its most current guidance for assessing whether health care providers or insurers (collectively "HCPs") are federal contractors or subcontractors for purposes of OFCCP jurisdiction. Click here for more information about Directive 293. The OFCCP's move was driven by the December 31, 2011 passage of the National Defense Authorization Act of 2012 (NDAA), which provides that a TRICARE managed care support contract that includes the requirement to establish, manage, or maintain a network of providers is not a covered contract for OFCCP's purposes. Click here for more information about the NDAA.

On April 25th, the OFCCP also hosted a Webinar to discuss its jurisdiction over HCPs. Here is what you need to know:

• Despite the passage of the NDAA, the OFCCP will not concede it lacks jurisdiction over TRICARE providers and is pursuing its position in the pending OFCCP v. Florida Hospital of Orlando case. (For more information about the Florida Hospital litigation, see here.) Instead, the OFCCP has merely put "on hold" all compliance evaluations for HCPs where the only basis for OFCCP's jurisdiction is a TRICARE managed care support contract.
   
• The OFCCP made clear it will do a deep dive into the federal contracts of HCPs to determine if there is a basis independent of TRICARE for OFCCP jurisdiction (such as a contract with the Department of Health and Human Services, the Veterans Administration, or the Department of Justice). The OFCCP vowed to move forward with compliance evaluations of HCPs now if it can find a non-TRICARE hook for continuing the review.
   
• If your organization is a HCP with a compliance evaluation that was put on hold with the passage of the NDAA, watch your mailboxes: the OFCCP will be contacting such contractors by letter beginning April 30, 2012 letting them know whether the OFCCP believes the only basis of jurisdiction is TRICARE and that the investigation is placed "on hold" or whether OFCCP believes it has an independent basis for jurisdiction and will continue its review.

The OFCCP also indicated that contractors who are subsequently selected for compliance evaluation while Florida Hospital is pending going forward will be subject to the same "on hold" or "move forward" policy depending on whether TRICARE is the only basis on which OFCCP may assert jurisdiction.

House Subcommittee Holds Hearing on Impact of OFCCP Actions

The OFCCP's aggressive approach has the attention of Congress! On April 18, 2012, the House Subcommittee on Health, Employment, Labor, and Pensions held the first oversight hearing on the activities of the Office of Federal Contract Compliance Programs (OFCCP) in more than 15 years. While the subcommittee hearing featured panelists both supportive and critical of OFCCP actions, significantly, OFCCP Director Patricia A. Shiu was not invited to participate.

Witnesses critical of OFCCP's increased enforcement activity voiced concerns about the tremendous burdens imposed by current, and especially pending, regulations. One witness suggested that OFCCP had greatly underestimated the burden and cost to contractors stemming from proposed disability regulations, pointing to a recent survey which showed that it would cost contractors at least $2 billion in first year of implementation and an additional $1.5 billion annually in subsequent years, rather than the $80.1 million estimated by OFCCP.

Another witness who is a director of human resources information systems at a research hospital, spoke of the significant resources, time, manpower, and infrastructure that goes into her organization's efforts to develop and implement its Affirmative Action Program under current regulations, and noted that such burdens make their focus "just trying to survive our next audit," not getting the best workers. Proponents of OFCCP's current and proposed regulations focused on the importance of OFCCP's mission and role in combating employment discrimination.

There was a mixed reaction of the House subcommittee members, along party lines. However, the hearing ended without indication of further action by the Subcommittee. The Subcommittee's webcast and the written testimony submitted to the Subcommittee is available here. Stay tuned for possible additional hearings in the near future.

OFCCP's 2013 Budget Justification Reveals Focus on Enforcement Activity and New Selection Process for Multi-Establishment Evaluations

The U.S. Department of Labor released its fiscal year (FY) 2013 Budget Request earlier this year. As usual, the Office of Federal Contract Compliance Programs' (OFCCP's) justification for its requested budget provides a blueprint for what lies ahead with the OFCCP. OFCCP's FY 2013 congressional budget justification is available here. The plans announced in this year's budget justification that are likely to have a significant impact on the federal contractor community.

• More and Higher Quality Audits: OFCCP will set out to complete 4,530 thorough compliance evaluations in FY 2013, a 12% increase over FY 2012 levels. It also appears that OFCCP wants to pay attention to the quality of compliance investigations, not just the quantity. The OFCCP plans to conduct regular training and implement monitored operational audits in field offices. The OFCCP's efforts towards training, quality and accuracy may improve the consistency of the OFCCP compliance officers during audits, but it also may make audits more difficult if auditors are imposing additional requirements. The proposed training materials have not been released to the public so the contractor community is in the dark regarding what standards are to be applied to them.
   
• Be Alert to Enterprise-Wide Audits; New "Strategic" Selection Process: Another big, though not surprising, development is OFCCP's plan to implement a "strategic" selection process to prioritize enforcement efforts and pinpoint multi-establishment and industry-wide deficiencies and violations. Contractors have been hearing for some time now about OFCCP's plan to crack down on those it calls "egregious violators" and enterprise-wide patterns of discrimination. It appears that OFCCP has come up with a formula that purports to find these contractors. OFCCP does not provide any specifics about its new strategic selection process, and its lack of transparency is troubling. OFCCP also remarked on its "renewed collaborative enforcement approach with the Office of the Solicitor (SOL) and other Departmental agencies," to increase its attention on those with multiple establishments and within industries of specific interest to the OFCCP. Contractors with multiple locations should anticipate greater attention and should be more vigorous in conducting self-audits and resolving apparent issues.
   
• New Compliance Manual: OFCCP is also in the process of updating its compliance evaluation manual with revised enforcement procedures. The FY 2012 procedures are expected to support a more robust and thorough compliance evaluation process, as well as create a level of consistency across regions. Our sources tell us that the new manual is in the final stages of review.
   
• Continued Emphasis on Eliminating the Pay Gap: It should come as no surprise to contractors that the OFCCP anticipates continuing its effort to combat pay discrimination through increasing the number and quality of its investigations of contractor pay practices. The OFCCP is more focused on pay equity than it has ever been and we expect that trend to continue.
   
• Sharper Focus on the Construction Industry: Construction contractors should be on their toes, as the budget justification provides some specifics about the OFCCP's plans to get actively involved with federal and federally-assisted construction contractors and subcontractors at the earliest stages of construction and to encourage construction contractors' recruitment and retention efforts of women, and racial, and ethnic minorities. OFCCP states that it will be directing its enforcement efforts specifically toward so-called Mega Projects, which OFCCP defines as "federal or federally-assisted construction projects lasting longer than one year, and likely to have a major employment or economic impact on a community." According to OFCCP, a focus on mega projects will enable it to utilize its enforcement resources more efficiently because such projects "tend to involve larger contractor and subcontractor workforces." Thus, it is more important than ever for constructor contractors to be audit-ready and keep up to date on the latest developments at the OFCCP concerning the construction industry.

OFCCP Director Shiu Delivers Keynote Address at SWARM Regional ILG Conference

Director Patricia Shiu gave the keynote address at the excellent 2012 Southwest and Rocky Mountain Region ("SWARM") Industry Liaison Group ("ILG") Conference held in San Antonio, Texas from April 10 through April 13. Here are some highlights of her address and her responses to questions that she answered from the floor:

• In a familiar refrain of this increasingly aggressive OFCCP, Director Shiu emphasized that good faith efforts are not enough, urging federal contractors to be proactive and "head off problems at the pass," rather than waiting until the OFCCP "comes knocking at your door" for a compliance review.
   
• Director Shiu was tightlipped about when proposed new regulations implementing Section 503 of the Rehabilitation Act and VEVRAA/Section 4212 would be released in final form, though she indicated it would be before the end of the year. Our sources tell us that the VEVRAA/Section 4212 regulations are likely to be out first and likely prior to the election in November 2012. Director Shiu indicated there would be some amount of time built-in for contractors to come comply with the new regulations, particularly with regard to data collection requirements, though she would not provide any specifics.
   
• Director Shiu rejected the suggestion that OFCCP consider extending the time for response to the new Scheduling Letter and Itemized Listing, when it is released in its final form. Director Shiu noted that that the continued issuance of Corporate Scheduling Announcement Letters (CSAL) was intended to provide advance notice of possible audit and that contractors should be prepared regardless of whether they receive a Scheduling Letter.
   
• Director Shiu also reiterated OFCCP's position that current and proposed goals, particularly the proposed 7% goal for individuals with disabilities in the proposed changes to Section 503 of the Rehabilitation Act, are not quotas but rather "aspirational goals." Interestingly, when Seyfarth Shaw's own Valerie Hoffman asked if federal contractors who meet these "aspirational goals" would be relieved of some or all of the significant administrative and procedural burdens required by the proposed regulations, Director Shiu's only comment was that it was a "good question."

 

What This Means For Contractors

Contractors should be proactive in their compliance efforts and address compliance issues before they are selected for a compliance evaluation. As always, we will continue to monitor the status of the proposed changes to various regulations surrounding OFCCP compliance and bring you news on these important developments as they occur.

By: Valerie Hoffman, Regina Grattan, Christine Hendrickson and Annette Tyman

Valerie Hoffman is a partner in Seyfarth's Los Angeles and Chicago offices. Regina Grattan is counsel in the firm's Sacramento office. Christine Hendrickson is senior counsel and Annette Tyman is an associate in the firm's Chicago office. If you would like further information, please contact your Seyfarth attorney, any attorney on our OFCCP & Affirmative Action Compliance Team, Valerie Hoffman at vhoffman@seyfarth.com, Regina Grattan at rgrattan@seyfarth.com, Christine Hendrickson at chendrickson@seyfarth.com or Annette Tyman at atyman@seyfarth.com.