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OFCCP News, Nov 30, 2012

OFCCP Manual Newsletters,272,OFCCP Federal Contract Compliance Manual (selections)

OFCCP FEDERAL CONTRACT COMPLIANCE MANUAL HEADLINES, No. 272, November 29, 2012

OFCCP sends new round of CSALs

Affirmative action ban passes in Oklahoma

Sixth Circuit rules Michigan’s voter-approved affirmative action ban unconstitutional as to university admissions policies

DOL ARB: NDAA exempts TRICARE provider hospital from OFCCP jurisdiction as a federal subcontractor

Administrative complaint seeking declaratory judgment that OFCCP violated contractor’s Fourth Amendment rights dismissed for lack of subject matter jurisdiction

Revised notice of proposed revisions to agreement approval process for FAAPs issued

 

OFCCP sends new round of CSALs

In mid-November 2012, the OFCCP issued its latest round of Corporate Scheduling Announcement Letters (CSALs), sending just over 1,760 letters to federal contractors identifying establishments slated for a possible compliance review during the first half of FY 2013. The letter is not required by law, but rather, is intended to facilitate the contractor’s complete, accurate, and timely production of materials and information should that contractor receive a scheduling letter and be selected for an evaluation.

The CSAL was first used by the OFCCP in August 2004 to provide advance notification of compliance reviews. In past practice, the letter was provided to the corporate headquarters of federal contractors with two or more establishments identified for possible compliance evaluations during that scheduling cycle. However, in this current and the previous round of CSALs, the OFCCP has apparently also sent letters to contractors with only one establishment slated for audit; in such cases, the CSAL was sent to that specific establishment location, rather than the contractor’s corporate headquarters.

As in the past, depending on the workload of individual OFCCP offices, all establishments identified in the attachment to the CSAL may not be scheduled for an evaluation.

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Affirmative action ban passes in Oklahoma

In the November 6, 2012, election, Oklahoma voters approved a ballot initiative to amend the state’s constitution to prohibit the state (including an agency, institution, instrumentality, or political subdivision of the state) from discriminating against or granting preferential treatment based on race, color, sex, ethnicity, or national origin “in the operation of public employment, public education, or public contracting.” State Question 759 was passed with over 59% of voters approving the measure. It allows exceptions to the prohibition when “bona fide qualifications based on sex” are “reasonably necessary” or when necessary to establish or maintain eligibility for any federal funding. In addition, it exempts court orders or consent decrees in force when the measure becomes effective. The passage of the ballot initiative is expected to impact the use of affirmative action in a number of areas, including employment, education and government contracting.

Oklahoma is the second state, after Arizona in 2010, to put such a measure on the ballot via legislative action. On April 27, 2011, the Oklahoma House, in a 59-14 vote, approved the measure (OK SJR 15), which had been approved by the Senate on March 8, 2011, in a 31-15 vote. Five other states have launched similar ballot initiatives through signature gathering campaigns. A similar anti-affirmative action measure was proposed, but did not qualify, to be on the November 4, 2008, ballot in Oklahoma because supporters of the measure failed to get enough valid signatures by the applicable deadline.

Ban previously passed in five other states, rejected in one. Oklahoma is the sixth state to approve such a measure. Similar ballot initiatives have been passed in California (1996), Washington state (1998), Michigan (2006), Nebraska (2008), and Arizona (2010). Colorado, in contrast, became the first state to reject an anti-affirmative action ballot measure in the November 2008 election.

Pending Supreme Court case. The issue of affirmative action is also currently pending before the U.S. Supreme Court. On October 10, 2012, the High Court heard arguments in (Dkt No 11-345). The last time the High Court addressed this issue was in 2003. In , the High Court upheld the University of Michigan’s consideration of race in its law school admissions. However, on that same day, the Court held that the university’s use of race as a factor in its undergraduate admissions policy violated the U.S. Constitution (). In the and cases, white students who claimed they were qualified but denied admission challenged the university’s law school and undergraduate admissions systems on equal protection grounds. Applying strict scrutiny, the Supreme Court found that the law school’s policy was narrowly tailored to achieve the compelling state interest of a diverse student body, but that the undergraduate policy was not. The issue presented in is whether the High Court’s decisions interpreting the Equal Protection Clause of the Fourteenth Amendment, including , permit the University of Texas at Austin’s use of race in undergraduate admissions decisions.

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Sixth Circuit rules Michigan’s voter-approved affirmative action ban unconstitutional as to university admissions policies

An Sixth Circuit has ruled, 8-7, that a voter-approved ban on government affirmative action in the state of Michigan, as it applies to race-conscious admissions policies in public colleges and universities, violated the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution (, November 15, 2012, 96 EPD ¶44,674). The majority of the deeply divided court ruled that the measure violated equal protection under the political process theory because equal protection does not permit the kind of political restructuring that the measure affected. The Sixth Circuit ruling was limited to the area of university admissions, but the constitutional analysis could be applicable to race-conscious decisions in state employment and the awarding of government contracts.

Background. In November 2006, Michigan voters approved a ballot initiative, Proposal 2, to amend the state’s constitution to prohibit state universities, the state, and all other state entities from discriminating against or granting preferential treatment based on race, sex, color, ethnicity or national origin. The initiative impacts the state’s use of affirmative action in a number of areas, including employment, education and government contracting. The Michigan measure was largely prompted by a June 2003 decision in which the U.S. Supreme Court, in a 5-4 vote, upheld the University of Michigan’s consideration of race in its law school admissions policy (). However, on that same day in a 6-3 decision, the Court held that the university’s use of race as a factor in its undergraduate admissions policy violated the U.S. Constitution (). In the and cases, white students who claimed they were qualified but denied admission challenged the university’s law school and undergraduate admissions systems on equal protection grounds. The Court found that the law school’s policy was narrowly tailored to achieve the compelling state interest of a diverse student body, but that the undergraduate policy was not.

In 2007, the Sixth Circuit ruled that a federal district court in Michigan should not have issued an injunction allowing three state universities a short-term delay, with respect to admissions and financial aid, in the implementation of the ban. In 2008, the district court dismissed on summary judgment a challenge by the Coalition to Defend Affirmative Action, Integration & Immigrant Rights & Fight for Equality By Any Means Necessary and other interest groups and individuals to the constitutionality of the ban. The district court, which allowed Michigan’s attorney general to intervene in the case, determined that the measure did not violate the Equal Protection Clause.

On July 1, 2011, a three judge panel of the Sixth Circuit reversed by a vote of 2-1. The panel found that Proposal 2 unconstitutionally altered Michigan’s political structure by impermissibly burdening racial minorities. The Sixth Circuit then granted the Michigan attorney general’s request for review, and thereby, vacated the panel opinion.

Equal protection. The majority decision of the court was written by the same judge who authored the 2011 panel decision and both rulings follow similar reasoning. At the outset of its opinion, the majority noted that it was “neither required nor inclined to weigh in on the constitutional status or relative merits of race-conscious admissions policies as such.” Rather, the only issue before the court was “whether Proposal 2 runs afoul of the constitutional guarantee of equal protection by removing the power of university officials to even consider using race as a factor in admissions decisions—something they are specifically allowed to do under ,” the court majority clarified.

Applying the U.S. Supreme Court’s decisions in (1982) and (1969), the appeals court found that Proposal 2 unconstitutionally altered Michigan’s political structure by impermissibly burdening racial minorities. The and decisions clarify that equal protection of the laws is more than a guarantee of equal treatment under the law substantively. It is also an assurance that “the majority may not manipulate the channels of change so as to place unique burdens on issues of importance to [minority groups],” the majority opinion explained. These decisions provide the benchmark for when the majority has not only won in the political process, but has also rigged the game to reproduce its success indefinitely. They require courts to apply strict scrutiny to enactments that change the governmental decision-making process for determinations with a racial focus.

Using a two-part analysis derived from and , the Sixth Circuit majority found that Proposal 2 deprived minority groups of equal protection because it: (1) it has a racial focus, targeting a program that “inures primarily to the benefit of the minority,” and (2) it reorders the political process in Michigan in such a way as to place “special burdens” on racial minorities. As to the first prong, the majority held that race-conscious admissions policies now barred by Proposal 2 inured primarily to the benefit of racial minorities and Proposal 2, insofar as it prohibits consideration of applicants’ race in admissions decisions, had a racial focus in targeting that program.

Looking to the second prong, the majority concluded that Proposal 2 modified the Michigan political process by placing special burdens on the ability of minority groups to achieve beneficial legislation. By amending Michigan’s constitution to prohibit university admissions units (which were governmental decision-making bodies) from utilizing race-conscious admissions policies, proponents of Proposal 2 consequently removed the authority to institute racially focused policies from Michigan’s universities and lodged it at the most remote level of Michigan’s government, the state constitution. As such, Michigan has, via Proposal 2, created less onerous avenues to effect political change to those advocating consideration of nonracial factors in admissions decisions than those advocating for consideration of racial factors.

To illustrate this point, the majority noted:

“A student seeking to have her family’s alumni connections considered in her application to one of Michigan’s esteemed public universities could do one of four things to have the school adopt a legacy-conscious admissions policy: she could lobby the admissions committee, she could petition the leadership of the university, she could seek to influence the school’s governing board, or, as a measure of last resort, she could initiate a statewide campaign to alter the state’s constitution. The same cannot be said for a black student seeking the adoption of a constitutionally permissible race-conscious admissions policy. That student could do only one thing to effect change: she could attempt to amend the Michigan Constitution—a lengthy, expensive, and arduous process—to repeal the consequences of Proposal 2.”

This comparative structural burden undermines the Equal Protection Clause’s guarantee that all citizens have equal access to the tools of political change, according to the majority. Moreover, this contrast between the paths for political change available to different admissions proponents following Proposal 2 illustrated why the constitutional amendment could not be construed as a mere repeal of an existing race-related policy, the court wrote. Had those favoring abolition of race-conscious admissions successfully lobbied the universities’ admissions units, just as underrepresented minorities did to have these policies adopted in the first place, there would be no equal protection problem. Because less onerous avenues to effect political change remain open to those advocating consideration of nonracial factors in admissions decisions, Michigan cannot force those advocating for consideration of racial factors to go down a more arduous road than others without violating the Fourteenth Amendment.

Strict scrutiny. Because Proposal 2 changed the governmental decision-making process for determinations with a racial focus, the measure had to withstand strict scrutiny in order to pass constitutional muster. Here, because the Michigan attorney general did not assert that Proposal 2 satisfies a compelling state interest, the majority concluded that it need not consider this argument.

Having found that Proposal 2 deprives the plaintiffs of equal protection of the law under the political-process doctrine, the court majority determined that it not reach the question of whether Proposal 2 also violates the Equal Protection Clause when assessed using the “traditional” equal protection analysis.

Therefore, the majority held that those portions of Proposal 2 that affect Michigan’s public institutions of higher education violate the Equal Protection Clause. In a footnote, the majority noted that because the plaintiffs’ challenge is limited to public education, the court’s ruling did not determine whether the portions of Proposal 2 that affect public employment and public contracting also violate the Equal Protection Clause.

Dissents. In a total of five separate opinions, Chief Judge Batchelder, along with Judges Boggs, Gibbons, Rogers, Sutton, Cook, and Griffin dissented. In general, the dissents asserted that the majority did not correctly follow U.S. Supreme Court precedent and that Proposal 2 did not impermissibly restructure the political process in the state of Michigan to burden the ability of minorities to enact beneficial legislation and that Proposal 2 was not unconstitutional under traditional equal protection analysis. In addition, Judge Griffon wrote that the political structure doctrine “is an anomaly incompatible with the Equal Protection Clause,” and urged the Supreme Court to do away with it.

Similar ballot measures in other states. The Michigan initiative is similar to measures passed by voters in California (1996), Washington state (1998), Nebraska (2008), Arizona (2010), and Oklahoma (2012). Colorado, in contrast, became the first state to reject an anti-affirmative action ballot measure in the November 2008 election. A similar ban is slated to appear on the Oklahoma ballot in 2012.

Pending Supreme Court case. The issue of affirmative action is also currently pending before the U.S. Supreme Court. On October 10, 2012, the High Court heard arguments in (Dkt No 11-345). The issue presented in is whether the High Court’s decisions interpreting the Equal Protection Clause of the Fourteenth Amendment, including , permit the University of Texas at Austin’s use of race in undergraduate admissions decisions.

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DOL ARB: NDAA exempts TRICARE provider hospital from OFCCP jurisdiction as a federal subcontractor

In light of the National Defense Authorization Act (NDAA) for Fiscal Year 2012, Florida Hospital of Orlando (Florida Hospital) — an acute care, not-for-profit hospital that contracted with a government contractor, Humana Military Healthcare Services (HMHS), to provide medical services to military service members, their survivors, and their families as part of the TRICARE program — was not subject to the jurisdiction of the OFCCP as a covered subcontractor, the DOL ARB ruled in a plurality opinion. (, ARB No 11-011, October 19, 2012). Accordingly, the ARB reversed an ALJ’s decision and dismissed the OFCCP’s administrative complaint against Florida Hospital. However, only two judges (the plurality) found that the NDAA completely barred the OFCCP from exercising jurisdiction over Florida Hospital. The three other judges (Brown, Corchado, and Royce) expressly or implicitly found that the OFCCP’s jurisdiction under one element of the agency’s definition of “subcontract” remained an open issue.

TRICARE. TRICARE is a Department of Defense (DOD) Field Activity tasked with administering the TRICARE program, the DOD’s worldwide health care program for active duty and retired military service members and their families. In order to exercise jurisdiction over a company, the OFCCP must first establish the existence of a federal contractor or subcontractor relationship.

NDAA. On December 31, 2011, President Obama signed the NDAA into law. Section 715 of the NDAA states that:

“In establishing rates and procedures for reimbursement of providers and other administrative requirements, including those contained in provider network agreements, the Secretary shall, to the extent practicable, maintain adequate networks of providers, including institutional, professional, and pharmacy. For the purpose of determining whether network providers under such provider network 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, manage, or maintain 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.”

ALJ ruling. Prior to enactment of the NDAA, a DOL ALJ ruled on October 18, 2010, that Florida Hospital was subject to OFCCP jurisdiction as a federal subcontractor (ALJ Case No 2009-OFC-00002; CCH ¶21,713). Therefore, the ALJ ordered the hospital to grant the OFCCP access to its facilities and otherwise permit the agency to conduct compliance reviews. On November 1, 2010, the hospital appealed that decision to the ARB.

OFCCP policy directives. On December 16, 2010, the OFCCP issued a directive which, according to the agency, restated existing OFCCP policy for determining whether health care providers and insurers are covered contractors or subcontractors based on their relationship with federal health care programs. Directive 293 (CCH ¶15,821) stated that the OFCCP used a case-by-case approach in making coverage determinations because of the wide-array of relationships health care providers and insurers may have with the federal government. On April 25, 2012, the OFCCP issued Directive Number 301 (CCH ¶15,824), rescinding Directive Number 293, in light of the NDAA.

ARB proceedings. On January 9, 2012, Florida Hospital asked the ARB to dismiss the case as moot pursuant to Section 715 of the NDAA. On January 13, 2012, the Board ordered further briefing by the parties on the impact of Section 715.

The OFCCP argued that Section 715 only removes one basis for the agency’s jurisdiction over TRICARE network providers, but that Florida Hospital was still subject to OFCCP jurisdiction as a federal subcontractor on a separate, alternative basis. The agency’s regulations at 41 CFR Section 60-1.3 define a “subcontract” as “any agreement or arrangement between a contractor and any person (in which the parties do not stand in the relationship of an employer and an employee):”

(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 obligations under any one or more contracts is performed or undertaken or assumed.

The OFCCP conceded that the enactment of Section 715 removes the basis for the agency’s jurisdiction over TRICARE network providers under the second prong of the subcontract definition. Nevertheless, the OFCCP argued that Section 715 does not address the first prong of the OFCCP’s subcontract definition. The agency maintained that Florida Hospital’s services as a participant in the network were “necessary to the performance” of the TRICARE-HMHS prime contract, and, thus, met the first prong of the subcontractor definition. The OFCCP asserted that because Section 715 is silent on this prong, it cannot affect it. But the ARB disagreed.

ARB ruling. Given the specific terms of the two contracts at issue here – the TRICARE/HMHS prime contract and the HMHS/Florida Hospital subcontract – Section 715, precludes the OFCCP’s jurisdiction to engage in a compliance review of Florida Hospital under 41 CFR Part 60, the ARB concluded. The TRICARE/HMHS prime contract requires HMHS to develop a network of health care providers that will serve TRICARE beneficiaries in TRICARE’s designated South Region. The agreement between HMHS and Florida Hospital constitutes a subcontract designed to provide health care services to TRICARE beneficiaries pursuant to the terms of the prime contract. Under the subcontract, Florida Hospital agrees to be a provider of health care services to TRICARE beneficiaries. Like the prime contract, the impetus of the terms of the subcontract is for Florida Hospital to provide health care services to TRICARE beneficiaries and be part of the network of provider services pursuant to the prime TRICARE/HMHS contract.

The HMHS/Florida Hospital subcontract, which effectuates the TRICARE prime contract for the provision of a provider network, falls within the scope of Section 715’s language, the ARB determined. It was undisputed that institutional providers, as defined in Section 715, encompass hospitals and that Florida Hospital is a hospital that entered into a contract with government contractor HMHS. Applying Section 715 to the subcontract between Florida Hospital and HMHS, and under the definition of “subcontract” as set out under 41 CFR Section 60-1.3, the fact that the subcontract involves the provision of health care providers pursuant to a managed care prime contract between TRICARE and HMHS that includes the requirement to maintain a network of providers, means Section 715 removes the OFCCP’s jurisdiction here. Under Section 715, the subcontract is no longer a “subcontract” under Section 60-1.3 because the element of the contract that is “necessary to the performance of any one or more contracts” involves the provision of health care network provider services to TRICARE beneficiaries, the ARB explained. In other words, the express language of the HMHS/Florida Hospital subcontract designed to incorporate Florida Hospital as a part of the network of provider services renders it as “not a contract” in light of Section 715 because it involves the provision of network provider services to beneficiaries of TRICARE.

The ARB buttressed its ruling by pointing out that, in Directive 301, the OFCCP stated that it would “continue to use a case-by-case approach to make coverage determinations in keeping with its regulatory principles applicable to contract and subcontract relationships and OFCCP case law.” The particular contract language at issue here, and the contract relationship that formed under the contract(s) in light of Section 715, precludes the OFCCP from asserting jurisdiction over Florida Hospital in this specific case, the ARB wrote.

Because the ARB held that NDAA Section 715 precludes the OFCCP’s jurisdiction to conduct a compliance review of Florida Hospital based on the terms of the contracts at issue in this case, the Board did not address Florida Hospital’s argument (rejected by the ALJ) that TRICARE is a federal financial assistance program which precludes OFCCP’s jurisdiction to conduct a compliance review.

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Concurrences and dissents. Judge E. Cooper Brown wrote a separate opinion concurring in part and dissenting in part. He concurred with the plurality that the OFCCP does not have jurisdiction over Florida Hospital as a subcontractor of HMHS under the second prong of OFCCP’s regulatory definition of subcontractor in light of Section 715. He dissented with respect to part of the plurality decision regarding OFCCP jurisdiction under the first prong because he did not consider that issue properly before the Board. The OFCCP was barred from asserting jurisdiction before the ARB under the first prong because the agency’s argument in that regard was raised for the first time on appeal. The OFCCP asserted before the ALJ that it had jurisdiction over the hospital pursuant to prong one based its argument that the TRICARE-HMHS prime contract was a contract for the delivery of health care services. However, the OFCCP made a “completely different argument” before the ARB, according to Brown, by asserting that the prime contract is a contract for the establishment of a of health and medical service providers, with Florida Hospital’s contract with HMHS being a contract “for the purchase, sale or use of personal property or nonpersonal services” that are “necessary to the performance” of the prime contract.

Judge Luis Corchado, also concurred in part and dissented in part, noting that the Board unanimously reversed the ALJ’s decision based on prong two in light of Section 715 of the NDAA. However, he noted that three judges (himself, Brown, and Royce) expressly or implicitly found that the OFCCP’s jurisdiction under prong one remained open as an option under Section 715. Only two judges (the plurality) found that Section 715 completely bars OFCCP from exercising jurisdiction over Florida Hospital.

According to Corchado, the plurality overstated the reach of Section 715. Specifically, he wrote that he agrees that Section 715 clarifies the OFCCP’s reach over TRICARE network providers through subcontractor coverage, but it does not eradicate it (i.e. prong one survived Section 715). Thus, he dissented from the plurality’s opinion that Section 715 precludes the OFCCP from asserting jurisdiction under prong one, and therefore, the ARB should have analyzed the merits of OFCCP’s jurisdictional claim under that prong.

Even if jurisdiction existed under prong one, Judge Corchado wrote that the issue of federal financial assistance required further consideration because the ALJ’s reasons and bases were insufficient.

Judge Royce joined in Judge Corchado’s opinion, except to note that she reserved judgment on the interpretation of prong two, and whether the OFCCP may assert jurisdiction over Florida Hospital under that prong for reasons other than those prohibited by Section 715.

The full text of the ARB’s decision is in this report, ¶21,735.

Motion for reconsideration. On November 13, 2012, the OFCCP filed a motion for reconsideration. Notably, the OFCCP states in its motion that the agency “intends to continue to schedule and attempt to review hospitals because they are TRICARE network providers until it receives a definitive ruling on the issue.”

The reconsideration motion is based on the OFCCP’s assertion that because two ARB judges —Igasaki and Edwards — wrongly concluded that Section 715 deprived the OFCCP of jurisdiction over Florida Hospital, and one judge — Brown — wrongly concluded that the OFCCP’s prong one argument was not properly before the ARB, there is no majority ruling on the effect of Section 715 on prong one.

Judge Brown joined with judges Igasaki and Edwards for the plurality decision based on his conclusion that the OFCCP did not have jurisdiction over Florida Hospital under prong two, but he dissented from the plurality’s opinion as to the issue of the OFCCP’s jurisdiction under prong one, finding that issue was not properly before the board. Judges Corchado and Royce dissented from the plurality’s opinion that Section 715 precludes the OFCCP from asserting jurisdiction under prong one, and therefore, the dissenting judges asserted that the ARB should have analyzed the merits of OFCCP’s jurisdictional claim under that prong.

According to the OFCCP, the lack of a majority ruling on the applicability of Section 715 as to prong one means the only way the agency can obtain a ruling on this issue is to continue to notice TRICARE network providers for compliance reviews where prong one is applicable. “Inevitably, the providers will deny access to OFCCP, claiming that Section 715 bars OFCCP’s review of their facilities,” the agency asserts in its motion, adding that “[t]o obtain a resolution of this critical question, the OFCCP will be forced to bring another enforcement action against one or more TRICARE network providers.” Therefore, the OFCCP is requesting that the ARB grant its motion for reconsideration and rule on the prong one issue to avoid such “unnecessary litigation.”

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Administrative complaint seeking declaratory judgment that OFCCP violated contractor’s Fourth Amendment rights dismissed for lack of subject matter jurisdiction

A federal contractor’s administrative complaint against the OFCCP, seeking declaratory judgment that the agency violated the contractor’s Fourth Amendment rights by subjecting it to numerous audits without probable cause, has been dismissed by a DOL administrative law judge (ALJ) for lack of subject matter jurisdiction (, ALJ Case No 2012-OFC-00004, September 17, 2012). The ALJ ruled that the applicable regulations allow the DOL’s Office of Administrative Law Judges (OALJ) jurisdiction over complaints filed only by the OFCCP through the Labor Department’s Office of the Solicitor and that the regulations do not expressly authorize the initiation of a hearing before the OALJ by the filing an administrative complaint or other motion for relief by a contractor or subcontractor.

The contractor, U.S. Security Associates Inc. (USSA) filed the complaint with the OALJ on June 21, 2012 alleging that the OFCCP lacked probable cause to commence audits at 21 of 34 establishments in which it initiated compliance reviews in approximately the last year. According to the complaint, the OFCCP selected those 21 establishments without reference to a ”neutral administrative plan” and without evidence of a current violation of any of the laws enforced by the OFCCP, or their implementing regulations, as to any of the establishments at issue. USSA asserted that the OALJ had subject matter jurisdiction over the complaint pursuant to Executive Order 11246, as amended (EO 11246)); the Declaratory Judgment Act (28 USC Section 2201 et seq.); the OFCCP’s Rules of Practice (41 CFR Section 60-30); and Federal Rule of Civil Procedure (FRCP) 57.

On June 25, 2012, the ALJ ordered the parties to file briefs, within 10 days, addressing the OALJ’s authority to conduct a hearing on a contractor or subcontractor’s request for declaratory relief in the absence of an administrative complaint filed by the OFCCP under 41 CFR Section 60-30.5. Both parties filed briefs on July 5, 2012.

OFCCP regulations. The OALJ has subject matter jurisdiction over EO 11246 when an administrative complaint is filed under 41 CFR Section 60-30.5. That regulation expressly limits authorization to institute such proceedings to “[t]he Solicitor of Labor, Associate Solicitor for Labor Relations and Civil Rights Regional Solicitors and Regional Attorney upon referral from the [OFCCP],” the ALJ explained, citing 41 CFR Section 60-30.5(a).

Administrative cases brought pursuant to EO 11246 and the other laws enforced by the OFCCP are often based on the refusal of a contractor or subcontractor to give the OFCCP access to or to supply records or other information as required by law or to allow the OFCCP to conduct an on-site compliance review, but such proceedings are initiated by the filing of an administrative complaint under 41 CFR Section 60-30.5, the ALJ noted.

Thus, the regulations contemplate that the OALJ obtains the regulatory authority to adjudicate an OFCCP dispute only upon the filing of an administrative complaint by the OFCCP through the Office of the Solicitor. The regulations do not expressly authorize the initiation of a hearing before OALJ by the filing an administrative complaint or other motion for relief by a contractor or subcontractor. Therefore, the OALJ did not have subject matter jurisdiction over the contractor’s complaint under EO 11246 and the OFCCP’s Rules of Practice, the ALJ ruled.

FRCP 57. The ALJ also rejected the contractor’s argument that FRCP 57 was applicable to the complaint, ruling that FRCP 57 does not provide independent adjudicatory authority for the OALJ. USSA argued that FRCP 57 was applicable because it was incorporated by reference in the OALJ’s Rules of Practice, but the ALJ concluded that the OALJ’s Rules of Practice do not establish jurisdiction for proceedings before the OALJ. Moreover, the Federal Rules of Civil Procedure expressly provide that such rules govern the procedure for obtaining declaratory judgments under the Declaratory Judgment Act. Rule 57 is not applicable here because the complaint was not filed under the Declaratory Judgment Act which provides for filing a pleading seeking declaratory relief in “any court of the United States” and the the OALJ is not a “court of the United States” in this context, the ALJ determined.

The full text of the ALJ’s decision is in this Report at ¶21,731.

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Revised notice of proposed revisions to agreement approval process for FAAPs issuedIn the October 11, 2012 edition of the , the OFCCP published a notice of its revised information collection request (ICR) entitled, “Agreement Approval Process for Use of Functional Affirmative Action Programs,” submitted to the Office of Management and Budget (OMB) for review and approval for use in accordance with the Paperwork Reduction Act (PRA) of 1995 (77 FR 61787- 61788). The agency is proposing to revise its Functional Affirmative Action Program (FAAP) directive (No 296) and establish standard application procedures for contractors seeking the OFCCP’s approval to use FAAP agreements. The comment period for the revised proposal closed on November 13, 2012.The current notice revises an earlier notice, published in the May 22, 2012 edition of the (76 FR 30327-30329). Both notices indicated that the OFCCP sought comments “on its proposal to implement standard procedures for supply and service contractors seeking approval to develop affirmative action programs based on functional or business units.” However, neither notice supplies the substantive content of the proposal or indicates that the OFCCP is seeking to revise its current FAAP directive. Rather, the content of the proposal is revealed in supporting documentation for the notice provided to the Office of Management and Budget (OMB) by the OFCCP. The proposed revised FAAP directive and the OFCCP’s supporting statement submitted to the OMB explaining the changes are posted on the RegInfo.gov website (ICR Reference No: 201205-1250-001).Background. An FAAP is an Affirmative Action Program (AAP) that is developed and prepared based on functional or business units within a corporate structure, rather than an AAP based solely on an individual establishment location. Current OFCCP regulations permit contractors to negotiate with the OFCCP, subject to the approval of the OFCCP Director, for permission to use FAAPs (41 CFR Section 60-2.1(d)(4)). In the absence of an approved agreement under 41 CFR Section 60-2.1(d)(4), the regulations require contractors to develop, implement, and maintain a separate AAP for each physical location of an establishment with 50 or more employees.The first procedural directive for processing contractor functional AAP requests (No 254) was approved by then OFCCP Director Charles James, Sr., on March 21, 2002, and the agency sent out it first FAAP agreement on July 16, 2002. Between that time and early 2010, more than 130 FAAP agreements covering more than 1800 functional or business units and approximately 2 million employees had been approved, according to the OFCCP. In February of 2010, however, the OFCCP announced that it was not approving any new requests to develop or renew FAAP agreements while the program was under review.Directive 296. On June 14, 2011, OFCCP Director Patricia A. Shiu issued a new directive, No 296 (CCH ¶15,823), which superseded the FAAP directive issued in 2002. Under the policy announced in this new directive, approval of FAAP agreements is not automatic; rather, an agreement will be approved only if the OFCCP Director determines that the contractor’s overall operational structure, compliance history, and proposed functional AAPs meet the criteria set forth in the new directive. Other significant policy changes included: (1) requiring written approval by the agency’s director before contractors can begin developing FAAP agreements, thereby eliminating the previous provision for automatic approval if OFCCP failed to act upon the request within 120 days; (2) changing the expiration date for each agreement from three to five years, at which point a renewal will have to be approved; and (3) adding the possibility of a compliance evaluation by OFCCP should contractors fail to submit the required annual updates to their agreements.

The new policy does not contain a requirement that the contractor supply the FAAP to the OFCCP for review before the OFCCP approves its use. Instead, a review of a contractor’s FAAP will occur in the event of a scheduled compliance review. Also, a contractor with an approved FAAP agreement must have had at least two functional units undergo a compliance evaluation during the three-year term of the agreement to be eligible for renewal of the existing agreement.

Proposed revisions. Currently, the OFCCP has revised its proposal regarding Directive 296 to establish standard application procedures for contractors seeking the agency’s approval to use FAAP agreements. According to the OFCCP, it generally uses its directives, which are not public documents, to guide its staff in conducting evaluations. This proposed revised directive is unique in that it guides the public and imposes recordkeeping and reporting requirements on the public; thus, it is subject to the Paperwork Reduction Act of 1995.

The revised proposed FAAP directive, which is designed to guide the public in the application process, includes the proposed application procedures. It explains the data and documents that the OFCCP requires in order to evaluate whether a contractor can use FAAPs. The OMB Control Number for the FAAP directive proposal is 201205-1250-001. The collection of information associated with the development of AAPs and compliance evaluations of covered contractors are addressed in a separate ICR approved by the OMB under OMB Number 1250-0003.

Information sought. Specifically, the information required for FAAP consideration, is listed in Attachments B and C to the proposed directive. Documentation to be submitted to the OFCCP prior to the FAAP conference includes:

  • A statement of how the contractor is a covered federal contractor or subcontractor including specific information regarding at least one federal contract or subcontract of $50,000 or more, identifying the name of the federal contracting agency, the contract number, the contract period, and the name of the prime contractor if the contractor is a subcontractor;
  • A copy of the qualifying federal contract or subcontract of $50,000 or more;
  • A copy of the contractor’s most recent Consolidated EEO-1 Report;
  • An organizational chart that clearly identifies all of the proposed functional or business units and how they are related to each other within the corporation’s overall structure.
  • A narrative description of the “business or function” of each proposed FAAP unit and how it meets the definition of a functional or business unit set forth above;
  • The total number of employees by location (city and state) within each proposed functional or business unit, including the identification of the managing official of each functional or business unit;
  • A statement addressing the location, to include city and state, where each proposed FAAP unit will maintain its employee personnel records and applicant processing activities;
  • If the contractor proposes to maintain some establishment-based AAPs, provide: a list of the locations including the physical address, number of employees, and the phone number of the establishment’s managing official, AAP contact and the EEO-1 unit number for each establishment;
  • The dates of the proposed AAP year for the functional programs; and
  • Copies of personnel policies relevant to evaluating the proposed functions or business units, including organizational and unit-specific policies related to recruitment; hiring; promotion; compensation; and termination.

During the FAAP conference, the contractor would be required to provide information on:

  • The reporting hierarchy of the functional or business units;
  • Personnel procedures including recruitment; hiring; promotion; compensation; termination; record retention and data analysis as they apply to each functional or business unit, including identification of units that have differing personnel or compensation practices;
  • How each functional unit manages its human resources and equal employment opportunity responsibilities;
  • How the contractor plans to transition from establishment-based AAPs to FAAPs, and timeframes for completion;
  • Any ongoing or past EEO violations from local, state and federal agencies (over the last three years); and
  • How the contractor anticipates complying with the requirements of Section 503 of the Rehabilitation Act of 1973 and the affirmative action requirements of the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 within its functional or business units.

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