The Office of Federal Contract Compliance Programs (OFCCP)—the Department of Labor division responsible for ensuring federal contractors’ compliance with Equal Employment Opportunity laws—this month unveiled its long-awaited final sex discrimination rule, last updated in 1970. The final rule, which signals more aggressive and broader enforcement of anti-discrimination laws, takes effect Aug. 15.
On a practical level, the revised rule means now would be a good time for federal contractors and sub-contractors to review their anti-discrimination policies, procedures, and pay practices to ensure they are in compliance.
According to the OFCCP, the final rule generally applies to any company that (1) holds a single federal contract, sub-contract, or federally assisted construction contract or sub-contract in excess of $10,000; (2) holds federal contracts or sub-contracts that have a combined total in excess of $10,000 in any 12-month period; or (3) holds government bills of lading, serves as a depository of federal funds, or is an issuing and paying agency for U.S. savings bonds and notes in any amount.
Some employment law experts say the amended rule imposes more aggressive requirements on federal contractors beyond what federal anti-discrimination laws already require. Some of the changes “definitely push the envelope,” says Brian Barger, a partner in the labor and employment group at law firm McGuire Woods.
The final rule is also “an interesting preview of coming attractions about agency enforcement posture—not just at the OFCCP, but also at the EEOC,” Barger adds. From a broader policy perspective, the guidelines say a lot about what the agency is thinking, how it’s going to conduct audits, and what employers can expect, he says. “In and of itself, that’s valuable.”
Some of the most significant changes to the OFCCP’s sex discrimination guidelines are discussed below:
Sex discrimination redefined. The OFCCP defines “sex discrimination” to include, but is not limited to, discrimination on the basis of sex; pregnancy, childbirth, or related medical conditions; gender identity; transgender status; and sex stereotyping. According to the OFCCP, “gender identity refers to one’s internal sense of one’s own gender.”
New protections related to pregnancy, childbirth, and related medical conditions. Contractors must provide workplace accommodations—such as light-duty assignments—to an employee who needs such accommodations because of pregnancy, childbirth, or related medical conditions, in certain circumstances where those contractors provide comparable accommodations to other workers, such as those with disabilities or occupational injuries.
Many employment policies likely have not been updated to reflect the current state of the rule as it concerns pregnancy accommodations. “That’s something companies should definitely consider dusting off and taking a look at,” Barger says.
“What contractors need to expect is that their handbooks and policies related to work rules may be subject to increased scrutiny.”
Guy Brenner, Partner, Proskauer
Equal benefits to employees. The rule prohibits discrimination on the basis of sex with regard to fringe benefits—such as medical, hospital, accident, life insurance, and retirement benefits; profit-sharing and bonus plans; leave; and other terms, conditions, and privileges of employment.
The final rule prohibits facially neutral employment policies that have a disparate impact on the basis of sex if the policies or practices are not job–related and consistent with business necessity. “Where a contractor’s policy or practice has the effect of disproportionately excluding women from employment opportunities, the contractor has the burden of proving that the policy or practice is job–related and consistent with business necessity,” the OFCCP said. A failure to make this showing could subject the contractor to a discrimination claim.
Fair pay practices. Contractors may not deny opportunities for overtime work, training, better pay, or higher-paying positions because of an employee’s sex. The rule also includes a provision that enables employees to recover lost wages any time a contractor pays compensation that is the result of discrimination, not only when the decision to discriminate is made.
Transgender protections. The rule clarifies that sex discrimination includes discrimination relating to an employee’s gender identity. Furthermore, contractors must allow employees to use facilities consistent with the gender the employee identifies with.
Importantly, too, the OFCCP stated that “an explicit, categorical exclusion of coverage for all care related to gender dysphoria or gender transition is facially discriminatory because such an exclusion singles out services and treatments for individuals on the basis of their gender identity or transgender status.”
What the OFCCP is saying here is that they’re going to second guess the scope of coverage under this provision. “If you deny it, you better have a good businesses and medical justification for doing so other than discrimination based on sexual orientation or gender identity,” Barger says.
Below, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs provides FAQs setting forth the requirements that covered contractors (including subcontractors) must meet to fulfill their obligations under Executive Order 11246 to ensure nondiscrimination in employment on the basis of sex.
1. What are contractors required to do differently as a result of the final rule?
The Final Rule generally aligns OFCCP’s regulations with Title VII of the Civil Rights Act of 1964, as interpreted by courts and the EEOC. Because most covered contractors are subject to Title VII or to similar state laws, most contractors are already subject to many of these provisions and must continue complying with these laws, regulations, and court rulings.
The former guidelines were extremely outdated; they had not been amended substantively since they were adopted in 1970 and no longer provided accurate or sufficient guidance to contractors regarding their nondiscrimination obligations. The final rule clarifies contractors’ obligations, brings them up-to-date and aligns them with anti-discrimination law, eliminating the confusion and ambiguity that resulted from the former guidelines.
Moreover, while there have been many positive changes in employment policies and practices regarding women in the workforce since 1970, there is no doubt that sex discrimination remains a significant and pervasive problem. Sex-based occupational segregation, wage disparities, discrimination based on pregnancy or family caregiving responsibilities, sex-based stereotyping, and sexual harassment remain widespread. The final rule addresses these realities of today’s workplaces.
2. Under the final rule, do federal contractors have to make changes to the Equal Opportunity Clause?
No, the Final Rule does not require any changes to the Equal Opportunity Clause.
3. The final rule includes a ”best practices” appendix. Are contractors required to comply with this section?
No, the final rule’s ”best practices” appendix recommends a number of practices for contractors to consider. If adopted, these practices can contribute to the establishment and maintenance of workplaces that are free of unlawful sex discrimination. But adoption of these practices is not required.
Source: OFCCP FAQs
That’s a significant change, because the vast majority of insurance plans in the United States do not cover gender transition surgery, Barger says. “What that means is that there is going to be a lot of pressure, regulatory and otherwise, to expand coverage for individuals under your current plans that don’t currently have them,” he says.
“It’s an area where law is developing,” says Christopher Wilkinson, an employment partner at law firm Orrick. “You have to look at what your insurance coverage provides for transition-related services and make sure they’re compliant.”
“Contractors in light of these guidelines should be conducting a review of their policies and practices to determine whether any of them can be viewed as discriminatory on the basis of sex, as broadly viewed by the OFCCP,” says Guy Brenner, a partner in the labor and employment law department at law firm Proskauer.
Employers are also advised to take a look at the accompanying “best practices” issued by the OFCCP. Such practices include designating gender-neutral, single-user bathrooms, and avoiding the use of gender-specific job titles—such as “foreman” or “lineman”—where gender-neutral alternatives are available.
Large federal contractors with typically mature regulatory frameworks likely have many of these policies in place and are engaging in practices that are compliant with the rule itself. “In that sense, for them the final rule is not much of a game changer,” Wilkinson says. The ones who may struggle from a compliance standpoint are the mid-size and smaller government contractors that have not been as attuned to these issues, he says.
From an auditing standpoint, contractors should expect that OFCCP investigators, particularly if they get past the desk audit stage, will be looking into issues involving sex equality. “Whenever a new rule is promulgated, we see an increase in focus on the area at issue,” Brenner says.
“What contractors need to expect is that their handbooks and policies related to work rules may be subject to increased scrutiny, as potentially would things such as benefit plans,” Brenner says. The guidelines make clear, for example, that contractors offer equal benefits to male and female employees. “To the extent that a federal government contractor doesn’t do that, that would be a violation of the guidelines, and that’s something investigators may look into,” he says.
Another reason for contractors to be attentive to these issues is because employees have a reporting mechanism to alert the OFCCP to concerns, leading to increased scrutiny, Brenner adds. Because scrutiny can come not only from an OFCCP audit, but also from an individual employee complaint, he says “government contractors want to make sure that they’re able to present to the OFCCP their serious commitment to these guidelines to avoid any adverse findings or determinations from the OFCCP.”