OFCCP Finalizes Federal Contractor Sex Bias Rules

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By Jay-Anne B. Casuga

June 14 — The Labor Department's Office of Federal Contract Compliance Programs has finalized revisions to federal contractor sex discrimination rules that haven't been updated in more than 40 years, the agency announced.

“We need to bring the rules against sex discrimination into the 21st century,” Labor Secretary Thomas Perez said June 14 during the White House's United State of Women Summit. “We are clarifying for federal contractors that they must provide pregnancy-related accommodations and equal access to jobs and workforce development opportunities, and prevent sexual harassment and protect transgender workers’ access to bathrooms consistent with their gender identity.”

Management attorneys and consultants, including a former OFCCP official, generally commended the OFCCP for the final rules. They told Bloomberg BNA June 14 that although the rules are largely unchanged from their January 2015 proposed form, they do contain revisions and clarifications indicating the OFCCP took into consideration contractor concerns during the rulemaking period.

For example, the final rules make clear that a contractor's use of targeted female recruitment efforts as part of its affirmative action obligations won't be a violation, said Lynn Clements, director of regulatory affairs for Berkshire Associates Inc. in Columbia, Md.

“For the most part, the rules codify well-established sex discrimination principles that have developed since OFCCP first issued sex discrimination guidelines for contractors in the 1970s,” said Clements, acting and deputy director of OFCCP's Division of Policy, Planning and Program Development during the George W. Bush administration.

“In many cases, contractors will have to make few, if any, changes to their current practices in order to comply with these new regulations,” she said.

The OFCCP said it conformed the final rules (RIN:1250-AA05) under Executive Order 11,246 to amendments to Title VII of the 1964 Civil Rights Act enacted since 1970, as well as U.S. Supreme Court decisions interpreting that law. Generally, the OFCCP relies on Title VII principles to enforce the executive order.

Among other things, the OFCCP's final rules include provisions addressing compensation discrimination, pregnancy accommodations, discrimination based on gender identity, sex stereotypes and family caregiver bias.

The final rules (41 C.F.R. part 60-20) will be published in the June 15 Federal Register and go into effect Aug. 15.

They apply to covered federal supply and service contractors and subcontractors, as well as federally assisted construction contractors and subcontractors.

Compensation Reviews, Pay Discrimination

David Fortney, a management attorney with FortneyScott in Washington, told Bloomberg BNA that the final rules codify the OFCCP's Directive 307 “almost verbatim.”

Released in 2013, the directive provided the agency with broader and more flexible investigation procedures for pay discrimination.

Fortney said the final rule generally restates the agency's case-by-case approach to evaluating contractor pay systems during compliance reviews.

David Cohen, president of DCI Consulting Group Inc. in Washington, commended the OFCCP for not adopting the proposed rule's language that contractors must pay equal wages to similarly situated employees. The final rules instead focus on prohibiting discriminatory wages.

Mickey Silberman, a management attorney with Jackson Lewis in Denver, made a similar observation.

Silberman, who leads the firm's affirmative action compliance and OFCCP defense practice group, said the final rules make a “critical” distinction between equal pay for equal work and fair pay for comparable work.

He said the rules explicitly state that pay doesn't have to be equal. They allow for differences in pay based on neutral, job-related factors such as tenure, he said.

That language “aligns the regulations with governing law and case law that exists under Title VII” and “sets a reasonable expectation for employers,” Silberman said.

Cohen said the final rules also codify that the OFCCP can use a disparate-impact theory of sex discrimination as it relates to compensation practices.

The rules recognize that pay or other employment practices, including selection criteria, that have a disparate impact based on sex are unlawful unless shown to be job-related and consistent with business necessity.

Gretchen W. Ewalt, a management attorney with Ogletree Deakins in Raleigh, N.C., said the rules provide specific examples of selection criteria that might have a disparate impact based on sex, such as strength and agility testing, or height and weight qualifications.

Additionally, Ewalt said the rules clarify that sex-based pay bias can result from job segregation or classification, such as when an employer disproportionately steers women into lower-paying jobs because of sex stereotypes.

Alissa Horvitz, a management attorney with Roffman Horvitz in McLean, Va., told Bloomberg BNA that the examples provided by the OFCCP throughout the rules are culled from court cases and other adjudicated resolutions and are the “best part of the regulation for government contractors.”

Horvitz said contractors can use these examples as part of their compliance self-evaluation practices.

Pregnancy Discrimination, Accommodations

The OFCCP's final rules adopt the 1978 Pregnancy Discrimination Act, which amended Title VII and prohibits sex bias on the basis of pregnancy, childbirth or related medical conditions.

Fortney said the rules also broadly adopt the U.S. Supreme Court's decision in Young v. United Parcel Services, Inc., 135 S. Ct. 1338, 126 FEP Cases 765 (2015).

The rules require contractors to provide workplace accommodations to pregnant employees, such as extra bathroom breaks and light-duty assignments, if the employer grants comparable accommodations to other employees who are unable to perform their regular job duties because of work injuries or disabilities.

Clements said she still hears stories of contractors that deny such accommodations for pregnant workers but provide it for other employees who are similarly situated in their inability to work.

“This is a practice that employers should carefully examine to see if it can still be justified, and in what circumstances,” Clements said.

Rules Prohibit Transgender Bias

The rules also reiterate that prohibited sex bias under EO 11,246 includes discrimination based on gender identity or transgender status.

The OFCCP already memorialized this position in an August 2014 agency directive, as well as a final rule prohibiting discrimination based on transgender status and sexual orientation that went into effect in April 2014.

The rules require contractors to allow workers to use bathrooms, changing rooms and similar facilities that are consistent with their gender identity.

Fortney said contractors in states like North Carolina, which requires individuals to use public restrooms based on their biological sex at birth, may face a “Hobbesian choice” between complying with the OFCCP's rules and those state laws.

“How that gets sorted out remains to be seen,” Fortney said, observing that the OFCCP's rules don't address how contractors should make accommodations based on that conflict.

With respect to fringe benefits, the final rules require employers to provide equal benefits regardless of sex assigned at birth, gender identity or recorded gender.

According to the agency, fringe benefits include “medical, hospital, accident, life insurance, and retirement benefits; profit-sharing and bonus plans; leave; and other terms, conditions, and privileges of employment.”

On the topic of benefits, Clements, Ewalt and Silberman all observed that the rules state that explicit, categorical exclusion of medical coverage for care related to a worker's gender dysphoria or gender transition are facially discriminatory.

They said contractors should review their health-care policies and benefit plans to determine if changes need to be made.

“Not all health benefit plans will likely satisfy all of the standards set forth in the new rules,” Clements said. “Recognizing that such changes may not be able to be made immediately, OFCCP noted it will consider a contractor’s good faith progress in this area when deciding whether enforcement action is warranted.”

Additionally, the final rules provide that contractors may invoke the Religious Freedom Restoration Act as a basis for an exemption to the rules.

Sex Stereotypes, Harassment, BFOQs

The OFCCP said its final rules reflect the principle established by the Supreme Court in Price Waterhouse v. Hopkins, 490 U.S. 228, 49 FEP Cases 954 (1988), that employment decisions based on sex stereotypes are a form of sex discrimination.

In other words, the rule prohibits stereotyping “based on an employee's nonconformity with norms about how people with the employee's assigned sex at birth should look, speak, and act,” the agency said.

In addition, the rules bar contractors from making employment decisions based on stereotypes related to the “proper roles” of women and men regarding caregiving.

The OFCCP said its final rules also address workplace harassment or hostile work environments based on sex, pregnancy, childbirth or gender identity.

The rules acknowledge that sex can be a bona fide occupational qualification (BFOQ) if it is “reasonably necessary to the normal operation” of an employer's “particular business or enterprise.”

However, the rules prohibit sex-based job classifications and state the “underlying principle that, absent a job-specific BFOQ, no job is the separate domain of any sex.”

To contact the reporter on this story: Jay-Anne B. Casuga in Washington at jcasuga@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

For More Information

The OFCCP's final sex discrimination rules are available at http://src.bna.com/fSA.