Judge Nixes Construction Association's Challenge to OFCCP's Disabilities Rules

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By Jay-Anne B. Casuga  

March 21 --A federal judge in the District of Columbia March 21 struck down a national construction trade association's challenge to Labor Department regulations effective March 24 pertaining to federal construction contractors' affirmative action obligations toward individuals with disabilities (Associated Builders & Contractors, Inc. v. Shiu, D.D.C., No. 13-01806, 3/21/14).

The decision by Judge Emmet G. Sullivan of the U.S. District Court for the District of Columbia allows the DOL's controversial rules under Section 503 of the Rehabilitation Act, which apply to both construction and non-construction federal contractors, to proceed on schedule.

Among other things, the rules, which were finalized by the DOL's Office of Federal Contract Compliance Programs last September, will require federal contractors to establish a nationwide 7 percent utilization goal for disabled individuals in each job group of their workforce . If a contractor has fewer than 100 employees, the final rules require the 7 percent goal to be applied to its entire workforce.

Contractors also must record and analyze data on job openings, applicants and hires, as well as invite job seekers to voluntarily self-identify as disabled at the pre- and post-offer phases of the hiring process.

The Associated Builders and Contractors Inc., which has approximately 22,000 members from more than 19,000 construction firms nationwide, challenged those new requirements in a November 2013 complaint.

Granting summary judgment to the OFCCP, Sullivan found that Section 503's plain text delegates “broad authority” to the president to “define the ways in which contractors must engage in affirmative action.”

He said nothing in the Rehabilitation Act or other laws, including the Americans with Disabilities Act, prohibits the “use of benchmarks for workforce diversity or data collection and analysis to help meet those benchmarks.”

In addition, Sullivan rejected ABC's contention that the data collection and analysis requirements, and the 7 percent utilization goal are “arbitrary and capricious.” The judge also said the rules don't violate the Regulatory Flexibility Act with respect to their impact on small businesses.

OFCCP, Association, Others React

A Labor Department spokeswoman March 21 told Bloomberg BNA that the ruling, which backed the OFCCP's authority to update its rules implementing Section 503, “reaffirms the role of the federal government in ensuring that all workers have an equal opportunity to find and compete for good jobs”

“The department's rules will expand employment opportunities for people with disabilities and lead to a larger, more diverse hiring pool for federal contractors and subcontractors,” she said. “We look forward to continuing to work with members of the federal contracting community to ensure smooth implementation of this rule.”

Granting summary judgment to the OFCCP, Judge Sullivan found that Section 503's plain text delegates “broad authority” to the president to “define the ways in which contractors must engage in affirmative action.”  

Laura G. Abelson, an attorney with Brown Goldstein Levy in Baltimore, told Bloomberg BNA that the ruling demonstrates that the court understood that the Section 503 regulations “are necessary to further the goals of the Rehabilitation Act and prevent discrimination against people with disabilities in employment.”

“We are hopeful that the updated regulations will allow the government to take important steps to promote the hiring of people with disabilities and make meaningful improvement in their unemployment rate,” said Abelson, one of several attorneys representing a number of amici that supported the OFCCP, including the Judge D. Bazelon Center for Mental Health Law and the American Association of People with Disabilities, both in Washington.

Geoff Burr, ABC's vice president of government affairs, told Bloomberg BNA that the association is disappointed in the decision and will contemplate its options in further challenging the OFCCP's rules.

Burr said ABC and its members support nondiscriminatory practices toward individuals with disabilities on federal projects, and “remain committed to placing these individuals in good jobs and careers in the construction industry.”

But he maintained that the OFCCP's rules impose “wasteful and unnecessary data collection and reporting requirements on government contractors without any supporting evidence from the agency that contractors weren't previously meeting the requirements.”

John C. Fox, a management attorney with Fox, Wang & Morgan in San Jose, Calif., and a former OFCCP enforcement and policy official, told Bloomberg BNA that the ruling was “what the contractor community expected.”

“The only viable attack on the OFCCP's regulations would have been to challenge, through a labor economist, the OFCCP's cost and burden analyses,” he said, adding that a U.S. Chamber of Commerce study had shown that the agency's analyses were “faulty and vastly understated.”

Attorney Says 'Battle Is Not Over.'

Leigh M. Nason, a management attorney with Ogletree Deakins in Columbia, S.C., and chair of the firm's Affirmative Action/OFCCP Compliance Practice Group, told Bloomberg BNA March 21 that she was “a bit surprised at the ease with which the court dealt with” the OFCCP's calculation of the 7 percent utilization goal, as well as the alleged conflict between the rules' pre-offer disability self-identification requirement and the ADA.

The contractor community, as well as some Republican legislators, had repeatedly raised concerns about those issues ever since the OFCCP proposed its Section 503 updates in December 2011 (236 DLR AA-1, 12/8/11; 20 DLR A-2, 1/31/12; 69 DLR C-1, 4/10/12; 150 DLR A-12, 8/3/12; 183 DLR A-13, 9/20/13; 234 DLR C-1, 12/4/13).

“I think the battle is not yet over,” Nason said. “We are likely, of course, to see ABC appeal this decision; although any requested stay [of the rules] should apply only to construction contractors.”

David S. Fortney, a management attorney with FortneyScott in Washington, observed that “there is a strong possibility of further litigation based on the manner in which the OFCCP enforces the regulations.”

“If a quota-type approach is followed in evaluating federal contractors' good faith efforts that fall short of the 7 percent utilization requirements for each job group in each [affirmative action program] for each establishment, then it is likely that there will be further judicial challenges,” said Fortney, who represented the HR Policy Association, which submitted an amicus brief in the case.

Fortney added that it remains to be seen whether other federal courts will follow Judge Sullivan's ruling with respect to the rules' compliance with the ADA.

“We hope that other federal courts will follow this ruling on the ADA question, and we reaffirm our request that the Department of Labor foreclose private plaintiffs' litigation claims under the ADA in a more definitive fashion by addressing and resolving this question with appropriate rulemaking or legal guidance,” he told Bloomberg BNA March 21.

OFCCP Didn't Exceed Authority, Judge Says

In granting summary judgment to the OFCCP, Judge Sullivan rejected the ABC's argument that the agency exceeded its authority under Section 503 in issuing the rules (.

Following the framework established by the U.S. Supreme Court in Chevron, U.S.A. v. Natural Resources Defense Council, 467 U.S. 837 (1984) for reviewing agency interpretation of a statute, the judge found that the plain text of Section 503 supports Congress's “broad delegation of authority” to the OFCCP to define the law's affirmative action requirement.

Specifically, Section 503 (29 U.S.C. § 793(a)) states that covered federal contracts shall contain a provision requiring a contractor to “take affirmative action to employ and advance in employment qualified individuals with disabilities.” It further directs the president to “implement the provisions of this section by promulgating regulations.”

Section 503 doesn't define the phrase, “take affirmative action,” and OFCCP may interpret its scope, Sullivan said.

Judge Rejects Various Arguments

The judge found no merit in a number of ABC's contentions, including that Section 503's text prohibits OFCCP from introducing data collection and analysis requirements and utilization goals.

“The term 'affirmative action' encompasses the use of benchmarks to gauge progress and tools to gather and analyze data to track such progress,” he said.

Sullivan also was unpersuaded by the argument that the OFCCP's failure to previously require data collection, data analysis and utilization goals under Section 503--and Congress's subsequent reenactment of the provision without mandating use of such tools--meant that the agency “forfeited those tools.”

“This argument presumes that Congress ratifies everything it does not specifically disclaim,” the judge said. “That argument is not legally sustainable.”

By delegating broad power to the president to define the scope of Section 503's affirmative action requirement and “placing no limits on the tools OFCCP has implemented,” Sullivan said Congress has “directly spoken” on the issue of the OFCCP's authority to update rules implementing Section 503.

“Accordingly, 'that is the end of the matter; for the court … must give effect to the unambiguously expressed intent of Congress,” he said.

But even if Congress had not spoken, Sullivan said the OFCCP's rules still would survive Chevron scrutiny because they are a “permissible construction” of Section 503 and the court must defer to the agency's interpretation.

“Because the text of Section 503 grants unqualified authority over the scope of the affirmative-action requirement and nothing in the Rehabilitation Act or any other statute forbids the tools OFCCP has chosen, OFCCP's interpretation is subject to deference,” he wrote.

Rules Don't Violate ADA

With respect to other laws, Judge Sullivan held that the rules' requirement that contractors invite job applicants to voluntarily self-identify as disabled at the pre-offer employment stage do not violate the ADA.

He acknowledged that the ADA does prohibit employers from inquiring if a job applicant has a disability (42 U.S.C. § 12112(d)(2)). But he pointed out that ADA Section 12112(d) doesn't apply to voluntarily offered medical information.

Citing Senate and House reports from 1989, Sullivan added that the legislative history of that provision confirms that Congress intended to permit an employer to invite job applicants to disclose their disabilities, as long as that employer “is taking affirmative action pursuant to [Section 503].”

He pointed out that the Equal Employment Opportunity Commission, which enforces the ADA, agreed with that stance in an August 2013 opinion letter (167 DLR AA-1, 8/28/13).

Provisions Not 'Arbitrary' or 'Capricious.'

Additionally, Judge Sullivan disagreed with ABC's arguments that the OFCCP's data collection and analysis requirements are arbitrary and capricious because they either unjustifiably departed from past practice or never before existed.

“The fact that previous regulation under Section 503 did not require contractors to compile data regarding their workforce and applicant pool … does not make the new requirement[s] arbitrary and capricious,” he said. “[I]f the agency adequately explains the reasons for a reversal of policy, change is not invalidating.”

As an example, the judge said the OFCCP explained that extending data collection and analysis requirements with respect to disabled individuals was necessary because the lack of data made it “nearly impossible” for the agency and contractors to make “objective, data-based assessments” on the effectiveness of outreach and recruitment efforts, among other things.

As for the OFCCP's establishment of the 7 percent utilization goal, Sullivan said the agency did not act arbitrarily or capriciously, pointing to the agency's explanation that change was needed to lower the unemployment rate for disabled individuals.

Sullivan also said the agency's methodology for reaching the 7 percent figure was “reasonable,” even though he acknowledged that the OFCCP “was forced to estimate” the number of individuals with disabilities “who work or wish to find work” nationwide.

“While nationwide data may not capture unique circumstances in specific geographic locations and industries, there is no indication that the prevalence of qualified individuals with disabilities varies so widely that a nationwide goal is unreasonable,” he said.

Although ABC challenged the OFCCP's approach, Sullivan pointed out that the association presented “no better data on the subject and instead argue[d] that 'the only rational approach' is to 'keep[] in place the current … practice.”

With respect to the OFCCP's decision to not exclude construction contractors from the utilization goal requirement, Sullivan observed that the agency's existing regulations underExecutive Order 11246 already require such contractors to “group their employees by construction trade, strive to meet utilization goals for [minority and female] diversity within those trades, and take various steps-including the review of hiring processes.”

“While the requirements under the new [Section 503 rules] are not identical, they are tied to the same construction-trade groupings, require contractors to meet similar goals, and utilize similar review requirements,” he said. “Accordingly, OFCCP reasonably declined to credit arguments that the construction industry is uniquely unable to comply with the utilization goal.”

Moreover, the judge emphasized that the utilization goal is not a quota.

“[A]ny contractor that engages in significant affirmative-action efforts, but falls short of 7 percent because it is faced with too few qualified applicants with disabilities could arguably have complied with the rule,” he said. “No contractor is required to hire any unqualified individual and all that occurs if the benchmark is not met is that the contractor must examine its hiring practices to determine if they are excluding qualified individuals with disabilities.”


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

Text of the opinion is available at http://www.bloomberglaw.com/public/document/ASSOCIATED_BUILDERS_AND_CONTRACTORS_INC_v_SHIU_et_al_Docket_No_11/5.

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