OFCCP Issues Proposal to Update Outdated Sex Bias Rules to Conform With Current Law

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By Jay-Anne Casuga

Jan. 28 — The Labor Department's Office of Federal Contract Compliance Programs Jan. 28 issued a proposed rule to revise federal contractor sex discrimination guidelines under Executive Order 11,246 that haven't been updated in more than 40 years.

Management attorneys and consultants told Bloomberg BNA that the OFCCP's proposal generally didn't contain many surprises in its attempt to memorialize current workplace realities and legal precedents, but they added that federal contractors nevertheless should pay close attention to sections pertaining to compensation discrimination and certain benefits.

In a notice of proposed rulemaking published in the Jan. 30 Federal Register (80 Fed. Reg. 5245), the OFCCP said it would rescind its existing guidelines at 41 C.F.R. part 60-20, which were first adopted in 1970, and replace them with rules that “address current workplace practices and issues and align contractors' obligations with current law and legal interpretations.”

For example, the OFCCP said the current guidelines don't take into account amendments to Title VII of the 1964 Civil Rights Act or case law interpreting the statute, the principles of which are used by the OFCCP in enforcing EO 11,246.

Among other things, the OFCCP's proposed rule would clarify that adverse employment actions based on sex-based stereotypes related to family caretaking responsibilities or to gender norms and expectations are forms of sex bias, as is discrimination based on an individual's gender identity. The proposal also would confirm that contractors must provide workplace accommodations, and in certain situations health or disability insurance, for workers “affected by pregnancy, childbirth, or related medical conditions.”

In addition, the proposed rule would clarify that sex-based compensation discrimination can result from “job segregation or classification on the basis of gender, not just unequal pay for equal work”; confirm that contractors “must provide equal benefits and equal contributions for male and female employees participating in fringe-benefit plans”; and address the various forms of sexual harassment.

“Our sex discrimination guidelines are woefully out of date and don't reflect established law or the reality of modern workplaces,” OFCCP Director Patricia A. Shiu said in a Jan. 28 statement. “We owe it to the working women of America—and their families—to fix this regulatory anachronism so there is no confusion about how federal contractors must comply with their equal opportunity obligations."

Not Many Surprises, Some Attorneys Say

Alissa Horvitz, a management attorney and shareholder with Littler Mendelson in Washington, Jan. 28 told Bloomberg BNA that the OFCCP's proposed rule doesn't include many surprises and that it memorializes legal precedents and frameworks that have evolved over the past 40 years.

Horvitz, who also co-chairs Littler Mendelson's OFCCP Practice Group, said it would be difficult to determine whether the proposal could be a “game changer” for some contractors until the rule is finalized and the OFCCP begins to implement it through the use of information requests during compliance audits.

John Fox, an attorney with Fox, Wang & Morgan in San Jose, Calif., and a former OFCCP policy official, also told Bloomberg BNA that “most federal contractors will greet these proposed regulations with a yawn.”

However, he said a “number of small contractors” may be “quite animated in their opposition” to the proposed rule, which “may require payment of contraceptives for employees and for abortions in certain circumstances.”

Fox further observed that, in states that equate same-sex domestic partnerships with marriage between opposite-sex couples, the proposal would allow the OFCCP to find a contractor in violation of EO 11,246 if it granted benefits to married, opposite-sex couples but denied those same benefits to same-sex couples in domestic partnerships.

Meanwhile, David Fortney, a management attorney with FortneyScott in Washington, told Bloomberg BNA that the OFCCP's proposal does “push the line” in certain instances with an “expansive reading of the law,” such as in its attempt to codify the Equal Employment Opportunity Commission's position on workplace pregnancy accommodations in Young v. United Parcel Service, Inc., which currently is pending review by the U.S. Supreme Court.

Attorneys Highlight Proposal's Pay Section

Horvitz said contractors should pay attention to the OFCCP's proposed revisions to 41 C.F.R. § 60-20.4, which deals with compensation, given that OFCCP “has been pursuing pay issues now with much more zeal and rigor in compliance reviews than in the past.”

The proposed rule, she said, is an extension of the OFCCP's approach when analyzing a contractor's pay practices.

Horvitz also said the OFCCP in the proposed rule for the first time is calling contractors' attention to performance review systems as potentially having an adverse impact on compensation based on sex.

Fortney and David Cohen, president of DCI Consulting Group Inc. in Washington, also emphasized the importance of the OFCCP's proposed Section 60-20.4. Both Fortney and Cohen are faculty members of the OFCCP Institute.

Cohen said the proposal would codify the OFCCP's Directive 307 from February 2013, which provided the agency with broader and more flexible investigation procedures for pay discrimination.

Fortney added that the OFCCP's use of the term “equal wages” in its proposal raises important questions. He explained that EO 11,246 prohibits discrimination based on sex, but doesn't specifically require “equal pay.”

In its proposed rule, however, the OFCCP states that contractors may not engage in any employment practice that denies “equal wages,” Fortney said. “Why are we shifting from nondiscrimination to compelling equal pay? That's an important question to be answered.”

Compensation, Benefits

The OFCCP said its proposed rule would provide “a clearer general statement of the contractor's obligation to provide equal opportunity with respect to wages and other forms of compensation.”

It would define compensation broadly in line with President Obama's EO 13,655, and generally restate the agency's “case-specific approach to evaluating contractor pay systems and practices for sex discrimination,” as outlined in OFCCP Directive 307.

The proposed rule also would provide guidance to contractors on the practices they should review and the analyses they should conduct to identify potential sex-based pay discrimination.

In addition, it would specify different scenarios in which bias may occur apart from paying different compensation to similarly situated employees based on sex. For instance, the proposal would prohibit contractors from granting or denying “training, work assignments, or other opportunities that may lead to advancement,” or granting or denying opportunities for overtime hours, commissions or incentive compensation on the basis of sex.

The OFCCP further observed that the existing guidelines were issued when more workplaces were segregated by sex.

It said the proposed rule would clarify that other “more subtle forms” of sex-based pay bias can result from “de facto job segregation or classification on the basis of sex.” For example, it said, an employer may disproportionately steer women into lower-paying jobs because of stereotypes about women not being primary wage earners.

Furthermore, the proposal would bar “differential treatment between men and women with regard to retirement age” as well as “other terms, conditions, or privileges of retirement.”

Additionally, with respect to “fringe benefits,” the proposed rule would follow Supreme Court precedent stating that employers must “provide equal benefits to men and women, even if doing so costs more for one sex than the other.”

Pregnancy Discrimination

Since 1970, the OFCCP said, Title VII has been significantly amended four times, including in 1978 with the Pregnancy Discrimination Act, which prohibits sex bias “on the basis of pregnancy, childbirth or related medical conditions.”

The OFCCP's proposed rule would adopt that principle and require contractors to treat employees and job applicants “of childbearing capacity and those affected by pregnancy, childbirth, or related medical conditions the same for all employment-related purposes as other persons not so affected but similar in their ability or inability to work.”

Under the proposal, contractors would be prohibited from refusing to hire pregnant applicants; firing workers or requiring them to take leave because they are pregnant or have children; limiting pregnant employees' job duties or requiring a medical provider's note for continued employment; and not providing health insurance that covers pregnancy-related hospitalization and medical costs if the employer covers such costs for other medical conditions.

Additionally, the proposed rule would require contractors to provide reasonable workplace accommodations to pregnant employees, which may include alternative job assignments or modified duties if the employer grants such alternatives to other employees who are unable to perform their regular job duties because of work injuries or disabilities.

That issue is currently pending before the Supreme Court in Young v. United Parcel Serv., Inc.

“Should the Supreme Court rule contrary to our interpretation, OFCCP's final rule will be revised consistent with the ruling,” the OFCCP said.

In addition, the proposed rule would set forth the Title VII principle that family and medical leave may not be denied or provided differently based on sex, and would apply disparate impact analyses to contractor leave policies.

Sex Stereotypes, Gender Identity, Harassment

The OFCCP said its proposal would state the “well-recognized principle” established by the Supreme Court in Price Waterhouse v. Hopkins, 490 U.S. 228, 49 FEP Cases 954 (1988), and its progeny that employment decisions based on sex stereotypes are a form of sex discrimination.

In other words, the proposed rule would prohibit 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.

Additionally, the proposal would bar contractors from making employment decisions based on stereotypes related to the “proper roles of women and men regarding caregiving,” it said.

The proposed rule would prohibit sex-based job classifications and state that the “underlying principle that no job, absent a job-specific BFOQ, is the separate domain of any sex.” Under Title VII, sex can be a bona fide occupational qualification if it is “reasonably necessary to the normal operation” of an employer's “particular business or enterprise.”

Furthermore, the proposal would clarify that prohibited sex bias under EO 11,246 includes discrimination based on gender identity or transgender status.

The OFCCP has already memorialized this position in an August 2014 agency directive, which followed the Equal Employment Opportunity Commission's ruling in Macy v. Holder, as well as a final rule prohibiting discrimination based on transgender status and sexual orientation slated to go into effect in April.

Furthermore, the OFCCP said its current guidelines make no references to sexual harassment or sexually hostile work environments. The proposed rule would address harassment that is sexual in nature, harassment based on pregnancy or childbirth and harassment that is not sexual in nature but is based on sex, including gender identity.

To contact the reporter on this story: Jay-Anne 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 proposed rule is available at http://op.bna.com/dlrcases.nsf/r?Open=jaca-9t7p5f.

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