United States: House Subcommittee Hearing Examines New OFCCP Actions

The House Subcommittee on Workforce Protections held a hearing on Wednesday to discuss recent Office of Federal Contract Compliance Programs (OFCCP) rules and other initiatives affecting federal contractors, subcontractors, and healthcare providers.  Notably, the OFCCP recently issued its final revised affirmative action rules for protected veterans and individuals with disabilities. Among other requirements, these rules set hiring benchmarks for veterans, and a 7% utilization goal for employment of qualified individuals with disabilities for each of the job groups established in the contractor's women and minorities' affirmative action plans.

In addition, the Subcommittee also examined the role the OFCCP has taken in actively trying to extend its jurisdiction to healthcare providers based on the theory that providers participating in, and receiving more than $50,000 in reimbursement from, the Department of Defense's (DOD) TRICARE program render them federal government subcontractors subject to the agency's regulations.    

Healthcare Provider Issue

In response to perceived jurisdictional overreach by the OFCCP, Subcommittee Chairman Tim Walberg (R-MI) on December 3 introduced the Protecting Health Care Providers from Increased Administrative Burdens Act (H.R. 3633), a bill that would prevent the OFCCP from asserting jurisdiction over healthcare providers based on their federal health program participation.  Specifically, this bill provides:

A State, a local government, or other recipient that receives a payment from the Federal Government, directly or indirectly and regardless of reimbursement methodology, related to the delivery of health care services to individuals, whether or not such individuals are or have been employed by the Federal Government, shall not be treated as a Federal contractor or subcontractor by the Office of Federal Contract Compliance Programs based on the work performed or actions taken by such individuals that resulted in the receipt of such payments.

Attorney Curt Kirschner, testifying on behalf of the American Hospital Association, expressed his support for this bill.  He stated the OFCCP has "expanded aggressively its jurisdiction over hospitals without advance notice" and without any agreement or consent to become federal contractors.  Kirschner noted the OFCCP's position runs contrary to that of the Department of Defense (DOD) and Office of Personnel Management (OPM), which assert, through their regulations, that participating in a federal medical plan network does not render a hospital a government contractor.  He testified the OFCCP's current position departs significantly from its stance in the past. 

OFCCP Director Patricia A. Shiu denied the agency has expanded its jurisdiction over TRICARE-covered subcontracts, or that all healthcare providers that participate in the TRICARE network are subcontractors.  Shiu insisted the OFCCP examines contractor status "on a case-by-case basis."  While Kirschner agreed that the agency uses a case-by-case approach, he declared it "completely unworkable from a hospital's perspective."  He claimed the agency had previously issued internal directives explicitly stating that participation in the TRICARE or the Federal Employees Health Benefit Program (FEHBP) network did not render a provider a federal contractor, but that the OFCCP rescinded these directives and has taken the position that participation in the managed care component of these federal benefit programs does subject an entity to OFCCP jurisdiction.  According to Kirschner, this change is "untenable" and there "is no reasonable explanation for the abrupt change in position."  He noted federal benefit plans have not changed in many years and hospitals are already "subject to myriad laws and regulations. Dozens of federal entities have authority to regulate hospitals, subject to little or no coordination, and at least 10 of these agencies have jurisdiction over hospitals with respect to workforce issues alone."  He emphasized that being subject to additional OFCCP requirements will create "massive" and "crushing" recordkeeping and administrative burdens.  According to Kirschner, hospitals already spend more than 20% of their revenues on administrative costs. 

Chairman Walberg expressed his concern about potential lack of access to medical care if the OFCCP continues to assert jurisdiction over healthcare providers, as Kirschner testified certain hospitals "may decide to opt out of federal assistance programs, such as TRICARE or FEHBP, limiting the health care options available to service members, federal employees and their families. The DOD already has recognized and reported a trend that fewer health care providers are accepting new TRICARE participants."

Walberg considered the OFCCP's actions "bureaucratic overreach" and an effort to "expand its reach through regulatory fiat."

Veterans and Individuals with Disabilities

In addition to the jurisdictional issue affecting healthcare providers, the hearing addressed the two new affirmative action rules published in September.  Ranking member Joe Courtney (D-CT) and OFCCP Director Shiu said these rules set forth "non-punitive and aspirational goals." Shiu testified that these updated rules "provide for the first time specific aspirational metrics for hiring people with disabilities and veterans."  She said that the metrics will be used to measure progress and influence decision-making, but that the goals and benchmarks are not rigid requirements.

David Fortney, testifying on behalf of H.R. Policy Association, nevertheless voiced concern that these goals "may become a quota."  For example, if an employer's outreach efforts are deemed insufficient, he believes the OFCCP will establish a requirement for the employer as part of a conciliation agreement: "Falling short of the required 7% is likely to result in a formal conciliation agreement that requires a contractor to meet the 7% target, which then results in the goal being enforced as an unlawful quota."

Fortney also took issue with the new policy of having employers ask whether an individual has a disability before an offer of employment is made.  According to Fortney, the Americans with Disabilities Act specifically prohibits this type of inquiry.  Fortney worried that these conflicting policies will subject employers to litigation.  Shiu, however, said if the inquiry "is in furtherance of affirmative action, it is a permissible question."

Thomas C. Shanahan, Vice President and General Counsel of the University of North Carolina, Chapel Hill, discussed the administrative burdens the new rules impose.  He testified his organization will need to hire 20 additional personnel to comply with the rules' requirements.  The rules will also necessitate the expenditure of funds to purchase or upgrade new computer systems or programs to handle the recordkeeping and other obligations.  He stated that he was not certain the new recordkeeping obligations will achieve the OFCCP's desired outcomes without imposing significant administrative and cost burdens on employers.   

A complete list of panelists and links to their testimony can be found here

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