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Attention, Health Care Institutions: Get Your Affirmative Action Plan in Place ASAP!

As we jump into 2018, health care institutions who receive TRICARE dollars should assess whether those TRICARE dollars are high enough to require them to prepare Affirmative Action Plans ("AAPs"). If they do, they must get their AAPs in place beginning this year, so that they have the requisite information in place once the Office of Federal Contract Compliance Programs' ("OFCCP") moratorium on enforcement expires.

OFCCP Jurisdiction

To provide some background, an employer is considered a federal contractor if they have 50 or more employees, and relevant to health care institutions, a single federal contract in excess of $50,000 (for Women/Minorities obligations and Disability obligations), and $150,000 (for Veteran obligations). Many health care organizations have a direct contract with the federal government and therefore have affirmative action obligations by nature of that contract. For instance, a hospital may be a covered contractor as a result of a contract with the Department of Veterans' Affairs or the Department of Defense requiring the provision of medical services to active or retired military personnel.

Additionally, and relevant to this article, some organizations may have affirmative action obligations if they "subcontract" with an entity with a federal contract. A "subcontract" is generally any agreement between a contractor and a hospital (1) for the purchase, sale, or use of non-personal services that, in whole or in part, are necessary to the performance of any contract, or (2) under which any portion of the contractor's obligation under any contract is performed, undertaken, or assumed. Whether a health care employer’s subcontracts bring it under the OFCCP’s jurisdiction is a difficult inquiry, as it depends upon the nature of the prime contract and the terms of the subcontract.

One of the methods of becoming a subcontractor is by participation in a TRICARE Network. In 2010, an Administrative Law Judge ("ALJ") in OFCCP v. Florida Hospital of Orlando held that a hospital that subcontracted to provide medical services to TRICARE beneficiaries was a federal subcontractor subject to affirmative action laws. By providing medical services to TRICARE’s beneficiaries, the hospital was deemed to be a subcontractor because its services were necessary to the performance of TRICARE’s contract.

In light of the Florida Hospital decision, most health care institutions were considered federal subcontractors. However, on December 15, 2011, Congress passed Section 715 of the National Defense Authorization Act ("NDAA"), which seemed to reverse this decision. Despite this legislation, the OFCCP persisted in asserting that it had jurisdiction over Florida Hospital. In a July 22, 2013, ruling, the court again ruled that Florida Hospital and other TRICARE providers do meet the definition of a federal subcontractor, despite the NDAA legislation. This meant that health care institutions with TRICARE (or CHAMPVA which is very similar) in excess of $50,000, must comply with affirmative action obligations, which includes preparing an affirmative action plan.

Moratorium on Enforcement

In light of the continued back and forth about whether TRICARE brings with it OFCCP jurisdiction, on May 7, 2014, the OFCCP published Directive 2014-01, which established a five-year moratorium on its enforcement of obligations related to affirmative action programs and recordkeeping under the three affirmative action laws (Executive Order 11246, Section 503 of the Rehabilitation Act of 1973 (Section 503), and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA)).

Notably, the moratorium does not apply to health care institutions that are direct contractors with the federal government or TRICARE subcontractors that have a separate, non-health-care-related federal subcontract. The moratorium also does not apply to investigations of discrimination complaints against health care providers.

Why Does This Matter Now?

For TRICARE-only subcontractors, while there is a reprieve from the OFCCP's enforcement efforts until approximately May 2019, this does not mean that they can ignore their affirmative action obligations. The OFCCP is giving health care institutions this time to get their affirmative action compliance efforts together, not to sit by and wait a few years before starting the process. Make no mistake that the OFCCP will aggressively audit health care institutions following the end of the moratorium period, so there will be no excuses for non-compliance at that time. Given that AAP data includes applicant, hire, promotion, and termination data from the year prior to the official AAP plan date, employers seeking compliance should begin the AAP process now. Failure to do so will result in incomplete AAPs, and possible violations should the OFCCP conduct an audit.

In other words, if your hospital receives TRICARE dollars in excess of $50,000 annually, and you do not have a current AAP in place, you should contact your legal counsel promptly to begin the process.

Kelli P. Lieurance
Labor, Employment and Employee Benefits Section

1700 Farnam Street | Suite 1500 | Omaha, NE 68102 | 402.344.0500