OFCCP Issues Final Rule Updating Sex Discrimination Guidelines

On June 14, 2016, the Office of Federal Contract Compliance Programs (“OFCCP”) announced a Final Rule that sets forth the requirements that covered contractors must meet under the provisions of Executive Order 11246 that prohibit sex discrimination in employment.

According to the DOL, the Final Rule replaces the prior sex discrimination guidelines from 1970 with new regulations that align with current law, and address the realities of today’s workplaces. The Final Rule addresses a variety of sex-based barriers to equal employment and fair pay, including compensation discrimination, sexual harassment, hostile work environments, a lack of workplace accommodations for pregnant workers, and gender identity and family caregiving discrimination. The effective date of the Final Rule is August 15, 2016.

Applicability

The Final Rule generally applies to any business or organization that (1) holds a single federal contract, subcontract, or federally assisted construction contract or subcontract in excess of $10,000; (2) holds federal contracts or subcontracts that have a combined total in excess of $10,000 in any 12-month period; or (3) holds government bills of lading, serves as a depository of federal funds, or is an issuing and paying agency for U.S. savings bonds and notes in any amount. The Final Rule does not apply to federal grant recipients or non-construction recipients of federal financial assistance.

Disparate Treatment/Disparate Impact

The Rule provides examples of disparate treatment, which include:

• Making distinctions between married and unmarried persons that are not applied equally to men and women;
• Denying transgender employees access to the restrooms, changing rooms, showers, and similar facilities designated for use by the gender with which they identify—tackling the “restroom debate” circling the nation;
• Treating employees or applicants adversely because they have received, are receiving, or are planning to receive transition-related medical services designed to facilitate the adoption of a sex or gender other than the individual’s designated sex at birth;
• Restricting job classifications and maintaining seniority lines or lists on the basis of sex;
• Recruiting or advertising for certain jobs on the basis of sex;
• Imposing any differences in terms, conditions, or privileges of retirement on the basis of sex.

The Rule also gives the following examples of practices which may have a disparate impact:

• Relying on recruitment or promotion methods, such as ‘‘word-of mouth’’ recruitment or ‘‘tap-on-the shoulder’’ promotion, that have an adverse impact on women where the contractor cannot establish that they are job-related and consistent with business necessity.
• Using height or weight qualifications that are not necessary to the performance of a job, and that negatively affects women more than men.
• Requiring strength, agility, or other physical requirements that exceed the actual requirements necessary to perform the job in question and that negatively impact women substantially more than men.
• Providing no medical or family leave (or insufficient leave) that has an adverse impact on the basis of sex (male or female), unless the policy is job related and consistent with business necessity.

Discrimination in Compensation

The Final Rule focuses on the concept of “fair pay,” as opposed to “equal wages.” It states that contractors may not “pay different compensation to similarly situated employees on the basis of sex” or otherwise “discriminate[ ] in wages, benefits, or any other forms of compensation or … access to earnings opportunities, on the basis of sex,” echoing Title VII’s and Executive Order 11246’s broad approach to wage discrimination. For purposes of evaluating compensation differences, the determination of similarly situated employees is case-specific. Employees are “similarly situated” if they are “comparable” on some of the following factors, even if they are not similar on others: tasks performed, skills, minimum qualifications, levels of responsibility, working conditions, job difficulty, or other objective terms. Notably, they need not be paid equally, but fairly on the basis of gender-neutral, job-related factors.

It further adopts the Lilly Ledbetter Fair Pay Act standard that compensation discrimination occurs any time a contractor “pays wages, benefits, or other compensation that is the result in whole or in part of the application of any discriminatory compensation decision or other practice.”

Discrimination on the Basis of Pregnancy, Childbirth, or Related Medical Conditions

The Rule incorporates the language of Title VII as amended by the Pregnancy Discrimination Act, and prohibits contractors from discriminating on the basis of pregnancy, childbirth, or related medical conditions. It requires contractors to “treat people of childbearing capacity and those affected by pregnancy, childbirth, or related medical conditions the same for all employment-related purposes, including receipt of benefits under fringe-benefit programs, as other persons not so affected, but similar in their ability or inability to work.”

The following are examples of unlawful pregnancy discrimination:

• Refusing to hire pregnant workers or workers of childbearing capacity;
• Requiring employees to go on leave simply because they become pregnant or have a child;
• Requiring a doctor’s note in order for a pregnant employee to continue or resume working;
• Providing health insurance that does not cover hospitalization and other medical costs for pregnancy, childbirth, or related medical conditions to the same extent that hospitalization and other medical costs are covered for other medical conditions.

The Final Rule also updates the standards for federal contractors’ related to accommodation requests to reflect the U.S. Supreme Court’s decision in Young v. UPS. It specifies that denying accommodations for pregnancy, childbirth, or related medical conditions constitutes unlawful disparate treatment where (i) the contractor denies accommodations only to employees affected by pregnancy, childbirth, or related conditions; (ii) the contractor provides accommodations to other employees whose abilities or inabilities to perform their job duties are similarly affected, the denial of accommodations to employees affected by pregnancy, childbirth, or related medical conditions imposes a significant burden on those employees, and the contractor’s asserted reasons for denying accommodations do not justify that burden; or (iii) intent to discriminate is otherwise shown.

The Rule also clarifies that the OFCCP will apply a disparate-impact analysis to policies and practices that deny alternative job assignments, modified duties, or other accommodations to employees who are unable to perform some of their job duties because of pregnancy, childbirth, or related medical conditions. If such policies or practices have an adverse impact on the basis of sex, contractors must show that they are job-related and consistent with business necessity.

To the extent that a contractor provides family, medical, or other leave, the Final Rule provides that such leave must not be denied or provided differently on the basis of sex, and, specifically, that:

• Contractors must provide job-guaranteed medical leave, including paid sick leave, for employees’ pregnancy, childbirth, or related medical conditions on the same terms that medical or sick leave is provided for medical conditions that are similar in their effect on employees’ ability to work; and
• Contractors must provide job-guaranteed family leave, including any paid leave, for male employees on the same terms that family leave is provided for female employees.

Contractors that have employment policies or practices under which insufficient or no medical or family leave is available must ensure that such policies or practices do not have an adverse impact on the basis of sex unless they are shown to be job-related and consistent with business necessity.

Fringe Benefits

The Final Rule clarifies that contractors may not discriminate on the basis of sex with regard to the provision of fringe benefits, even if the cost of providing a fringe benefit to the members of one sex is greater than the cost of providing it to members of the other sex.

The OFCCP opens the door for claims against contractors who categorically exclude coverage for care related to gender dysphoria or gender transition. The OFCCP takes the position that such exclusion is facially discriminatory because it singles out services and treatments for individuals on the basis of their gender identity or transgender status, which constitutes discrimination based on sex. In evaluating whether the denial of coverage of a particular service (as opposed to a categorical exclusion) where an individual is seeking the service as part of a gender transition is discriminatory treatment, the OFCCP states it will review whether there is a legitimate, nondiscriminatory reason for such denial or limitation that is not a pretext for discrimination.

Sex-Based Stereotypes

The rule provides that employment decisions made on the basis of stereotypes — including failure to conform to gender norms and expectations for dress, appearance, and/or behavior; actual or perceived gender identity or transgender status; and caregiver responsibilities — are a form of sex discrimination. Examples given include:

• Adverse treatment of employees or applicants based on their sexual orientation where the evidence establishes that the discrimination is based on gender stereotypes.
• Adverse treatment of a female employee or applicant because she does not conform to a sex stereotype about women working in a particular job, sector, or industry.
• Adverse treatment of a male employee because he has taken leave to care for his newborn or recently adopted child based on the sex-stereotyped belief that women and not men should care for children.

Best Practices

The Final Rule also includes an Appendix of “Best Practices.” These are not required of contractors, but may serve as evidence of a contractor’s good faith efforts toward affirmative action compliance. Some of the “Best Practices” include:

• Designating single-user restrooms or similar facilities as sex-neutral;
• Using gender-neutral terminology instead of “foreman” or “lineman,” where gender-neutral alternatives are available;
• Providing, as part of broader accommodations policies, light duty, modified job duties or assignments, or other reasonable accommodations to employees who are unable to perform some of their job duties because of pregnancy, childbirth, or related medical conditions;
• Encouraging men and women equally to engage in caregiving-related activities;
• Providing appropriate time off and flexible workplace policies for men and women.

What Now?

As a general matter, the new Final Rule does not necessarily change the day-to-day behavior expected of federal contractors, as contractors are already subject to many of the same obligations pursuant to other laws, such as Title VII. Nevertheless, given the effort the OFCCP took to update the Rule, federal contractors should review their employment practices to assure compliance, as the OFCCP will likely do the same should they conduct an audit.

Kelli P. Lieurance