OFCCP Institutes 5-Year Moratorium on Its Attempts to Assert Jurisdiction Over TRICARE Participants

After years of attempting to assert jurisdiction over hospitals and the healthcare industry based solely on their TRICARE participation, the U.S. Department of Labor's Office of Federal Contractor Compliance Programs on May 7, 2014, issued Directive 2014-01 to establish a five-year moratorium freezing its enforcement efforts. Specifically, Directive 2014-01 states that during the five-year moratorium, the OFCCP will refrain from enforcing compliance of these entities' obligations under Executive Order 11246,1 Section 503 of the Rehabilitation Act of 1973,2 and the Vietnam Era Veterans' Readjustment Assistance Act of 19743 "including enforcement of actions related to affirmative action programs and recordkeeping."

The OFCCP stated in Directive 2014-01 that it was instituting the moratorium because: "there has been a difference in understanding between the Department of Labor and some entities affiliated with the TRICARE community, as to who is a covered subcontractor under the laws enforced by OFCCP." Due to this apparent "confusion," the OFCCP indicated that it was issuing the Directive so that it could engage in "outreach and technical assistance to provide greater clarity for the TRICARE subcontractor community about their obligations under the laws administered by OFCCP" and to "work with other federal agencies to clarify the coverage of healthcare providers under federal statutes applicable to subcontractors." The Directive was issued after the U.S. House of Representatives Subcommittee on Workforce Protections advised Thomas Perez, the DOL's Secretary, in March of this year, that it was their intent to divest the OFCCP of jurisdiction over hospitals merely based on their participation in TRICARE, through their passage of the National Defense Authorization Act in 2011.

Importantly, the five-year moratorium applies to all healthcare providers that participate in TRICARE programs through a subcontract with a prime contractor that administers the program. It also applies to healthcare entities that participate as subcontractors in both TRICARE and any federal health program (such as Medicare and the Federal Employee Health Benefits Program).

However, if a hospital, acting as a TRICARE subcontractor, holds a separate non-healthcare related federal subcontract, the hospital will still be subject to the OFCCP's enforcement activities. Furthermore, the directive does not cover a healthcare entity participating in TRICARE if the entity directly holds a prime contract with a federal agency.

Additionally, Directive 2014-01 provides that by June 19, 2014, the OFCCP will administratively close any open compliance evaluations of covered TRICARE subcontractors. As such, if a hospital is under audit or has received an OFCCP scheduling letter requesting affirmative action data, the hospital should "send to its local OFCCP office a written request that the compliance evaluation be administratively closed with a copy of its agreement to participate in the TRICARE program." Upon receiving same, the OFCCP should close the audit.

In lieu of exercising its prosecutorial discretion and to effectuate its stated outreach and educational goals, the OFCCP over the next five years will be providing information and training on the development of "cost effective affirmative action plans, and recordkeeping and applicant tracking systems" to the hospital and healthcare industry; conducting webinars to inform TRICARE subcontractors of the OFCCP's legal authority, jurisdiction and obligations; and convening "listening sessions" to learn about the unique issues facing TRICARE subcontractors in order to provide relevant and targeted technical assistance to them.

However, while Directive 2014-01 provides some good news to healthcare entities, this relief is only temporary as the OFCCP will likely reinstitute its attempts to assert jurisdiction over the healthcare industry when the moratorium period expires in May 2019. Additionally, Directive 2014-01 warns TRICARE subcontractors that the OFCCP will, in the interim, continue to process complaints of discrimination under Executive Order 11246, VEVRAA and Section 503. As such, hospitals and healthcare providers must remain vigilant to ensure that they do not violate these anti-discrimination provisions. Where hospitals or healthcare providers have questions about the potential implications of Directive 2014-01, or their potential exposure under the affirmative action laws, they should consult with experienced counsel for guidance.

Kenneth Rosenberg is a partner at Fox Rothschild LLP, a member of its Labor and Employment Department, and Chair of its Affirmative Action and OFCCP practice. He can be reached at krosenberg@foxrothschild.com.

1 E.O. 11246 prohibits federal contractors and subcontractors, “prohibits federal contractors and federally-assisted construction contractors and subcontractors, who do over $10,000 in Government business in one year from discriminating in employment decisions on the basis of race, color, religion, sex, or national origin.” Compliance Assistance – Executive Order 11246, Office of Federal Contract Compliance Programs, http://www.dol.gov/ofccp/regs/compliance/ca_11246.htm (last visited June 5, 2014). Also, the Executive Order imposes affirmative action obligations on federal contractors. Id.

2 Section 503 prohibits discrimination and requires employers with federal contractors or subcontracts that exceed $10,000 to take affirmative action with regard to qualified individuals with disabilities. See generally 29 U.S.C. § 793 (1993).

3 VEVRAA imposes affirmative action obligations with regard to specific categories of veterans under the Act. 38 U.S.C. § 4212 (2012).

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