In the past 35 years, many laws have been passed to promote equality and reflect changes in the workplace, including the Pregnancy Discrimination Act (1978), the Family Medical Leave Act (1993), and the Lilly Ledbetter Fair Pay Act (2009); yet the Department of Labor’s Sex Discrimination Guidelines have not been substantively changed since 1970. In an attempt to resolve this inconsistency, on January 28, 2015, the Department of Labor Office of Federal Contract Compliance Programs (OFCCP) issued a Notice of Proposed Rulemaking (NPRM) to better align the sex discrimination standards under Executive Order 11246 (Executive Order) with current interpretations of existing Title VII principles and the OFCCP’s interpretation of the Executive Order. The NPRM proposes regulations that attempt to “outline the sex-discriminatory practices that contractors must identify and eliminate, and clarify how contractors must choose applicants for employment without regard to sex.”
The Executive Order was issued in 1965, and has been amended several times over the past 40 years, including most recently by President Obama on July 23, 2014. The purpose of the Executive Order is to:
- Prohibit covered government contractors and subcontractors from discriminating based on race, color, religion, sex, sexual orientation, gender identity, or national origin; and2. Take affirmative action as required by the Secretary of Labor to ensure that contractors do not discriminate on any of these bases while candidates apply for a job and during the terms of their employment.
The Executive Order, and by extension the proposed rule, applies to businesses or organizations that hold at least one federal contract with a value over $10,000 or multiple federal contracts in a 12-month period with aggregate value over $10,000.
The preamble to the NPRM provides several prime examples of the tensions between current law and the 1970 Sex Discrimination Guidelines. One such example is state “protective laws,” which at one time explicitly barred women from certain occupations and have since been repealed, but are still permissible under the 1970 Sex Discrimination Guidelines. Likewise, in 1970, it was not unusual for employers to require female employees to retire at an earlier age than their male counterparts, and the Sex Discrimination Guidelines do not prevent such discrimination. However, since the 1986 amendment to the Age Discrimination in Employment Act abolished the mandatory retirement age but for a small number of exceptions, current law now prohibits precisely what the 1970 Guidelines permit.
- Requirements: Fortunately for large contractors, it appears that not much has changed beyond what NPRM calls “minimal” additional administrative costs. Large contractors are already subject to Title VII of the Civil Rights Act (any business with 15 or more employees), and the Family Medical Leave Act (any business with 50 or more employees). The NPRM does not create additional requirements for those contractors, and instead seeks to end the confusion that arose when the Sex Discrimination Guidelines and the civil rights statutes were at odds.
- The NPRM Fact Sheet identifies nine highlights of the proposed rule. The Fact Sheet characterizes most of the proposed changes as clarifications and confirmations, and the most significant economic effects will likely be created by the required pregnancy accommodations (proposed § 60-20.5) and fringe-benefit provisions (proposed § 60-20.6).
- According to the Fact Sheet, the proposed rule, “confirm[s] that contractors must provide workplace accommodations, ranging from extra bathroom breaks to light-duty assignments, to women affected by pregnancy, childbirth, and related medical conditions comparable to the accommodations that they provide to other workers similar in their ability or inability to work, such as workers with disabilities or occupational injuries.” While the new language does not facially add economic burdens, it is likely to increase costs for contractors. For example, simple logic suggests if a company considers “bathroom breaks” to be part of the hours an employee works, an employee who requires additional bathroom breaks will be working less time than an employee who requires fewer bathroom breaks over the course of the same number of hours.
- The Fact Sheet also highlights the proposed rule’s, “confirm[ation] that contractors must provide equal benefits and equal contributions for male and female employees participating in fringe-benefit plans.” If the proposed rule is enacted, it will no longer be sufficient that contractors provide equal access to men and women (i.e., make equal contributions), they must provide equal benefits regardless of cost.
- Estimated Costs: The preamble to the NPRM states that there will be “minimal” new costs imposed on government contractors, and that the “only” new administrative burden is a one-time cost of familiarization for an estimated $26 million (or approximately $52 per contractor per company). But, the NPRM also acknowledges that the “costs of pregnancy accommodation” will add burdens on government contractors of approximately $10 million per year (or approximately $19 per contractor per company). As to be expected, the first year of the new regulations would be the most burdensome for government contractors, with costs totaling $36 million (or $71 per contractor per company). For large companies with thousands of employees, an additional $71 per employee could be a significant expenditure. How those costs can be offset remains to be determined and is one of the areas for which the OFCCP requests comments.
Alternatives to Proposed Rulemaking
The OFCCP also requests comments from contractors who may have alternative suggestions for how to update the outdated Sex Discrimination Guidelines. The NPRM acknowledges that the OFCCP considered two alternatives to the current proposed rules:
- Maintain the current Sex Discrimination Guidelines as they currently exist; or2. Rescind, but not replace, the current Guidelines.
The first alternative is essentially one of no risk and no reward—contractors would not have increased cost burdens, but the current confusions and tensions between the law and the Guidelines would remain. The second alternative—to rescind the current Sex Discrimination Guidelines, but not replace them—would, like the first alternative, impose no additional administrative cost burdens on contractors, but would likely create even more confusion with contractors operating without guidance, leading, potentially, to expensive litigation. The OFCCP warns that the second alternative may create a “vacuum,” but nevertheless, requests comments regarding both alternatives.
The OFCCP encourages comments about the NPRM, which must be received by the OFCCP and identified by RIN number 1250-AA05 no later than March 31, 2015.