Depending on whom you listen to, recent actions by the Office of Federal Contract Compliance Programs (OFCCP) will either create onerous new administrative burdens for organizations that conduct business with the federal government or will create thousands of new job opportunities for veterans and people with disabilities.
The House Subcommittee on Workforce Protections held a hearing Dec. 4, 2013 to examine two new OFCCP regulations and an attempt to extend the agency’s jurisdiction over private-sector health care providers that offer medical care services to federal employees and members of the U.S. military. Chairman Tim Walberg, R-Mich., set a contentious tone in his opening remarks at the, hearing when he harshly criticized the Obama administration for creating a new set of burdensome regulations and for attempting to ignore and avoid Congress’ oversight responsibilities.
“We should be working together to find ways to streamline this regulatory mess; we should be discussing solutions that would make it easier for employers to follow the law and easier to identify those who don’t,” Walberg said. “Regrettably, the Obama administration has pursued a different agenda. Instead of simplifying the process, the administration is creating more confusion and uncertainty. Instead of working together, Department of Labor officials are refusing to provide adequate responses to our most basic oversight requests.”
Walberg and other GOP members of the subcommittee expressed misgivings about two regulations the OFCCP finalized in August 2013. The rules are set to take effect March 24, 2014, and will revise how the agency will enforce Section 503 of the Rehabilitation Act of 1974 and the Vietnam Era Veterans’ Readjustment Assistance Act.
According to OFCCP officials, the rule changes are needed to improve job opportunities for veterans and disabled workers. Agency officials estimated that the revisions could create more than 715,000 new jobs for veterans and disabled workers within the first 12 months of taking effect. The rules apply to veterans in protected categories, which include disabled veterans, veterans who served during the Vietnam War and individuals who have ended their active military service in the past three years.
“Taken together, these rules have a very simple message: If you are a veteran who served our nation for love of country, even if you suffered a disabling injury, we have your back,” said Rep. Joe Courtney, D-Conn., the subcommittee’s ranking minority member. “With the cooperation of federal contractors, the Department of Labor’s rules are a game changer for veterans and disabled individuals, providing them 715,000 additional private-sector job opportunities.”
The rules set nationwide aspirational goals that federal contractors will hire another 205,000 veterans and that 7 percent of the contractors’ workforces will be qualified individuals with disabilities. Larger organizations will apply the 7 percent goal to each job group, while those with fewer than 100 employees will apply the goal to their entire workforce.
“These are merely aspirational goals and not quotas,” OFCCP Director Patricia Shiu testified. “Employers will not be penalized for not meeting the goals, but we will, instead, work with contractors to ensure that they are doing everything possible to meet these goals.”
Even though Shiu repeatedly assured the subcommittee that the new rules would not establish quotas, David Fortney, an attorney testifying on behalf of the HR Policy Association, said the aspirational goals would eventually become a “de-facto” quota system.
“If a contractor fails to meet the goals set by the OFCCP, then the agency will require additional data, documents and information on their hiring practices,” Fortney said. “And if the OFCCP and the contractor then settle on a conciliation agreement to help meet the goals, this will place more pressure on businesses to hire more disabled workers and veterans. Once that happens, it becomes, in reality, a quota.”
In addition, administrative burdens are creating problems and unwanted expenses for businesses and institutions that must abide by the new OFCCP regulations. Thomas Shanahan, general counsel for the University of North Carolina, told the subcommittee that his employer would need an additional 20 full-time positions to revise and update systems to ensure that the state’s 17-campus university system complies with the rule revisions.
“This comes at a time when the state legislature has cut $500 million in funding to the university system, so our resources are stretched very thin,” Shanahan said. “And instead of using badly needed funds to educate students, the university system instead will be forced to redirect those resources to make sure it complies with new federal regulations.”
The subcommittee also heard testimony from Curt Kirschner, a partner in Jones Day’s San Francisco law office. Kirschner appeared on behalf of the American Hospital Association to discuss a renewed effort by the OFCCP to classify hospitals that provide medical care to federal employees and members of the U.S. military as federal contractors.
In December 2010 the OFCCP issued a directive stating that health care providers that were reimbursed through Medicare Parts C and D could fall under the agency’s jurisdiction. Although the directive was later withdrawn, the OFCCP has made similar claims on a case-by-case basis. The agency, according to Kirschner, is now attempting to extend its jurisdiction over hospitals that accept health insurance plans for federal employees and TRICARE, the federal government medical insurance for military members and veterans.
“This attempt by the OFCCP radically changes more than 40 years of established practices and runs counter to opinions issued by the Department of Defense and Office of Personnel Management,” Kirschner said. “Both DOD and OPM officials have stated that applying OFCCP rules for federal contractors to thousands of health care providers would create more administrative burdens and could reduce access to affordable health care for federal workers, veterans and their families.”
In response to increasing complaints from health care providers, Walberg introduced the Protecting Health Care Providers from Increased Administrative Burdens Act (H.R. 3633) on Dec. 3, 2013. The legislation would exempt health care providers that accept TRICARE and other federal health insurance from being classified as government contractors.
Walberg concluded the hearing by urging Shiu to improve the OFCCP’s cooperation with the subcommittee and to reply in a timelier manner to oversight inquiries. Shiu promised to discuss the matter further with the Labor Department’s congressional liaison team.
Bill Leonard is senior writer for SHRM.
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