For the first time in more than four decades, OFCCP revised its Sex Discrimination Guidelines prohibiting discrimination by government contractors on the basis of sex (the “final rule”). The final rule applies to employers with Federal contracts or subcontracts totaling $10,000 or more over a 12-month period.  The final rule outlines sex-based discriminatory practices that contractors must identify and eliminate.  It also clarifies how contractors must take affirmative action to ensure their hiring and employment practices do not adversely affect employees on the basis of sex.

The final rule broadly covers issues of sex discrimination in the modern workplace, essentially bundling together in one rule a collection of legal issues – some settled and some sharply divided – covered by Title VII, the Pregnancy Discrimination Act, the Equal Pay Act and various EEOC and OFCCP pronouncements. Below, we highlight some of the issues raised by the rule and “best practices” Federal contractors should consider.  The final rule takes effect August 15, 2016.

Background

OFCCP is charged with enforcing Executive Order 11246, which prohibits discrimination by contractors on the basis of race, color, religion, sex, sexual orientation, gender identity, or national origin. The Executive Order also requires covered Federal contractors to take affirmative action to recruit, hire, train and retain qualified applicants and employees in these protected categories.

In 1970, OFCCP promulgated its Sex Discrimination Guidelines. Those guidelines have not been substantively updated since they were first promulgated.  Of course, the law regarding sex discrimination in the workplace has changed drastically since 1970.  As a result, OFCCP revised the guidelines to align them with developments in nondiscrimination law.  OFCCP has taken the position that the revised guidelines, published in the final rule, do little to change the obligations of covered employers.  OFCCP sees this final rule merely as a statement of the current law applicable to contemporary workplace issues.

General Prohibitions

Broadly speaking, the final rule prohibits discrimination against any employee or applicant for employment because of sex. The final rule defines “sex discrimination” broadly to include discrimination on the bases of pregnancy, childbirth, related medical conditions, gender identity, transgender status, and sex stereotyping.  The final rule gives particular examples of unlawful sex-based discriminatory practices.  For example, the adverse treatment of unmarried women, but not unmarried men, who become parents is prohibited.  Similarly, imposing any differences in retirement age or other terms, conditions or privileges of retirement on the basis of sex, or restricting job classifications on the basis of sex are unlawful acts of discrimination.

Protection for Gender Identity and Trans-Gender Individuals

The final rule prohibits discrimination based on an individual’s gender identity or transgender status. For example, the final rule prohibits denying transgender employees access to restrooms and other facilities designated for use by the gender with which they identify.  The final rule also prohibits treating employees or applicants adversely because they have received, are receiving, or will receive transition-related medical services.  OFCCP is clear that the prohibitions against discrimination based on sex, including gender identity or transgender status, also protect applicants and employees who identify as neither male nor female.

In the section of the final rule that requires employers to allow applicants and employees to use the restroom of the gender with which they identify, OFCCP confronted the concern that such a requirement would impact other employees’ privacy expectations:

To begin with, this [submitted] comment [raising concerns about employees’ expectation of privacy] assumes that non-transgender employees will react to the presence of transgender employees based on the transgender employees’ birth-assigned gender, rather than on the gender with which they identify in their daily interactions with co-workers. It also assumes that non-transgender employees’ reactions will be based on fear, ignorance, or prejudice about transgender individuals.  It is well established that private bias, prejudice, or fear is not a legitimate basis for retaining the status quo.  Non-transgender co-workers’ fears, ignorance, or prejudice about transgender individuals can no more be permitted to trump the right of transgender employees to equal workplace treatment than white co-workers’ prejudices against sharing restrooms or drinking fountains with black employees would have been permitted to trump black employees rights after [certain civil rights laws] went into effect 50 years ago.^[1]

OFCCP declined to include in the final rule an explicit provision making it an unlawful employment practice to offer health insurance that excludes coverage for all health services associated with gender dysphoria or gender transition. Even so, OFCCP states that such categorical exclusions would likely violate prohibitions on both sex and gender identity discrimination because they single out services and treatments for individuals on the basis of their gender identity or transgender status.

Discrimination Based On Sex-Based Stereotyping Is Prohibited

OFCCP’s final rule represents the first federal law or regulation expressly prohibiting discrimination on the basis of “sex-based stereotypes.” The final rule prohibits employment decisions based on stereotypes such as how males and females are expected to look, speak, or act.  The final rule provides several examples of actions that “may” be unlawful sex-based stereotype discrimination.  OFCCP is careful to use the term “may,” recognizing that whether a particular behavior is unlawful discrimination requires a fact-specific analysis.

In general, covered employers are prohibited from treating an employee adversely because of that employee’s failure to comply with gender norms and expectations. OFCCP includes a series of examples of actions that may be considered unlawful employment decisions based on sex-based stereotyping.  For example, contractors may not subject a woman to an adverse employment action because of her choice of clothing, including whether or not she wears jewelry, make-up, or high heels.  Similarly, harassment of a man because he is perceived as effeminate is prohibited.  As described above, adverse treatment of employees or applicants because of their actual or perceived gender identity or transgender status is unlawful sex-based stereotyping.

Similarly, the final rule prohibits employers from making employment decisions based on their employees’ caregiver responsibilities. For example, an employer may not fail to offer a female employee overtime hours because of an assumption that she has family caretaking responsibilities and that those responsibilities will interfere with her desire to work the overtime.  Similarly, an employer must not take adverse action against a male employee who is not available to work overtime because he is caring for an elderly parent, if that adverse treatment is based on the sex-based stereotype that men do not have family caregiving responsibilities that affect their availability for work.

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

Under the final rule, employers must treat the following individuals the same for all employment-related purposes: (1) people of childbearing capacity; (2) those affected by pregnancy, childbirth, or related medical conditions; and (3) other persons not so affected but similar in their ability or inability to work. Pregnancy/childbirth related medical conditions are defined in the rule to include lactation; disorders directly related to pregnancy such as preeclampsia, placenta previa, and gestational diabetes; symptoms such as back pain; complications requiring bed rest; and the after effects of a delivery.

The final rule also provides specific examples of unlawful pregnancy discrimination. It is, for example, unlawful to provide an employee with 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.  OFCCP’s original proposed rule exempted employers from having to pay for health insurance benefits for abortion, “except where the life of the mother would be endangered if the fetus were carried to term, or except where medical complications have arisen from an abortion.”^[2]  Following comments in opposition, however, OFCCP removed any reference to abortion in the final rule.  Similarly, although the proposed rule required that employer-provided health insurance cover contraception to the same extent that medical costs are covered for other medical conditions, that requirement was removed from the final rule.

Although complications related to conception are not specifically included in the list of related medical conditions in the final rule, OFCCP notes that employment decisions based on complications related to conception, such as treatment for infertility, may constitute sex discrimination when those decisions are sex specific.

In explaining the prohibition against discrimination on the basis of pregnancy, OFCCP was careful to keep its language gender neutral where possible. For example, recognizing that “some persons who have the physiology necessary to have a chance of becoming pregnant do not identify as women,”^[3] OFCCP prohibits contractors from “limiting pregnant employees’ job duties based solely on the fact that they are pregnant, or requiring a doctor’s note in order for a pregnant employee to continue working.”^[4]

Provision of Family and Medical Leave Must be Gender Neutral

The final rule sets forth the general principal that, to the extent a contractor provides family, medical, or other leave, such leave may not be denied or provided differently on the basis of gender. The comments to the final rule identify policies offering fewer weeks of “paternity” leave than “maternity” leave as “evidence of discriminatory practices in the provision of family or medical leave.”^[5]  Family leave, therefore, must be made available to fathers on the same terms as it is available to mothers.  Contractors must also provide job-guaranteed medical leave for employees’ pregnancy, childbirth, or related medical conditions on the same terms that medical leave is provided for medical conditions that have a similar impact on an employee’s ability to work.

The final rule does not require that employers provide paid leave to their employees.^[6]  It does require, however, that if paid leave is provided, it must be provided on the same basis for women as for men.  Moreover, it is OFCCP’s position that the failure to provide a worker who is temporarily unable to work due to pregnancy, childbirth, or related medical conditions with any parental or medical leave at all, or with insufficient leave, may be unlawful if it has an adverse impact on the worker, unless the contractor can show that the failure to provide leave or sufficient leave is job-related and consistent with business necessity.

Relationship to Affirmative Action Policies

In drafting the final rule, OFCCP was cognizant that certain prohibitions on sex discrimination could be read to conflict with contractors’ obligations to undertake good faith efforts to expand employment opportunities for women. Therefore, the new rule states explicitly that “under no circumstances will a contractor’s good faith efforts to comply” with its affirmative action requirements be considered a violation of the final rule.^[7]  According to OFCCP, Federal contractors should not interpret the new rule as prohibiting them from using targeted efforts to recruit and advance women to comply with their affirmative action obligations.

For example, as part of their affirmative action requirements, Federal contractors are already required to evaluate their compensation systems to determine whether similarly-situated employees are paid differently based on sex, national origin, or race. The final rule does not create new obligations in that regard, but does provide specific factors that might be relevant to help contractors assess compliance.  The final rule also contains prohibitions against specific sex-based pay practices.  For example, Federal contractors may not deny women an equal opportunity to obtain regular and/or overtime hours.  Similarly, contractors may not grant or deny training, apprenticeships, or other opportunities on the basis of sex.

Sexual Orientation is not Explicitly Covered

During the comment period, OFCCP was urged to add sexual orientation discrimination to the list of types of sex discrimination prohibited by the final rule. Although OFCCP stated that it “supports this view as a matter of policy,” and noted that Executive Orders, Federal agencies, Federal laws and courts have taken steps to prohibit sexual orientation discrimination, OFCCP declined to add that ground explicitly in the final rule.  Recognizing that the EEOC, which OFCCP describes as “the lead Federal agency responsible for administering and enforcing title VII,” has concluded that discrimination based on sexual orientation is prohibited by Title VII as one form of sex discrimination, OFCCP states that it will “continue to monitor the developing law” in this area.^[8]

Violations and Enforcement

An individual who believes they have been the subject of discrimination prohibited by the final rule has the right to file an individual claim of discrimination or harassment with OFCCP. Although OFCCP generally has not handled individual claims of discrimination or harassment, we have observed an increased willingness by OFCCP to investigate these claims, particularly if they implicate a company policy or practice that impacts other employees. A contractor found to be in violation “may be liable for make-whole and injunctive relief and subject to suspension, cancellation, termination and debarment of its contract(s) after the opportunity for a hearing.”^[9]

Moreover, OFCCP will likely focus on these additional nondiscrimination obligations during compliance audits. Particularly during the on-site phase of compliance investigations, OFCCP compliance officers may also look for opportunities to identify and remedy class-wide claims for violations of the final rule.  The agency’s standards for class claims and relief are substantially less rigorous than those that apply to class actions in federal court.

Advice to Employers

Included in the final rule are a series of contractor “best practices.” Although they are not mandatory, they are recommended as a means of ensuring compliance with various aspects of the final rule.  The recommended best practices include:

• Avoiding the use of gender-specific job titles such as “foreman” or “lineman” where gender-neutral alternatives are available;

• Designating single-user restrooms, changing rooms, showers, or similar single-user facilities as sex-neutral;

• Providing, as part of their 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;

• Providing appropriate time off and flexible workplace policies for men and women;

• Encouraging men and women equally to engage in caregiving-related activities;

• Fostering a climate in which women are not assumed to be more likely to provide family care than men; and

• Fostering an environment in which all employees feel safe, welcome, and treated fairly, by developing and implementing procedures to ensure that employees are not harassed because of sex. Examples of such procedures include:

  • Communicating to all personnel that harassing conduct will not be tolerated;

  • Providing anti-harassment training to all personnel; and

  • Establishing and implementing procedures for handling and resolving complaints about harassment and intimidation based on sex.^[10] For instance, OFCCP may view the following decisions and behaviors of managers as sex-based stereotyping:

  • In addition, Federal contractors who offer health insurance should review their plans for categorical exclusions, which may be deemed facially discriminatory under the final rule. Covered employers are also advised to pay particular attention to actions and decisions that can be considered sex-based stereotyping. Employers’ training programs should explicitly address the more subtle forms of discrimination, which may run counter to managers’ attempts to, in their view, “do the right thing.”

• Deciding not to assign a project involving travel to a pregnant employee, even though the employee has not identified any travel restriction;

• Asking an unmarried worker without children to handle an emergency project because he or she does not want to inconvenience other workers who are married or have children;

• Declining to assign an employee to a particular client or account because the employee does not have “the right look” or may not be able to “connect” because of his or her clothing style or gender affiliation; and

• Changing work hours or locations (e.g., telecommuting) only for employees who are pregnant or have children.

OFCCP’s final rule may provide fodder for an increase in discrimination charges. In preparation, employers should review their policies to make sure they are non-discriminatory and gender neutral.  In addition, Federal contractors should be prepared for OFCCP Compliance Officers to focus on compliance issues related to the final rule during desk audits and onsite visits.

^{[1] Final Rule Regarding Discrimination on the Basis of Sex, 81 Fed. Reg. 39,108, 39,123 (June 15, 2016).}

^{[2] Discrimination on the Basis of Sex, 81 Fed. Reg. at 39,129.}

^{[3] Discrimination on the Basis of Sex, 81 Fed. Reg. at 39,131.}

^{[4] Discrimination on the Basis of Sex, 81 Fed. Reg. at 39,168.}

^{[5] Discrimination on the Basis of Sex, 81 Fed. Reg. at 39,114-15.}

^{[6] As we recently reported the Obama administration plans to issue a Final Rule implementing the Establishing Paid Sick Leave for Contractors Executive Order (the “EPSL”) by September 2016.  The EPSL requires federal contractors to provide up to 56 hours (7 days) of paid sick leave per year to their employees on new contracts entered into after January 1, 2017.}

^{[7] Discrimination on the Basis of Sex, 81 Fed. Reg. at 39,167.}

^{[8] Discrimination on the Basis of Sex, 81 Fed. Reg. at 39,120.}

^{[9] Discrimination on the Basis of Sex, 81 Fed. Reg. at 39,109.}

^{[10] Discrimination on the Basis of Sex, 81 Fed. Reg. at 39,169.}