Over the past year, we have been tracking the uptick in executive and regulatory actions affecting the labor and employment practices of government contractors.  Last Friday, the D.C. Circuit upheld one of those regulations.  The decision concludes the first skirmish in what promises to be a lengthy and high-stakes legal battle involving industry, Congress, and the Administration.

The Office of Federal Contract Compliance Programs (“OFCCP”), part of the Department of Labor, administers the regulations governing employment of individuals with disabilities.  OFCCP issued final regulations last year that expanded contractors’ affirmative action and reporting requirements with respect to qualified individuals with disabilities.  Contractors must now invite all applicants to self-identify (voluntarily) as having a disability, and they must collect and analyze the data from those self-identifications.  The prior regulation limited this exercise to those applicants to whom the contractor had offered employment.  In addition, the new regulations impose a 7% “utilization goal” for individuals with disabilities.  Although OFCCP insists that failing to meet the utilization goal will not lead to sanctions, the regulations require contractors to “develop and execute action-oriented programs” if they fall short of the 7% goal.

A construction industry trade association challenged the regulations.  It claimed that OFCCP exceeded its regulatory authority by expanding the self-identification mandate and acted arbitrarily and capriciously in setting the utilization goal.  Not so, held the court.  The unanimous three-judge panel applied the customary – and deferential – standard of review to agency rulemaking and concluded that the trade association identified “nothing in the rulemaking that suggests OFCCP flunked this highly deferential standard.”

Although this rule survived, opponents are already setting their sights on other regulations.  As we reported on this blog, some members of Congress have objected to the streamlined process the Labor Department used to prevent federal government contractors from discriminating on the basis of sexual orientation.  Neither the disability regulations nor the LGBT protections, however, impose as many burdens as other proposed and forthcoming labor rules.  Executive Order No. 13673 (“Fair Pay and Safe Workplaces”), for example, contemplates wide-ranging disclosure and data-collection obligations.  We expect the drafting process for its implementing regulations to begin in 2015.

The contracting community suffered a loss in the D.C. Circuit, but the ruling does not foreclose opportunities to shape – or to challenge – other new employment regulations.  “Now this is not the end.  It is not even the beginning of the end.  But it is, perhaps, the end of the beginning.”