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.”

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Photo of Jeff Bozman Jeff Bozman

Jeff Bozman practices with the Public Policy & Government Affairs and Government Contracts practice groups in Washington, DC.  He focuses on the defense and aerospace industry, and on the labor and employment laws that apply to government contractors.

Photo of Jennifer Plitsch Jennifer Plitsch

Jennifer Plitsch is co-chair of the firm’s Government Contracts practice group. Her practice includes a wide range of contracting issues for large and small businesses in both defense and civilian contracting. Her practice involves advising clients on contract proposal, performance, and compliance questions…

Jennifer Plitsch is co-chair of the firm’s Government Contracts practice group. Her practice includes a wide range of contracting issues for large and small businesses in both defense and civilian contracting. Her practice involves advising clients on contract proposal, performance, and compliance questions as well as transactional and legislative issues. Her practice also includes bid protest and contract claims and appeals litigation before GAO, agency boards and the federal courts. Ms. Plitsch has particular expertise in advising clients in the pharmaceutical and biologics industry. She advises a range of pharmaceutical and biologics manufacturers on Federal Supply Schedule contracts, including the complex pricing requirements imposed on products under the Veterans Health Care Act, as well as research and development contracts and grants with various federal agencies. She also has significant experience advising on the requirements of various programs under which vaccine products and biodefense medical countermeasures are procured by the Government.