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DC Circuit rejects construction contractor group’s attempt to block OFCCP’s revised disability affirmative action regulations

December 15th, 2014  |  Cynthia L. Hackerott

Affirming a ruling earlier this year by a federal district court, the DC Circuit rejected an attempt by Associated Builders and Contractors, Inc (ABC) to overturn OFCCP regulatory revisions that require federal contractors and subcontractors to establish a 7 percent utilization goal for the employment of workers with disabilities. Emphasizing that its review of an agency’s exercise of rulemaking authority is narrow, the appellate court upheld the rule’s utilization goal as well its data collection requirements. The court also found that, in promulgating the rule, the OFCCP was justified in not exempting construction contractors. (Associated Builders & Contractors, Inc v Shiu, December 12, 2014, Tatel, D; to be reported at 98 EPD ¶45,216)

New requirements. The final rule containing the revisions at issue was published in the Federal Register on September 24, 2013 (78 FR 58682-58752); the rule revises the OFCCP’s regulations at 41 CFR Part 60-741 that implement the provisions of Section 503 of the Rehabilitation Act of 1973 (Section 503). The OFCCP derived the 7 percent utilization goal primarily from disability data collected as part of the Census Bureau’s American Community Survey (ACS). Contractors must apply the utilization goal to each of their Affirmative Action Plan job groups, with the exception of contractors with 100 or fewer employees, who may apply the go to their entire workforce. In addition, contractors must conduct an annual utilization analysis and assessment of problem areas, and establish specific action-oriented programs to address any identified problems.

In addition to the utilization goal, the rule imposes new data collection and recordkeeping requirements. Among other obligations, contractors are required to invite applicants to self-identify as individuals with disabilities (IWDs) at both the pre-offer and post-offer phases of the application process. It also requires that contractors invite their incumbent employees to self-identify as IWDs every five years.

Plaintiff’s assertions. On November 19, 2013, ABC, a national trade association representing 22,000 members from more than 19,000 construction and industry-related firms, sued the OFCCP and its Director, Patricia Shiu, as well as the Labor Department and Secretary of Labor Thomas Perez (defendants) in the federal district court for the District of Columbia. In its complaint, ABC asserted that the final rule violates not only Section 503, but also the Administrative Procedure Act (APA), and the Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act. On November 25, 2013, the trial court granted the parties joint motion for an expedited briefing schedule for dispositive motions. On March 21, 2014, the district court denied ABC’s motion for summary judgment and granted the defendants’ cross motion for summary judgment, thereby allowing the rule to take effect as scheduled on March 24, 2014.

Agency did not exceed its statutory authority. Applying the Chevron analysis, the appellate court determined that the OFCCP’s interpretation of Section 503 did not exceed its statutory authority and was a permissible construction of the statute. The court determined that ABC failed to meet its burden of showing the statute “unambiguously forecloses” the OFCCP’s interpretation.

Pre-offer invitations to self-identify. The text of Section 503 requires that covered government contractors “take affirmative action to employ and advance in employment qualified individuals with disabilities.” Challenging the pre-offer invitation to self-identify requirement, ABC asserted that the word “qualified” expressly limits affirmative action to individuals already offered jobs. “But that word does no such thing,” the DC Circuit wrote. Rather, the term describes the statute’s beneficiaries —“qualified individuals with disabilities.”

Observing that Congress has repeatedly amended Section 503 without expressing any disapproval of the OFCCP’s previous implementation of the statute, ABC asserted that this history was persuasive evidence that the OFCCP’s interpretation of the statute prior to publishing the challenged rule was the one intended by Congress. However, although this assertion was true in principle, the OFCCP has never issued a limiting interpretation of Section 503 that Congress could have endorsed via silence, the court pointed out. Therefore, even though the agency’s previous regulations included neither a pre-job-offer data-collection requirement nor a utilization goal, the OFCCP never said it lacked authority to include such requirements or that it would not do so in the future. Put another way, the fact that the OFCCP “did not make use of its full panoply of powers with the earlier regulations” does not mean those powers were forfeited, the court said. Indeed, if ABC’s assertion were to be adopted, that would mean that agencies would be unable to strengthen regulations implementing statutes that Congress has amended. “This is simply not how administrative law works,” the court remarked.

Heightened review standard not applicable. Turning to ABC’s assertion that the final rule is arbitrary and capricious, the court first rejected the argument that the revised regulations were subject to heightened review under the Supreme Court’s 2009 decision in FCC v Fox Television Stations, Inc. In that case, the High Court held that when a prior factual finding conflicts with a finding underlying the rule at issue, the agency must provide a “reasoned explanation” for disregarding the facts and circumstances that were the basis for the prior policy.

According to ABC, the OFCCP’s finding “that the ACS survey data was somehow sufficient” to set a utilization goal, conflicts with an earlier finding by the agency that it had insufficient data to set such a goal. The court, however, found that is not what happened here. Prior to the challenged rulemaking, the OFCCP never found that setting a utilization goal was infeasible; indeed, nothing in the administrative record suggests that the OFCCP even considered setting such a goal.

As such, the court proceeded under the normal arbitrary and capricious standard.

Need for rule. ABC first argued that the OFCCP has failed to explain the need for the regulatory revisions, maintaining that in justifying the rule, the OFCCP did not identify a disparity in the employment of IWDs among government contractors in particular, but rather only pointed to the continuing disparity in the workforce population as a whole. Yet, the OFCCP had no obligation to make such a particularized finding, the court stated; rather, the agency was permitted to infer the existence of employment barriers from its analysis of the workforce as a whole.

Applicant data collection. Next, the association challenged the requirement that contractors collect data from all job applicants instead of from just those offered jobs, claiming that the “new data collection on mere job applicants is meaningless, because there is no way to tell whether the applicants measured are qualified or not.” Pointing out that it had already rejected this argument, the court reiterated that the word “qualified” refers to the beneficiaries of affirmative action, rather than limiting the kind of affirmative action the OFCCP can require.

Along similar lines, ABC contended that the OFCCP failed to explain how the new data collection requirements “will enable anyone to better monitor or evaluate contractors’ hiring of qualified individuals with disabilities.” On the contrary, the agency did just that, the court found.

In the preamble to the final rule, the OFCCP explained that “[m]aintaining this information will provide meaningful data to assist the contractor in evaluating and tailoring its recruitment and outreach efforts” and that without this type of data, it would be nearly impossible for the contractor or the agency to perform even rudimentary evaluations of the availability of IWDs in the workforce, or to assess how effective contractor outreach and recruitment efforts have been in attracting IWDs as candidates. Thus, the OFCCP “has more than satisfied its obligation to provide a reasoned explanation and to draw a connection between the problem (the low workforce participation of individuals with disabilities) and the regulatory solution (more refined data collection),” the court wrote.

Utilization goal. Attacking the utilization goal, the association noted that the ACS: (1) does not use the same definition of disabilities as the OFCCP’s rule, (2) does not break down the data by industry or geography, and (3) “could not possibly have surveyed whether the disabled workers in question were ‘qualified’ for jobs in different industries in any particular percentages.”

Noting that the OFCCP was aware of all of these things when it issued to rule, the court first found that the fact that the definition of disability used by the ACS is not as broad as that contained in Section 503 means that this difference, if anything, would result in an underestimate of the size of the population with disabilities. Moreover, the agency’s decision to set a single national goal was based on the fact that the ACS disability data cannot be broken down into as many job titles, or as many geographic areas as the data for race and gender. Even so, based on the geographic data that the OFCCP did have, it observed that there was an almost uniform distribution of IWDs consistent with the use of a single national goal.

Second, the court remarked that it was unsure of how the ACS could measure the number of qualified IWDs in particular industries since job qualifications vary from position to position and industry to industry. But that did not mean the use of the ACS data was inappropriate. “Of course, there may be fewer individuals with disabilities who are qualified to perform certain jobs, just as there are fewer individuals without disabilities who are qualified to fill some positions because skills are unevenly distributed across the labor force,” the court reasoned. Therefore, even though the association and the agency might prefer a utilization goal that accounts for variations in the number of qualified IWDs by industry or job type, the OFCCP has adequately explained why the best available data did not allow it to create a tailored goal and why the uniform goal advances its regulatory objective, the court found.

ABC also objected to the OFCCP’s use of the “discouraged worker effect” in calculating the utilization coal because, according to ABC, the OFCCP failed to consider “the likelihood that a significant number of such workers were unable to work because of the disqualifying nature of their disabilities.” Yet, the OFCCP knew that the underemployment of IWDs could have different causes, and nevertheless, concluded that at least a portion of employment disparity the rule was designed to address was due to discrimination, and although, the goal isn’t perfect, it will “provide a yardstick against which contractors will be able to measure the effectiveness of their equal employment opportunity efforts.”

Construction industry considerations. ABC’s last argument was that the OFCCP acted arbitrarily and capriciously by failing to exempt the construction industry from the final rule because of the unique nature of the construction industry, which has previously been exempt from certain OFCCP regulatory requirements applied to non-construction contractors. Pointing out that the rule does not prohibit employers from making case-by-case hiring decisions based on the qualifications of each individual, and that nothing in the rule requires a contractor to hire an individual who cannot perform the essential functions of a job, the court rejected ABC’s contention that the “uniquely hazardous and physical” nature of the construction industry should justify its exemption from the rule.

In addition, ABC failed to explain its assertion that “the fluidity of the construction industry workforce” makes the job-group analysis required by the rule so burdensome as to require an industry exemption, especially given that the rule exempts small contractors from the job-group requirement.

Finally, the court rejected ABC’s claim that the construction industry should be exempt for the new requirements because it has “no experience” with job-group analysis given that under Executive Order 11246, which requires affirmative action in the hiring of women and minorities, construction contractors are required to perform utilization-goal analysis only on an employer-wide basis. Finding this claim “proves too much,” the court wrote it “would doom virtually any regulation that imposes new obligations on regulated entities.”