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In latest act of longstanding, unsuccessful protest against revised OFCCP disability regulations, construction contractor group asks SCOTUS to weigh in

March 24th, 2015  |  Cynthia L. Hackerott

Continuing its dogged attempt 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, Associated Builders and Contractors (ABC) has filed a petition for writ of certiorari requesting the U.S. Supreme Court to review the DC Circuit’s December 2014 decision upholding the regulations. According to ABC’s petition, the OFCCP exceed the statutory authority granted to the agency by Section 503 of the Rehabilitation Act of 1973 (Section 503) in promulgating the rule. ABC further asserts that the rule is “arbitrary and capricious in its failure to distinguish between the diverse industries covered by its terms.” (Associated Builders & Contractors, Inc v Shiu, Dkt No 14-1111, petition filed March 12, 2015).

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. 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.

On top of 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.

Lower court rulings. 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, and the Regulatory Flexibility Act, 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. ABC filed an appeal with the DC Circuit on March 28, 2014.

On December 12, 2014, the DC Circuit affirmed the district court’s decision. Emphasizing that its review of an agency’s exercise of rulemaking authority was narrow, the appellate court upheld the rule’s utilization goal as well its data collection requirements. The circuit court also found that, in promulgating the rule, the OFCCP was justified in not exempting construction contractors (98 EPD ¶45,216).

Questions presented. ABC’s cert petition presents the following two questions for review:

“1. Whether OFCCP exceeded the limited authority delegated to the agency by Congress under the plain language of [Section 503] by requiring government contractors for the first time to collect burdensome and meaningless data on applicants who are “not qualified individuals with disabilities.”

2. Whether OFCCP acted arbitrarily and in violation of the Administrative Procedure Act by promulgating a rule that requires all government contractors, regardless of significant differences among different industries and different jobs, to meet a uniform utilization goal of seven percent qualified disabled individuals.”

Related veterans rule. On the same day the Section 503 final rule was published, the OFCCP also published a similar final rule (78 FR 58614–58679) to revise the agency’s regulations at 41 Part 60-300 that implement the provisions of the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA) (and rescind the outdated regulations at 41 CFR Part 60-250). The VEVRAA rule requires contractors to set a variable hiring benchmark for protected veterans per establishment (rather than job group), either based on the national percentage of veterans in the workforce (currently 7.2 percent – seehttp://www.dol-esa.gov/errd/VEVRAA.jsp ), or based on the best available data and factors (specified in the regulations at 41 CFR § 60-300.45(b)(2)) unique to their establishments. The benchmark applies only to hiring data and does not need to be applied to each AAP job group. The VEVRAA rule also imposes new data collection and recordkeeping requirements that are similar, but not identical to, the requirements in the Section 503 rule. The agency has repeatedly made clear that failing to meet the benchmark is not a violation of the regulations and will not carry any penalties. However, failure to set the benchmark and meet the data collection, analysis, and recordkeeping requirements related to this benchmark does violate the regulations.

Both rules took effect on March 24, 2014, with the exception of the requirements in Subpart C of both rules the affirmative action program (AAP) requirements which was phased in accommodate individual contractor’s standard affirmative action program (AAP) review and updating cycles.

Longstanding protest. ABC’s objections to the Section 503 rule go back prior to its finalization. In July 2013, ABC was part of a coalition of employer advocacy groups that sent a letter to the newly sworn-in Secretary of Labor Thomas Perez seeking a meeting to discuss the then pending Section 503 rule. The coalition asserted that the new requirements contained in the proposal would place enormous cost and time burdens on federal contractors without actually achieving the stated goal of increasing the employment and advancement of workers with disabilities.

In light of employer concerns expressed about both rules during the public comment period, some of the more onerous provisions of the proposals were eliminated or made more flexible in order to reduce the compliance burden on contractors. The changes between the proposed and final rules are detailed in the preambles contained in the Federal Register publications of each final rule.

Nevertheless, on August 28, 2013, the day after both final rules were announced, ABC issued a press release in which its Vice President of Government Affairs Geoff Burr said, “[a]lthough industry studies show that the individuals covered by these rules are already appropriately represented in the federal contracting sector, now contractors will be saddled with incredibly expensive recordkeeping obligations that will do nothing to increase employment of these individuals.”  ABC further complained that “the new rules revise existing procedures by drastically the paperwork burdens on federal contractors in all industries.” Of most concern to construction contractors, ABC asserted, were the provisions requiring written documentation and tracking of workforce statistics to determine whether the percentage of protected employees meets affirmative action requirements for federal projects. “Such paperwork and reporting provisions are completely new to the construction industry—a fact that was not taken into account in OFCCP cost estimates,” the ABC stated, adding that the OFCCP “ignored the unique nature of the construction industry and its workforce, which the agency itself has characterized as ‘fluid’ and ‘transitory,’ and which has historically warranted a unique approach toward affirmative action compliance.”

Only one of the two similar rules challenged. Further, the ABC statement said the organization “will explore avenues to challenge the rules in federal court” (emphasis added).  Interestingly, even though the August 28, 2013 statement indicated that ABC was considering litigation to challenge both rules, it chose to challenge only the Section 503 rule in federal court; thus, begging the question of why the alleged burdens of the Section 503 rule warranted litigation but the similar alleged burdens of the VEVRAA rule did not.