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ALJ dismisses OFCCP individual sexual orientation bias claim due to voluntary compliance, rejects jurisdictional claims

March 24th, 2017  |  Cynthia L. Hackerott

A DOL ALJ has dismissed, due to the defendant company’s agreement to comply with the agency’s request for an on-site investigation, what is apparently the OFCCP’s first enforcement action based on an individual complaint of sexual orientation discrimination. In a previous decision issued ten days before the dismissal, the ALJ rejected arguments by the defendant, AccuWeather, Inc. that it was not a federal contractor subject to the OFCCP’s jurisdiction. (OFCCP v AccuWeather, Inc., March 13, 2017, DOL OALJ Case No 2017-OFC-11)

Weather forecasting service AccuWeather, Inc. of State College, PA provides a wide-range of enterprise solutions to media, business, government as well as news, weather, content and video for third party websites. According to the OFCCP’s administrative complaint, filed on or about January 19, 2017, the agency received a complaint from a former AccuWeather employee alleging that she was subjected to a hostile work environment and ultimately terminated due to her sexual orientation. She also claimed that a Vice President of AccuWeather called her derogatory names on the basis of her sexual orientation, and that this VP, along with people who worked under him, interfered with her work performance by cutting her out of communications and refusing to follow her instructions.

On-site investigation access denied. On October 25, 2016, the OFCCP sent a letter to the contractor to schedule an on-site complaint investigation starting on November 8, 2016. On November 2, the contractor send a letter responding that it would not permit the agency to conduct an on-site complaint investigation because it asserted that the company was not a federal contractor. The OFCCP discussed the issue with the company via phone on November 2 and 10, but the company reaffirmed that it was denying access, and it’s legal counsel reiterated this position in a November 10 letter.  That same day, the OFCCP issued a Notice to Show Cause why the agency should not initiate enforcement proceedings. On December 15, the company’s legal counsel sent a letter responding to the Notice to Show Cause by reaffirming the company’s refusal to produce requested documents and or permit access to its facility to conduct an on-site investigation In the complaint, the OFCCP asserts that this denial violated Executive Order (EO) 11246.

Contracts at issue. In its answer to the administrative complaint, AccuWeather maintained its assertion that it is not a federal contractor subject to OFCCP jurisdiction, arguing that it fell under the exemption at 41 CFR Sec. 60-1.5(a)(1) for contractors that hold government contracts of less than $10,000. The company requested dismissal of the complaint on that basis. The OFCCP countered, as it had also alleged in the complaint, that AccuWeather had federal contracts totaling in excess of this threshold amount, specifically, with the Defense Logistics Agency (DLA) for $11,845 (effective May 20, 2015, with a completion date of May 23, 2020) and the Department of the Navy for 74,107.41 (effective June 24, 2015, with a completion date of June 20, 2018). On March 3, ALJ Richard A. Morgan issued an order finding that the OFCCP had proper jurisdiction in this case because AccuWeather, Inc. was a federal contractor within the meaning of the EO 11246 and its implementing regulations.

As to the DLA contract, to which the defendant acknowledged it was a party, it argued that contract did not exceed $10,000 because the base amount of the contract was $2,369 for the first year, and the additional three years of option contract in the amount of $2,369 per year should not be considered as aggregate in valuing the contract. The base value of the Navy contract was $23,976 with two subsequent option year extensions, the first valued at $24,695 and the second valued at $25,436. AccuWeather did not deny that this contract exceeded the $10,000 jurisdictional threshold. Yet, the defendant asserted that it was not a party to the Navy contract because AccuWeather, Inc. was not a party to that contract, but rather, the specified contract was between a related company, AccuWeather Enterprise Solutions (AWES), and the Navy.

Jurisdiction established. The ALJ, however, found that the alleged distinctions between AccuWeather, Inc. and AWES were neither noted or accepted by the contracting representative of the Department of the Navy who issued the Navy contract to “AccuWeather, Inc.”  Based on the evidence submitted by the parties, the court pointed out that the contractor-identifying “Commercial and Governmental Entity” (CAGE) number belonging to AccuWeather, Inc. was also used on all the Navy contract documents, and that CAGE number was assigned only AccuWeather, Inc. Indeed, AWES was not registered in the System for Awards Management as a government contractor. Further, there was no acknowledgement by the government contracting agency of a modification to the Navy contract subsequent to AWES’ claimed scratching out of AccuWeather, Inc. on the contract and handwriting in AWES. As the OFCCP’s counsel pointed out, if this alleged scratch out could be  viewed as a request to modify the contract, that modification was never agreed to in writing by the government. Moreover, the option year one modification of the Navy contract was sent to AccuWeather, Inc. and signed by a representative “on behalf of AccuWeather, Inc.”

Therefore, even assuming that there were significant distinctions between AccuWeather Inc. and AWES based on the services that they provide as well as legal distinctions in the formation and operation of these companies, the ALJ found no evidence to support that these distinctions were made known to, or acknowledged by the representatives of the government agency that prepared the Navy contract or the DLA contract. “At the very least, there was a blurring of these distinctions by the defendant which was never adequately clarified by the defendant and was never corrected or acknowledged by the contracting agency,” the ALJ wrote.

Finding that OFCCP jurisdiction was established under the Navy contract, the court deemed it  unnecessary to address whether the DLA contract fell within the $10,000 exemption and whether the value of the option extensions should be considered in the aggregate.

Case dismissed due to voluntary compliance. Since the defendant did not allege any defense to the complaint outside of the jurisdictional issue, the ALJ ordered the parties to address whether the hearing scheduled for March 21, 2017 should go forward. On March 9, the OFCCP informed the court that the company had agreed to comply with the OFCCP’s requested on-site investigation, and as such, a hearing in the case would not be necessary. The following day, AccuWeather confirmed to the court that it had scheduled an on-site investigation in compliance with the OFCCP’s request. Accordingly, on March 13, the ALJ dismissed the complaint due to AccuWeather’s voluntary compliance, thereby cancelling the March 21, 2017 hearing date.

Sexual orientation discrimination enforcement background. Sexual orientation and gender identity were expressly added to the categories protected from discrimination under EO 11246 on July 21, 2014, when President Obama signed EO 13672 (79 FR 42971- 42972), which applies to covered contracts entered into or modified on or after April 8, 2015, the effective date of the OFCCP’s regulations (79 FR 72985-72995) promulgated under EO 13672). On March 17, 2015, pursuant to the Paper Reduction Act, the Office of Budget and Management (OMB) approved the information collection requirements necessary for implementation of those regulations.

On April 16, 2015, the OFCCP issued Directive 2015-01, entitled “Handling Individual and Systemic Sexual Orientation and Gender Identity Discrimination complaints,” to establish the agency’s policy on accepting and investigating individual and systemic complaints based on gender identity or sexual orientation. The policy set forth in this directive provides that the OFCCP will accept and investigate individual and systemic complaints that allege discrimination on the basis of sexual orientation and gender identity against a federal contractor or subcontractor. It will analyze each complaint to determine whether the alleged discrimination occurred on the basis of sexual orientation or gender identity, as well as on the basis of sex, and will coordinate with, and refer complaints to, the EEOC on a case-by-case basis.

Scope of sex discrimination rules. In addition, the OFCCP published a final rule on June 15, 2016 (81 FR 39108-39169) to replace the guidelines at 41 CFR Part 60-20 with new sex discrimination regulations. While EO 11246, as amended by EO 13672, now covers explicitly covers both sexual orientation and gender identity bias, the final sex discrimination rule reflects the OFCCP’s view that adverse treatment of employees based on failure to conform to particular gender norms and expectations about their appearance, attire, or behavior is unlawful sex discrimination. In contrast, courts have not generally recognized claims based on sexual orientation as cognizable under Title VII. The OFCCP says that it enforces the nondiscrimination obligations under EO 11246 by following Title VII and the case law principles that have developed interpreting Title VII, and the agency notes, in the preamble to the final rule, the weakness of federal court support for the proposition that Title VII’s prohibition against sex discrimination encompasses sexual orientation discrimination not based on sex stereotyping. (The most recent case of note on this point is the Eleventh Circuit’s March 10, 2017 decision in Evans v Georgia Reg’l Hosp.)

Recent enforcement developments. At the end of January 2017, the Trump White House issued a statement indicating that President Obama’s EO 13672 will remain in force. The statement was issued in light of speculation that the Trump Administration might back off of the prior administration’s efforts to advance and protect the rights of the lesbian, gay, bisexual, transgender, and queer community.

On February 21, 2017, the OFCCP published a renewed notice (82 FR 11245-11246) seeking comments regarding its request for OMB approval to update the OFCCP’s complaint form, to add “sexual orientation” and “gender identity” as protected bases, among other updates. The renewed notice notes that “additional substantive information” on this request is contained in its earlier, related notice published on July 1, 2016 (81 FR 43254- 43261). The earlier notice included a supporting statement, a copy of the proposed revised form, and a corresponding instruction sheet. The comment period for the July 2016 notice closed on August 30, 2016. Written comments on the renewed notice are due by March 23, 2017.

The agency reports in the supporting statement that it received 790 complaints from individuals in fiscal year (FY) 2013, 699 complaints in FY 2014, and 769 complaints in FY 2015. Therefore, on average, the OFCCP receives about 753 individual complaints annually.

As previously discussed in an Employment Law Daily piece last year regarding the OFCCP’s sex discrimination regulations, a potential legal impediment to OFCCP enforcement of protections on the basis of sexual orientation or gender identity, such as those included in EO 13672 and its implementing regulations, is the fact that Congress has not explicitly delegated legal authority to the President to protect employees from discrimination based on sexual orientation or gender identity, according to John C. Fox, a former OFCCP official and current president of Fox, Wang & Morgan P.C. in Los Gatos, California.

[Author’s note: This story was originally published in the Employment Law Daily email newsletter on March 20, 2017]

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