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Oracle challenges OFCCP’s administrative enforcement ‘power grab’

By Pamela Wolf, J.D.

The “coercive administrative-enforcement and adjudicative regime” is unlawful under constitutional separation of powers, the Administrative Procedure Act, and Executive Order 11246, according to the complaint.

Oracle America, Inc., is suing the U.S. Department of Labor and its Office of Federal Contract Compliance Programs, asking a federal district court in Washington, D.C., to declare the OFCCP’s enforcement regime unlawful—calling it a “power grab.” The three-count complaint challenges the OFCCP’s enforcement actions under the U.S. Constitution’s separation of powers, the Administrative Procedure Act, and Executive Order 11246.

Challenge to the administrative state. The complaint makes clear that at issue is not whether claims of discrimination and affirmative-action violations connected with government contracts should be adjudicated, but rather where and in what manner they can be adjudicated. Lawful prosecution and adjudication in an Article III court of employment-discrimination claims against employers, including government contractors, “can play an important role in promoting equal employment opportunity and ending unlawful employment discrimination,” according to Oracle. What the company objects to is the “unlawful, agency-originated and agency-based administrative-enforcement and adjudicative regime to which Oracle and other government contractors are currently subject.”

“Unprecedented overreach.” Calling it “unprecedented overreach by an executive agency,” the complaint challenges the OFCCP’s authority “to create an administrative trial system wherein agency officials prosecute and adjudicate discrimination claims against government contractors and then award broad injunctive and compensatory relief if the agency finds violations.” The scheme and its supporting rules go far beyond any Act of Congress and exceed any authorization from the President, according to Oracle.

“Power grab.” The complaint refers to the OFCCP’s “1977 Power Grab,” in which the agency and the DOL created a “coercive administrative-enforcement and adjudicative regime” for both prosecuting and deciding agency claims that federal contractors have not complied with the antidiscrimination contractual provision in their government contracts, Oracle alleges. When the agency suspects that a contractor has violated the contractual provision by engaging in employment discrimination, or by failing to comply with the DOL’s affirmative-action regulations, the process for resolving that dispute “is far removed from how breach-of-contract claims are normally resolved,” Oracle says.

Really breach of contract claims? The OFCCP brings administrative-enforcement proceedings against accused contractors before DOL administrative law judges (ALJs) instead of bringing the contractor before an Article III tribunal, Oracle notes. The OFCCP does not pursue claims for breach of the government contract, but rather, prosecutes claims of employment discrimination and affirmative-action violations. Further, when the OFCCP wins, it does not claim the right to obtain contract damages. Instead the agency claims the right to “individualized back pay and other ‘make whole’ relief on behalf of the contractor’s employees as well as broad injunctive relief,” the complaint states.

“Without authority from any Act of Congress—indeed, in contravention of congressional legislation—a group of unelected, unaccountable, and unconfirmed administrative officials have cut from whole cloth this adjudicative agency-enforcement scheme,” Oracle contends.

Executive Order 11246. Although the OFCCP has claimed that this regulatory scheme reflects its authority under Executive Order 11246, that order in relevant part “requires only that government officials include a set of anti-discrimination provisions—collectively known as the Equal Opportunity Clause—in government contracts, and tasks the Secretary of Labor with overseeing a limited, contract-based compliance system,” the complaint alleges.

The EO purportedly contemplates that the Labor Secretary “may, after consulting with the contracting agency, direct the agency to sanction an offending contractor by altering the contractor’s ongoing relationship with the government, such as by suspending or cancelling the contract.” The EO does not authorize the OFCCP to create an administrative system that brings, prosecutes, and adjudicates employment discrimination and affirmative-action violation claims, and obtains injunctive relief, back pay, and other make-whole relief for government contractor employees, Oracle contends.

Acts of Congress. The complaint alleges that the OFCCP’s administrative-enforcement system is not authorized by any Act of Congress. The executive order purportedly fails to identify any source of statutory authority for the OFCCP’s regime, stating merely that it “is promulgated ‘[u]nder and by virtue of the authority vested in [the] President of the United States by the Constitution and statutes of the United States.’” Allegedly, while the Supreme Court has not ruled on whether congressional authority exists, it “has signaled doubt, noting that the source of congressional authority is ‘somewhat obscure and ha[s] been roundly debated by commentators and courts.’”

Procurement Act. Oracle also contends that the necessary authorization does not flow from the Procurement Act, citing Chrysler Corp. v. Brown, 441 U.S. 281, 304 (1979): “‘N]owhere in the Act is there a specific reference to employment discrimination.’” The Act’s express purpose is ‘”to provide the Federal Government with an economical and efficient system” for “[p]rocuring and supplying property and nonpersonal services, and performing related functions,” “[u]sing available property,” “[d]isposing of surplus property,” and “[r]ecords management.”’

While the President is authorized to centralize government contracting and insist on inclusion of certain terms in government contracts, the Act does not delegate to the DOL or the OFCCP “the vast power to regulate into existence an administrative system to prosecute and adjudicate employment-discrimination claims and affirmative-action violations, let alone award injunctive relief and make-whole relief on behalf of classes of employees against their government-contractor employers,” Oracle contends.

Equal employment opportunity laws. Further, the Civil Rights Act and the amendments to Title VII made by the Equal Employment Opportunity Act of 1972 (EEOA) contradict any notion that the OFCCP is entitled to the power it exercises, according to the complaint. “The Supreme Court has already decided that Titles VI and VII contain no relevant ‘express substantive delegation to the President,’” Oracle alleges, again citing Chrysler. Purportedly, Title VI “foreswears any relevant ‘authoriz[ation] [of] action by any department or agency with respect to any employment practice of an employer,’” and Title VII “disclaims that anything within it ‘require[s] any employer’ to institute affirmative-action programs.”

Oracle also asserts that the OFCCP’s enforcement regime is inconsistent with Titles VI and VII. In Title VII, Congress addressed employee discrimination claims involving federal contractors and other private-sector employers; it requires a judicial dispute-resolution mechanism for discrimination claims—involving prosecution by the agency or individuals in an Article III court, the complaint contends. This is “radically” different from the DOL’s and OFCCP’s “self-created, agency-based enforcement and adjudication scheme.”

OFCCP limitations. Oracle points to the OFCCP’s limits as originally recognized. The executive order and its initial implementing regulations authorized the OFCCP to terminate a contract or debar a contractor if that contractor engaged in prohibited discriminatory conduct. But the OFCCP was required to refer breach-of-contract claims to the Department of Justice (DOJ), and Title VII discrimination claims to either the DOJ or the EEOC for litigation in an Article III court.

Among other things, Oracle contends that during the 1960s and early 1970s, legislators, executive-branch officials, and commenters plainly understood the OFCCP as a contract-compliance manager, not a prosecutor of Title VII-like discrimination or affirmative-action violation claims. It was only later that the DOL and the OFCCP seized enforcement, adjudicatory, and remedial powers through an administrative scheme.

The OFCCP’s current administrative-enforcement and adjudicatory scheme far exceeds the authority conferred by the Procurement Act or any other law, and thus violates the separation of powers, contravenes the core requirements of the Administrative Procedure Act, and conflicts with Executive Order 11246 and Title VII, according to the complaint.