Last week, the Office of Federal Contract Compliance Programs issued its Final Rule on Discrimination on the Basis of Sex. The new regulations rescind the OFCCP's prior Sex Discrimination Guidelines and give regulatory effect to the latest interpretations of the law by the Equal Employment Opportunity Commission including the EEOC's interpretations of discrimination based on pregnancy and gender identity and case law precedent that supports the government's positions.

Much of the Final Rule incorporates well-established principles of Title VII (which the OFCCP uses to interpret the nondiscrimination provisions of Executive Order 11246), but contractors should review the regulations and the OFCCP's comments closely to ensure they are in compliance. The Final Rule becomes effective August 15.

General Provisions Both disparate treatment and disparate impact on the basis of sex are unlawful. "Sex" includes, but is not limited to, "pregnancy, childbirth, or related medical conditions; gender identity; transgender status; and sex stereotyping." Sexual orientation was not included in the definition because it is already expressly listed as a prohibited basis of discrimination under Executive Order 11246. (Of course, gender identity is also now a specifically protected category as well, yet the OFCCP included it in these new regulations.)

Some examples of disparate treatment sex discrimination listed in the regulations include the following:

  • making distinctions between married and unmarried individuals that are not applied the same to men and women
  • steering women into lower paying jobs
  • denying transgender employees access to restrooms or similar facilities designated for use by the gender with which they identify
  • treating individuals "adversely because they have received, are receiving, or are planning to receive transition-related medical services designed to facilitate the adoption of a sex or gender other than the individual's designated sex at birth."

An example of disparate impact sex discrimination is "relying on recruitment or promotion methods, such as `word-of-mouth' recruitment or `tap-on-the-shoulder' promotion, that have an adverse impact on women where the contractor cannot establish that they are job-related and consistent with business necessity."

Bona Fide Occupational Qualifications

The regulations recognize that sex may be a bona fide occupational qualification if it is "reasonably necessary to the normal operation of the contractor's particular business or enterprise."

Compensation Discrimination

Contractors may not use "any employment practice that discriminates in wages, benefits, or any other forms of compensation, or denies access to earnings opportunities, because of sex, on either an individual or systemic basis. . . ." The rule identifies legitimate factors that may influence compensation:

  • a particular skill or attribute
  • education
  • work experience
  • position, level, or function
  • tenure in position
  • performance ratings

The agency specifically declined to address whether use of market forces or prior salaries are legitimate or prohibited factors in setting compensation, stating that the case law in this area is unsettled. Any such practice will be reviewed on a case-by-case basis. Further, the OFCCP will determine whether a factor actually accounts for differences in compensation, as well as whether the contractor applied it consistently without regard to sex.

The regulations provide that similarly situated employees may not be compensated differently because of their sex. Whether employees are similarly situated requires a case- and fact-specific analysis. Relevant factors include "tasks performed, skills, effort, levels of responsibility, working conditions, job difficulty, minimum qualifications, and other objective factors." Employees can be "similarly situated" even if they are not comparable in every one of these respects.

Compensation practices are unlawful if they have an adverse impact on the basis of sex and are not job-related and consistent with business necessity.

Pregnancy-Related Discrimination

The regulations prohibit discrimination "on the basis of pregnancy, childbirth, or related medical conditions, including childbearing capacity," and adopt the EEOC's pronouncement that individuals who are pregnant or who have pregnancy-related medical conditions must be treated "the same for all employment-related purposes, including receipt of benefits under fringe-benefit programs, as other persons not so affected, but similar in their ability or inability to work." In the preamble to the Final Rule, the OFCCP states that lactation is a pregnancy-related condition and, therefore, "certain adverse actions against a lactating employee, including denial of an adequate time and place to express milk . . . will be considered unlawful sex discrimination under this rule." The EEOC has taken the same position, as have some courts.

Failure to provide workers affected by pregnancy or related conditions with any leave, or providing insufficient leave, may be unlawful if the employer practice or policy has an adverse impact and is not job-related and consistent with business necessity.

Other Fringe Benefits

Fringe benefits must be provided without regard to sex. Fringe benefits include, but are not limited to, "medical, hospital, accident, life insurance, and retirement benefits; profit-sharing and bonus plans; leave and other terms, conditions, and privileges of employment." In the preamble, the OFCCP specifically noted that "certain trans-exclusive health benefit offerings may constitute unlawful discrimination." Categorical exclusions of health services related to gender dysphoria or gender transition are considered facially discriminatory by the OFCCP. The agency also commented that "a claim of discrimination due to a contractor's failure to provide the same fringe benefits to same-sex spouses that it provides to opposite-sex spouses would" violate the Executive Order.

Sex Stereotyping

Contractors are prohibited from basing employment decisions on how the genders are expected to look, speak, or act. Examples in the regulations of discrimination based on sex-based stereotyping include the following:

  • taking an adverse action against a woman based on stereotypes about attire
  • harassing a male employee because he is "effeminate" or "not masculine"
  • treating individuals adversely based on their sexual orientation where such treatment is based on gender stereotypes
  • treating individuals adversely based on sex-based stereotypes about caregiver responsibilities, such as demoting a male employee with such responsibilities but not a similarly situated female.

Harassment and Hostile Work Environment

The regulations restate existing EEOC guidelines regarding what constitutes harassment, and include a provision that "harassment because of sex" includes harassment based on gender identity and transgender status, as well as harassment based on pregnancy or related medical conditions.

Best Practices

In addition to outlining conduct that constitutes prohibited sexual discrimination, the OFCCP sets forth a short list of best practices for contractors, which includes the following:

  • avoiding gender-specific job titles, such as "lineman" or "foreman." (This was a per se example of discrimination in the proposed rule. In backing down somewhat in the Final Rule, the OFCCP comments that the EEOC's policy provides, "where sex-referent language is used in conjunction with prominent language that clearly indicates the employer's intent to include applicants or prospective applicants of both sexes, no violation of Title VII will be found.")
  • designating single-user restrooms and facilities as gender-neutral
  • encouraging both men and women to engage in caregiving activities
  • providing appropriate time off and flexible workplace policies for both men and women.

Practical Recommendations

To ensure compliance with these new regulations, contractors should review the following policies and procedures:

  • Recruitment and promotion. Ensure that affirmative action recruitment requirements are satisfied. Establish open promotion processes that allow for qualified candidates to express an interest in openings.
  • Insurance policies. Eliminate exclusions for coverage related to gender identity or transgender related services.
  • Leave and accommodation. Provide that pregnant employees and those with related medical conditions are treated the same as others who are similar in their ability or inability to work.
  • Hiring. Require applicants to identify the specific position in which they are interested, and consider them for that position only. This is essential to avoiding allegations of sexbased steering in job placement and compensation.
  • Compensation. Analyze your compensation at least annually, and do not limit yourself to grouping by job title because the OFCCP will not. Review the factors that the OFCCP will consider in determining which employees are similarly situated, and conduct your own analyses.
  • Other policies and procedures. Review all existing policies for compliance with the new regulations.