On January 28, 2015, the Office of Federal Contract Compliance Programs (OFCCP) issued a Notice of Proposed Rulemaking (NPRM) to replace the current sex discrimination guidelines. This updated rule is intended to reflect legislative changes that have occurred since the guidelines were implemented in 1970, judicial rulings interpreting these laws, and current policies of OFCCP and the U.S. Equal Employment Opportunity Commission (EEOC). (More information on the proposed regulations, including a fact sheet and frequently asked questions may be found on the U.S. Department of Labor’s OFCCP website.).

The proposed rules set forth the requirements that covered federal contractors and subcontractors must meet in fulfilling their obligations under Executive Order 11246 to provide affirmative action and ensure nondiscrimination on the basis of sex. The NPRM addresses gender identity and transgender discrimination, pay discrimination, workplace accommodations for pregnancy, fringe benefits, sex-based stereotypes, and sexual harassment.

Few Changes for Most Federal Contractors and Subcontractors

For federal contractors and subcontractors already covered by Title VII of the Civil Rights Act of 1964 (i.e., those employing at least 15 employees) or the Family and Medical Leave Act (i.e., those employing at least 50 employees), the new rules generally implement or clarify existing case law or applicable requirements from other federal agencies to which contractors are already subject.

Small Contractors Take Note

For contractors with fewer than 15 employees—and thus not covered by Title VII—the regulations impose significant additional exposure to claims for sex discrimination. The preamble to the new regulations clearly states, “This NPRM provides no differing compliance requirements for small entities.” Thus, contractors with fewer than 15 employees are now on notice that, upon the effective date, they are covered by the sex discrimination regulations including provisions to provide workplace accommodations for pregnant employees and extend leave to male employees.

What’s in the Proposed Rule?

1. A New Title

OFCCP proposes to change the “Sex Discrimination Guidelines” (emphasis added) to regulations about “Discrimination on the Basis of Sex” to make clear that the rules have the force and effect of law.

2. General Prohibitions: Existing Law and Gender Identity

Section 60-20.2 of the proposal confirms existing law that discrimination on the basis of sex includes discrimination based on pregnancy, childbirth, or related medical conditions. The section also makes clear that sex discrimination includes discrimination on the basis of gender identity and transgender status. Like OFCCP’s Directive 2014-2, “Gender Identity and Sex Discrimination,” the NPRM does not address gender identity as a “stand-alone protected category” and does not mention protections for “sexual orientation.” The section also provides a list of examples of practices prohibited on a disparate treatment theory of discrimination and confirms that employment policies or practices that have a disparate impact on one sex also violate Executive Order 11246.

3. Bona Fide Occupational Qualification (BFOQ) Defense: Nothing New

Section 60-20.3 adopts the existing reference in Title VII to the bona fide occupational qualification defense available to employers if they hire, employ or classify jobs based on sex when doing so is reasonably necessary for the normal operation of that particular business. 42 U.S.C. § 2000e–2(e)(1)

4. Compensation Discrimination: Ambiguity Continues

Section 60-20.4 OFCCP declares that “compensation may not be based on sex.” The preamble to the new regulations reiterates OFCCP’s focus on perceived widespread compensation discrimination. As with the agency’s Directive 307, the NPRM continues to focus on “similarly situated employees,” but offers little concrete guidance except to say that the determination of similarity is “case specific.” The NPRM lists factors such as skills, effort, and level of responsibility as relevant to the determination, but states that employees are similarly situated where they are comparable on some of these factors, even if they are not similar on others. The section also notes that contractors may be subject to liability on a disparate impact theory if their compensation practices, such as performance evaluations, have an adverse impact on women.

5. Pregnancy Discrimination: Accommodation, Insufficient Leave, and Equal Treatment for Males

Section 60-20.5 incorporates the protections of the Pregnancy Discrimination Act, which prohibits employers from treating employees differently on the basis of pregnancy. The NPRM essentially reflects the principles announced in last year’s EEOC Enforcement Guidance on Pregnancy Discrimination and Related Issues, including the requirement that pregnant employees be afforded all the same accommodations a contractor would afford disabled persons or persons injured at work. OFCCP’s Fact Sheet states that the proposed rule would “confirm that contractors must provide a variety of workplace accommodations, ranging from extra bathroom breaks to light-duty assignments, to women affected by pregnancy, childbirth, and related medical conditions comparable to the accommodations that contractors provide to other workers similar in their ability or inability to work, such as employees with disabilities or occupational injuries.” In the preamble, OFCCP acknowledges that the extent to which employers must provide reasonable accommodations for routine pregnancies is a question currently pending before the Supreme Court of the United States, stating, “Should the Supreme Court rule contrary to our interpretation, OFCCP’s final rule will be revised consistent with the ruling.”

In addition to disparate treatment, this section also prohibits policies or practices that may have a disparate impact on the basis of sex. Specifically, contractors with policies or practices under which insufficient (as determined by OFCCP) or no medical or family leave is available must ensure that the policies or practices do not have an adverse impact on the basis of sex, unless they are shown to be job-related and consistent with business necessity.

The section also clarifies that leave for child care must be available to men on the same terms as it is available to women.

6. Fringe Benefits: Cost Is Not a Defense

Section 60-20-.6 defines “benefits” broadly and updates regulatory language to confirm that contractors must provide equal benefits and equal contributions for male and female employees participating in fringe-benefit plans, even if doing so costs more for one sex than the other.

7. Sex-based Stereotypes Include Gender Identity and Caregiver Responsibility

Section 60-20.7 incorporates federal case law relating to sex stereotyping and prohibits employment actions taken based on stereotypes about how a particular sex looks, speaks, or acts. The section provides examples of adverse treatment of employees because they do not conform to gender norms and expectations about appearance, attire, and behavior.

This section also prohibits discrimination on the basis of gender identity stereotypes and clarifies that adverse treatment of male and female employees because of gender-stereotyped assumptions about family caretaking responsibilities is discrimination.

8. Sexual Harassment

Finally, section 60-20.8 incorporates EEOC guidelines, addresses both quid pro quo and hostile-environment sexual harassment, and includes as a best practice that contractors develop and implement procedures to ensure an environment in which all employees feel safe and welcomed, are treated fairly, and are not harassed because of sex.

Conclusion

The proposed regulations reflect OFCCP’s broad interpretation of Title VII case law regarding compensation discrimination, pregnancy accommodation, sex-based stereotyping, and transgender discrimination. If finalized as proposed, the regulations will be binding on federal contractors and subcontractors. Contractors can anticipate aggressive enforcement by OFCCP in audits and when investigating individual charges of discrimination filed with the agency.

Comments

Comments may be submitted to OFCCP on or before March 31, 2015.