On May 7, 2014, the Office of Federal Contract Compliance Programs (OFCCP) issued Directive 2014-01, TRICARE Subcontractor Enforcement Activities (the Directive), establishing a five-year moratorium on enforcement of affirmative action obligations required of TRICARE subcontractors (with some exceptions noted below).1 The moratorium applies to all healthcare entities that participate in TRICARE under a subcontract between the Department of Defense (DOD) TRICARE Management Activity and one of the prime managed-care contractors. During the moratorium, OFCCP will engage in “extensive outreach and technical assistance” to educate TRICARE participants of their obligations under OFCCP’s programs. OFCCP will also engage with federal agencies to clarify principles regarding the applicability of these federal statutes to healthcare providers (HCPs).
OFCCP’s purpose is to enforce affirmative action and equal employment policies for those who do business with the federal government. See generally U.S. Department of Labor, Office of Federal Contract Compliance Programs, http://www.dol.gov/ofccp/. OFCCP is responsible for the enforcement of a variety of laws that collectively prohibit federal contractors and subcontractors from discriminating on the basis of race, color, religion, sex, national origin, and status as a qualified individual with a disability or protected veteran. These laws also require federal contractors and subcontractors to take affirmative steps to ensure equal employment opportunity.2 Finally, the laws impose “flow-down” requirements, requiring federal contractors to flow-down these affirmative action and equal employment opportunity clauses to their subcontractors in certain cases.3
In recent years, OFCCP has attempted to establish jurisdiction over HCPs based on the theory that HCPs receiving more than $50,000 in reimbursement from TRICARE, the DOD healthcare program that provides medical benefits to active duty and retired military personnel and their families, qualify as subcontractors and are required to comply with the various affirmative action and equal opportunity regulations detailed above. However, OFCCP’s jurisdictional claims appear to conflict with Section 715 of the 2012 National Defense Authorization Act (NDAA), which expressly exempted TRICARE HCPs from OFCCP jurisdiction. Furthermore, DOD has indicated that participating in federally funded healthcare programs does not confer federal contractor or subcontractor status sufficient for the purpose of establishing OFFCP jurisdiction.4
OFCCP’s Five-Year Moratorium
In the Directive, OFCCP states that recent events brought to its attention a difference in understanding between the Department of Labor and TRICARE-affiliated entities regarding the definition of a covered subcontractor under the laws enforced by OFCCP. As a result of that confusion, OFCCP enacted the five-year moratorium, effective May 7, 2014. The moratorium does not apply to investigation of complaints of discrimination under 41 C.F.R. § 60-1.24; 41 C.F.R. § 60-300.61, and 41 C.F.R. § 60-741.61. Nor does it extend to any obligations a TRICARE subcontractor may have under other federal nondiscrimination laws.
Under the moratorium OFCCP will administratively close all open and scheduled compliance evaluations for lower tier TRICARE providers by June 18, 2014 (within 30 business days of the Directive’s effective date). HCPs that receive scheduling letters may request administrative closure by submitting a written request to their local OFCCP office.
However, the moratorium does not apply to all HCPs because some HCPs may be covered by provisions other than the TRICARE subcontractor provisions. Specifically, HCPs that hold prime contracts with TRICARE or another federal agency, such as the Department of Veterans Affairs, are not covered under the moratorium. Additionally, TRICARE subcontractors that hold separate, independent non-healthcare-related contracts or subcontracts would also remain subject to OFCCP regulations under those independent contracts or subcontracts. Finally, there is uncertainty regarding whether HCPs that are considered subcontractors solely by virtue of their participation in the Federal Employees Health Benefits Program (FEHBP) are covered by the moratorium because the moratorium extends only to “TRICARE subcontractors.” Although the Directive clearly indicates that HCPs that participate in both TRICARE and FEHBP as subcontractors are covered by the moratorium, the Directive gives no guidance regarding those HCPs that only participate in FEHBP.
It is important to note that OFCCP’s moratorium, although giving HCPs a brief respite from OFCCP enforcement activities, is not an indication that OFCCP is conceding or plans to concede that it lacks jurisdiction over HCPs. Indeed, quite the opposite is true; because of the Directive’s limited scope and duration, OFCCP looks poised to reinstitute enforcement efforts after the moratorium is lifted. Furthermore, the Directive provides no additional guidance or clarification on the scope of OFCCP’s jurisdiction. It remains unclear from the Directive whether actions taken by lower tier TRICARE providers during the moratorium may serve as the basis for enforcement actions initiated after the moratorium is lifted.
During the moratorium, in light of the prospect of future enforcement activity, TRICARE subcontractors should take the opportunity to examine their OFCCP compliance programs to determine what can be done to prevent future enforcement actions. Additionally, subcontractors under the TRICARE program may email OFCCP at OFCCP-Public@dol.gov to ensure they receive notifications about training and technical assistance.