Why it matters

The Office of the Federal Contract Compliance Programs (OFCCP) published its final rule on sex discrimination, the agency's first update to the relevant guidance since 1970. With a goal of eliminating gender-based barriers to equal employment opportunity, the "Discrimination on the Basis of Sex" rule covers a broad variety of topics from compensation discrimination to accommodations for pregnant workers. The final rule—which applies to all federal contractors and some subcontractors—makes clear that gender identity falls under the heading of sex discrimination, including harassment based on transgender status, requiring covered employers to allow workers to use restrooms, changing rooms, and other facilities consistent with the gender the worker identifies with. With respect to another hot-button issue, the final rule prohibits compensation discrimination against "similarly situated" employees on the basis of sex. To help guide employers, the OFCCP also provided examples of what the agency considers to be gender discrimination, such as the use of strength tests that exceed the actual demands of the job and negatively impact women more than men, as well as "word-of-mouth" recruitment that has an adverse impact on female employees. The final rule takes effect on August 15.

Detailed discussion

"Women make up a significant share of the U.S. workforce, but sex discrimination remains an unfortunate reality," the Office of the Federal Contract Compliance Programs (OFCCP) wrote, explaining the agency's new guidance on the issue in more than 40 years. While the prohibition against sex discrimination is well established, the prior guidelines were out of touch with current law and the realities of today's workforce and workplaces, the agency stated.

To reflect modern laws and modern times, the OFCCP published a Notice of Proposed Rulemaking in January 2015. After considering the 553 comments received on the proposal, the OFCCP released its final rule, set to take effect on August 15.

Articulating the general ban on both disparate treatment and disparate impact discrimination, the final rule defined "sex" to include gender identity, transgender status, pregnancy, and sex stereotyping. Also prohibited is sexual harassment, including unwelcome sexual advances, requests for sexual favors, offensive remarks about a person's sex, and other verbal or physical conduct of a sexual nature when such conduct unreasonably interferes with an individual's work performance, becomes the basis for employment decisions, or creates a hostile working environment.

Protections related to pregnancy, childbirth, and related medical conditions were added to the new guidance in line with the U.S. Supreme Court's March 2015 decision in Young v. UPS, requiring contractors to provide workplace accommodations (such as extra bathroom breaks and light-duty assignments) to an employee who needs such accommodations in certain circumstances where those contractors provide comparable accommodations to other workers, such as those with disabilities or occupational injuries.

Examples of unlawful pregnancy discrimination listed by the OFCCP ranged from refusing to hire pregnant applicants to limiting a pregnant employee's job duties based on pregnancy, to providing employees with health insurance that does not cover hospitalization and other medical costs related to pregnancy, childbirth, or related medical conditions when hospitalization is provided for other medical conditions.

The final rule also addressed compensation discrimination. Contractors may not deny opportunities for overtime work, training, better pay, or higher-paying positions because of a worker's sex, according to the guidance. Nor can contractors pay similarly situated workers differently because of their sex. Unless the contractor can meet the high bar of demonstrating that requirements based on an applicant's or employee's sex are a bona fide occupational qualification, such mandates are discriminatory, the OFCCP said.

In addition, requirements that adversely affect applicants because of their sex—such as height or weight qualifications—are not allowed unless a contractor can demonstrate the qualifications are job-related and consistent with business necessity. Similarly, "word-of-mouth" recruitment and "tap-on-the-shoulder" promotion efforts raise concerns about having an adverse impact on women, absent a demonstration of business necessity.

An evaluation of whether employees are similarly situated requires consideration of factors such as the tasks performed, skills, effort, levels of responsibility, working conditions, job difficulty, minimum qualifications, and other objective factors. A new provision in the final rule permits employees to recover lost wages any time a contractor pays compensation that is the result of discrimination, not only when the decision to discriminate is made.

The promotion of fair pay practices extends to equal benefits for those participating in fringe benefit plans, the OFCCP said, such as medical, hospital, accident, life insurance, and retirement benefits; profit-sharing and bonus plans; leave; and other terms, conditions, and privileges of employment.

In another change from the 1970s guidance, the final rule makes clear that discrimination based on gender identity, transgender status, and sex stereotypes is covered by the prohibition on sex discrimination. To that end, the rule requires contractors to allow workers to use bathrooms, changing rooms, showers, and similar facilities consistent with the gender with which the workers identify. Further, the preamble to the final rule states that an explicit, categorical exclusion of coverage for all care related to gender dysphoria or gender transitioning is facially discriminatory by singling out services and treatments for individuals on the basis of their gender identity or transgender status.

Adverse treatment on the basis of failure to conform to particular gender norms and expectations, whether in regard to appearance, attire, or behavior, also constitutes unlawful sex discrimination, the OFCCP said. This principle applies to stereotypes about caregiving responsibilities, preventing contractors from denying mothers employment opportunities that are available to fathers based on a faulty assumption that their childcare responsibilities will conflict with their job performance, for example, or denying fathers flexible workplace arrangements that are available to mothers, assuming that men do not have childcare responsibilities.

For additional guidance, an appendix to the final rule identifies best practices for contractors to ensure compliance.

To read the OFCCP's Sex Discrimination Final Rule, click here.