New Government Contractor Regulations Define and Prohibit Workplace Sexual Bias

HIGHLIGHTS:

• The OFCCP's proposed regulations for government contractors are the first major overhaul of its sexual discrimination guidelines in more than 40 years.
• The changes are significant and identify specific examples of prohibited conduct.
• The proposed regulations codify existing OFCCP practice banning discrimination based on gender identity or gender status.

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The Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) has proposed the first major substantive changes to its Sex Discrimination Guidelines in more than 40 years. The new regulations are significant in that they seek to identify and prohibit inherent discrimination in the workplace based on sex, and thus address behaviors and practices not previously expressly regulated. Interested persons have until March 31, 2015, to submit comments on the Jan. 30, 2015, Notice of Proposed Rulemaking (NPRM). The NPRM was published in the Federal Register. 80 Fed. Reg. 5245 (Jan. 30, 2015).

While styled as "guidelines," OFCCP's regulatory preamble restates the policy that the provisions are in fact requirements for federal government contractors, subcontractors, and federally assisted construction contractors and subcontractors. One of the key differences between the proposed and existing regulations is the proposal's identification of specific practices considered to be discriminatory. To that end, the new regulations are re-organized around general prohibited practices, such as gender discrimination in pay, which are then supplemented with specific examples tied to each element of pay, such as opportunities to obtain overtime. OFCCP's analyses supporting the new regulations tie the regulatory examples to judicial decisions overturning specific discriminatory practices.

The new regulations also codify OFCCP's policy, as stated in OFCCP Directive 2014-02, “Gender Identity and Sex Discrimination” (Aug. 19, 2014), that discrimination based on gender identity or transgender status is a form of sex discrimination. A new section was added that prohibits discrimination based on sex-based stereotypes, including adverse treatment based on an individual's failure to adhere to certain gender norms. Overall, the NPRM seeks to align the guidelines with the case law and public policy as they have evolved over the past 40 years.

General and Specific Prohibitions Relating to Employment Practices

The new regulations begin with this general prohibition: "It is unlawful for a contractor to discriminate against any employee or applicant for employment because of sex." For purposes of this statement, the term "sex" includes pregnancy, childbirth or related medical conditions, gender identity and transgender status. To be able to make a hiring or employment decision based on sex, a contractor must show that sex is a bona fide occupational qualification reasonably necessary to the normal operation of the contractor's business.

The regulations expand on the general prohibition by providing specific examples of sex-based discriminatory practices in employment and hiring. These are:

• making a distinction between married and unmarried persons that is not equally applied to both sexes
• denying women with children an employment opportunity that is available to men with children
• firing, or otherwise treating adversely, unmarried women, but not unmarried men, who become parents
• imposing any differences in retirement age or other terms, conditions, or privileges of retirement on the basis of sex
• restricting job classifications on the basis of sex
• maintaining seniority lines and lists based on sex
• recruiting or advertising for individuals for certain jobs on the basis of sex
• distinguishing on the basis of sex in apprenticeship or other training programs, in opportunities such as networking, mentoring, individual development plans and in performance appraisals
• making facilities or employment-related activities available to only one sex (except that if changing facilities are provided, the contractor must ensure that they ensure privacy)
• denying transgender employees access to the bathrooms used by the gender with which they identify
• treating an employee or applicant adversely because he or she has undergone, is undergoing, or is planning to undergo sex-reassignment surgery or other processes or procedures designed to facilitate the adoption of a sex or gender other than the individual's designated sex at birth

Of particular note is the fact that the new regulations eliminate unreasonable cost as a basis to justify an inability to provide appropriate facilities for both sexes.

As with the general employment practices, the NPRM enunciates an overarching prohibition on pay discrimination, and then lists specific practices that constitute sex-based compensation discrimination. For example, organizations doing business with the government or a government prime contractor may not (1) pay different compensation to similarly situated employees on the basis of sex; (2) grant or deny higher-paying wage opportunities such as job classifications, work assignments, training, overtime hours, incentive compensation, or development programs on the basis of sex; or (3) utilize performance review systems that have an adverse impact on the basis of sex. Similarly, contractors may not discriminate on the basis of sex in connection with providing fringe benefits.

Prohibitions on Discrimination Based on Pregnancy, Childbirth and Related Medical Conditions

The NPRM adds new sections detailing prohibited discriminatory practices based on pregnancy and childbirth, including health insurance and leave. With respect to pregnancy and children, the regulations make clear that disparate treatment based on the capacity to have children is a prohibited practice. For example, refusing to hire based on an individual's child-bearing age or capacity is an expressly prohibited practice. On a more subtle level, eliminating a pregnant woman for consideration of a position involving travel might constitute a violation of the regulations.

As for insurance, the regulations prohibit contractors from providing health insurance that does not cover hospitalization and other medical costs for pregnancy, childbirth, or related medical conditions, including contraceptive coverage, to the extent that hospitalization and other medical costs are covered for medical conditions. However, contractors are not required to offer insurance that covers abortions unless the life of the mother is in danger or where medical complications have arisen from an abortion. Medical leave for pregnancy, childbirth or related medical conditions must be provided on the same terms as leave for other medical conditions that are similar in their effect on the employee's work. Lastly, family leave for male employees must be the same as family leave for female employees.

Prohibition on Discrimination Based on Sex-Based Stereotypes

The regulations now expressly ban discrimination on the grounds of sex-based stereotypes, such as stereotypes about how "males and/or females are expected to look, speak, or act." They list specific examples of such discrimination based on recent case law:

• failure to promote a woman or treating a woman adversely because of sex stereotypes involving dress such as jewelry, make-up or high heels
• harassment of a male because he is considered insufficiently masculine or effeminate
• adverse employment treatment because an employee is in a same-sex relationship
• adverse employment treatment because of gender identity or transgender status
• adverse employment treatment because of stereotypes arising from caregiver roles; more specifically, the NPRM prohibits failure to provide women with opportunities because of assumptions about their care-giving roles interfering with their work responsibilities or to treat men differently if they decide to take leave to care for newborn or adopted children

Sexual Harassment Is Now an Express Violation

Lastly, the proposed OFCCP regulations now make sexual harassment and the presence of a hostile work environment express violations of the rules. They prohibit "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 submission to such conduct is either an explicit or implicit condition of employment or create an offensive or intimidating working environment. The regulations stop short of requiring sexual harassment training for all employees. Instead, they advise that it is a "best practice" to implement procedures to prevent sexual harassment. These procedures include communicating to all employees that harassing conduct will not be tolerated, providing anti-harassment training, and having established mechanisms for receiving and resolving complaints about sexual harassment.

OFCCP Proposal Designed to Align with Recent Case Law

OFCCP's new regulatory proposal seeks to align the agency's sex discrimination guidelines with the recent case law and its own developing policies. The proposal's delineation of specific prohibited practices makes clear that individual behavior can expose an entire organization to risk. Government contractors, as well as other institutions, therefore should review their current sexual discrimination policies and practices to ensure that they reflect OFCCP's attempt to eliminate not just overt, but inherent, discrimination based on sex. To this end, employee and management training programs should be scrutinized and, where appropriate, revamped, to address the types of behavior prohibited by OFCCP's new proposed rules.

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Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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