Compliance Update - Department of Labor Administrative Review Board

Ruling adds affirmative action requirements even though subcontractor status had not been identified in contract language

In the ruling of Office of Federal Contracts Compliance Programs (OFCCP) v. UPMC Braddock, ARB Case No. 08-048 (May 29, 2009), a Department of Labor Administration Review Board (ARB) issued a ruling that hospitals contracting with a Health Maintenance Organization (HMO) to provide medical services to federal employees are to be considered “subcontractors” even when the subcontract does not have written EEO and Affirmative Action provisions.In the ruling of Office of Federal Contracts Compliance Programs (OFCCP) v. UPMC Braddock, ARB Case No. 08-048 (May 29, 2009), a Department of Labor Administration Review Board (ARB) issued a ruling that hospitals contracting with a Health Maintenance Organization (HMO) to provide medical services to federal employees are to be considered “subcontractors” even when the subcontract does not have written EEO and Affirmative Action provisions.

The three University of Pittsburgh Medical Center hospitals were contracted providers for a HMO participating in the Federal Employees Health Benefits Program (FEHBP). They contracted with UPMC Health Plan to provide medical services for individuals insured by the Health Plan. Even though none of the three hospitals held a federal contract, UPMC Health plan had one with the Office of Personnel Management to provide medical coverage.

After the hospital received an OFCCP scheduling notice of a compliance review, they argued that they were not subject to the OFCCP requirements since they were never notified by the Health Plan of their federal contractor status or of the Medical Center’s subcontractor obligations.

The hospitals referred to a DOL precedent (OFCCP V. Bridgeport Hospital) that held that hospitals that provide medical coverage through an insurance company’s arrangement with the federal government were not federal subcontractors because the medical coverage was not necessary to the performance of the insurance company’s direct federal contractor, which was to provide insurance, not medical services, to federal employees. The ARB distinguished this case from Bridgeport Hospital by looking at the underlying contract. In Bridgeport, the prime contractor, Blue Cross/Blue Shield of Connecticut had a contract with OPM to provide health insurance to federal employees. In the UPMC case, the prime contract was to provide medical services to federal employees.

Both the Administrative Law Judge and ARB found that such clauses were incorporated into the hospital’s contract by operation of law and therefore the hospitals were bound by them. Additionally, even though the UPMC’s contract with the OPM specifically excluded “providers of direct medical services and supplies” from its definition of “subcontractor,” the ARB found that parties to a contract cannot agree to eliminate compliance with federal anti-discrimination laws.

EMPLOYER IMPACT: This decision reinforces that employers cannot rely on contract language to insulate the organization from OFCCP requirements. Employers should examine their customer/vendor agreements and contractual relationships to determine if the goods and services being provided create federal subcontractor status even if the contract language is silent on this topic.

We hope that this compliance update provides you with valuable information when examining your contracts. For the full text on this ruling, go to http://www.oalj.dol.gov/OFC/08_048.OFCP.HTM.

The foregoing has been prepared for the general information of clients and friends of eQuest and Workplace Dynamics LLC. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you would like to contact Workplace Dynamics they may be reached at www.workplace-dynamics.com.