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Government Contractor Compliance & Regulatory Update

District Court Rejects Challenge to Section 503 Final Rule

Posted in Disability, OFCCP

On Friday, March 21, 2014, Federal District Judge Emmet Sullivan ruled in favor of the Office of Federal Contractor Compliance Programs’ (“OFCCP”) recent rule implementing Section 503 of the Rehabilitation Act, denying a challenge by the Associated Builders and Contractors trade organization (“ABC”).  As a result, OFCCP’s Rule—“Affirmative Action and Nondiscrimination Obligations of Contractors and Subcontractors Regarding Individuals with Disabilities (“Final Rule”)—will go into effect today unchanged.

ABC filed suit in federal district court in 2013 seeking to invalidate the Final Rule.  ABC argued that portions of the Rule (1) were contrary to Section 503; (2) were arbitrary and capricious in violation of the Administrative Procedure Act; and (3) violated the Regulatory Flexibility Act, 5 U.S.C. §601.  The Court rejected ABC’s arguments and granted OFCCP’s cross-motion for summary judgment.

As discussed in prior posts regarding Rule FAQs, an update to the FAQs, the self-identification form, and OFCCP guidance, OFCCP promulgated its Final Rule implementing Section 503, which applies the Rehabilitation Act to government contractors, in September 2013.  The Rule requires government contractors to (1) gather information on the disability status of job applicants; (2) compile that data and related data on new employees, along with the total number of job openings, job applicants, and jobs filled; and (3) establish a utilization goal as a benchmark against which contractors can measure the efficacy of their affirmative action steps. 

ABC argued that the requirements are contrary to Section 503 because their promulgation exceeds OFCCP’s delegated authority to effectuate affirmative action policy under the Rehabilitation Act.  The Court disagreed, finding that the requirements fall squarely within that authority.  ABC also argued that the requirements exceed OFCCP’s authority because they violate the Americans with Disabilities Act (“ADA”) insofar as they force a contractor to inquire as to an applicant’s disability status.  The Court disagreed, ruling that the Rule merely requires contractors to invite applicants to volunteer information.  The Court additionally found that the Rule’s requirements were not unreasonable, that they were neither arbitrary nor capricious, and that they are not an unjustified departure from past practice.

The Court also rejected ABC’s argument that the construction industry should be exempted from the utilization goal.  Historically, affirmative action obligations of construction contractors have been less stringent due to “the fluid and temporary nature of the construction workforce.”  The Court found, however, that OFCCP reasonably declined to exempt construction contractors because construction contractors already comply with similar data collection requirements under Executive Order 11,246.  The Court also expressly rejected ABC’s argument that it was impossible for construction contractors to find enough qualified individuals with disabilities to hire due to the industry’s hazardous and physically demanding jobs.

The ruling means that the Final Rule will take effect today.