Last week, a divided Department of Labor Administrative Review Board (“ARB”) agreed to reconsider its ruling that the Office of Federal Contract Compliance Programs (“OFCCP”) did not have jurisdiction over a federal contractor based solely on its participation in TRICARE, the Department of Defense’s managed health care program for active duty and retired military members and their families.

The ARB had ruled in October 2012 that Florida Hospital of Orlando’s (“Florida Hospital’s”) subcontract with Humana Military Healthcare Services Inc. (“Humana”) was not a covered subcontract for purposes of the affirmative action and other compliance obligations imposed by OFCCP.  OFCCP v. Florida Hospital of Orlando, ARB Case No. 11-011.  The ARB panel found in favor of Florida Hospital based on Section 715 of the December 2011 National Defense Authorization Act for Fiscal Year 2012 (“NDAA”).  That provision states that TRICARE-managed care contracts that include the requirement to “establish, manage, or maintain” a provider network may “not be considered” to be contracts for the performance of health care services or supplies for determining whether such entities are subcontractors for the purposes of Federal Acquisition Regulations “or any other law.”  On November 13, 2012, OFCCP filed a motion with the ARB asking it to reconsider its decision.

Granting OFCCP’s motion for reconsideration, the ARB ruled 3-2 that nothing in the plain text of Section 715 “categorically bans the ability to label a TRICARE network provider,” such as Florida Hospital, as a subcontractor, or “categorically eliminates” OFCCP jurisdiction over TRICARE network providers.  In addition, the ARB ruled that Florida Hospital fell within OFCCP’s jurisdiction under prong one of the agency’s definition of “subcontract,” which includes agreements for the “purchase, sale or use of personal property or nonpersonal services which, in whole or in part, is necessary to the performance of any one or more contracts.”  41 C.F.R. § 60-1.3.  Having found that the NDAA did not bar OFCCP jurisdiction, however, the majority remanded the case to an administrative law judge for further proceedings concerning the separate issue of whether TRICARE payments were “federal financial assistance” and not federal contract payments subject to OFCCP regulations.