The OFCCP is a federal agency that enforces equal employment opportunity and affirmative action laws. Entities that fall under the jurisdiction of the OFCCP have numerous affirmative action obligations if they have contracts or subcontracts with executive branch agencies. A Labor Department Administrative Law Judge (“ALJ”) recently issued a decision that could expand the reach of the OFCCP to include hospitals and other health care entities which provide medical services for beneficiaries of TRICARE. See OFCCP v. Florida Hospital of Orlando, DOL OALJ No. 2009-OFC-00002 (October 18, 2010). Florida Hospital has appealed the ALJ’s ruling. If the ruling stands, numerous health care providers will be subject to the OFCCP’s jurisdiction.
The ruling is especially notable considering that there has been an increase in funding of the OFCCP and an increase in hiring of OFCCP compliance officers. With this in mind, hospitals and health care providers should review their contractual obligations to determine whether they are federal contractors or subcontractors. Entities that are federal contractors and subcontractors must comply with numerous obligations including filing EEO-1 and Vets 100/100A reports, ensuring nondiscrimination in employment, posting certain notices, establishing affirmative action programs and conducting adverse impact analyses for hires, promotions and terminations.
OFCCP v. Florida Hospital of Orlando
TRICARE is a federal health care program for active and retired members of the military and their family. It is administered by TRICARE Management Activity (“TMA”). In OFCCP v. Florida Hospital of Orlando, TMA contracted with Humana Military Healthcare Services, Inc. (“HMHS”) to provide networks of health care providers to the beneficiaries of TRICARE. HMHS in turn contracted with Florida Hospital of Orlando (“Florida Hospital”) and other hospitals to provide health care services to individuals eligible to receive benefits under the agreement between HMHS and TMA.
The OFCCP sued Florida Hospital arguing it is a federal subcontractor and subject to OFCCP’s jurisdiction. The ALJ granted summary judgment for the OFCCP, ruling that Florida Hospital was a federal subcontractor because it provided medical services to TRICARE beneficiaries. The ALJ focused on the regulatory definition of subcontractor which states that a subcontract is:
[A]ny agreement or arrangement between a contractor and any person . . .: (1) 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; or (2) Under which any portion of the contractor’s obligation under any one or more contracts is performed, undertaken or assumed.
41 C.F.R. §§ 60-1.3, 60-250.2; 60-741.2. The ALJ reasoned that Florida Hospital undertook a portion of HMHS’s obligations under its contract with TMA, “specifically the provision of medical services to TRICARE’s beneficiaries.”
The ALJ rejected Florida Hospital’s arguments to the contrary. Florida Hospital argued that it was not a federal subcontractor because it merely received financial assistance from the federal government similar to Medicare funding. The ALJ distinguished Florida Hospital’s funding from Medicare because Medicare only pays for medical services whereas TRICARE provides medical services. The ALJ also rejected Florida Hospital’s arguments that TRICARE did not consider its network providers to be subcontractors and that Florida Hospital’s contract did not contain any of the federal subcontractor compliance provisions.