District Court Rejects Challenge to the OFCCP's New Disability Regulations Effective March 24, 2014 | Practical Law

District Court Rejects Challenge to the OFCCP's New Disability Regulations Effective March 24, 2014 | Practical Law

In Associated Builders and Contractors, Inc. v. Shiu, the US District Court for the District of Columbia struck down a challenge to new regulations by the Department of Labor's (DOL) Office of Federal Contract Compliance Programs (OFCCP). The new regulations under Section 503 of the Rehabilitation Act of 1973 require government contractors to "take affirmative action to employ and advance in employment qualified individuals with disabilities." The court denied the plaintiff's motion to enjoin portions of Section 503 and granted summary judgment in favor of the OFCCP. As a result, the new regulations will take effect as scheduled on March 24, 2014.

District Court Rejects Challenge to the OFCCP's New Disability Regulations Effective March 24, 2014

by Practical Law Labor & Employment
Published on 24 Mar 2014 • USA (National/Federal)
In Associated Builders and Contractors, Inc. v. Shiu, the US District Court for the District of Columbia struck down a challenge to new regulations by the Department of Labor's (DOL) Office of Federal Contract Compliance Programs (OFCCP). The new regulations under Section 503 of the Rehabilitation Act of 1973 require government contractors to "take affirmative action to employ and advance in employment qualified individuals with disabilities." The court denied the plaintiff's motion to enjoin portions of Section 503 and granted summary judgment in favor of the OFCCP. As a result, the new regulations will take effect as scheduled on March 24, 2014.
On March 21, 2014 in Associated Builders and Contractors, Inc. v Shiu, the US District Court for the District of Columbia struck down a challenge to new regulations under Section 503 of the Rehabilitation Act of 1973 (Section 503) and granted a cross-motion for summary judgment in favor of the OFCCP. The new regulations take effect as scheduled on March 24, 2014. (No. 13-1806 (D.D.C. March 21, 2014).)

Background

The plaintiff, a trade organization that represents the construction industry, including many federal contractors, challenged recent revisions to Section 503. The new rule requires contractors to take certain actions with regard to recruitment, training, recordkeeping and policy dissemination to improve the hiring and promotion of individuals with qualified disabilities, similar to those required to promote workplace diversity for women and minorities.
Specifically, the new regulations require contractors to:
  • Invite applicants to inform the contractor if they believe that they are individuals with disabilities.
  • Document the number of applicants and new employees who self-identify as having a disability, as well as the number of job openings, applicants and jobs filled.
  • Strive to meet a goal of having 7% of each job group in their workforce filled with qualified individuals with disabilities.
The plaintiff asked the court to enjoin certain portions of the updated rule, alleging that:
  • The OFCCP exceeded its authority under Section 503.
  • The new rule is arbitrary and capricious.
  • The new rule violates the Regulatory Flexibility Act.
Both parties moved for summary judgment.

Outcome

The district court held that:
  • The OFCCP did not exceed its authority under Section 503, based on the analysis in Chevron, U.S.A. v. Natural Resources Defense Council, because:
    • the text of Section 503 delegates broad authority to the President to impose and define the ways federal contractors should take affirmative action;
    • nothing in Section 503, the rest of the Rehabilitation Act or the ADA prohibits using data collection and analysis as tools to meet certain benchmarks in promoting workforce diversity; and
    • the OFCCP's interpretation is a permissible construction, and therefore the court must defer to it.
    (467 U.S. 837 (1984).)
  • The rule is not arbitrary and capricious because:
    • the agency justified the need for the rule and the required tools to implement it; and
    • the plaintiff failed to prove that 7% is an unreasonable benchmark.
  • The new rule does not violate the Regulatory Flexibility Act because the OFCCP certification, that the new regulation will not cause a significant economic burden on small businesses because the affected businesses are already required to provide reports on workforce diversity, was reasonable.

Practical Implications

Employers that employ or work with federal contractors should review their policies and procedures to ensure they are in compliance with the new regulations under Section 503.
To facilitate compliance with the new regulations, the OFCCP has launched two new databases:

Update

On December 12, 2014, in Associated Builders & Contractors, Inc. v. Shiu, the US Court of Appeals for the DC Circuit upheld the final OFCCP disability rule against a challenge by a construction contractor. In addition, the DC Circuit upheld the rule's data collection requirements and rejected the argument that the hazardous nature of the construction industry should exempt it from the rule. (No. 14-5076, (D.C. Cir. Dec. 12, 2014).)