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Do You Need To Worry About OFCCP Audits and Fines?

April 12, 2017

OFCCP.jpgFor the last few years, we've been talking about hospitals and the Office of Federal Contract Compliance Program (OFCCP). The core issue is whether hospitals are subject to OFCCP equal employment opportunity requirements. Hospitals, of course, are subject to EEOC requirements, but should they also face OFCCP audits and possible penalties?

Brief History

  • In December 2010, the OFCCP took the position that hospitals are subject to their jurisdiction as a result of contracts to provide care under TRICARE, the federal government's healthcare program for active duty and retired military and their families.

  • Congress and former President Obama gave hospitals some relief with the National Defense Authorization Act for Fiscal Year 2010, which established that hospitals are specifically NOT subcontractors subject to OFCCP jurisdiction based solely on TRICARE participation. (This provision only addressed jurisdiction based on TRICARE participation; the law didn't affect other bases for coverage, such as contracts with the Veterans Administration, the Department of Defense, or other federal agencies.)

  • A proposed Bill sought to broaden the protection against OFCCP jurisdiction by completely preventing the agency from categorizing hospitals and other healthcare providers as contractors.

  • The Bill had momentum, but two days before a scheduled hearing, the Secretary of Labor submitted a letter to the committee proposing that a legislative solution could be avoided in favor of an administrative solution - including a proposed five-year moratorium on enforcement actions, stopping any on-going compliance evaluations, education and technical assistance to subcontractors about OFCCP jurisdiction and sub-contractor obligations, etc. In other words, the Labor Department would suspend enforcement while they "educate" hospitals that they are, indeed, subject to enforcement and on how to comply. The Bill was withdrawn by its sponsors.

Here's what the DOL website states today:

Is a hospital or other health care provider covered under the laws enforced by OFCCP as a result of the reimbursements it receives for medical care and services provided to Medicare or Medicaid patients?

The provider agreements, pursuant to which hospitals and other health care providers receive reimbursement for services covered under Medicare Parts A and B, and the provider agreements that hospitals and other health care facilities have entered into with State Medicaid agencies, are not covered Government contracts under the laws enforced by OFCCP. Accordingly, a hospital or other health care provider is not covered under the laws enforced by OFCCP if its only relationship with the Federal government is as a participating provider under Medicare Parts A and B and Medicaid. Please note that a hospital or other health care provider may be a covered contractor because of other contractual arrangements, such as providing health care to active or retired military under a contract with the Department of Veterans' Affairs or the Department of Defense. Likewise, a teaching hospital doing research for a university that has a contract with the Federal government may be covered.

So, this isn't completely resolved. The moratorium on enforcement is in place, but the DOL is still asserting that a number of contractual arrangements can make hospitals subject to OFCCP jurisdiction.

To help us understand how hospitals should respond to the ambiguity of the issue, I went straight Dr. Ted Kinney, Select International's Director of R&D. A recognized I/O psychology expert on legal defensibility in the hiring process, Dr. Kinney shared the following thoughts:

  • Until there is some clear legislative solution, he tells clients to act as if they are under OFCCP jurisdiction because the OFCCP still asserts jurisdiction, and in many respects, they make up the rules, practically speaking.

  • What’s the risk? The complexity of hospitals shifts the risk. In a typical federal contractor scenario, we worry about adverse impact – and the OFCCP’s approach to using a test of adverse impact that is sensitive to statistical power. This works against companies who fill a high volume of entry-level positions. Health systems, though, are not as easy a target for the OFCCP from an adverse impact perspective because of the complex make-up of their workforce.

  • Hospital risk is different – and it highlights the critical importance of the “PROCESS” piece of the three-legged selection system stool (Competencies, Content, Process). The risk that hospital systems have relating to the OFCCP is usually due to poor documentation and inconsistent process administration. The large number of positions and decentralized hiring processes make it harder for the OFCCP to find adverse impact, but it makes it really easy to find inconsistencies in documentation. This is why the PROCESS work should never be neglected – it is our best strategy to mitigate OFCCP risk.

  • In many ways, the EEOC is a larger concern. Some would say that the EEOC has taken an overbearing, quota-driven, proactive strategy in recent years as they aggressively pursue judgments. That said, their approach using primarily significance tests for establishing the prima-facie case for unfair discrimination is less effective, in low-volume position requisitions.

  • Accordingly, if you do sufficient job analysis, document decisions, and administer the process consistently, you should be well positioned with regard to the EEOC. Make no mistake though, if a complaint is filed, the EEOC will try to build a class to look for adverse impact, and you’d better understand how they look at the class and the statistical analysis they perform.

  • How do we manage the risk? Through the sound application of I/O science.  We build and implement tools that are fair. We spend time with clients designing the process to make sure it is consistent. We configure tools that do not have adverse impact in high-volume situations. We document evidence of validity of every step of the hiring process. By doing these things, we can generally remain safe in the face of an ‘expanded class’ scenario.

To learn more about adding a legally defensible selction system to your hiring process, check out the whitepaper below:

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Bryan Warren Bryan Warren is the President of J3 Personica, a consulting, assessment, training, and coaching firm, and a guest blogger for PSI. Bryan is an expert in progressive talent strategies, with a particular focus on leader and physician selection and development.