Sex Discrimination Guidelines for Federal Contractors Finalized by U.S. Department of Labor

By Travis Hockaday and Patrick Lawler

On June 14, 2016, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) issued its Final Rule to update sex discrimination guidelines for federal government contractors. The OFCCP enforces Executive Order 11246, as amended, which prohibits federal contractors and subcontractors from discriminating on the basis of race, color, religion, sex, sexual orientation, gender identity and national origin, and requires them to take affirmative steps to ensure employees and applicants are treated without regard to these characteristics. The Final Rule updates the agency’s guidelines pertaining to sex discrimination and harassment, largely unchanged since 1970, to align them with Title VII case law and the Equal Employment Opportunity Commission’s and OFCCP’s interpretations. According to the OFCCP, it is “bring[ing] these old guidelines from the ‘Mad Men’ era to the modern era, and align[ing] them with the realities of today’s workplace and legal landscape.” The Final Rule becomes effective on August 15, 2016. 

General prohibition on sex discrimination clarified

Federal contractors have always been forbidden from discriminating on the basis of sex, but the Final Rule expands the definition of “sex” to expressly include “pregnancy, childbirth, or related medical conditions; gender identity; transgender status; and sex stereotyping.” A contractor may not make distinctions based on sex in recruiting, hiring, firing, promoting, compensation, hours, job assignments, training, benefits, or other terms, conditions, or privileges of employment (unless the contractor can meet the very high bar of demonstrating that sex is a “bona fide occupational qualification” of the position). For example, a contractor must not treat men and women differently with regard to the availability of flexible work arrangements. Additionally, a contractor may not utilize sex-neutral policies or practices that adversely impact members of a particular sex (unless the policies or practices are job-related and consistent with business necessity). For example, a word-of-mouth recruitment policy may be facially sex-neutral, but adversely impact women. 

Compensation and other fringe benefits

The Final Rule provides that contractors may not “pay different compensation to similarly situated employees on the basis of sex,” reminds contractors that the determination of whether employees are “similarly situated” is case specific, and interprets “similarly situated” broadly. Indeed, OFCCP notes that, in some cases, employees are “similarly situated” where they are comparable on some factors (such as tasks performed, skill, effort, level of responsibility, working conditions, job difficulty, minimum qualifications and other objective factors), even if they are not similar on others. 

The Final Rule also prohibits discrimination in the provision of fringe benefits, such as medical, hospital, accident, and life insurance, retirement benefits, leave, and other terms, conditions and privileges of employment. It notes that the greater cost of providing a fringe benefit to members of one sex is not a defense to the contractor’s failure to provide benefits equally to both sexes.

Pregnancy, childbirth and related medical conditions  

The Final Rule forbids discrimination on the basis of pregnancy, childbirth or related medical conditions. Contractors may not refuse to hire pregnant women (or women of childbearing capacity), terminate employees or require them to take leave because of their pregnancy, and they may not limit job responsibilities solely because an employee is pregnant. Contractors also are forbidden from providing employees with health insurance that does not cover hospitalization and other medical costs for pregnancy, childbirth or related medical conditions when such costs are covered for other medical conditions. Contractors may not deny a reasonable accommodation (such as an alternative job assignment or modified duties) due to an employee’s inability to perform the job duties because of pregnancy, childbirth or related medical conditions when it (i) denies such accommodations only to employees affected by pregnancy, childbirth or related medical conditions, or (ii) provides such accommodations to workers with other conditions whose abilities or inabilities to perform their job duties are similarly affected, where the denial of accommodations imposes a significant burden on employees affected by pregnancy, childbirth or related medical conditions. Moreover, contractors must provide any job-guaranteed medical leave (including paid sick leave) for pregnancy, childbirth or related medical conditions on the same terms that such leave is provided for medical conditions that are similar in their effect on employees’ ability to work and must provide job-guaranteed family leave for male employees on the same terms that such leave is provided for female employees. 

Sexual harassment

The Final Rule makes clear that it prohibits sexual harassment, which now expressly includes “harassment based on pregnancy, childbirth or related medical conditions;” “harassment based on gender identity or transgender status;” and “harassment that is not sexual in nature but that is because of sex or sex-based stereotypes.” 

Prohibitions on the use of sex-based stereotypes

The Final Rule stresses that contractors may not make employment decisions on the basis of sex-based stereotypes, such as stereotypes about how males and/or females are expected to look, speak and act. For example, OFCCP states that it would violate EO 11246 for a contractor to impose adverse treatment on a male employee because he has taken or is planning to take leave to care for his newborn or recently adopted or foster child based on the belief that women and not men should be responsible for caring for children. Similarily, a contractor may not deny employment to a woman because of sex stereotypes about women working in particular jobs or industries. 

Application of Final Rule to treatment of transgender employees

Contractors should be particularly mindful of the Final Rule’s provisions regarding transgender employees. In addition to the prohibitions against adverse treatment of employees based on actual or perceived gender identity or transgender status, the Final Rule provides that it would be unlawful for a contractor to treat employees differently because they have received or plan to receive transition-related medical services. OFCCP also notes that although it does not require contractors to construct gender-neutral bathrooms, it does require contractors to allow employees to access sex-segregated facilities consistent with their gender identity. 

With respect to health coverage issues, the Final Rule obligates contractors to ensure that coverage for healthcare services be made available on the same terms for all individuals for whom the services are medically appropriate, regardless of sex assigned at birth, gender identity or recorded gender. The preamble to the Final Rule also notes that an explicit, categorical exclusion of health plan coverage for all care related to gender dysphoria or gender transition is facially discriminatory because such an exclusion singles out services and treatments for individuals on the basis of their gender identity or transgender status. 

Next steps for federal contractors

Fortunately for employers, the Final Rule generally adopts existing law, so most federal contractors probably are aware of the “do’s” and “don’ts” regarding equal treatment. But the Final Rule highlights several areas of importance and potentially heightened enforcement, so prudent contractors should review their policies and practices to ensure they are in compliance with the new guidelines and that women are treated equally in all respects to, and provided the same opportunities as, men. Contractors should take care not to treat any employees or applicants adversely because they fail to comply with preconceived concepts of “sex” and expectations about how women and men should look or act or what kind of jobs they do. Contractors also should analyze their health plans with an eye toward any exclusions that single out services and treatments for individuals on the basis of their gender identity or transgender status. 

The Final Rule includes detailed examples of policies and practices that could violate its provisions, as well as a list of recommended best practices for contractors’ consideration.

The Final Rule, to be codified at 41 C.F.R. Part 60-20, is available here. OFCCP also has published several resources for contractors, including a fact sheet and a set of Sex Discrimination FAQs.


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