New Compliance Regulations for Federal Contractors: OFCCP’s Final Rule on Sex Discrimination Presented by: T. Scott Kelly (Birmingham) . ogletreedeakins.com © 2016, Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Background The final rule is the first substantive update in the sex discrimination guidelines since they were issued in 1970. The new rule also incorporates President Obama’s July 2014 Executive Order that prohibits covered federal contractors from discriminating on the basis of sexual orientation and gender identity. The final rules are regulations, not guidelines. Effective date is August 15, 2016. 2

The final rule applies to: All contractors and subcontractors covered by Executive Order 11246. An employer is subject to EO 11246 if: It has a contract or subcontract with a federal executive branch agency worth $10,000 or more annually; It has a government bill of lading which in any 12-month period totals or can reasonably be expected to total $10,000 or more; It serves as a depository of government funds; It is a financial institution which is an issuing and paying agent for U.S. savings bonds and savings notes in any amount. 3

“Good faith efforts” and the final rule “. . . under no circumstances will a contractor’s good faith efforts to comply with the affirmative action requirements of part 60-2 of this chapter be considered a violation of” the final rule. 41 CFR § 60-20.1. 4

Definition of “sex” and discrimination prohibited The final rule now defines “sex” to include: Gender identity Transgender status Pregnancy Sex stereotyping Absent from the definition is “sexual orientation,” although discrimination on this basis is prohibited by EO 13672. The final rule prohibits disparate treatment and disparate impact sex discrimination. 5

Examples of disparate treatment sex discrimination Denying transgender employees access to the restrooms, changing rooms, showers, and similar facilities designated for use by the gender with which they identify Restricting job classifications and maintaining seniority lines or lists on the basis of sex Treating men and women differently with regard to the availability of flexible work arrangements Steering women into lower-paying jobs on the basis of sex 6

Examples of disparate impact sex discrimination Relying on recruitment or promotion methods, such as “word-of- mouth” recruitment, that have an adverse impact on women where the contractor cannot establish that they are job-related and consistent with business necessity Using height or weight qualifications in hiring that are not necessary to the performance of the job and that negatively impact women substantially more than men Using strength, agility, or other physical requirements that exceed the actual requirements necessary to perform the job and that negatively impact women substantially more than men 7

Sex as a bona fide occupational qualification (BFOQ) The BFOQ defense is preserved in the final rule. “Contractors may not hire and employ employees on the basis of sex unless sex is a bona fide occupational qualification . . . reasonably necessary to the normal operation of the contractor’s particular business or enterprise.” 41 CFR § 60-20.3. 8

Compensation Contractors may not pay different compensation to “similarly situated” employees on the basis of sex. The word “compensation” includes “wages, benefits, or any other forms of compensation, or . . . access to earnings opportunities . . .” 41 CFR § 60-20.4. The final rule adopts the Lilly Ledbetter Fair Pay Act standard that compensation discrimination occurs “any time” a contractor pays wages, etc. that are the result in whole or in part of the application of any discriminatory compensation decision or practice. 9

“Similarly Situated” OFCCP does not conduct comparable worth assessments when reviewing contractors’ compensation systems. OFCCP will evaluate whether similarly situated employees are paid differently. Job title may not be the only relevant consideration; OFCCP does a case-by-case assessment. 10

Evaluating Compensation Differences OFCCP will apply both disparate treatment and disparate impact to the contractor’s compensation practices. Depending on the contractor’s pay systems and policies, the analysis may involve comparing: Employees in similar, but not necessarily identical jobs; or Employees who are similar in terms of level, function, or other classification relevant to the contractor’s workforce. 11

Discrimination on the basis of pregnancy, childbirth, or related medical conditions Incorporates the language of the Pregnancy Discrimination Act It also covered related medical conditions, such as lactation Treat people with “childbearing capacity and those affected by pregnancy, childbirth, or related medical conditions the same for all employment-related purposes, including receipt of benefits under fringe-benefit programs, as other persons not so affected, but similar in their ability or inability to work.” 41 CFR § 60-20.5. Includes subsections regarding provision of pregnancy accommodations and leave 12

Pregnancy Accommodation Contractors must provide accommodations for pregnancy- related limitations where such accommodations must be supplied to other employees with other medical conditions, either by policy or by law. A policy that adversely affects employees, not just women, who are “affected by pregnancy, childbirth, or related medical condition” may result in a finding of disparate impact under the new rule. 13

Leave Policies To the extent that a contractor provides family, medical, or other leave, such leave must not be denied or provided differently on the basis of sex. Medical Leave: Job-guaranteed medical leave, including paid sick leave, must be provided to employees with pregnancy, childbirth, or related medical conditions on the same terms that medical or sick leave is provided for medical conditions that are similar in their effect on employees’ ability or inability to work. Family Leave: Job-guaranteed family leave, including any paid leave, for male employees on the same terms that family leave is provided for female employees. 14

Other Fringe Benefits Contractors may not discriminate on the basis of sex in the provision of fringe benefits Even if the cost of providing a fringe benefit to members of one sex is greater than the cost of providing the same benefit to members of the other sex 15

Other Fringe Benefits Denying or limiting access to benefits based on an employee’s gender identity or transgender status constitutes impermissible disparate treatment discrimination. Insurance plans may not contain blanket exclusions of coverage for care associated with gender transition. Coverage for healthcare services must 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. 16

Sex-based Stereotypes Prohibited Employment decisions made on the basis of sex-based stereotypes are prohibited. Adverse employment treatment of a woman because she doesn’t wear jewelry, makeup, or high heels; Harassing a man because he is considered effeminate; or Adverse treatment of employees or applicants based on their sexual orientation where the evidence establishes that the discrimination is based on gender stereotypes. 17

Examples of adverse treatment based on sex-based stereotypes The new rule also prohibits adverse treatment of: A female employee or applicant because she does not conform to a sex stereotype about women working in a particular job, sector, or industry; A male employee because he has taken or is planning to take leave to care for his newborn or recently adopted child; or A male employee who is not available to work overtime or on weekends because he cares for his elderly father. 18

Harassment and Hostile Work Environment OFCCP has adopted the substance of EEOC’s Guidelines on Discrimination Because of Sex relating to sexual harassment. 29 CFR § 1604.11(a). Both quid pro quo and hostile work environment harassment are prohibited. 19

Prohibited Harassment Based on Sex Harassment based on sex includes: Harassment based on gender identity, transgender status, pregnancy, childbirth, or related medical conditions; and Harassment that is not sexual in nature, but that is because of sex or sex-based stereotypes. 20

Best Practices Recommended by OFCCP These best practices are not required, but suggested in the Appendix to the new rule: Avoid gender-specific job titles where there are gender- neutral alternatives; Designate single-user restrooms or similar facilities as sex- neutral; Provide light duty, modified job duties or assignments or other reasonable accommodations to employees who are unable to perform some of their job duties because of pregnancy, childbirth, or related medical conditions; 21

Best Practices Recommended by OFCCP Provide flexible workplace policies for men and women; Encourage men and women equally to engage in caregiving-related activities; Foster a climate in which women are not assumed to be more likely to provide family care than men; and Foster an environment in which all employees feel safe and welcome through procedures to ensure that employees are not harassed because of sex. 22

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Ogletree Deakins, Nash, Smoak & Stewart, P.C. Thank You T. Scott Kelly Ogletree Deakins, Nash, Smoak & Stewart, P.C. 420 20th Street North Suite 1900 Birmingham, AL 35203 Phone: (205) 986-1024 Scott.Kelly@ogletreedeakins.com 24

New Compliance Regulations for Federal Contractors: OFCCP’s Final Rule on Sex Discrimination Presented by: T. Scott Kelly (Birmingham) . ogletreedeakins.com © 2016, Ogletree, Deakins, Nash, Smoak & Stewart, P.C.