OFCCP Issues Enforcement Moratorium for TRICARE Subcontractors

June 2, 2014

On May 7, 2014, the Office of Federal Contract Compliance Programs (OFCCP) began a five-year moratorium on its enforcement of the affirmative action obligations that it has been asserting were applicable to all TRICARE subcontractors. This limited reprieve announced in Directive 2014-01 applies to all healthcare providers that participate in TRICARE (the Department of Defense healthcare program that provides medical benefits to active duty and retired military personnel and their families) through a subcontract with one of the direct contractors that administer the TRICARE program.

Directive 2014-01 is a result of what the OFCCP described as a “difference in understanding” between the OFCCP and “some entities affiliated with the TRICARE community” regarding which healthcare employers are subject to OFCCP oversight. By way of example:

  • For years the OFCCP has been attempting to assert jurisdiction over healthcare providers that receive more than $50,000 in reimbursements from TRICARE, on the theory that they qualify as federal subcontractors and therefore (a) are required to prepare detailed affirmative action plans, and (b) are subject to OFCCP’s affirmative action and equal opportunity regulations prohibiting federal contractors and subcontractors from discriminating on the basis of race, color, religion, sex, national origin, disability or veteran status. See OFCCP Directive 293 (December 16, 2010); OFCCP v. Florida Hospital of Orlando, ALJ Case No. 2009-OFC-00002 (Oct. 18, 2010).
  • In December 2011, President Obama signed the National Defense Authorization Act (NDAA), which was generally seen as exempting TRICARE healthcare providers from OFCCP jurisdiction on that basis.
  • Despite the provisions in NDAA, the OFCCP did not change course or abandon its efforts to assert jurisdiction over healthcare providers based on TRICARE participation alone. See OFCCP v. Florida Hospital of Orlando, ARB Case No. 11-011 (Oct. 19, 2012 and July 22, 2013).

Though OFCCP has now implemented an enforcement moratorium with respect to healthcare providers in cases where affirmative action coverage is based solely on TRICARE participation, Directive 2014-01 makes it clear that the OFCCP will continue its efforts to assert jurisdiction. During the moratorium, the OFCCP plans to engage in “extensive outreach and technical assistance to inform TRICARE participants of their responsibilities under OFCCP’s programs. In addition, during this time, OFCCP will work with other federal agencies to clarify the principles governing coverage of healthcare providers under federal statutes applicable to contractors and subcontractors.”

Importantly, Directive 2014-01 is limited in scope. It applies to healthcare providers that participate in TRICARE only as subcontractors, and does not, for example, extend to (a) healthcare providers that hold prime contracts with a covered agency of the federal government, or (b) TRICARE subcontractors that hold an independent non-healthcare related federal subcontract. Further, the moratorium does not apply to investigation of complaints of discrimination under 41 C.F.R. § 60-1.24, 41 C.F.R. § 60-300.61 and 41 C.F.R. § 60-741.61, and it does not extend to any obligations a TRICARE subcontractor may have under other federal nondiscrimination laws.

Lastly, for healthcare providers that have pending OFCCP audits or receive new audit notices:

  • The OFCCP has indicated it will close pending audits subject to the TRICARE moratorium by June 19, 2014.
  • If a healthcare provider currently has a pending OFCCP audit, it should analyze its bases for coverage and request administrative closure under the moratorium, if applicable.
  • If a TRICARE subcontractor covered by the moratorium receives a new OFCCP audit letter, it should send a response to the OFCCP compliance officer requesting administrative closure, along with a copy of the subcontractor’s TRICARE agreement.

For questions regarding the OFCCP’s TRICARE enforcement moratorium or assistance in analyzing your organization’s coverage as a potential federal contractor or subcontractor or with affirmative action compliance generally, please reach out to the authors, your McGuireWoods contact, or a member of the firm’s affirmative action team or labor and employment group.