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OFCCP Issues Directive 2014-01: TRICARE Subcontractor Enforcement Activities

May 8, 2014

By Michael G. McClory

Yesterday, the US Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) issued an enforcement directive that it believes is needed due to the OFCCP’s perception “that there has been a difference in understanding between the Department of Labor and some entities affiliated with the TRICARE community as to who is a covered subcontractor under the laws we enforce.”  With that explanation, OFCCP issued Directive 2014-01: TRICARE Subcontractor Enforcement Activities.  The directive is effective immediately.

Background:

TRICARE is the federal government’s healthcare program for active duty and retired military members and their families.  On December 16, 2010 OFCCP quietly issued Directive 293 in which it asserted that hospitals and other health care providers are federal subcontractors (and must have affirmative action plans) if they participate in TRICARE.

OFCCP’s interpretation of its jurisdiction efforts proved controversial and led to congressional intervention.  Specifically, the National Defense Authorization Act for Fiscal Year 2012, signed into law by President Obama on December 31, 2011, included a “carve out” for TRICARE subcontractors.  Section 715 of the NDAA stated that healthcare providers operating as part of a TRICARE managed care network of providers are not covered contractors or subcontractors based solely on their TRICARE participation.

Since that time, OFCCP has been thinking.  I interpreted the language of the statute as evincing a clear intent by Congress to overrule OFCCP’s assertion that it has jurisdiction over TRICARE providers based solely on their participation in TRICARE.  However, OFCCP (despite withdrawing Directive 293 in April 2012) refused to concede.  In fact, compliance audits open when the NDAA was signed (on December 31, 2011) have remained open since then (in a form of long-term hibernation).

Directive 2014-01:

With yesterday’s directive OFCCP has signaled that it believes it now has figured out how to get its way.  Putting its best spin forward, OFCCP states the following in paragraph 5.

“In light of this confusion regarding who is covered and what obligations the TRICARE subcontractor community has under the laws enforced by OFCCP, the agency is issuing this Directive. The Directive establishes a five-year moratorium on enforcement of the affirmative obligations required of all TRICARE subcontractors. During the moratorium period, OFCCP will engage in outreach and technical assistance to provide greater clarity for the TRICARE subcontractor community about their obligations under the laws administered by OFCCP. In addition, the agency will work with other federal agencies to clarify the coverage of health care providers under federal statutes applicable to subcontractors.”

We offer three observations regarding the directive.

Audits in hibernation: OFCCP has resolved its problem related to currently open compliance audits.  The agency will close those audits.  “To the extent that there are any open compliance evaluations of TRICARE subcontractors covered by the moratorium as described below in Section (7)(a), OFCCP will administratively close those cases within 30 business days of the effective date of this directive.”

Scope of moratorium: The moratorium has a limited application.  It applies to healthcare entities that participate in TRICARE only as subcontractors.  However, it “does not apply to health-care entities that participate in TRICARE as subcontractors and who are holders of prime contracts with an agency of the federal government. Similarly, this moratorium does not extend to TRICARE subcontractors that hold a separate, independent non-health-care-related federal subcontract.”

Discrimination claims: The moratorium also does not apply with respect to complaints of discrimination.  OFCCP makes clear that it intends to continue to exercise jurisdiction in this area.  “The moratorium does not apply to the processing of complaints of discrimination under 41 CFR 60-1.24; 41 CFR 60-300.61 and 41 CFR 60-741.61. This moratorium does not extend to any obligations a TRICARE subcontractor may have under other federal nondiscrimination laws, including Title VII of the Civil Rights Act of 1964, as amended (42 U.S.C. 2000e et seq.) and the Americans with Disabilities Act of 1990, as amended (42 U.S.C. 12101 et seq.).”

Healthcare entities having any level of participation in TRICARE would be well advised to review Directive 2014-01 and confer with legal counsel.

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Michael G. McClory joined Bullard Law in 1997. He likes talking about employment law, debating it, proposing revisions to it and even complaining about it.  Perhaps so they could get some work done, his colleagues at Bullard Law suggested that he start a blog about employment law issues (broaden the conversation). And that is how this blog came to be. 

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