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Court Grants OFCCP Summary Judgment in Lawsuit Challenging the New Section 503 Regulations

Overview of Article. On March 21, 2014, the U.S. District Court for the District of Columbia granted summary judgment in favor of the U.S. Department of Labor ("DOL")'s Office of Federal Contract Compliance Programs ("OFCCP") in the lawsuit brought in November 2013 by the Associated Builders & Contractors ("Associated Builders") against the agency. (Associated Builders & Contractors v. Shiu, No. 1:13-cv-01806-EGS, U. S. District Court for the District of Columbia). In that lawsuit Associated Builders sought declaratory and injunctive relief to stop the implementation of the OFCCP's new regulations promulgated under Section 503 ("Section 503") of the Rehabilitation Act of 1973 ("the Rehabilitation Act") that would require Federal contractors and subcontractors, including construction contractors, to assume new obligations, including having a 7% goal for employees with disabilities in their workplaces, as well as a number of other new obligations.

In its March 21, 2014, decision the Court: 1) rejected all of Associated Builders' arguments that the new regulations, which became effective on March 24, 2014, were illegal; and 2) denied the organization's motion for summary judgment, while granting the OFCCP's motion.

Background of lawsuit. Associated Builders is a national trade organization representing 22,000 members from more than 19,000 construction and industry-related firms. On November 19, 2013, Associated Builders filed a complaint in Federal court alleging that the OFCCP's new Section 503 regulations ("the new Section 503 Regulations" or "the Final Rule") violate several Federal statutes. The complaint alleged that Section 503 did not authorize the OFCCP to:

* engage in any data collection or utilization analysis regarding hiring and/or employing employees with disabilities;

* invite job candidates to self-identify as individuals with disabilities; or

* establish numerical hiring goals for people with disabilities.

Associated Builders' complaint asked the Court to enter judgment in its favor and: 1) issue an injunction barring defendants from enforcing or applying those portions of OFCCP's new Section 503 Rule that impose unauthorized or otherwise unlawful data collection and/or utilization analysis requirements and/or goals on construction contractors; 2) declare that the provisions of the Final Rule violate the Rehabilitation Act, the Administrative Procedure Act ("APA") or the Regulatory Flexibility Act ("RFA"); 3) declare the Final Rule as arbitrary, capricious, an abuse of discretion, and/or otherwise not in accordance with law; 4) vacate and set aside the provisions of the Final Rule shown to be unlawful in the complaint and any related provisions that cannot be lawfully severed; and 5) award Associated Builders its cost of litigation, including reasonable attorneys' fees.

Following the filing of the complaint, the Court granted the parties' joint request for an expedited briefing schedule in advance of the Rule's March 24, 2014, effective date and held oral argument on the parties' cross motions for summary judgment on March 14, 2014.

March 21, 2014, District Court decision. In granting the summary judgment in favor of the OFCCP, the Court held as follows:

* The new Section 503 regulations were not promulgated in excess of the OFCCP's authority under Section 503 because:

o the text of the Rehabilitation Act indicates a broad delegation of authority to define how Federal contractors can take affirmative action, and the new Section 503 regulations clearly state that contractors are not required to hire any unqualified individual;

o the data collection requirements of the new Section 503 regulations do not violate the Americans with Disabilities Act (the "ADA") since the legislative history of the ADA specifically contemplates employers inviting applicants to volunteer information pursuant to Section 503, and under the new regulations applicants are free to decline and will suffer no loss if they do so;

o the legislative history of the Rehabilitation Act and related statutes provides no contrary guidance about Section 503 allowing the use of data collection, data analysis and utilization goals; and

o the Final Rule is a permissible construction of Section 503 since the text of that law grants unqualified authority over the scope of the affirmative action requirements and nothing in the Rehabilitation Act or any other statute forbids the tools the OFCCP has chosen.

* The Final Rule was not arbitrary or capricious.The Court found that the agency had fulfilled its obligation to consider factors relevant to its decision, and articulated a rational connection between the facts found and the choices made, for the following reasons:

o the revised data-collection requirements are not an "unjustified departure from past practice," since the current regulations already require contractors to invite newly-hired employees to disclose whether they are individuals with disabilities;****

o the point of the data collection is to establish robust data regarding the disability status of all job applicants and to enable the contractor and the OFCCP to better monitor and evaluate the contractor's hiring and selection practices, and to provide the contractor and the agency with valuable information regarding the number of individuals with disabilities who apply for jobs with Federal contractors;****

o the fact that the previous Section 503 regulations did not require contractors to compile data regarding their workforce and applicant pool did not make the new requirement arbitrary and capricious, as the OFCCP explained that the lack of data "makes it nearly impossible for the contractor" and the OFCCP to perform "even rudimentary evaluations of the availability of individuals with disabilities" or to make any sort of objective, data-based assessments of how effective contractor outreach and recruitment efforts have been;****

o the OFCCP reasonably declined to exempt construction contractors because they: 1) are not exempted under the regulations implementing Executive Order 11246; 2) have not traditionally been exempted from other Section 503 regulations; and 3) the requirements under the new Section 503 Rule are tied to the same construction-trade groupings, require contractors to meet the same goals and utilize similar review requirements;****

o the new utilization goal is not arbitrary or capricious for a number of reasons, including the OFCCP's explanation that although regulations under Section 503 have been in place since the 1970s, the intervening years have seen little improvement in the unemployment and workforce participation rates of individuals with disabilities; and****

o the OFCCP's methodology for reaching the 7% figure is not arbitrary or capricious since the agency used the American Community Survey as well as other data, such as the estimate of the number of individuals with disabilities who are not currently in the workforce, but would be if they did not have to face barriers or discrimination related to their disability.****

* The Final Rule does not violate the RFA since that law requires agencies to analyze the impact of their regulations on small businesses. The OFCCP certified that the Final Rule will not have a significant economic impact on small entities, and justified this conclusion by estimating the expected financial burden of complying with the new Section 503 regulations on all contractors.

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