You could be subject to the jurisdiction of the U.S. Department of Labor Office of Federal Contract Compliance Program (OFCCP) without knowing it. In a recent case, three hospitals were held liable for noncompliance with OFCCP regulations even though they were not government contractors and were not parties to any subcontract that referenced a federal contract.

In OFCCP v. UPMC Braddock, three hospitals had contracts with the University of Pittsburgh Medical Center Health Plan (Health Plan) to provide services to government employees covered by the Health Plan. The Health Plan in turn had contracted with the Federal Office of Personnel Management (OPM) to provide medical services to federal employees. The contract between the hospitals and the Health Plan did not contain any language notifying the hospitals that they were subcontractors subject to OFCCP jurisdiction. Moreover, the Health Plan contract with the OPM specifically excluded the member hospitals from its definition of “subcontractor.” The OFCCP sent letters to the hospitals requesting copies of their affirmative action plans and other documents demonstrating that they were in compliance with various federal regulations prohibiting discrimination. The hospitals refused to cooperate, arguing that they were not federal contractors or subcontractors. The OFCCP disagreed and filed an administrative complaint against the hospitals.

The Department of Labor found that the hospitals were federal subcontractors subject to OFCCP jurisdiction even though the hospitals did not agree to become federal subcontractors and even though they had no notice of the terms of the contract between the Health Plan and the OPM. The Department of Labor determined that the equal employment opportunity and affirmative action obligations imposed by the OFCCP were incorporated into the hospitals’ contracts by operation of law. The rationale behind the decision was that, because the hospitals had assumed part of the Health Plan’s obligations under the Health Plan’s contract with the government (i.e., the provision of health care services to government employees), the hospitals were subcontractors bound by the OFCCP regulations. The Department of Labor also rejected the argument that the hospitals’ contracts with the Health Plan specifically excluded them from the definition of “subcontractor,” finding that the parties could not contractually invalidate the equal opportunity provisions of federal laws.

What This Means For You.
Health care providers with 50 or more employees that provide medical care worth $50,000 or more to federal employees may be subject to OFCCP jurisdiction. Failure to comply with OFCCP requirements can result in serious consequences, including exclusion from all federal contracting and subcontracting for three years or more. Entities that are in violation of the OFCCP requirements can also be prohibited from participating in Medicare and Medicaid programs. To avoid these unwanted consequences, you should take some simple steps. First, review your contracts to determine if you are providing health care services worth more than $50,000 to federal employees. If so, consult with legal counsel to determine your potential responsibilities under the federal government’s EEO and affirmative action programs. Finally, if you receive a compliance review letter, consult with legal counsel before refusing to cooperate.