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OFCCP Rescinds Directive 293, Creates Further Jurisdictional Uncertainty over Healthcare Providers

  • May 1, 2012

The Office of Federal Contract Compliance Programs has announced the rescission of Directive 293, which the Agency previously relied on to establish jurisdiction over healthcare providers and insurers, including participants in TRICARE. In addition, Directive 293 stated contractors could not limit OFCCP jurisdiction contractually in subcontract agreements. The April 25th announcement was made during a webinar called, “Status of Pending Compliance Evaluations of Entities that Participate in TRICARE Networks.”  The rescission, viewed with current pending litigation, results in uncertainty and confusion: uncertainty for the healthcare provider community as to whether they are subject to OFCCP jurisdiction and confusion for the Agency on how to proceed with existing compliance reviews.
Agency representatives explained the decision to rescind Directive 293 was based on the pending appeal of the OFCCP v. Florida Hospital and the recent passage of the National Defense Authorization Act.  In Florida Hospital, an administrative law judge held a Florida hospital providing medical services on behalf of a federal contractor servicing DoD TRICARE beneficiaries was a covered federal subcontractor subject to OFCCP jurisdiction.  In contrast, the National Defense Authorization Act,  (“NDAA”) signed by President Barack Obama on December 31, 2011, exempts medical providers that participate solely in the TRICARE program from OFCCP jurisdiction on a going-forward basis.  As a result of these conflicting developments, OFCCP put on hold compliance evaluations of entities where the Agency’s only basis for jurisdiction is TRICARE. 

Only those contractors who participate solely in TRICARE program currently are exempted from OFCCP jurisdiction under the NDAA.  The Agency confirmed it has reviewed the basis of jurisdiction for the suspended compliance investigations of healthcare entities and will notify contractors in the upcoming weeks whether the Agency believes there is a basis other than TRICARE for the Agency’s jurisdiction.  If the Agency believes there is an independent basis, it will proceed immediately with the reviews.

Adding to the complexity of the matter for subcontractors is OFCCP v. UPMC Braddock, a case pending in federal court.  Braddock deals with whether parties to subcontracts can determine covered contractor status for purposes of OFCCP jurisdiction.  Directive 293, which was issued as a result of the favorable Agency findings in Braddock and Florida Hospital, expressly stated that, though the Agency reviews jurisdictional basis on a “case by case” basis, OFCCP jurisdiction “cannot be altered, limited of defeated” by contract provisions.  With the rescission of Directive 293 and the pending Braddock litigation, the jurisdictional landscape is increasingly murky.  It remains imperative that employers identify and review the sources of their federal revenue to determine whether they are covered contractors or subcontractors.

Additional developments in OFCCP jurisdiction for the healthcare industry are expected.  If you have any questions about this development or would like assistance with preparing an affirmative action plan, please feel free to contact the Jackson Lewis attorney with whom you regularly work.

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