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Ruling on Government Contractors and TRICARE Leaves Unanswered Questions

  • October 26, 2012

The Office of Federal Contract Compliance Programs does not have jurisdiction over a Florida hospital providing medical services on behalf of a federal contractor servicing Department of Defense TRICARE beneficiaries, the Department of Labor’s Administrative Review Board (ARB) has decided.  OFCCP v. Florida Hospital of Orlando, ARB No. 11-011, ALJ No. 2009-OFC-002 (ARB Oct. 19, 2012).  While the plurality decision is noteworthy, it does not resolve the issue of jurisdiction for the healthcare industry at large.

The ARB decision resolves litigation initiated in 2008 by OFCCP when Florida Hospital, asserting it was not a covered federal subcontractor subject to OFCCP jurisdiction, refused to submit to a compliance review by the Agency.  The ARB decision confirmed the Hospital’s position based on recent legislative developments. 

On December 31, 2011, President Obama signed The National Defense Authorization Act for Fiscal Year 2012.  Among other provisions, the NDAA exempted from OFCCP jurisdiction medical providers who participated in the Department of Defense (DoD) TRICARE program.  It was intended to overturn the earlier Administrative Law Judge decision that Florida Hospital was in fact subject to OFCCP Jurisdiction.

On April 25, 2012, OFCCP announced that it rescinded its Directive 293, which set forth the agency’s jurisdiction over employers in the healthcare industry, including TRICARE participating companies.  OFCCP cited passage of the NDAA as well as the pending appeal in the Florida Hospital case as reasons for the withdrawal of the directive.  (For more information, see our article, OFCCP Rescinds Directive 293, Creates Further Jurisdictional Uncertainty over Healthcare Providers.)

Now, the ARB found in OFCCP v. Florida Hospital of Orlando that the NDAA’s narrowly tailored exception for TRICARE contracts requiring the establishment and management of a network of providers in fact applied to Florida Hospital.

Only a discrete portion of the healthcare industry falls within the purview of the NDAA and the divided decision in OFCCP v. Florida Hospital of Orlando.  The majority of medical providers must remain vigilant and review their sources of federal revenue to ascertain whether they are a covered contractor or subcontractor for purposes of OFCCP jurisdiction.

OFCCP’s jurisdiction over the healthcare industry is determined on a case-by-case basis.  It is critical, therefore, that employers in the industry understand the arguments for (and the limited arguments against) Agency jurisdiction.

If you have questions about this development or would like assistance assessing OFCCP jurisdiction, please feel free to contact the Jackson Lewis attorney with whom you regularly work.

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