Labor and Employment

Earlier this year, the U.S. Department of Labor (DOL) announced a series of proposed changes to its federal regulations regarding worker classification.  If implemented, the highly controversial rule would require U.S. employers to potentially re-classify over 5 million workers as “non-exempt”—greatly expanding the number of U.S. employees eligible for overtime compensation.  The DOL received over 250,000 public comments on the proposed changes throughout its open comment period, which ended on September 4, 2015.

Since that time, employers have had three common questions: (1) when would the DOL release its final decision on the proposed changes; (2) what will the final changes (if any) entail; and (3) when will employers have to comply with any final changes.  Recent (yet conflicting) guidance from President Obama’s Administration indicates that the final ruling will not be issued before July 2016, and likely later into the year.

On November 20, 2015, the U.S. Office of Management and Budget (OMB) published its Fall 2015 Unified Agenda and Regulatory Plan

The important thing to know about these dates [in the Unified Agenda] is that they are estimates and rarely accurate.  The agency has no legal obligation to meet that published deadline.  Some rules have been on the regulatory agenda for years and they just change the date with the new agenda comes out.”

Prior to the publication of the Fall Unified Agenda, officials with the DOL, including Solicitor of Labor Patricia Smith, indicated that the final rule would likely be issued sometime in “late 2016.”  DOL officials also stated that any changes would be issued early enough to for the changes to take effect before the President Obama leaves office.

Under either scenario, employers should not have to comply with any of the proposed changes to the FLSA’s overtime exemptions during the 1^st half of 2016.  However, the “late 2016” predictions are important for employers if true, as it suggests that the time between publication of the final rule and its effective date will be short, because the later the final rule is published, the smaller the window of time the department can allow employers to review and adapt before the new regulations become effective.  In fact, it is very likely that employers may only have 30 to 60 days after the final changes are published before they become legally effective.

With a recent decision, the National Labor Relations Board (NLRB) announced broad changes to its “joint employer” standard by creating a new test that is virtually guaranteed to result in more findings of a “joint employer” relationship under the National Labor Relations Act (the Act).  Under this new test, the NLRB considers a company to be a “joint-employer” if it (1) exercises “indirect control” over working conditions, or (2) if it has “reserved authority” to do so. This marks a significant departure from the NLRB’s decades-old “joint-employer” standard that required the actual exercise of control—not just the ability to do so.   Affecting both unionized and non-union companies (and even entities that have no employees of their own) alike, the NLRB’s decision also has the potential for broad implications for other employment laws and government agencies such as the Department of Labor, EEOC and OFCCP.

On August 27, 2015, the NLRB issued a 3-2 ruling, involving Browning-Ferris Industries of California, Inc. (BFI), an owner/operator of a California-based recycling facility.  In its decision, the NLRB ruled that BFI should be considered a “joint employer” with a Leadpoint Business Services, a temporary staffing company that provided short-term labor to BFI’s recycling facility.  At the time, BFI employed approximately 60 employees—most of whom worked outside the recycling facility, moving and preparing materials to be sorted inside the facility.  BFI contracted with Leadpoint to provide over 200+ in-facility workers under a temporary labor services agreement.  In June 2013, the Teamsters Local 350 (the Union) filed a claim with the NLRB on behalf these in-facility employees, claiming that BFI and Leadpoint were actually their “joint-employers.”

Under the former joint-employer standard (utilized by the NLRB since 1984), the NLRB examined “whether alleged joint employers share the ability to control or co-determine essential terms and conditions of employment.” See TLI, Inc., 271 NLRB 798 (1984); Laerco Transp., 269 NLRB 324 (1984). The NLRB provided specific examples of what it considered to be “essential terms and conditions of employment,” including: hiring, firing, discipline, and supervision.  TLI, Inc., 271 NLRB 798.  In later decisions, NLRB emphasized the type of control exercised by alleged joint employers—requiring that the control be “direct and immediate.” See, e.g., Airborne Freight Co., 338 NLRB 597 (2002).

The NLRB’s Browning-Ferris decision overturns this 30 years of precedent.  Under the new test, the NLRB first asks if there is a common-law employment relationship between the employees and the alleged employer in question.  If this common-law employment relationship exists, the NLRB then asks if the alleged joint employer possesses “sufficient control” over the employees’ “essential terms and conditions of employment.”   Importantly, the NLRB stated that from now on, a company possesses “sufficient control” if it has the ability to exercise control over these terms and conditions of employment.  While the actual exercise of “direct and immediate” control is probative, it is no longer essential.

This decision by the NLRB vastly expands the types and number of entities that can be held responsible for unfair labor practice violations and who may be held to have collective bargaining obligations regarding employees of a totally separate, independent employer.  While the NLRB claims it is clarifying its joint-employer standard, in actuality, the NLRB is completely recasting the “joint employer test.”  In the past, the determination was based on a close analysis of the actual relationships between the alleged joint employers.  Going forward, the NLRB will consider what the relationship between the two entitiesmight be expanded to encompass.  Then, based upon that speculation, the NLRB’s decision shoehorns this “possible relationship” into a concrete joint-employer finding.

The NLRB’s Browning-Ferris decision follows on the heels of the July 2014 decision from the NLRB General Counsel stating that McDonald’s is a “joint-employer” of workers at franchised restaurants, along with the individual franchisees.   The NLRB’s expanded concept of a “joint employer” also parallels recent efforts by the U.S. Department of Labor, the U.S. Equal Employment Opportunity Commission and the Office of Federal Contract Compliance Programs—all seeking to hold large companies responsible for legal compliance as to individuals from whose services they benefit—regardless of whether a direct employment relationship exists.

The NLRB’s new theory of joint employment has the potential to have far-reaching and, if so, likely troubling impacts on employers throughout the United States.  In addition to facing joint liability for labor law violations, entities that are deemed to be joint employers under this new standard may face collective bargaining obligations and find themselves enmeshed in labor disputes between direct employers and labor organizations.  Any companies that utilize contingent workers employed by another entity or staffing company, as well as parties to franchise agreements, should consider reviewing their employment practices, contractual arrangements and course of dealing in light of this significant change in the law.

Unfortunately, there is no single or simple solution to the issue.  A company’s “joint employment” status is a factual inquiry that will vary from employer to employer.  Each relationship will need to be considered in light of (as the NLRB puts it) the “industrial realities” to develop the most effective responses.

This Newsletter is a publication of the Labor and Employment Department of the law firm of Brunini, Grantham, Grower & Hewes located in Jackson, Mississippi. This Newsletter is not designed or intended to provide legal or professional advice, as any such advice requires the consideration of the facts of the specific situation.

IRS Circular 230 Notice

To ensure compliance with requirements imposed by the IRS, we inform you that, unless specifically indicated otherwise, any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any tax-related matter addressed herein.

Seeking to capitalize on the political momentum generated by the U.S. Supreme Court’s recent landmark decision legalizing same-sex marriage, Democratic members of Congress recently unveiled a broad piece of proposed legislation which would greatly and expressly expand civil rights’ protections afforded to members of the lesbian, gay, bisexual and transgender community in the United States.

On July 23, 2015, Senator Jeff Merkley (D-Ore.) and Representative David Cicilline (D-R.I.) introduced The Equality Act.  If passed, the Equality Act would extend the 1964 Civil Rights Act’s protections against racial and sex-based discrimination to include–and ban–discrimination on the basis of both sexual orientation and gender identity.  If passed, the Equality Act would prohibit discrimination against LGBT persons in categories ranging from employment to housing to education to jury selection and service.  Additionally, the proposed legislation would broaden areas of illegal discrimination in “public accommodation.” Presently, only 19 states have laws prohibiting discrimination based on an individual’s sexual orientation and/or gender identity.

Since 1994, Democratic members of Congress have sought to pass legislation known as the Employment Non-Discrimination Act (the “ENDA”).  As proposed, the ENDA sought to amend only Title VII of the 1964 Civil Rights Act by expressly enumerating “sexual orientation” and “gender identity” as protected classes under Title VII–thus prohibiting employers from discriminating against LGBT individuals in employment decisions.  Despite several close attempts, Congress has yet to pass the ENDA.  The Equality Act, as written, would accomplish the same goals as the ENDA and beyond.

One key issue of contention during Congressional debate over the ENDA dealt with objections (and potential exceptions) based on religious liberty.  While the Equality Act does preserve exemptions for religious corporations, schools and associations in areas such as hiring, the Equality Act expressly prohibits use of the federal Religious Freedom Restoration Act–and most likely, its state counterparts–to justify discrimination that would otherwise be banned under the Act.  Experts expect this provision to be a key area of division during debate over the Act, as both federal and state religious freedom acts have been relied-upon by business owners and others with sincerely-held religious objections to same-sex marriage in declining to service LGBT customers.

Recently, the U.S. EEOC issued guidance and opinions setting forth its belief that Title VII, as written, provides employment protection for individuals on the basis of sexual orientation.  However, this position has yet to be fully adopted at the judicial level.  If passed, the Equality Act would nullify this debate and present employers with two additional protected characteristics (and practically speaking, 4 new protected classes) for which they must account.

Additionally, the Equality Act would require employers and other businesses to review other aspects of their operations–to its employees, its customers, and to the public at-large–to ensure “public accommodation” compliance for LGBT individuals.  The most common and immediate example cited by industry professionals revolves around employer/company “bathroom policies,” as it involves transgender individuals.

Presently, the Equality Act has over 200 Congressional co-sponsors in both the House and Senate–but none from the Republican side of the aisle.  While remaining optimistic, co-sponsors Sen. Merkley and Rep. Cicilline admit that ultimate passage of the Equality Act will be difficult without some bi-partisan support.

Continuing a whirlwind month for both the federal government and U.S. employers, on July 16, 2015, the U.S. Equal Employment Opportunity Commission (EEOC) ruled that workplace discrimination based on an employee’s “sexual orientation” is already illegal under Title VII of the Civil Rights Act of 1964.  The EEOC’s groundbreaking decision is the agency’s first administrative ruling declaring that employment discrimination against gay, lesbian, and bisexual workers is unlawful.

In a split 3-2 vote, the EEOC concluded that Title VII forbids sexual orientation discrimination on the job, because it’s a form of discrimination based on “sex or gender,” which the Act prohibits.  In a seventeen page opinion (link here), the EEOC argues that when an employer disapproves of a lesbian employee’s orientation, it is really objecting to the fact that a woman is romantically attracted to another woman.  According to the EEOC, such an objection is based on a “stereotyped” view of that employee’s gender role.  The EEOC also presented a secondary theory, arguing that sexual orientation discrimination is “associational discrimination on the basis of sex.”

The EEOC’s analysis in this case is important.  Three years earlier, the agency used a similar “sex stereotyping” analysis in ruling that discrimination based on an employee’s “gender identity” is also sex discrimination under Title VII.  Since that time, many federal courts—including the Fifth Circuit Court of Appeals—has accepted this ruling in extending Title VII protections to transgender employees.

For now, the EEOC’s decision applies only to EEOC claims lodged by federal employees, as sexual orientation protection under Title VII for private employees has been generally rejected by the federal courts.  However, even private employers should keep two important caveats in mind.  First, the EEOC handles the initial investigation of EEOC Charges of Discrimination filed by private employees against private employers.  Following this ruling, all charges of sexual orientation discrimination will be considered illegal at the EEOC level—something that may empower gay and lesbian private employees to lodge discrimination complaints. Second, until the U.S. Supreme Court offers its opinion, it is possible that lower federal courts may choose to accept the EEOC’s reading of Title VII—especially following the EEOC’s recent success with its position on sexual identity.

Employers should carefully review their current employment policies for areas this ruling could potentially impact, such as Employee Handbooks and Company EEO Statements.

This Newsletter is a publication of the Labor and Employment Department of the law firm of Brunini, Grantham, Grower & Hewes located in Jackson, Mississippi. This Newsletter is not designed or intended to provide legal or professional advice, as any such advice requires the consideration of the facts of the specific situation.

IRS Circular 230 Notice

To ensure compliance with requirements imposed by the IRS, we inform you that, unless specifically indicated otherwise, any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any tax-related matter addressed herein.

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While most Mississippians were aware that, beginning July 1, 2015, the State no longer requires motorists to annually renew their vehicle’s inspection stickers, July 1^stalso ushered in a new wave of laws impacting gun rights within the State.  And, as with the passage of the much more publicized “Open Carry Law” in 2013, Mississippi’s businesses and employers must be aware of the potential implications of our state’s newest gun laws.

On April 10, 2015, Governor Phil Bryant signed 2015 Senate Bill 2394—sponsored by Senator Terry Burton (R. Newton)—into law.  Dubbed the “Purse Carry Law” for short, beginning on July 1, 2015, Bill 2394—now codified in Mississippi Code Annotated §45-9-101(24)—creates a broad exception to the State’s existing “concealed carry permit” requirements.  Specifically, the new law states that Mississippi citizens are not required to obtain a concealed weapon license/permit in order to carry a “loaded or unloaded pistol or revolver” in a “purse, handbag, satchel, other similar bag or briefcase or fully enclosed case.”    Prior to the passage of this law, carrying a pistol or revolver in such a “fully enclosed case” qualified as carrying of a concealed weapon, for which Mississippians were required to obtain a license or permit.

The “Purse Carry Law” follows on the heels of the Legislature’s passage of the State’s “Open Carry Law.”  Passed in 2013, the State’s Open Carry Law amended several sections of the Mississippi Code in an effort to provide further “clarification” as to what qualified as a “carrying a concealed weapon” (which requires a license/permit), as opposed to what qualified as “open carrying of a firearm” (which does not require a license/permit).  While proponents of the Open Carry Law argued that the legislation merely “restated the right to bear arms as provided by the Mississippi Constitution,” opponents worried about the effects the Law would bring.  Set to take effect on July 1, 2013, the Open Carry Law was initially blocked from taking effect due to a restraining order issued by Hinds County Circuit Judge Winston Kidd.  Following the receipt of wide-ranging support of the Law—including support from Governor Bryant, about 80 state lawmakers and the National Rifle Association—the Mississippi Supreme Court unanimously overturned Judge Kidd’s restraining order on August 29, 2013, allowing the Law to take effect state-wide.

When combined, the Open Carry Law and Purse Carry Law provides Mississippi citizens with the right to “openly carry” a pistol or revolver, including in a sheath or holster that is only partially visible, and the right to “conceal carry” a pistol or revolver in an enclosed bag, completely concealed from view.  For business owners and employers, these laws mean that Mississippians generallyhave the right to enter your place of business with a weapon in plain view, in partial view and possibly even completely concealed from view—and all without the requirement of a Mississippi license or permit.

For businesses that wish to limit the public’s general right to carry weapons on their premises, Mississippi’s Attorney General’s Office continues to emphasize the posting of a clearly written notice (readable from a distance of at least 10 feet) that the carrying of a pistol or revolver is prohibited on your premises.  Individuals who bring a firearm onto a private business with such a sign clearly posted are subject to prosecution for criminal trespass.  Additionally, employers are encouraged to take additional steps by insuring that their employment policies clearly express any company prohibitions concerning employees bringing firearms (and other weapons) onto company property.

This Newsletter is a publication of the Labor and Employment Department of the law firm of Brunini, Grantham, Grower & Hewes located in Jackson, Mississippi. This Newsletter is not designed or intended to provide legal or professional advice, as any such advice requires the consideration of the facts of the specific situation.

IRS Circular 230 Notice

To ensure compliance with requirements imposed by the IRS, we inform you that, unless specifically indicated otherwise, any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any tax-related matter addressed herein.

On Wednesday, July 15, 2015, the U.S. Department of Labor (DOL) issued new guidance targeting employer misclassification of employees as independent contractors.  Authored by David Weil, the head of the DOL’s Wage and Hour Division, the 15-page guidance (termed an “administrator’s interpretation”) states that, according to the DOL, “most workers” in the United States qualify as “employees” under the Fair Labor Standards Act (FLSA).

As pointed out in the guidance opinion, employees that are improperly labeled as “independent contractors” do not receive certain statutory protections under the FLSA, such as guaranteed minimum wages and overtime pay.  These are in addition to other benefits provided only to “employees” by employers that are not governed by the FLSA—such as health benefits, workers’ compensation protections and unemployment benefits.

Under the FLSA, the key question in determining whether one is an “employee” versus an “independent contractor” rests on the question of economic dependence.  Accordingly, the DOL utilizes the six factor “economic realities” assessment that guide employers—and DOL investigators—in determining if an individual is truly in business for himself/herself (and thus, an independent contractor), as opposed to being “economically dependent” on the employer (and thus, an employee):

1. Is the work an integral part of the employer’s business?
2. Does the worker’s managerial skill affect the worker’s opportunity for profit or loss?
3. How does the worker’s relative investment compare to the employer’s investment?
4. Does the work performed require special skill and initiative?
5. Is the relationship between the worker and the employer permanent or indefinite?
6. What is the nature and degree of the employer’s control?

The new guidance stresses that the six factor assessment should be applied “broadly,” based on the FLSA’s broad scope of employment and work standard.  Supporting its interpretation for broad coverage, the DOL specifically stressed that Congress previously rejected a more narrow “common-law control” test when drafting the FLSA.  Additionally, the DOL opined that the factors shouldn’t be “analyzed mechanically or in a vacuum” and no one factor should get too much weight.

“Whether a worker is an employee under the [FLSA] is a legal question determined by the economic realities of the working relationship between the employer and the worker, not by job title or any agreement that the parties may make,” Weil said Wednesday in a blog post. According to Weil, the DOL “supports the use of legitimate independent contractors— who play an important role in our economy—but when employers deliberately misclassify employees in an attempt to cut costs, everyone loses.”

The new administrator’s interpretation comes two weeks after the DOL unveiled a proposed rule  that would broaden federal overtime pay regulations to cover nearly millions of additional workers, resulting in more than double the minimum salary threshold required to qualify for a “white collar” exemption under the FLSA.  The proposed rule and new administrator’s interpretation likely signal the DOL’s intent to ramp-up its FLSA audit and enforcement for employers beginning in 2016.

This Newsletter is a publication of the Labor and Employment Department of the law firm of Brunini, Grantham, Grower & Hewes located in Jackson, Mississippi. This Newsletter is not designed or intended to provide legal or professional advice, as any such advice requires the consideration of the facts of the specific situation.

IRS Circular 230 Notice

To ensure compliance with requirements imposed by the IRS, we inform you that, unless specifically indicated otherwise, any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any tax-related matter addressed herein.

UPDATE:  The Department of Labor has established a deadline of Friday, September 4, 2015 for individuals/entities to submit comments on this Proposed Rule.  We do not anticipate the DOL to extend the comment period beyond this date.  If you want to offer your comment, follow the link in the article below, or go to:http://www.regulations.gov/#!documentDetail;D=WHD-2015-0001-0001

Original Newsletter sent June 30, 2015:

On Tuesday, the United States Department of Labor (the DOL) released its newest Proposed Rule that, if implemented, would broaden federal overtime pay regulations to cover 5 million additional workers who are currently exempt from overtime eligibility.  Under the Proposed Rule, the DOL seeks to update the regulations governing which executive, administrative, and professional employees (the so-called “white collar” workers) are entitled to minimum wage and overtime pay protections under the Fair Labor Standards Act (the FLSA).

The FLSA requires employers to pay its “non-exempt employees” overtime (1 ½ the workers’ “regular rate of pay”) for all hours worked in excess of forty (40) per week.  29 U.S.C. § 207.  The DOL’s regulations implementing the FLSA sets forth a variety of employment classifications that are “exempt” from the FLSA’s overtime requirement—including employees performing executive, administrative, and/or professional job duties.  Since the 1940’s, in order for an employee to qualify as an exempt “white collar” employee, he/she had to meet three “tests”:  (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed; (2) the amount of salary paid must meet a minimum specified amount; and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties (as defined by the regulations).  The DOL last updated these regulations in 2004, setting the current minimum salary threshold at $455 per week (or $23,660 per year).

With its proposed rule, the DOL seeks to update the salary level required for exemption and to identify ways to “simplify” the identification of nonexempt employees.  The key provisions of the Proposed Rule include raising the minimum salary level for exempt employees to $921 per week (or $47,892 annually); and increasing the total annual compensation requirement needed to exempt “highly compensated employees” to $122,148 annually (currently set at $100,000 annually).  In addition, the DOL proposes the establishment of a mechanism to automatically update these salary thresholds going forward in the future, in an effort to keep the thresholds from “becoming outdated” as time passes between rulemakings.

While the DOL also targets the specific duties needed to qualify for an exempt “white collar” employee, the DOL’s Proposed Rule stops short of including actual proposed changes to the duties tests applicable to the white collar exemptions.  Instead, the DOL said it was considering whether changes to those tests were needed and requested comments on the current requirements.

If the Proposed Rule is adopted, the DOL estimates that over 5 million workers who are currently classified as “salaried exempt”—and thus, not eligible for overtime—will become eligible for overtime pay.  Other observers feel the number could rise as high as 10 million.  If implemented, the Proposed Rules will undoubtedly result in greater expense or operational change for many employers as they struggle to deal with a shrinking pool of workers who are eligible for an exemption from the overtime pay.

The Proposed Rule is still subject to a lengthy comment period before implementation.  The DOL encourages interested parties to submit comments on the Proposed Rule via its dedicated website:http://www.dol.gov/whd/overtime/NPRM2015/.

Though the Proposed Rule has not yet been finalized, employers are encouraged to be proactive and engage their legal counsel to begin planning for the change now.  Preparations should include auditing current practices and projecting the cost of change and FLSA compliance under the anticipated new framework. This includes evaluating the possibility and effects of significantly higher operating costs.

This Newsletter is a publication of the Labor and Employment Department of the law firm of Brunini, Grantham, Grower & Hewes located in Jackson, Mississippi. This Newsletter is not designed or intended to provide legal or professional advice, as any such advice requires the consideration of the facts of the specific situation.

IRS Circular 230 Notice

To ensure compliance with requirements imposed by the IRS, we inform you that, unless specifically indicated otherwise, any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any tax-related matter addressed herein.

If you have missed our previous newsletters, please click here.

U.S. Equal Employment Opportunity Commission (EEOC) Chair Jenny Yang announced the agency’s intention in 2015 to propose new regulations addressing the interplay between corporate wellness programs and federal anti-discrimination statutes.  The EEOC raised eyebrows recently by launching its first-ever series of lawsuits under the Americans with Disabilities Act (ADA) directly challenging wellness programs.  Many critics complained the agency engaged in litigation against employers without giving them needed clarity on how not to run afoul of the ADA, as well as the Genetic Information Nondiscrimination Act (GINA).  The interplay between corporate wellness programs and the Affordable Care Act only heightens the need for additional clarity from the EEOC.  “That is an area that we think is very important for us, as a commission, to provide guidance on — how the Affordable Care Act interacts with the ADA and other laws such as GINA,” said Yang.

The EEOC’s fall 2014 regulatory agenda lists two rules—to amend regulations under the ADA and GINA respectively—for which notices of proposed rulemaking are slated for February.  The ADA-related rule aims to tackle “financial inducements and/or penalties” under health plan wellness programs, as well as other aspects of wellness programs, and their interaction with the ADA.  The other rule seeks to address inducements to workers’ spouses or other family members who answer questions about current or past medical conditions. The EEOC said voluntary wellness programs are permissible, but they must be genuinely voluntary.

While offering clarity remains the goal, the EEOC stops short of guaranteeing that the notices of proposed rulemaking will actually issue in February 2015.   “The [February 2015] date is somewhat of a target; it’s not a fixed date,” said Yang. “I wish I could give you a more certain prediction, but I can say that it’s something we’re going to be focusing on.”

On December 3, 2014, the United States Department of Labor’s Office of Federal Contract Compliance Program (“OFCCP”) announced a final rule implementing President Obama’s Executive Order 13672 (“EO 13672”) which prohibits discrimination on the bases of sexual orientation and gender identity in the federal contracting workforce. EO 13672 does not directly impact employment considerations outside the federal contracting context. The OFCCP also updated its “Frequently Asked Questions” document concerning the changes implemented, as well as addressing employer exemptions under the new rule. The rule goes into effect 120 days after its publication in the Federal Register and applies to federal contracts entered into or modified on or after that date.

The OFCCP designed the new rule to address problems associated with employment discrimination on the basis of sexual orientation and gender identity and to ensure a fair and inclusive work environment in the context of Federal contractors. The OFCCP noted that contractor employees who face discrimination on the basis of sexual orientation or gender identity on the job may experience lower self-esteem, greater anxiety and conflict, less job satisfaction, receive less pay and have less opportunity for advancement. The OFCCP designed the new rule to address these issues.

The new rule implements EO 13672, by amending certain sections within Title 41 of the Code of Federal Regulations. The new rule requires contractors to incorporate new language into the equal opportunity clauses currently used in covered subcontracts and purchase orders. Additionally, the new rule requires contractors to notify job applicants and employees of their non-discrimination policy by posting specific notices, provided by OFCCP, in conspicuous places.

When soliciting for employees, the new rule requires federal contractors to expressly state that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex, “sexual orientation, gender identity,” or national origin. Contractors must also ensure that facilities provided for employees are not segregated by any of the covered basis which now includes sexual orientation and gender identity.

Although designed to safeguard against sexual orientation and gender identity discrimination, this rule does not require contractors to set goals for employing persons on the basis of sexual orientation or gender identify, collect and maintain statistics on applicants or employee on the basis of sexual orientation or gender identity, or conduct statistical analysis of applicants or employees on the basis of sexual orientation or gender identity.

Most importantly, the new rule makes no changes to the existing religious exemption allowing religiously affiliated contractors (religious corporations, associations, educational institutions, or societies) to favor individuals of a particular religion when making certain employment decisions.

Until its publication in the Federal Register, non-exempt employers should prepare for the new rule and its changes by updating its current contracts and purchase orders to include the necessary language; update job applications and job postings to comply with the new rule; and watch for the notice posting issued by OFCCP to publish in the workplace.