Disparate Impact & Disability and Protected Veteran Status: What Contractors Need to Know

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Ever since the OFCCP issued its Final Rules implementing Section 503 of the Rehabilitation Act and the Vietnam Era Veterans’ Readjustment Assistance Act in September 2013, federal contractors have been concerned that the OFCCP will use the newly required collection of disability and protected veteran status from applicants as a tool to allege disparate impact on the basis of such protected status. This article will address the potential for such claims by the OFCCP under the Rehabilitation Act and VEVRAA.



What the OFCCP says



The new regulations require contractors to solicit disability and protected veteran status from applicants, just as we have been doing for race and gender under the Executive Order 11246 regulations. Of course, it is this very race and gender information that the OFCCP uses to advance disparate impact claims against contractors. Generally, under the Uniform Guidelines on Employee Selection Procedures, if the differences in selection rates between races or genders is statistically significant, then the OFCCP will allege that the contractor utilizes a selection process that has a discriminatory impact. Therefore, it is not surprising that contractors have expressed concern over the OFCCP’s ability to conduct analyses of the selection rates of disabled applicants and non-disabled applicants and protected veteran applicants and non-protected veteran applicants.



In the preambles to the Final Rules, the OFCCP anticipated and addressed this very concern: “OFCCP Compliance Officers will not be using the applicant and hiring data to conduct underutilization or impact ratio analyses, as is the case under Executive Order 11246, and enforcement actions will not be brought solely on the basis of statistical disparities between individuals with, and without, disabilities [and veterans and non-veterans] in this data.” 78 Fed. Reg. 58702, 58637 (emphasis added). (I have always interpreted this sentence to be internally inconsistent – if the OFCCP is not conducting impact ratio analyses at all, as the first phrase states, then how could it bring any enforcement action based on statistical disparities, not just based “solely” on such disparities, as the second phrase states?)



In addition, representatives from the OFCCP have stated in the compliance webinars that the agency will not conduct impact ratio analyses of contractors’ data on applicants with a disability or protected veteran applicants.



Is that all we need to know? Should we just sit back and relax now with that warm and fuzzy feeling (or is that a knot in the pit of our stomachs)?



What the law says



Section 503 of the Rehabilitation Act



Section 503 explicitly provides that, to determine whether a violation has occurred, the Americans with Disabilities Act standards shall apply. 29 U.S.C. § 793(d). Both the ADA and the regulations implementing Section 503 provide that it is unlawful to use a selection criteria that screens out or tends to screen out an individual with a disability or a class of individuals with disabilities unless the standard is shown to be job-related for the position and consistent with business necessity. 42 U.S.C. § 12112(b)(6); 41 C.F.R. § 60-741.21(a)(7)(i). This means that employers cannot have a facially neutral policy or practice that has the effect of treating the protected group more harshly. It is this language that provides the basis for a disparate impact claim on the basis of disability, and the United States Supreme Court has made clear that disparate impact claims are cognizable under the ADA. Raytheon Co. v. Hernandez, 540 U.S. 44, 53 (2003). Thus, there really can be no dispute that Section 503 provides the basis for a disparate impact claim.



VEVRAA



What is interesting about VEVRAA is the lack of any reference to discrimination – either disparate treatment or disparate impact – in the statute itself. The statute simply provides that covered contractors must “take affirmative action to employ and advance in employment qualified covered veterans.” 38 U.S.C. § 4212. In the implementing regulations, the OFCCP has expanded this statutory requirement of affirmative action to include non-discrimination. 41 C.F.R. § 60-300.21. Whether this regulatory expansion is a valid exercise of agency discretion is a question for the courts to decide, should a contractor choose to challenge it. I would argue, however, that Congress is very adept at using the word “discrimination” when it intends to do so, and its failure to include a non-discrimination provision in VEVRAA is striking and must have been intentional. Therefore, should the OFCCP bring a discrimination case of any type under VEVRAA, the responding contractor would be well-advised to argue that the OFCCP’s regulation is invalid.



Similar to the Section 503 regulations, the OFCCP included a “disparate impact” regulatory provision under VEVRAA: it is unlawful for a contractor to use selection criteria that are not job-related and consistent with business necessity and that screen out or tend to screen out individuals on the basis of their status as a protected veteran. 41 C.F.R. § 300.21(g). Because this is the language that provides for the theory of disparate impact liability under the ADA and Section 503, it is clear that it intends to provide for such liability under VEVRAA as well. Thus, assuming the OFCCP can clear the “but-the-statute-does-not-prohibit-discrimination” hurdle, the agency is well positioned to pursue a disparate impact claim under VEVRAA.



UGESP



As the OFCCP representatives have been quick to point out when the question about disparate impact claims has been raised, the OFCCP regulations provide that the Uniform Guidelines on Employee Selection Procedures do not apply to Section 503 or VEVRAA. 41 C.F.R. §§ 60-300(g)(2); 60-741.21(a)(7)(iii). What is the significance of this? I don’t think it is of great significance at all. By its very terms, UGESP only applies to employment practices that have a discriminatory impact on the basis of “race, sex, or ethnic group.” 41 C.F.R. 60-3.3(A). Therefore, it could not apply to claims alleging discrimination on the basis of disability or protected veteran status. After all, the ADA regulations also say that UGESP does not apply, and it has not had any effect on the ability to pursue disparate impact claims under the ADA. Employees and applicants have been advancing disparate impact claims under the ADA for years, and the Supreme Court has recognized that the ADA provides for liability when such a claim is proven. The UGESP is not necessary for the institution or success of such claims.



What contractors should consider



We would all like to believe that the OFCCP has no intention to analyze contractors’ applicant data in an effort to find disparate impact against applicants with a disability or protected veteran applicants. Any maybe it doesn’t . . . for now . . . during this administration. But, as we have repeatedly seen, enforcement initiatives, strategies, and priorities change from administration to administration. Unless the law prohibits the OFCCP from conducting such analyses, which it does not, then the agency’s current stance could change as the wind blows.



Although the OFCCP stated in the preamble to the regulations that compliance officers would not be conducting impact ratio analyses, it certainly left itself enough wiggle room for initiating an enforcement action on this basis if it chooses to do so. And don’t forget that the preamble is not “the law.” The statutes and regulations provide what the law is; any other material issued by the OFCCP is generally for interpretive use and guidance only.



Perhaps even more significant is the potential for EEOC or private lawsuits against contractors alleging disparate impact disability discrimination. (There is no private cause of action for individuals under VEVRAA; only the OFCCP can initiate an action under that statute). Now that contractors will be required to collect, gather, and maintain data on the disability and protected veteran status of their applicants for three years, there will be a treasure trove of data to mine. Not only is this data available to the OFCCP during a compliance review, but it could be requested by the EEOC and/or a private plaintiff during the prosecution of a lawsuit or investigation of a charge of disability discrimination. Thus, the new regulations may both increase the number of ADA disparate impact claims against contractors and facilitate the compilation of evidence to support those claims.



In light of all this, to help prevent claims of disparate impact – by the OFCCP or otherwise – as well as to find and eliminate potential problem areas before such claims occur, contractors should consider performing adverse impact analyses (under the protection of the attorney-client privilege) on applicants and hires with and without a disability and protected veterans and non-protected veterans. Even if not done on an annual basis, I would certainly recommend that such analyses be performed prior to submitting data to the OFCCP during a compliance review (or to the EEOC or plaintiff during a charge or lawsuit).



Cara would like to thank and recognize Tamara Jones, an attorney in Constangy’s Dallas, Texas office, for her assistance with the legal research for this article.