May 12, 2014

OFCCP Establishes Five-Year Moratorium for TRICARE Providers

Effective May 7, 2014, the Department of Labor’s (“DOL”) Office of Federal Contract Compliance Programs (“OFCCP”) established a five-year moratorium on enforcement of the affirmative obligations required of TRICARE subcontractors pursuant to Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, that require federal contractors and subcontractors to take certain affirmative steps to ensure that there is equal employment opportunity in their employment processes.  To the extent that there are any open compliance evaluations of TRICARE subcontractors, the OFCCP will administratively close those cases within 30 business days of the effective date.   Instead, the OFCCP will “engage in outreach and technical assistance to provide greater clarity for the TRICARE subcontractor community” regarding their affirmative obligations under federal law. 

This moratorium is in the wake of a continuing battle between the OFCCP and Congress regarding the OFCCP’s jurisdiction over TRICARE.  The issues first came to a head in 2010 when an administrative law judge held that Florida Hospital in Orlando was a federal subcontractor subject to the OFCCP’s jurisdiction due to its participation in a health care provider network administered for TRICARE.  Since then, Congress attempted to limit the OFCCP’s jurisdiction over TRICARE providers by implementing Section 715 of the National Defense Authorization Act (“NDAA”) of 2012, that states that health care providers operating as part of the TRICARE-managed network of providers will not be considered federal contractors or subcontractors.  Specifically, Section 715 provides:

[F]or the purpose of determining whether network providers under such provider network agreements are subcontractors for purposes of the Federal Acquisition Regulation or any other law, a TRICARE managed care support contract that includes the requirement to establish, manage, or maintain a network of providers may not be considered to be a contract for the performance of health care services or supplies on the basis of such requirement.

OFCCP regulations define a subcontract as:

[A]ny agreement or arrangement between a contractor and any person (in which the parties do not stand in the relationship of an employer and an employee):

  1. For the purchase, sale or use of personal property or nonpersonal services which, in whole or in part, is necessary to the performance of any one or more contracts; or

  2. Under which any portion of the contractor’s obligation under any one or more contracts is performed, undertaken, or assumed.

In light of the NDAA, the OFCCP switched gears and argued that the NDAA rendered only the second prong of the definition of “subcontract” ineffective for TRICARE providers, leaving the first prong intact and operative.  However, on March 28, 2014, the OFCCP withdrew its jurisdictional complaint against Florida Hospital in Orlando after reaching an agreement with Congress to establish the five-year moratorium.

For the moment, health care providers participating in TRICARE can breathe a sigh of relief.  However, it is apparent that the OFCCP is maintaining its position that there are certain circumstances where health care providers offering care to participants in federally funded health benefit programs, including Medicare, TRICARE, and the Federal Employees Health Benefits Program, will be considered subcontractors by the OFCCP.  If you have any questions regarding the moratorium or whether your business qualifies as a federal subcontractor, please do not hesitate to contact your Labor and Employment Counsel at Smith, Gambrell & Russell, LLP


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