Surety Bond Quarterly - Fall 2016 - 21


compensation to disadvantaged
applicants and employees.
A further area of complication
is how these requirements apply
not only to federal prime contractors, but also to other contractors further downstream. The
non-discrimination requirements
protecting women and minorities
apply not only to federal prime
contracts, but also to federally
assisted construction contracts
administered by state and local
governments. Of greater concern,
however, is OFCCP's aggressive
enforcement of these requirements
against "subcontractors," which
are broadly defined to include virtually any entity providing goods
or services necessary to the completion of a federal government
contract. Not only are traditional
subcontractors performing work
on a job site included in the definition, but also support businesses-
such as material suppliers, staffing
agencies, and possibly even surety
bond producers-can qualify as
well if their goods or services are
"necessary" to the contract.

B

Compliance failures
are costly and unpredictable
The broad definition of "subcontractor" gives the government's
equal employment opportunity
requirements a long reach, catching unsuspecting businesses
unaware even when they lack any
direct ties to the government. In
recent years, OFCCP has become
increasingly aggressive in attempting to expand this already broad
scope. Two recent examples highlight the risk contractors face of
being caught in OFCCP's crosshairs, and the consequences of
non-compliance.
In March 2013, three hospitals
affiliated with the University
of Pittsburgh Medical Center
were deemed "subcontractors"
by a federal district court in

Washington, DC, after an investigation by OFCCP resulted in an
order for the hospitals to comply
with government equal employment opportunity policies. None
of the hospitals held contracts
directly with the federal government; instead, the hospitals provided medical services to patients
participating in a health maintenance organization (HMO) that
contracted with a federal agency
to provide healthcare coverage to
the agency's employees. Because
the HMO policy called for providing these services, the court reasoned, the role of the hospitals
was "necessary" to the contract,
rendering them "subcontractors"
subject to the regulations.
A more recent case demonstrates the potential costs of noncompliance. In May 2016, Gordon
Food Service, Inc. paid a total of
$1.85 million in damages to disadvantaged female applicants over
allegations of discriminatory hiring, in addition to hiring 37 previously rejected applicants. As part
of a compliance review, OFCCP
had determined that a strength
test employed by Gordon for warehouse laborer jobs discriminated
against women. Nine years earlier,
the company had been the subject
of a settlement over similar allegations in which it paid out approximately $450,000 in damages.
The broad reach and serious
consequences of OFCCP reviews
shown by these recent cases demonstrate the need for construction contractors to re-evaluate
their employment practices and
to ensure that these practices
are consistent with the OFCCP
guidelines.

requirements is only increasing in
today's environment. Construction
contractors not already emphasizing equal employment opportunity as an element of their
compliance procedures run the
risk of costly audits and crippling
financial penalties and would be
well advised to re-evaluate their
existing practices before it is too
late. Such re-evaluations should
occur with an eye towards the following elements:
* Ensuring a genuine business justification for all hiring criteria to
avoid disparate impacts;
* Information collection procedures to track the contractor's
hiring;
* Community outreach to encourage members of protected
classes to apply and work with
contractors; and
* Updating policies and guidelines to make modifications as
needed.
With these measures, construction contractors can reduce their
compliance risk in connection with
federal equal employment opportunity requirements.
●

Conclusions for sureties
and their contractors
As seen above, the importance of compliance with federal
equal employment opportunity

The last article in this series will
address "implied" false certifications under the False Claims Act
and the impact of a recent Supreme
Court decision.

C

W. Barron A. Avery is chair of the
Government Contracts practice at Baker
& Hostetler, LLP. He specializes in federal
government contract law. He also serves
on the NASBP Attorney Advisory Council.
Avery can be reached at 202.861.1705
or wavery@bakerlaw.com. William B.
O'Reilly is an associate with Baker &
Hostetler's Government Contracts practice. O'Reilly is practicing in Washington,
D.C. under the supervision of Avery pursuant to Rule 49(c)(8) of the Rules of the
District of Columbia Court of Appeals.
O'Reilly can be reached at 202.861.1745
or woreilly@bakerlaw.com.

NATIONAL ASSOCIATION OF SURETY BOND PRODUCERS | WWW.NASBP.ORG

21


http://WWW.NASBP.ORG

Table of Contents for the Digital Edition of Surety Bond Quarterly - Fall 2016

NASBP Upcoming Meetings & Events
2016-2017 Executive Committee
From the CEO: Success Comes with Sharing Perspective and Knowledge
Practical Insights: A Contractor’s Risk Management Portfolio Should Include a Commercial Crime Policy
Rethinking the Change Order Process: NECA Foundation’s Guidelines Offer New Approach, Substantially Reducing Change Order Costs
Six Considerations in Underwriting Subdivision Bonds (Part 2 of 2)
Affirmative Action and the Office of Federal Contract Compliance Programs: What Surety Professionals and Their Contractors Should Know
Surety Data Standards: What are They, and Why Should Surety Professionals Care about Them?
2016 NASBP Resource Directory
Index to Advertisers
Surety Bond Quarterly - Fall 2016 - cover1
Surety Bond Quarterly - Fall 2016 - cover2
Surety Bond Quarterly - Fall 2016 - 3
Surety Bond Quarterly - Fall 2016 - 4
Surety Bond Quarterly - Fall 2016 - 5
Surety Bond Quarterly - Fall 2016 - 6
Surety Bond Quarterly - Fall 2016 - 2016-2017 Executive Committee
Surety Bond Quarterly - Fall 2016 - From the CEO: Success Comes with Sharing Perspective and Knowledge
Surety Bond Quarterly - Fall 2016 - 9
Surety Bond Quarterly - Fall 2016 - Practical Insights: A Contractor’s Risk Management Portfolio Should Include a Commercial Crime Policy
Surety Bond Quarterly - Fall 2016 - 11
Surety Bond Quarterly - Fall 2016 - 12
Surety Bond Quarterly - Fall 2016 - 13
Surety Bond Quarterly - Fall 2016 - Rethinking the Change Order Process: NECA Foundation’s Guidelines Offer New Approach, Substantially Reducing Change Order Costs
Surety Bond Quarterly - Fall 2016 - 15
Surety Bond Quarterly - Fall 2016 - 16
Surety Bond Quarterly - Fall 2016 - Six Considerations in Underwriting Subdivision Bonds (Part 2 of 2)
Surety Bond Quarterly - Fall 2016 - 18
Surety Bond Quarterly - Fall 2016 - 19
Surety Bond Quarterly - Fall 2016 - Affirmative Action and the Office of Federal Contract Compliance Programs: What Surety Professionals and Their Contractors Should Know
Surety Bond Quarterly - Fall 2016 - 21
Surety Bond Quarterly - Fall 2016 - 22
Surety Bond Quarterly - Fall 2016 - 23
Surety Bond Quarterly - Fall 2016 - Surety Data Standards: What are They, and Why Should Surety Professionals Care about Them?
Surety Bond Quarterly - Fall 2016 - 25
Surety Bond Quarterly - Fall 2016 - 26
Surety Bond Quarterly - Fall 2016 - 2016 NASBP Resource Directory
Surety Bond Quarterly - Fall 2016 - 28
Surety Bond Quarterly - Fall 2016 - 29
Surety Bond Quarterly - Fall 2016 - 30
Surety Bond Quarterly - Fall 2016 - 31
Surety Bond Quarterly - Fall 2016 - 32
Surety Bond Quarterly - Fall 2016 - 33
Surety Bond Quarterly - Fall 2016 - 34
Surety Bond Quarterly - Fall 2016 - 35
Surety Bond Quarterly - Fall 2016 - 36
Surety Bond Quarterly - Fall 2016 - 37
Surety Bond Quarterly - Fall 2016 - 38
Surety Bond Quarterly - Fall 2016 - 39
Surety Bond Quarterly - Fall 2016 - 40
Surety Bond Quarterly - Fall 2016 - 41
Surety Bond Quarterly - Fall 2016 - Index to Advertisers
Surety Bond Quarterly - Fall 2016 - cover3
Surety Bond Quarterly - Fall 2016 - cover4
Surety Bond Quarterly - Fall 2016 - outsert1
Surety Bond Quarterly - Fall 2016 - outsert2
Surety Bond Quarterly - Fall 2016 - outsert3
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