As we previously noted, federal contractors have been besieged in recent months with regulatory changes and enforcement initiatives advanced by the Office of Federal Contract Compliance Programs (“OFCCP”) and various divisions within the Department of Labor (“DOL”). The holiday season has not offered any relief, as the DOL recently announced its final rule implementing Executive Order (“EO”) 13672 on December 3, 2014.

EO 13672, signed by President Obama on July 21, 2014, required the DOL to update the rules that implemented EO 11246, which previously prohibited discrimination by federal contractors and subcontractors on the basis of race, color, religion, sex, and national origin. EO 13672 called for the DOL to add gender identity and sexual orientation to the classes that EO 11246 protects. President Obama’s directive is the first federal action aimed at ensuring LGBT workplace equality in the private sector. The final rule will take effect 120 days from the date of its publication in the Federal Register, which is on or about the first week of March 2015.

The final rule applies to federal contractors holding contracts entered into or modified on or after the date the rule takes effect. In addition to updating the existing rules to include gender identity and sexual orientation, the final rule also updates the Equal Opportunity Clause included in federal contracts. That clause now states that the contractor considers all applicants for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability, or age. Federal contractors and subcontractors must also include similar statements in their job solicitations and required notices posted conspicuously at work sites.

Importantly, the final rule generally does not:

• Change provisions of earlier rules and regulations governing contractors’ reporting and information collection obligations;
• Require contractors to set placement goals on the basis of sexual orientation or gender identity;
• Require contractors to collect and analyze any data on these classes of workers or applicants;
• Change the exemption available to religious organizations, or otherwise affect religiously affiliated contractors’ ability to favor individuals of a particular religion when making employment decisions.

While it does not require contractors to collect data on the sexual orientation or gender identity of applicants or employees, the final rule also does not prohibit contractors from doing so. Nevertheless, contractors should proceed with caution when determining whether to solicit this information because doing so may be prohibited by state or local law.

The DOL has deemed the OFCCP’s directive titled “Gender Identity and Sex Discrimination,” and the EEOC’s decision in Macy v. Holder consistent with its final rule. The OFCCP’s directive clarified that sex discrimination includes discrimination on the bases of gender identity and transgender status. This position was echoed by the Holder decision in which the EEOC stated that Title VII’s ban on sex discrimination prohibits discrimination on the basis of both biological sex and gender. The EEOC further stated that “gender” encompasses both a person’s biological sex, and the cultural and social aspects associated with masculinity and femininity. Therefore, discrimination against an individual because they are transgendered is sex discrimination from the EEOC’s perspective.

Contractors and subcontractors that fail to comply with the final rule risk losing valuable contracts with the federal government. For questions regarding implementation of compliance measures to comport with the final rule, readers should consult their employment counsel.

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