Health Care Case Makes Clear That Specific Contractual Language Is Not Necessary for OFCCP Jurisdiction

Three Pittsburgh hospitals have been found to be federal subcontractors subject to the jurisdiction of the Office of Federal Contract Compliance Programs (OFCCP) because of the medical services they provide to a Health Maintenance Organization (HMO) that is a federal contractor. According to the U. S. District Court for the District of Columbia, the hospitals are subject to the affirmative action obligations of federal subcontractors even though the contract they signed specifically excluded medical service providers as “subcontractors.” UPMC v. Harris, No. 09-01210 (D.D.C. March 30, 2013).

This case raises two important points for health care employers and others:

1)      A contract to provide “medical services” to an HMO could result in a health care provider’s obligations to comply with federal affirmative action regulations. In the hospital case, the court found that the HMO was a “medical service provider” whose contracts with hospitals to provide medical care were “necessary” to the HMO’s federal contract with the Office of Personnel and Management (OPM). Hospitals and other health care providers should take note: not only can OFCCP assert jurisdiction in the case of direct federal contracts with an executive agency, such the Veterans Administration or the Bureau of Prisons, but also in the case of subcontracts with federal agencies deemed necessary to the federal contract, as in the case of the Pittsburgh hospitals’ contracts with the HMO which held a federal contract with OPM.

2)      As this case illustrates, an employer can be held responsible for compliance with  affirmative action obligations even though contractual documents disclaim such responsibility or are silent on the issue. According to the judge in the UPMC case, any contractual provision that violates or conflicts with federal law is invalid. Thus, it did not matter that the hospitals’ contracts with the HMO contained a provision that excluded them from being considered federal subcontractors. Moreover, it would not have mattered if the HMO contracts had been completely silent on the affirmative action compliance issue. Consent to be bound by the regulations and laws is not necessary; the affirmative action obligations are part of a government contract and necessary subcontract even if the contract does not specifically state that they are.

Leigh M. Nason is a shareholder in the Columbia office of Ogletree Deakins, and chairs the firm’s Affirmative Action and OFCCP Compliance Practice Group.