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Associated Builders & Contrs., Inc. v. Shiu

United States District Court, D. Columbia.

March 21, 2014

ASSOCIATED BUILDERS & CONTRACTORS, INC., Plaintiff,
v.
PATRICIA A. SHIU, et al., Defendants

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For ASSOCIATED BUILDERS AND CONTRACTORS, INC., Plaintiff: Maurice Baskin, LITTLER MENDELSON, P.C., Washington, DC.

For PATRICIA A. SHIU, THOMAS E. PEREZ, UNITED STATES DEPARTMENT OF LABOR, Defendants: Daniel Riess, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Washington, DC.

For JUDGE DAVID L. BAZELON CENTER FOR MENTAL HEALTH LAW, EPILEPSY FOUNDATION, Movants: Daniel F Goldstein, LEAD ATTORNEY, PRO HAC VICE, Laura Ginsberg Abelson, BROWN, GOLDSTEIN & LEVY, L.L.P., Baltimore, MD.

For AMERICAN ASSOCIATION OF PEOPLE WITH DISABILITIES, Amicus: Daniel F Goldstein, LEAD ATTORNEY, PRO HAC VICE, Laura Ginsberg Abelson, BROWN, GOLDSTEIN & LEVY, L.L.P., Baltimore, MD.

For HR POLICY ASSOCIATION, Amicus: David S. Fortney, LEAD ATTORNEY, FORTNEY & SCOTT, Washington, DC.

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MEMORANDUM OPINION

Emmet G. Sullivan, United States District Judge.

Plaintiff, the Associated Builders and Contractors, brings this lawsuit to challenge a final rule promulgated by the Department of Labor's Office of Federal Contract Compliance Programs (" OFCCP" ). See Affirmative Action and Nondiscrimination Obligations of Contractors and Subcontractors Regarding Individuals with Disabilities (" Final Rule" ), 78 Fed. Reg. 58,682 (Sept. 24, 2013). The Rule, which goes into effect on March 24, 2014, implements Section 503 of the Rehabilitation Act, which requires that government contractors " take affirmative action to employ and advance in employment qualified individuals with disabilities." 29 U.S.C. § 793(a). Plaintiff asks the Court to enjoin portions of the Rule that it alleges: (1) are contrary to Section 503; (2) are arbitrary and capricious in violation of 5 U.S.C. § 706; and (3) violate the Regulatory Flexibility Act, 5 U.S.C. § 601, et seq. Pending before the Court are the parties' cross motions for summary judgment. Upon consideration of the motions, the responses and replies thereto, the applicable law, and the administrative record, the Court DENIES plaintiff's motion and GRANTS defendants' cross motion.

I. Background

A. Section 503 of the Rehabilitation Act

In 1973, Congress enacted the Rehabilitation Act, 29 U.S.C. § 701, et seq., " to empower individuals with disabilities to maximize employment, economic self-sufficiency, independence, and inclusion and integration into society." Id. § 701(b). Section 503 applies this policy to government contractors:

Any contract in excess of $10,000 entered into by any Federal department or agency for the procurement of personal property and nonpersonal services (including construction) for the United States shall contain a provision requiring that the party contracting with the United States shall take affirmative action to employ and advance in employment qualified individuals with disabilities. The provisions of this section shall apply to any subcontract in excess of $10,000 entered into by a prime contractor in carrying out any contract for the procurement of personal property and nonpersonal services (including construction) for the United States. The President shall implement the provisions of this section by promulgating regulations within ninety days after September 26, 1973.

Id. § 793(a).[1]

The current regulations implementing Section 503, which are not challenged here, " apply to every Government contractor that has 50 or more employees and a contract of $50,000 or more." 41 C.F.R. § 60-741.40(a). All such contractors must " prepare and maintain an affirmative action program." Id. § 60-741.40(b). This program must include, among other things, a review of job qualification standards that may exclude qualified individuals with disabilities; procedures for internal and external publication of the program; steps to engage in outreach and recruitment of qualified individuals

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with disabilities; and regular audits to measure the program's effectiveness. See id. § 60-741.44. The regulations also require contractors to invite newly hired employees " to inform the contractor whether the applicant believes that he or she may be covered by the act and wishes to benefit under the affirmative action program." Id. § 60-741.42(a).

B. Executive Order 11,246

Executive Order 11,246 creates affirmative-action obligations with respect to race and gender. See Exec. Order 11,246, 30 Fed. Reg. 12319 (Sept. 28, 1965); Exec. Order 11,375, 32 Fed. Reg. 14,303 (Oct. 17, 1967). OFCCP's regulations implementing this Order require most contractors to develop formal affirmative-action programs, 41 C.F.R. § 60-2.10, but construction contractors need only take various affirmative-action steps. See 41 C.F.R. pt. 60-4. The primary reason for this distinction is " the fluid and temporary nature of the construction workforce." Office of Federal Contract Compliance Programs, Technical Assistance Guide for Federal Construction Contractors at 7 (2009), available at http://www.dol.gov/ofccp/TAguides/ consttag.pdf.

The regulations, nonetheless, impose similar requirements on all contractors to strive to meet benchmarks for workforce diversity. Non-construction contractors must group their workforce by " job group" --jobs with similar duties and wages--and use these groups to " compar[e] . . . the representation of minorities and women in its workforce with the estimated availability of minorities and women qualified to be employed." 41 C.F.R. § 60-2.12. Construction contractors must group their workforce by " construction trade" and use those groups to follow " goals and timetables for minority and female utilization." Id. § 60-4.6; see also id. § 60-4.2(d). Construction contractors are also required to engage in various affirmative-action steps enumerated in the regulations. See id. § 60-4.3(a).

The regulations also require all contractors to collect and compile data and records related to the gender and race of employees and job applicants. See, e.g., id. § 60-1.7(a) (requiring annual filing of reports containing the number of employees by gender and race); id. § 60-1.12 (requiring contractors to keep " [a]ny personnel or employment record" so that the contractor is " able to identify . . . [t]he gender, race, and ethnicity of each employee; and . . . [w]here possible, the gender, race, and ethnicity of each applicant" ).

C. The Rulemaking Process

OFCCP became concerned that the regulations implementing Section 503 have not sufficiently advanced the employment of qualified individuals with disabilities because " the percentage of people with disabilities in the labor force in March 2010 was 22.5 compared with 70.2 for persons with no disability" and " [t]he unemployment rate for those with disabilities was 13.9 percent, compared with 10.1 percent for persons with no disability." See Evaluation of Affirmative Action Provisions of Contractors and Subcontractors Under Section 503 of the Rehabilitation Act, 75 Fed. Reg. 43,116, 43,117 (July 23, 2010). Accordingly, in July 2010, it invited input on ways to strengthen the regulations. See id. Commenters responded " that quantitative and measurable analyses similar to those for minorities and women were needed to make affirmative action for individuals with disabilities 'more than a paperwork exercise.'" Affirmative Action and Nondiscrimination Obligations of Contractors and Subcontractors Regarding Individuals With Disabilities, 76 Fed. Reg. 77,056, 77,057 (Dec. 9, 2011).

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Accordingly, OFCCP proposed three major changes to its Section 503 regulations: (1) requiring contractors to gather information on the disability status of job applicants; (2) requiring contractors to compile that data and related data on new employees, along with the total number of job openings, job applicants, and jobs filled; and (3) establishing a utilization goal to provide a benchmark against which contractors can measure the efficacy of their affirmative-action steps. See id. at 77,062-77,071. After receiving over 400 comments on these proposals, OFCCP issued its final rule on September 24, 2013. Final Rule, 78 Fed. Reg. at 58,682. The Rule becomes effective on March 24, 2014. Id.

The Rule clarifies that affirmative action " is more than a paperwork exercise" and " includes measurable objectives, quantitative analyses, and internal auditing and reporting systems that measure the contractor's progress toward achieving equal employment opportunity for individuals with disabilities." Id. at 58,742. The Rule imposes three major requirements:

Data Collection: Contractors must " invite applicants to inform the contractor whether the applicant believes that he or she is an individual with a disability." Id. This supplements the contractor's preexisting obligation to invite new employees to do the same. See id.

Data Analysis: Contractors must document the number of job applicants and newly hired employees who self-identify as having a disability, as well as the total number of job openings, job applicants, and jobs filled. See id. at 58,745.

Utilization Goal: Contractors must strive to meet a numerical goal for the employment of qualified individuals with disabilities. See id. at 58,745-58,746. This goal " is not a rigid and inflexible quota which must be met" ; the point is " to establish a benchmark against which the contractor must measure the representation of individuals [with disabilities]." Id. at 58,745. For employers with 100 or fewer employees, the goal is 7% of the employer's entire workforce. Id. Employers with over 100 employees should strive to have 7% of employees in each job group--defined as " the same job groups established for utilization analyses under Executive Order 11246, either in accordance with 41 CFR part 60-2, or in accordance with 41 CFR part 60-4, as appropriate" --be individuals with disabilities. Id. Contractors must evaluate their utilization annually to identify any problem areas and must " develop and execute action-oriented programs designed to correct any identified problem areas," but " [a] contractor's determination that it has not attained the utilization goal . . . does not constitute either a finding or admission of discrimination . . . ." Id. at 58,746.

D. This Lawsuit

Associated Builders and Contractors is a trade association that represents over 19,000 construction-industry firms. See Burr. Aff. ¶ 1, ECF No. 9 at 41. Many of its members perform work on government construction contracts and are subject to Section 503. Id. Many of them will have to comply with the Rule because they have more than 50 employees. Id. ¶ 2. Plaintiff claims that the Rule not only harms its members, but also violates " one of ABC's core principles . . . to advance and protect the free enterprise system and open competition in both public and private procurements in the construction industry." Id. ¶ 5.

Plaintiff filed this lawsuit on November 19, 2013. See Compl., ECF No. 1. The Court granted the parties' joint request for an expedited briefing schedule in advance of the Rule's March 24, 2014 effective date and held oral argument on the parties'

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cross motions for summary judgment on March 14, 2014. These motions are ripe for ...


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