Fedweek Legal

EEO plans should remain enforceable under Department of Labor compliance regulations. Image: ValeStock/Shutterstock.com

Federal contractors should stay the course on anti-discrimination under EO 11246 in the wake of the Supreme Court’s Decisions in the Harvard and UNC Cases.

I. Introduction

For over five decades, employers have developed and administered equal employment opportunity plans (“EEO Plans”) and affirmative action programs (“AAPs”) as a requirement of contracting for work with the Federal Government.  Executive Order (“EO”) 11246, which prohibits federal contractors from discriminating in employment decisions on the basis of race, color, religion, sex, sexual orientation, gender identity or national origin and requires certain contractors to take affirmative action to ensure that equal opportunity is provided in all aspects of their employment, forms the principal legal authority on which today’s EEO Plans and AAPs are based.

On June 29, 2023, the Supreme Court of the United States issued its decision in Students for Fair Admissions, Inc. v. University of North Carolina and Students for Fair Admissions, Inc. v. Harvard University (the “Harvard-UNC cases”).  While the Harvard-UNC cases upend over forty years of precedent in higher education, these decisions may have implications beyond the education industry.

This article focuses on the implications of the Harvard-UNC decision on federal contractors who are covered by EO 11246, which is derived from powers unique to the Executive and is buttressed by congressional action in labor and procurement spaces, among others.  While it is anticipated that the Harvard and UNC cases may ignite litigation surrounding EO 11246 (we discuss some anticipated challenges below), EEO Plans and AAPs should remain enforceable under the Department of Labor’s Office of Federal Contract Compliance Programs’ (“OFCCP’s”) regulations.  The “goals” in the contractor context are categorically different than the “goals” denounced in the Harvard-UNC cases and, when overlayed against relevant labor areas, are measurable and capable of judicial review.

II. A Brief History of EO 11246

To understand why EO 11246 may be insulated from attacks based on the Harvard-UNC cases, it is helpful to take a brief look at its history.

A. Executive Action in Federal Contracting

Issued in 1941 by President Roosevelt, EO 8802 marks the first instance of Presidential action in this field, requiring that all Federal Government contracting agencies include in all defense contracts a covenant not to discriminate against any worker because of race, creed, color, or national origin.  In 1943, EO 8802 was amended by EO 9346, which required that an antidiscrimination clause be written into all government contracts, not only those related to defense.

During the Korean War, President Truman issued EO 10210, reiterating that a non-discrimination clause would be incorporated by reference into all defense contracts.  President Eisenhower then issued EO 10479—the first Executive Order on antidiscrimination that omits any mention of defense production.  President Kennedy signed EO 10925, which specified that the President’s Committee on Equal Employment Opportunity could impose sanctions for violation of the Order and amended the required contract language to include the following provision: “The Contractor will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, creed, color, or national origin.” (emphasis added).  EO 11114, also signed by President Kennedy, provided that the non-discrimination contract provisions required in all federal procurement contracts be included in all federally assisted construction contracts.

Then, just one year after the Civil Rights Act of 1964 was enacted, President Johnson issued Executive Order 11246, which established requirements for non-discriminatory practices in the hiring and employment of persons working for federal contractors and subcontractors and empowers the Secretary of Labor to issue rules and regulations necessary and appropriate to ensure equal opportunity for minorities in federal contractors’ recruitment, hiring, training, and other employment practices.  Over the years, EO 11246 has been amended by multiple presidents and remains the principal legal authority to enforce the development of EEO Plans and AAPs by qualifying federal contractors, whose employees  constitute one-fifth of the entire U.S. labor force.

The OFCCP administers and enforces EO 11246 and its implementing regulations.  Pursuant to the President’s charge that each contractor take “affirmative action” to provide equal opportunity in employment, OFCCP audits contractors’ AAPs, which are customized to reflect each employer’s organizational structure, policies, practices, programs, and data.  Each contractor’s AAP must contain a diagnostic component that includes a number of quantitative analyses designed to evaluate the composition of the workforce of the contractor and compare it to the composition of the relevant labor pools.  Effective AAPs include action-oriented programs and internal auditing and reporting systems as a means of measuring the contractor’s progress toward achieving the workforce that would be expected in the absence of discrimination.

B. Jurisprudential History

While EO 11246 has been challenged, courts have generally upheld the Executive’s power to impose fair employment conditions incident to the power to contract.  In 1971, the Third Circuit resolved whether the Executive may impose the contract terms required by Executive Order 11246 upon federally assisted state construction contracts.[1]  Because of the strong federal interest in ensuring that the cost and progress of federally assisted contract projects were not adversely affected by an artificial restriction of the labor pool caused by discrimination, the Court found that Congress delegated authority to promulgate EO 11246 through the Federal Property and Administrative Services Act.[2]  The President had acted pursuant to Congress’s authorization, meaning his power was at its zenith, and his actions could be said to “personify the federal sovereignty.”[3]  Thus, the Third Circuit found that federal contractors and subcontractors can be required to enact and comply with AAPs based on the President’s procurement power, independent of other federal antidiscrimination law.

III. Enter the Harvard-UNC Cases

Given that the Harvard-UNC cases are being described as challenges to “affirmative action in college admissions,” some employers are concerned that the Supreme Court’s analysis could be applied to “affirmative action in employment” under EO 11246.

A. The Court’s Rulings

On June 29, the Supreme Court held that Harvard and UNC’s race-conscious admissions practices violate the Equal Protection Clause because they discriminate on the basis of race.  According to the Court, the proffered justifications for the practices do not withstand strict scrutiny, as the justifications do not rise to the level of a compelling government interest.  The Court’s decision leaves little room for race to play a role in college admissions going forward, but it does not foreclose that use entirely.  The majority did not address whether the programs violate Title VI (which prohibits discrimination by recipients of financial assistance) and instead noted that the Court has previously interpreted the protections of Title VI co-extensively with the protections of the Equal Protection Clause.  Justice Gorsuch, on the other hand, would have found that the admissions practices explicitly violated Title VI as well.  Interestingly, the majority opinion never used the phrase “affirmative action” to describe Harvard and UNC’s admissions programs, though Justice Thomas, in his concurring opinion, did.

A key factor in the Court’s decision was the zero-sum nature of college admissions.  Race cannot be a determinative factor in a zero-sum environment because, the Court ruled, using race as a “plus” factor in that context necessarily uses it as a “negative” factor for other students.  There is room to argue that in contexts that are not zero-sum, the use of race as a plus factor for some does not result in race being a negative for others.

The Court excluded military academies from the scope of its decision, recognizing the academies may present “potentially distinct interests” given their national security context and were not parties to these cases, in any event.

B. Anticipated Challenges to EO 11246

Federal contractors may face challenges to their EEO Plans and AAPs in the wake of the Harvard-UNC cases.  Ultimately, however, EO 11246 is not inconsistent with  the Equal Protection Clause because it does not discriminate on the basis of race.  To the contrary, the Order expressly provides that federal contractors “will not discriminate against any employee or applicant for employment[.]”[4]  Even the phrase “affirmative action” is used in EO 11246 in a way that prohibits discrimination: “The Contractor will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex, sexual orientation, gender identity, or national origin.”[5]  This language stands in opposition to the admissions processes struck down by the Supreme Court, which, in fact, expressly considered an applicant’s race as one of several factors before making a decision as to admission or rejection.

In direct procurement, moreover, the federal government has a distinct interest in ensuring that the largest possible pool of qualified candidates be available for the accomplishment of its projects, and EO 11246 has been upheld by the courts as a valid exercise of this Executive power.  The Department of Labor’s OFCCP has been established to regulate this space, and it is difficult to envision the OFCCP changing course, even in a post-Harvard/UNC world.  To combat the vestiges of past discrimination, the OFCCP requires federal contractors to implement goals and adhere to timetables that are measurable and tailored to address disparities specific to the various industries in which they are used.  Typically, federal contractors are required to take remedial action only after the OFCCP has identified some discrete issue, such as underutilization for a particular job category.  This reactive regime is more likely to pass muster under the Supreme Court’s Harvard/UNC analysis, particularly given the OFCCP’s mandate to “hold those who do business with the federal government – contractors and subcontractors – to the fair and reasonable standard that they take affirmative action and not discriminate based on race, color, religion, sex, sexual orientation, gender identity, national origin, disability or status as a protected veteran.”[6]  Additionally, given that EO 11246’s origins can be traced directly to national security concerns, defense contractors, in particular, seem well-positioned to continue operating AAPs to advance the “potentially distinct” national security interest recognized by the Supreme Court’s (interim) carve-out for military academies.

Nevertheless, activist organizations may attack the goals and timetables that some contractors are required to develop to measure progress of their AAPs as illegal quotas.  Litigation would then focus on how the goals and timetables were applied in practice and whether they incentivized illegal hiring based on race.  While previous courts have dismissed a zero-sum argument (i.e., that a decision to hire any Black employee necessarily involves a decision not to hire a qualified White employee),[7] the 6–3 majority adopted this line of reasoning in its Harvard-UNC decision.  But federal contractors should note that this argument does not translate as well to the employment context.  The labor market differs from a college admissions applicant pool in that the labor market is generally rolling in nature, requires specific skills, credentials, and experience, and may be tethered to geography given the workplace location and nature of the project, among other myriad factors.  As addressed above, while Harvard and UNC allowed race to function as a “tip” or “plus” for applicants in the admissions process, contractors are prohibited from using race in their hiring or promotion decisions.  Under EO 11246, contractors are empowered to consider race only in downstream strategies such as recruiting sources.  Indeed, as a means to measure a contractor’s good faith efforts, the OFCCP inquires whether “the contractor’s recruitment at high schools, colleges, and universities includes those that enroll large numbers of minorities and women[.]”[8]  This inclusive approach guards against the pernicious effects of discrimination.  The OFCCP makes clear that its regulations do not permit quotas, preferences, or set asides, and that placement goals “are not to be interpreted as a ceiling or floor for the employment of particular groups of persons but, rather, should serve as a benchmark against which the contractor measures the representation of persons within its workforce.”[9]  Thus, federal contractors may be better positioned to refute this “zero sum” argument.[10]

IV. Conclusion

Federal contractors should continue to monitor the regulatory and legal landscape.  Challenges to EEO Plans and AAPs are anticipated and may result in business disruption and employee-relations issues.  Given the Executive’s inherent powers in this space, however, and considering the text of EO 11246 and the multiple instances of judicial approval and congressional delegation, the executive order is likely to remain enforceable for the foreseeable future.

The legal landscape in higher education has shifted.  But federal contractors operate in a different landscape; EO 11246 remains in place and there is no indication that the OFCCP will yield from its mission of educating contractors about equal employment opportunity and conducting compliance audits or investigations.  Contractors should continue to take—and memorialize—their good faith efforts to comply with the law.

[1] Contractors Ass’n of E. Pa. v. Sec’y of Lab., 442 F.2d 159 (3d Cir. 1971).
[2] 40 U.S.C. § 471 et seq. (The Procurement Act). Congress has said that this Act’s purpose is to provide “an economical and efficient system” for, among other things, the procurement of personal property and services.  Id. § 471. The Act authorizes Executive Orders “necessary to effectuate (its) provisions,” id. § 486(a), but does not mention employment discrimination.
[3] Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 636 (1952) (Jackson, J., concurring).
[4] 30 Fed. Reg. 12319 (1985).
[5] Id.
[6] Federal Contract Compliance Manual (“FCCM”) 1 (2020 ed.) available at https://www.dol.gov/sites/dolgov/files/OFCCP/FCCM/508_FCCM_05012020.pdf.
[7] Contractors Ass’n of E. Pa., 442 F.2d at 176.
[8] FCCM, supra, at 98.
[9] https://www.dol.gov/agencies/ofccp/faqs/AAFAQs
[10] Another such challenge may attack EO 11246 as contravening the policy of free collective bargaining embodied in the National Labor Relations and Railway Labor Acts; however, the District of Columbia Circuit Court of Appeals dismissed this argument in 1979. See AFL-CIO v. Kahn, 618 F.2d 784, 796 (D.C. Cir. 1979).


David Dziengowski
David Dziengowski litigates complex employment and executive compensation disputes in courts and arbitral forums throughout the country. David brings a diverse skill set to any case, having tried complex disputes, led internal investigations, and argued high-risk issues on appeal in federal courts. David is a partner in Morgan Lewis’s Philadelphia office.
 
Megan Lipsky
Megan Lipsky represents and advises clients on labor and employment matters. She is an associate in Morgan Lewis’s Washington, DC office.

The authors can be reached at https://www.morganlewis.com

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