Labor Department Imposes Disability Hiring Quotas, Even in Divisions that Don’t Get Federal Contracts

by Hans Bader on September 23, 2013 · 1 comment

in Economy, Employment, Labor, Legal, Regulation

The Obama Labor Department has just finalized rules that will effectively require businesses that get federal contracts to adopt a 7 percent hiring quota for the disabled. Much of the American workforce is employed by a federal contractor, since most large companies have federal contracts. So this will affect much of the economy, and impose massive new costs on American business.

Disturbingly, the new rules require a 7 percent quota not just for the division of the company that receives a federal contract, but for the company as a whole. And they require that the 7 percent quota be met not just for the company as a whole, but also in each line of business in the company. That means they effectively must be met even in job categories where the number of disabled people is lower than average, either because the qualified labor pool is disproportionately able-bodied (like those that require hard physical labor) or because the job is not compatible with certain mental or psychological impediments that qualify as disabilities.

As the Cato Institute’s Walter Olson notes, the rules impose quotas in all but name; the director of the Office of Federal Contract Compliance Programs

insists the initiative should not be described as quotas, since contractors falling short will not suffer automatic penalty. Instead, they’ll be thrown into a process of auditing and having their internal procedures put under review and having to demonstrate progress and that sort of thing. Nothing penalty-like about that! Also, if their willingness to go along with this process doesn’t please the federal overseers, they can eventually be debarred from any future contract work, a devastating economic sanction for many firms. Crucially, the feds are applying the regulation to firms’ entire workforce even if only a single divisions has federal contracts, so that if, say, a food company has one line of business that caters to the military, and nineteen others that do no federal contracting whatsoever, all twenty lines must adopt the quot… sorry, benchmarks. [Cleveland Plain Dealer, OFCCP, Government Executive, Federal News Radio]

The fact that the 7 percent benchmark is not called a “quota” does not keep it from being a quota. Almost none of the racial or gender quotas struck down by the federal courts were called “quotas,” and architects of those unconstitutional quotas usually went to great pains to call them something else, like a goal or target or benchmark, and to claim that they were not rigid or inflexible.

For example, a federal appeals court voided a state law seeking to increase the number of minority contracts in Bras v. California Public Utilities Commission, 59 F.3d 869 (9th Cir. 1995). The law provided for “goals” and “methods for encouraging” minority and women subcontracts, and expressly abjured “quotas.” The court nevertheless held that the provisions were not “immunized from scrutiny because they purport to establish goals rather than quotas.” The court concluded that “the relevant question” was ”not whether a statute requires the use of such measures, but whether it authorizes or encourages them.”

Similarly, in Lutheran Church–Missouri Synod v. FCC, 141 F.3d 344 (D.C. Cir. 1998), the D.C. Circuit invalidated an FCC rule that potentially subjected broadcasters to audits if they failed to attain a minority hiring goal, but did not require them to achieve any particular percentage, much less an inflexible quota. The court approving quoted the Reagan Justice Department’s description of an earlier version of the FCC’s rule as having “operated as a ‘de facto hiring quota,’” where it required that radio stations’ hiring and equal employment opportunity programs be ”reviewed if minority groups and/or women are not employed full time at a ratio of 50% of their availability in the workforce overall.”

The Constitution does not forbid disability-based quotas the way it presumptively does racial quotas, so if Congress actually passed a disability quota for government contractors, it might well be valid.

But it hasn’t. The Rehabilitation Act, which Congress passed, contains two relevant provisions: (1) a general provision aimed at workforces in general (Section 504), which the Supreme Court has specifically ruled in Southeastern Community College v. Davis, 442 U.S. 397, 410-11 (1979) is not an “affirmative action” statute (since it requires only individualized reasonable accommodations, not group-based preferences or a generalized preference for the disabled); and (2) a provision dealing with government contracts (Section 503) which does contain vague language promoting affirmative action for the disabled.

In its recent disability quota, the Labor Department has sought to circumvent the Supreme Court’s Davis decision, and make the exception devour the rule, by interpreting the affirmative-action language of Section 503 as reaching even employees and divisions totally unrelated to the performance of a government contract, and then invoking Section 503′s affirmative-action language to impose a quota in all but name. Since these quotas harm taxpayers, undermine merit-based hiring and reduce efficiency, they are not authorized under the Procurement Act and court rulings like Chamber of Commerce v. Reich (1996), which limit the power of the executive branch to unilaterally dictate the hiring decisions of government contractors.

Even the Labor Department admits its rule will result in hundreds of millions of dollars in compliance costs. But the real costs will surely be in the billions. As Government Executive notes, “A commercial construction contractors group has charged the rules will cost companies nearly $6 billion a year in compliance costs,” quoting ”Stephen E. Sandherr, CEO of Associated General Contractors of America.” “These rules will force federal contractors to spend an estimated $6 billion a year to produce reams of new paperwork proving they are doing what the federal government already knows they are doing,” he said in a statement. “OFCCP Director Patricia Shiu rejected that figure, saying the disability hiring rule is expected to cost between $349 million and $659 million.”

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