On October 19, 2012, the U.S. Department of Labor’s Administrative Review Board (“ARB”) ruled in OFCCP v. Florida Hospital of Orlando, that Florida Hospital of Orlando’s participation in TRICARE was not enough, on its own, to give the Office of Federal Contract Compliance Programs (“OFCCP”) jurisdiction over the hospital.

The OFCCP had argued that participation in TRICARE, a Department of Defense program that pays for medical benefits for active and retired military personnel and their families, alone qualified healthcare providers as federal government subcontractors. The ARB’s decision rejected this argument, making it clear that the OFCCP may not support jurisdiction simply on this basis.

As we previously reported, on December 31, 2011, Section 715 of the National Defense Authorization Act (“NDAA”) of Fiscal Year 2012 was signed into law. Section 715 explicitly states that network providers and providers of medical services under TRICARE are not subcontractors that are subject to the OFCCP’s jurisdiction. The new law was created as a reaction to the OFCCP asserting jurisdiction over network providers and providers of medical services under TRICARE.

In response, on April 25, 2012, the OFCCP rescinded Directive 293 that provided guidance for determining whether a healthcare provider or insurer fell within OFCCP’s jurisdiction as a contractor or subcontractor. At that time, in light of the enactment of the NDAA, the OFCCP decided to put a hold on their scheduled compliance evaluations of entities over which their only basis for jurisdiction was the entities’ participation in TRICARE, until the outcome of then-pending OFCCP v. Florida Hospital of Orlando. Nevertheless, despite the NDAA’s clear statement exempting TRICARE providers, the OFCCP adhered to its claim of jurisdiction over healthcare providers participating in TRICARE.

The ARB’s October 19, 2012 holding that the NDAA does exempt TRICARE providers from the OFCCP’s jurisdiction puts that argument to rest. However, the ARB’s decision was divided and noted that the NDAA exemption was narrow. The decision in OFCCP v. Florida Hospital of Orlando does not foreclose the possibility that there are some TRICARE arrangements that would subject healthcare providers to OFCCP’s jurisdiction. At this time, the OFCCP has not yet stated whether it plans to appeal the ARB’s decision in OFCCP v. Florida Hospital of Orlando.

If you have any questions about these issues, please contact your employment counsel at Smith, Gambrell, & Russell, LLP.