Piliero Mazza &
Pargament, PLLC

Legal Advisor
Vol. V, Issue 5
May 2000

An Update for Federal Contractors and Commercial Businesses

A R T I C L E S


GOVERNMENT CONTRACTS
Affirmative Action Plan Proposal Issued by OFCCP



CORPORATE
DOJ and FTC Release Joint Antitrust Guidelines



EMPLOYMENT
When the ADA and the FMLA Overlap





H O M E


P U B L I C A T I O N S



GOVERNMENT CONTRACTING

Affirmative Action Plan Proposal Issued by OFCCP

On May 4, 2000, the Department of Labor's Office of Federal Contract Compliance Programs ("OFCCP") issued a proposed rule that would overhaul federal regulations prescribing affirmative action requirements for government contractors. In general, the proposal would emphasize a performance-based standard of compliance with affirmative action requirements, as opposed to the current regulatory framework, which emphasizes the development of a comprehensive written document to comply with detailed standards.

All federal contractors and subcontractors are required by Executive Order 11246 to "take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex, or national origin."

Regulations implementing this general mandate require non-construction contractors and subcontractors with 50 or more employees and a contract of $50,000 or more to prepare and implement an Affirmative Action Plan ("Plan") for each of their establishments. These current regulations require Plans to contain several elements, including a workforce analysis (to identify job titles and numbers of employees in each position by race, gender and ethnicity) and a job group analysis (to determine whether minorities and women are being employed at a rate that would be expected given their availability). If underutilization of minorities and women is found to exist, the contractor is required to analyze its policies and practices to determine possible causes, and to identify corrective measures that will be taken to overcome the underutilization. The Plan must also explain the contractor's equal employment policies, its methods of dissemination, its recruitment programs, its proposed solutions to identified problems, and its affirmative action goals.

The recently released proposal is the result of years of extensive review and analysis by OFCCP of the current regulations and the various ways to improve them. The proposal also reflects input by contractor and civil rights representatives at a series of public meetings several years ago.

Under the proposal, contractors would have greater freedom to design their plans around their unique business structures and needs. The proposal would also greatly reduce the number of elements required to be included in a Plan. For example, contractors would be required to consider only two of the current eight factors that must be analyzed to determine the availability of minorities and women for employment. In addition to reducing the number of technical requirements, contractors would have the flexibility to include in the Plan elements they consider to be necessary to carry out their affirmative action and non-discrimination commitments.

The OFCCP anticipates that these changes, together with clearer regulatory language, will make it easier for contractors to put together compliant and effective Plans. The OFCCP also believes that preamble explanations and illustrations will make the new regulations more user friendly.

The proposal would also change the way OFCCP monitors compliance with contractor Plans. The OFCCP would place greater emphasis on the results achieved by the contractor in implementing its affirmative action and non-discrimination policies, and less emphasis on compliance with detailed technical requirements. Under the proposal regulations, a Plan would be considered to be effective if problem areas are being accurately identified and good faith efforts are being undertaken to address those areas.

To assist OFCCP in better monitoring compliance, the proposal would include a new Equal Opportunity Survey, to be prepared and filed by most contractors (no less than 50% of non-construction businesses) each year. Issues that would be addressed in the Survey include personnel activities, pay policies and affirmative action programs. The Survey, which contractors would be encouraged to file electronically, would allow OFCCP to more effectively identify and monitor contractors that are experiencing problems with their affirmative action obligations. The new rule would also restate OFCCP's practice of not releasing data in response to FOIA requests if the contractor asserts that the data is confidential and that release could cause commercial harm.

The proposed changes to the Affirmative Action Plan regulations are likely to be the subject of considerable discussion within the government contracting community. In general, the proposed regulations would implement a performance-based approach that is less rigid and, at least on paper, less burdensome for contractors. We are conducting a more thorough review of the proposed rule and will provide a detailed summary in our next newsletter. In the meantime, comments on the proposed rule must be submitted before July 3, 2000.







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CORPORATE

DOJ and FTC Release Joint Antitrust Guidelines

On April 7, 2000, the Department of Justice and the Federal Trade Commission released the Antitrust Guidelines for Collaborations Among Competitors ("the Guidelines"). The Guidelines do not contain any new regulations or policies. Rather, they provide guidance to businesses so that they can proposed transactions with a greater understanding of antitrust implications.

The Guidelines recognize that competitive forces are creating incentives for firms to engage in complex collaborations. Examples include joint ventures, teaming arrangements, partnerships, and distributorships. The Guidelines
recognize that such collaborations are often procompetitive in that they may enable participants to offer goods or services that are cheaper, more valuable to consumers, or brought to market faster. However, some collaborations may harm competition and consumers by artificially increasing prices or by reducing the quantity or quality of the product or service.

Two types of analyses are used to determine the lawfulness of an agreement among competitors: per se
and "rule of reason."

Agreements that always or almost always tend to raise prices or reduce output are per se
illegal and therefore, the anticompetitive impact is presumed.. Examples include agreements to fix prices or output, rig bids, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce.

All other agreements are analyzed under the "rule of reason" to determine their overall competitive effect. The "rule of reason" analysis focuses on the competitive impact of the relevant agreement. The business purpose of the agreement will be examined to determine whether the agreement, if already in operation, has caused anticompetitive harm. In some cases, the nature of the agreement and the absence of market power together may demonstrate the absence of anticompetitive harm. In such cases, the Guidelines
suggest that the DOJ/FTC will be disinclined to challenge the agreement.

The Guidelines
indicate that the DOJ/FTC may examine factors such as market share and concentration, and the extent to which the competitors have the ability and incentive to compete independently. If the examination of these factors indicates no potential for anticompetitive harm, the investigation will end. If, however, the investigation indicates anticompetitive harm, the DOJ/FTC will examine whether procompetitive benefits offset anticompetitive harms.

The Guidelines
identify the following kinds of agreements as examples of those that could have an adverse impact on competition:

Production Collaborations – Competitor collaborations may involve agreements to jointly produce a product. Such agreements are often procompetitive because participants combine complementary technologies, know-how, or other assets to enable the collaboration to produce a product more efficiently. However, such collaborations should control the level of output, the use of key assets or the price of the product.

Marketing Collaborations – Competitor collaborations may involve agreements to jointly sell, distribute, or promote goods or services. Such agreements may be procompetitive, for example, where a combination of complimentary assets enables products more quickly and efficiently to reach the marketplace. However, marketing collaborations should not control the use of significant assets, such as an extensive distribution network.

Buying Collaborations – Competitor collaborations may involve agreements to jointly purchase necessary goods and services. Purchasing collaborations may enable participants to centralize ordering or to combine warehousing or distribution functions more efficiently. However, such agreements can impermissibly create or increase market power by increasing the parties' ability to artificially drive down the price of the product or services, thereby depressing output.

Research & Development Collaborations – Competitor collaborations may involve agreements to engage in joint research and development ("R&D"). Through the combination of complimentary assets, technology, or know-how, an R&D collaboration may enable participants more quickly or more efficiently to research and develop new or improved goods, services, or production processes. Joint R&D agreements, however, can create or increase market power by limiting independent decision making or by resulting in control of one party's assets or R&D efforts by the other party.

Because competitor collaborations are often procompetitive, the Guidelines establish two "safety zones" to encourage such collaborations. These "safety zones" are designed to provide participants with a level of comfort that, absent extraordinary circumstances, the arrangements will be presumed lawful. The "safety zones" are as follows: (1) collaborations in which the market shares of the collaboration and its participants account for no more than 20% of each relevant market; or (2) collaborations that are in an innovation market where three or more independently controlled research efforts (in addition to those of the collaboration) possess the required specialized assets or characteristics and the incentive to engage in R&D that is a close substitute for the R&D activity of the collaboration. Neither of the safety zones, however, apply to agreements that are per se
illegal.

In summary, the Guidelines reflect that competitor collaborations are often procompetitive, and therefore, can benefit both the participants and consumers. However, businesses that are considering entering into collaborative agreements should determine whether the collaboration would have an anticompetitive impact that could violate antitrust laws. In particular, special attention should be given to avoiding provisions that would control prices, control production levels, or divide markets, as such provisions likely would be considered to be per se illegal.







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EMPLOYMENT

When the ADA and the FMLA Overlap

The Americans with Disabilities Act ("ADA") and the Family and Medical Leave Act ("FMLA") each pose significant challenges to human resources personnel. Employers should be aware that, in some cases, both statutes may apply simultaneously. This article outlines some of the complexities that arise when the ADA and FMLA overlap.

The scope of the ADA and FMLA differ significantly. The employment provisions of the ADA, which cover employers with fifteen or more employees, require that "reasonable accommodations" be made for employees with "disabilities." "Disabilities" are defined as physical or mental impairments which substantially limit a "major life activity." Employees with disabilities may be entitled to unpaid leave if such leave would be a "reasonable accommodation."

The FMLA, in contrast, requires employers with fifty or more employees to provide up to twelve weeks of unpaid leave for eligible employees for a variety of reasons, including situations where the employee has a "serious health condition" which renders them unable to work.

In practice, the ADA and FMLA will overlap only when an employee has a "serious health condition" which also constitutes a "disability" under the ADA. The definitions of these terms differ considerably. Therefore, many health conditions which may be "serious health conditions" under the FMLA will not constitute "disabilities" under the ADA. For example, a broken leg may constitute a serious health condition, but would not amount to an ADA-protected disability because it is temporary in nature. In contrast, a more lasting condition, such as a spinal injury which renders the employee unable to lift or bend, may be covered under both statutes.

If an employee with a disability requests unpaid leave as an accommodation under the ADA, the employer may not be required to provide it. Instead, the employer may be entitled to provide an alternative accommodation, such as job restructuring or light duty. In addition, a request for leave may be denied if it would result in an "undue hardship" to the employer. However, if the employee is also eligible for FMLA leave, he or she possesses an absolute right to unpaid leave, even if some other accommodation would eliminate the need for leave. If an employer attempts to discourage or interfere with such leave, it may be liable under the FMLA.

Under the FMLA, if an employee remains unable to return to work after having exhausted his/her twelve-week leave entitlement, the employer may terminate his/her employment. However, if the employee's serious health condition also constitutes an ADA-protected disability, the employee may be entitled to additional unpaid leave under the ADA. In such cases, terminating the employee without exploring the possibility of additional leave may violate the ADA. Such leave need not be of indefinite duration, however; the ADA requires only "reasonable" accommodations.

Under the FMLA, an employee returning from medical leave may be reinstated to his or her original position or an "equivalent" position. Under the ADA, in contrast, an employee who has taken a leave of absence must be returned to his/her original position, not an "equivalent."

In addition, unlike the FMLA, the ADA provides protection for employees who can no longer perform their job duties after returning from medical leave. Under the FMLA, such employees may be terminated. However, if the employee is also covered under the ADA, the employer must explore accommodations that would enable the employee to perform the job. In addition, if no such accommodation is possible, the employer may be required to reassign the employee to a vacant alternative position which is equivalent in terms of pay and "status." Recent court decisions have placed considerable burdens on employers with respect to the duty to reassign disabled employees.

The foregoing is only a brief overview of the most significant issues which may arise when the ADA and FMLA overlap. Other issues may also arise when employees are entitled to leave under both statutes, including issues relating to health insurance and medical examinations. Given the complexity of these statutes, employers covered by the FMLA should carefully examine whether employees entitled to medical leave because of their serious health condition may also be entitled to protection under the ADA.
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