For the first time in more than four decades, the U.S. Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) has revised sex discrimination regulations for federal contractors and subcontractors. Effective August 15, 2016, the updated rule aligns OFCCP guidelines with case law and Equal Employment Opportunity Commission (EEOC) guidance under Title VII with respect to a number of issues, including sexual harassment, pregnancy accommodations, gender identity bias, compensation discrimination, sex stereotypes, and family caregiving discrimination.

Under the revised regulations, federal contractors may not discriminate "on the basis of sex; pregnancy, childbirth, or related medical conditions; gender identity; transgender status; and sex stereotyping." As explained by Labor Secretary Thomas Perez, the new regulations require federal contractors to "provide pregnancy-related accommodations and equal access to jobs and workforce development opportunities, and prevent sexual harassment and protect transgender workers' access to bathrooms consistent with their gender identity." The new rule also addresses fair pay practices by prohibiting contractors from denying opportunities for overtime work, training, or higher paying jobs based on a worker’s sex.

The final rule applies to employers with a single federal contract or subcontract valued in excess of $10,000, or with multiple federal contracts that combined exceeds $10,000 over any 12-month period. The rule also applies to any business or organization that holds government bills of lading, serves as a depository of federal funds, or is an issuing and paying agency for U.S. savings bonds and notes in any amount to covered federal contractors or subcontractors. According to OFCCP guidance on the revised regulations, all employees who work or seek to work for federal contractors are protected, including those who work for a covered employer but do not actually work under the employer's federal contract.

Regarding pregnancy discrimination, federal contractors are now required to "provide workplace accommodations, such as extra bathroom breaks and light-duty assignments, to an employee who needs such accommodations because of pregnancy, childbirth, or related medical conditions, in certain circumstances where those contractors provide comparable accommodations to other workers, such as those with disabilities or occupational injuries." As explained by the OFCCP, the new regulations track the U.S. Supreme Court's 2015 decision in Young v. United Parcel Service, Inc., a case that altered the framework for how a pregnant employee may challenge an employer’s workplace accommodation policies and practices under Title VII. Now, an employee who has been denied an accommodation for pregnancy, childbirth, or related medical conditions may establish disparate treatment under the Young framework by showing that the federal contractor-employer:

• denies accommodations only to employees affected by pregnancy, childbirth, or related conditions; or
• provides comparable accommodations to other employees who are similarly unable to perform job duties due to injury or disability; or
• otherwise demonstrates an intent to discriminate.

To rebut a claim of disparate treatment, federal contractors must show that the decision to deny an accommodation is job-related and consistent with business necessity.

The new rule also prohibits federal contractors from discriminating against employees based on gender identity or transgender status. The OFCCP explains that "gender identity" is defined by the individual's "internal sense of [his or her] own gender," which may not correspond to an individual's biological sex at birth and may not be made visible to others. Federal contractors now must allow workers to use bathrooms, changing rooms, showers, or similar facilities in keeping with the gender with which workers identify. Given the apparent conflict between the new regulations and some state laws—for example, North Carolina's law requiring an individual to use the restroom that conforms to his or her biological sex at birth—it remains to be seen how contractors can comply with both federal and state requirements.

In addition, contractors must apply the same generally applicable standards in determining coverage for health care services to all employees, regardless of their gender identity or transgender status. The rule prohibits facially discriminatory employer policies that exclude coverage for health care services associated with gender dysphoria or gender transition. As explained in the preamble to the rule, "[i]f a contractor generally provides coverage for a particular treatment or service, e.g., hormone replacement or mental health care, where it is medically necessary, the contractor cannot decline to provide coverage for that same treatment when it is deemed medically necessary for a transgender individual because the treatment is related to his or her gender identity or transgender status."

Other provisions of the new rule prevent federal contractors from paying employees differently because of their sex, or otherwise discriminating against employees on the basis of sex with regard to fringe benefits such as insurance and retirement benefits, profit sharing plans, or other terms and conditions of employment. To ensure that contractors understand their obligations, the new rule provides a number of examples of prohibited sex discrimination, as well as an appendix of best practices to assist with contractor compliance. For example, the appendix to the rule recommends that employers avoid the use of gender-specific job titles such as "foreman" or "lineman" where gender-neutral alternatives are available. Another best practice suggests that employers should consider designating single-user restrooms, changing rooms, showers, or other similar facilities as sex-neutral.