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Fourth Circuit Rules that, Without Waiver from Department Of Labor, Federal Affirmative Action Requirements Apply To All Contractor Facilities

In Trinity Industries, Inc. v. Herman, the Fourth Circuit Court of Appeals ruled that Trinity's Asheville, North Carolina, facility was not exempt from federal contract affirmative action requirements and Office of Federal Contract Compliance Programs (OFCCP) review. According to the Fourth Circuit's April 12, 1999, decision, the company failed to obtain a proper waiver from the Secretary of Labor to support its argument that the Asheville facility's operations were unrelated to Trinity's federal government contracts.

Before beginning our analysis of the case, some basic information on federal contract affirmative action coverage may be helpful. Under the Rehabilitation Act of 1973, the Vietnam Era Veterans Readjustment and Assistance Act, and Executive Order 11246, contractors who employ 50 or more employees and contract with the U.S. government to provide supplies, services, or property for payment of $50,000 or more per year are required to develop affirmative action programs for each of their establishments, within 120 days of entering into a government contract. Certain subcontractors who meet a similar 50-employee, $50,000 subcontract threshold are also subject to affirmative action obligations. The federal contract laws allow the Secretary of Labor to waive compliance for a particular facility of an employer if it is "in all respects separate and distinct from the activities of the . . . contractor . . .related to the performance of the [federal government] contract."

In 1996, the OFCCP notified Trinity that its Asheville facility had been selected for a compliance review of that facility's affirmative action program and supporting documentation. As an enterprise, Trinity met the 50-employee, $50,000 contract threshold for the affirmative action requirements outlined above. However, Trinity took the position that the OFCCP lacked jurisdiction to conduct the review because the Asheville facility was not connected to any of Trinity's government contracts. The company also requested a waiver of coverage for the Asheville facility, arguing that it was a "separate and distinct" operation that had no involvement with the company's federal contracts. The OFCCP responded that only the Deputy Assistant Secretary of Labor had authority to grant a waiver or exemption, and that it would continue to process its review. Trinity refused to supply the requested affirmative action information and made no further effort to obtain a waiver.

The OFCCP then filed an administrative complaint against Trinity for failing to comply with its audit requests. The OFCCP prevailed at the administrative level and again before the U.S. District Court for the Western District of North Carolina. Trinity appealed to the Fourth Circuit, continuing to argue that the Asheville facility was not subject to OFCCP jurisdiction or affirmative action requirements because: (1) it is separate and distinct from activities related to Trinity's other facilities' government work; (2) it has an autonomous organization, function, and management; and (3) it makes its own employment decisions regarding hiring, firing, discipline, and pay increases. Essentially, Trinity argued that the waiver provision applied automatically to each autonomous facility, without the need to proceed through the waiver process provided in the Secretary of Labor's regulations.

In its ruling, the Fourth Circuit sided with the OFCCP, holding that the "waiver provisions make itplain that, in the absence of an express waiver or exemption, even facilities of a contractor that are not involved in work related to a government contract are subject to the reporting requirements." The Fourth Circuit recognized that the Deputy Assistant Secretary would have been well within her discretion to grant a waiver to the Asheville location; however, the court ruled that Trinity had no authority to unilaterally declare the Asheville facility "separate and distinct" and exempt from affirmative action requirements. Trinity's only options were either to comply with the requirements or obtain an express waiver or exemption from the Deputy Assistant Secretary.

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