On March 7, 2014, the Office of Federal Contractor Compliance Programs (OFCCP) issued Directive 2014-01, TRICARE Subcontractor Enforcement Activities concerning the affirmative action obligations of subcontractors of TRICARE—a health care program of the U.S. Department of Defense that pays for the medical benefits of active duty and retired military personnel and their families. Effective immediately, the directive establishes a five-year moratorium on the enforcement of affirmative action obligations of health care entities deemed by OFCCP to be TRICARE subcontractors, and provides for technical outreach and assistance to those entities about their obligations under the laws administered by OFCCP. In addition to the moratorium, OFCCP will close any open and scheduled compliance evaluations for TRICARE health care entities covered by the moratorium within 30 business days of the effective date of the directive.

OFCCP Not Conceding Jurisdiction

As the directive’s title implies, OFCCP is plainly not conceding the hotly-contested ultimate issue: Does OFCCP have jurisdiction over health care providers based solely on their participation in TRICARE managed care? In fact, the opposite is true. Throughout, the directive refers to such participants as “covered subcontractors.” Furthermore, the moratorium expressly does not apply to OFCCP investigations of complaints of discrimination against TRICARE participants under any of the statutes that the agency enforces, which, of course, require OFCCP jurisdiction. OFCCP’s retention of jurisdiction over complaints of discrimination is significant because applicable regulations impose significant recordkeeping obligations on covered subcontractors, allow OFCCP access to the contractor’s place of business, and establish a presumption that any records not preserved by the subcontractor would have been unfavorable to the subcontractor. (The relevant regulations can be found at 41 CFR 60-1.12(e), 60-1.43; 60-300.80(b)(c),  60-300.81, 60-741.80(b)(c), and 60-741.81.)

The outreach efforts described in the directive—essentially, compliance assistance for presumed covered contractors—also reinforce the agency’s stance on jurisdiction. OFCCP will spend the next five years training TRICARE subcontractors on how to develop affirmative action programs, conducting regional and national webinars that cover OFCCP’s legal authority, and convening listening sessions to learn about unique issues facing TRICARE subcontractors.

Who is covered?

The directive states:

The five-year moratorium applies to all health care entities that participate in TRICARE as subcontractors under a prime contract between Department of Defense (DOD) TRICARE Management Activity and one of the prime managed-care contractors, including:

i.            Health-care entities that participate in TRICARE only as subcontractors;

ii.           Health-care entities that participate in TRICARE as subcontractors and as subcontractors under any Medicare program;

iii.          Health-care entities that participate in TRICARE as subcontractors and as subcontractors under the Federal Employee Health Benefits Program (FEHBP); and

iv.           Health-care entities that participate in TRICARE as subcontractors and as subcontractors under any other federal health program.

The directive does not apply to health care entities that participate in TRICARE managed-care contracts and that are also holders of prime contracts with an agency of the federal government, such as the U.S. Department of Veterans Affairs. The moratorium also does not extend to TRICARE subcontractors that hold separate, independent non-health-care-related federal subcontracts.

Open Questions

The directive makes clear that those health care providers that participate in both TRICARE and FEHBP as subcontractors are covered by the moratorium. The directive gives no guidance regarding those health care providers that only participate in FEHBP. Furthermore, the inclusion of Medicare in the moratorium suggests that OFCCP may assert jurisdiction over health care providers receiving reimbursement from Medicare Advantage Plans (Part C) or Medicare prescription drug plans (Part D) when the moratorium is lifted.

Resolution of Fundamental Issue Delayed

The directive follows up on a letter Secretary of Labor Thomas E. Perez sent to congressional leaders on March 11, 2014, announcing OFCCP’s agreement to this moratorium (as discussed in our March 2014 post, “OFCCP Agrees to 5-Year Enforcement Moratorium for TRICARE Providers”). There have been more than seven years of agency proceedings with a Florida hospital involving the application of the regulatory definition of “subcontract” to participants in TRICARE managed-care contracts. During this period, the Department of Labor’s Administrative Review Board issued multiple conflicting decisions on OFCCP’s jurisdiction over these TRICARE participants, and Congress enacted section 715 of the 2012 National Defense Authorization Act that had the express purpose of excluding such managed-care contracts from the definition of federal contracts. Nonetheless, the directive states, “Recent events have brought to OFCCP’s attention that there has been a difference in understanding between the Department of Labor and some entities affiliated with the TRICARE community, as to who is a covered subcontractor under the laws enforced by OFCCP.”

In fact, there is much more than a “difference in understanding.”  Congressional leaders and health care industry advocates argue that health care providers are simply not federal subcontractors based solely on their participation in TRICARE managed-care contracts. This fundamental issue is very much unresolved. Furthermore, after Secretary Perez’s letter to Congress, OFCCP withdrew the complaint in the long-standing Florida litigation, thus eliminating the possibility of a judicial determination adverse to OFCCP’s position. Thus, absent a change in policy or additional legislation, the directive simply preserves and postpones OFCCP’s assertion of jurisdiction over TRICARE providers.


Because of the directive’s limited scope and duration, the directive is nothing more than a delay of game. OFCCP is poised to assert jurisdiction and resume enforcement efforts once the moratorium is lifted. As a result, health care providers should carefully consider whether they want to participate in TRICARE managed-care contracts. If so, they must either prepare to come into compliance with OFCCP’s regulations, or prepare for the possibility of burdensome litigation with OFCCP.

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The experienced attorneys in our OFCCP Compliance, Government Contracting, and Reporting Practice Group advise and defend federal contractors and subcontractors on jurisdictional, compliance, and enforcement issues relevant to government contracting, including those involving the Office of Federal Contract Compliance Programs (OFCCP).

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