The FAR Council and the Department of Labor have published the final versions of their respective final rule and DOL guidance implementing the President’s July 2014 Executive Order entitled “Fair Pay and Safe Workplaces”—EO 13673.

Detractors frequently refer to EO 13673 as the “Blacklisting” or “Bad Actors” Executive Order. The order and the new regulations purport to promote efficiency in government procurement by ensuring that federal agencies contract only with “responsible” contractors that comply with federal and state workplace protection laws.

This objective is already a well-established requirement of the government’s procurement rules. The regulations impose additional administrative burdens on current and future contractors, adding an element of uncertainty to future contract award decisions, but only achieving marginal improvements in workplace law compliance.

A new Final Rule addressing sex discrimination in employment by federal contractors and subcontractors will go into effect on August 15, 2016. The new Final Rule was published by DOL’s Office of Federal Contract Compliance Programs. It implements Executive Order 11246, which has been essentially unchanged since it was first issued in 1970. OFCCP’s new rules and guidelines include several significant changes from the 1970 version, but the changes are primarily intended to update DOL requirements so that they conform to well-established federal caselaw and other more recently enacted federal requirements.

Who is affected?

OFCCP’s new Final Rule on sex discrimination applies to any business or organization that (1) holds a single Federal contract, subcontract, or federally assisted construction contract in excess of $10,000; (2) has Federal contracts or subcontracts that, combined, total in excess of $10,000 in any 12-month period; or (3) 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.

What does the Final Rule address?

As they have for many years, DOL’s regulations require contractors to ensure nondiscrimination in employment on the basis of sex and to take affirmative action to ensure that they treat applicants and employees without regard to their sex. The new Final Rule is much more specific.

The Department of Labor has issued its final rule amending the overtime and exemption regulations of the Fair Labor Standards Act. Although the final rule differs in some ways from the July 2015 proposed rule, it will have significant administrative and budgetary impacts on most employers. The new rule becomes effective December 1, 2016, and will update automatically every three years thereafter.

We have previously written about the Department of Labor’s effort to expand the scope of its regulatory and enforcement jurisdiction over government contractors against the wishes of Congress and even fellow federal agencies. The United States Court of Appeals for the District of Columbia struck down an attempt by the DOL to significantly expand the Davis-Bacon Act to apply to the construction of a Public-Private Partnership project. The Davis-Bacon Act requires that contractors on federal and DC government construction projects pay prevailing wages and fringe benefits to the workers on such projects. DOL sought to apply the Act to CityCenterDC, which is a mixed-use development on the site of the DC Convention Center. This project includes 60 retail stores, various private offices, approximately 700 residential units, and a 370-room luxury hotel. 

On February 25, 2016, the Department of Labor proposed regulations requiring many government contractors to provide up to seven days of paid sick leave to employees. The proposal seeks to implement Executive Order 13706, which was
issued by President Obama on Labor Day last year. DOL estimates that the new regulations will provide paid sick leave to nearly 437,000 government contractor employees who had none before.

Here is a look at DOL’s proposal—

The basics

Application:  Government contractors and subcontractors working under covered contracts.

Covered Contracts:  (1) Davis-Bacon Act contracts; (2) Service Contract Act contracts; (3) concessions contracts; and (4) contracts offering services under leases and licenses associated with Federal property.

Affected Employees:  Employees performing work on covered contracts whose wages are governed by the DBA, SCA, or FLSA, as well as exempt employees.

Absences Covered:  Those absences resulting from:

  • Their own illnesses or other physical or mental health care needs, including preventive care.
  • The care of a family member or loved one who is ill or needs healthcare, including preventive care.
  • Purposes resulting from being the victim of domestic violence, sexual assault or stalking, or to assist a family member or loved one who is such a victim.

No Credit:  Paid sick leave under the proposed regulations would not count towards meeting prevailing wage or fringe benefit obligations under the DBA or SCA.

Enforcement:  Complaints of non-compliance would be filed with the DOL’s Wage and Hour Division. There is an investigatory process and an administrative process for resolving disputed questions of fact and law. Contractors found to have violated the regulations may be subject to the withholding of funds, damages, and debarment.

Effective Date:  New or replacement contracts solicited by or otherwise awarded on or after January 1, 2017.

Most court cases filed on the heels of a Department of Labor investigation focus on misconduct by a contractor. In that respect, the Fifth Circuit’s recent decision in Gate Guard Services, L.P. v. Perez, 792 F.3d 554 (5th Cir. 2015), is unusual. The case is the result of an action by a contractor challenging misconduct by the Department of Labor. According to the decision, DOL investigators and attorneys acted unethically, frivolously, and in bad faith. Ultimately, DOL was forced to close the investigation by making a $1.5 million payment to the contractor.

What happened? Gate Guard provides gate attendants at remote drilling sites for oilfield operators. The gate attendants remain at the drilling sites and record the license plates of vehicles entering and leaving the site. Because many locations are isolated, attendants often live on site and Gate Guard hires service technicians to deliver supplies to them. Gate Guard considers attendants to be independent contractors and pays them between $100 and $175 per day.

In July 2010, DOL investigator David Rapstine received a tip that Gate Guard had misclassified its gate attendants as independent contractors instead of employees. If that were true, Gate Guard would be violating the Fair Labor Standards Act by not paying overtime and by not keeping detailed time records. Rapstine had little training or experience in contractor misclassification cases, but he decided to open an investigation. 

Criminal charges for minimum wage violations are certainly rare. But the November 2015 indictment of electrical contractor Marcus Butler shows that they are possible. Mr. Butler faces jail time and heavy fines for allegedly making false certifications regarding $126,514 in Davis-Bacon Act wages on three HUD multi-family housing projects.

Given the rarity of criminal indictments for wage-and-hour violations, I infer that Mr. Butler’s alleged conduct was much worse than simply miscalculating the prevailing wage or losing track of some payroll records. But there is nothing in the indictment that would reveal the underlying aggravating factors that motivated it. The Government asserts simply that Mr. Butler participated in a “scheme” and that he “knowingly and willfully” overstated wages and benefits on his 61 separate certified payrolls (DOL Form WH-347).

It will probably be some time before we see whether this is case is the result of overreaching conduct by DOL and government attorneys (like another recent DOL case) or the application of the new Justice Department policy set forth in the Yates Memorandum on Individual Accountability for Corporate Wrongdoing. This new policy will almost certainly increase the number of criminal charges arising from ordinary non-compliance and administrative oversight. Husch Blackwell’s client alert on the Yates Memorandum is available here.

Either way, now is the right time for federal contractors to take on the task of reviewing and updating their own HR policies and practices.

Submitted by Husch Blackwell Associate Kayt Kopen

Federal contractors will soon need to update their Equal Employment Opportunity policies and their Affirmative Action Plans. According to an announcement by DOL’s Office of Federal Contract Compliance Programs, federal contracts and subcontracts awarded or modified after April 8, 2015, must include new contract language prohibiting discrimination

Retaliating against an employee for reporting safety violations, the U.S. Postal Service asserted baseless terrorism charges against him. As a result, the employee was dismissed from his job, arrested, detained, harassed, criminally charged with committing acts of terrorism, and subjected to an extended campaign of public disparagement. That sounds like the exaggerated ranting of a would-be whistleblower seeking to cash in on a big pay day. But it’s not. These are the allegations made by the U.S. Department of Labor in a lawsuit it filed against its sister agency, the U.S. Postal Service, in an action filed in the U.S. District Court for the Eastern District of Missouri, Eastern Division, Case No. 4:14-cv-1233.