Labor & Employment

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.

The line between “white collar crime” and “street crime” is often blurred as prosecutors and investigators deploy all of the tools at their disposal against white collar and regulatory offenses. Principal among these tools is the search warrant. While the execution of a lawfully-obtained search warrant cannot be stopped, a company’s reaction to the search and to the agents conducting it can have a significant impact on the course of a government investigation. A well-executed response may yield intelligence about the nature and scope of the investigation and may limit the amount of information the government obtains.

In this post, we present an overview of the search warrant process and offer some basic guidelines that may be used in preparing for and responding to a search warrant.

Understanding the element of surprise

Government investigators correctly see search warrants as their one chance to use the element of surprise. They make every effort to use it effectively. Long before a warrant is served, agents spend weeks or months on pre-search surveillance. They serve warrants simultaneously at all of a company’s offices. They conduct interviews of key executives at their residences early in the morning before attorneys are available. They use whistleblowers present during the execution of the warrant wired to record employee conversations of the employees. They interview employees on site before company attorneys can inform them of their rights or contact the lead prosecutor. They engage in surveillance of key individuals after the search is executed. They even search nearby dumpsters for evidence. Several weeks later, they may issue a grand jury subpoena requiring the company to produce email and text messages sent during and after the search.

Investigators have the process down to a science, while the company at the center of the investigation likely will be going through it for the first time. Preparation and training on the process will help level the playing field. Here are the five basic elements that should be addressed in an action plan for responding to a search warrant.

President Obama signed an Executive Order raising the minimum wage for employees of federal contractors on February 12, 2014. Our earlier entry on the issue discusses how a higher minimum wage will affect current contractors. It looks like more waiting will be required before the true impact will be known.

The Executive Order calls for the Secretary of Labor and the FAR Council to draft regulations and contract provisions implementing the new minimum wage and to publish them later this year. But the Executive Order also includes some useful guidance.

Here are the key takeaways—

As part of the Obama Administration’s push to raise the minimum wage, the President announced during his State of the Union speech that he intends to issue an Executive Order raising the minimum wage for workers on federal contracts to $10.10 per hour. We’ll wait for the Executive Order itself before offering specific guidance on its requirements, but it’s not too early for contractors to begin thinking about how this might impact their business. Here are a few things to consider—

1.  The new minimum wage could apply to some current contracts.

The Obama Administration has asserted that the wage increase will apply only to new federal contracts—i.e., those awarded after the effective date of the Order. But the regulations implementing the prevailing wage requirements could mean that the $10.10 minimum will also apply to some current contracts.

The McNamara-O’Hara Service Contract Act requires contractors and subcontractors performing service contracts to pay their workers not less than the locally prevailing wage or the amount paid by the predecessor contractor under a collective bargaining agreement. The Department of Labor prepares wage determinations establishing the minimum wages and fringe benefits based on surveys of local prevailing wages or existing collectively bargaining agreements.

FAR provisions implementing the Service Contract Act contemplate that the prevailing wages may change during the course of a service contract. Under FAR 22.1007, the contracting officer is required to obtain and incorporate a new wage determination for modifications that extend the term of an existing contract or make a change in the scope of work “whereby labor requirements are affected significantly.” FAR 22.1007(b). A new wage determination is also required on the annual or biennial anniversary date of multi-year service contracts. FAR 22.1007(c). Depending on how the Executive Order implementing the new minimum wage is worded, the wage determination applicable to contract modifications or to multi-year service contracts could require current contractors to pay the new $10.10 minimum wage.

New OFCCP rules amending the nondiscrimination and affirmative action provisions of the Vietnam Era Veterans Readjustment and Assistance Act and Section 503 of the Rehabilitation Act are expected to be effective March 24, 2014. OFCCP has published a set of forms that are to be used in implementing the new rules, which are available in this client alert from Husch Blackwell’s OFCCP compliance team.

As we have discussed in several earlier posts, the new rules represent an aggressive move by OFCCP. They impose significant new recordkeeping obligations on federal contractors and subcontractors. They set high placement goals and hiring benchmarks for veterans and individuals with disabilities. They authorize OFCCP to obtain more contractor information during compliance reviews.

One of the key issues with the new rules is that they require federal contractors and subcontractors to ask job applicants and current employees whether they are individuals with disabilities. Such questioning is normally prohibited by the Americans with Disabilities Act.  Needless to say, there has been a lot of opposition to the new OFCCP rules.