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.

Continue Reading How current federal contractors are affected by 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.

Continue Reading OFCCP’s new hiring policies under attack

The United States Defense Department has published a final cybersecurity regulation concerning unclassified “controlled technical information.” See 78 Fed. Reg. 69,273 (Nov. 18, 2013) [pdf]. The objective of the regulation is to require contractors to maintain “adequate security” on unclassified information systems on which CTI may reside or transit and to implement detailed reporting requirements for “cyber incidents.” The final rule is narrower than the proposed regulation, which sought to safeguard unclassified DoD information generally.  See 76 Fed. Reg. 38,089 (June 29, 2011) [pdf].

Definition of CTI

The final rule includes a new DFARS provision (DFARS 204.7300) and a DFARS contract clause (DFARS 252.204.7012), which impose new security measures and reporting requirements on contractors and subcontractors whose work involves unclassified “controlled technical information resident on or transiting through contractor information systems.”

The rule broadly defines CTI as “technical information with military or space application that is subject to controls on the access, use, reproduction, modification, performance, display, release, disclosure, or dissemination.”  DFARS 204.7301.

The term “technical information” is further defined to mean “recorded information, regardless of the form or method of the recording, of a scientific or technical nature . . . .” See DFARS 252.227-7013. Examples of technical information include research and engineering data, engineering drawings and associated lists, specifications, standards, process sheets, manuals, technical reports, technical orders, catalog-item identifications, data sets, studies and analyses and related information, and computer software executable code and source code.

While this is a broad definition, comments on the new rule limit its application to information requiring controls pursuant to DoD Instruction 5230.24 [pdf] and DoD Directive 5230.25 [pdf]. Contractors should not have to devote resources simply to the task of determining whether information is CTI or not.

Continue Reading DoD’s new cybersecurity rules on unclassified “controlled technical information”

Under the OFCCP’s final rule announced on August 27, 2013, federal contractors and subcontractors that meet the applicability criteria will be required to meet new goals for hiring protected veterans and individuals with disabilities. For veterans, the new “benchmark” is based on the percentage of veterans in the civilian labor force (currently 8 percent) or another figure that reflects the contractor’s unique hiring circumstances. 78 Fed. Reg. 58613 (Sept. 24, 2013) [pdf].  For individuals with disabilities [pdf], the “placement goal” is 7 percent, measured by job groups. 78 Fed. Reg. 58681 (Sept. 24, 2013) [pdf].

In addition to requiring contractors to implement and keep records reflecting their compliance with the new percentage benchmarks and goals, here are some key features of the new rule:

  • Flowdown of the Equal Opportunity clause. The precise language and appearance of contract clauses that impose the affirmative action requirements on subcontractors are specified.
  • Job listing requirements. Contractors will be required to state specifically that they are equal opportunity employers of protected veterans and individuals with disabilities.
  • Invitation to self-identify. Job applicants must be given an opportunity to self-identify as a protected veteran or as an individual with disabilities before they are given an offer of employment. OFCCP intends to publish a form for use by contractors in making this inquiry. All employees must be given an opportunity to self-identify as an individual with disabilities within a year after the rule is effective and thereafter at least every five years.
  • Data collection. Contractors will be required to document and update quantitative data on the number of veterans and individuals with disabilities that apply for jobs and the number that are hired.
  • OFCCP access to records. Contractors are required to allow OFCCP broader access to records needed to verify their compliance. Records would have to be provided on-site or off-site and in any format that OFCCP requests.

The new requirements are expected to go into effect in March 2014. Contractors with a written affirmative action plan in place on the effective date of the new rules will have until the date of their next affirmative action plan year to implement the goal-setting and self-identification requirements.

For more information on the final rule and the specific requirements imposed on federal contractors and subcontractors, Hush Blackwell’s client update is available here. Background on OFCCP’s initiatives for individuals with disabilities is available in these earlier blog entries:

OFCCP’S push for a 7% disabled workforce (Dec. 27, 2011)

Morbid obesity as a disability under the ADA (Oct. 3, 2011)

Project Labor Agreements have become increasingly common on federal government construction projects, especially since the issuance of Executive Order 13502 [pdf] and the implementing regulations (FAR Subpart 22.5). These rules encourage the use of PLAs in connection with all “large-scale construction projects,” defined as a “project where the total cost to the Federal Government is $25 million or more.” Opposition to these rules focused on the potential for discriminatory impact on non-union contractors and employees. Implementation has not been without controversy either, with contentious litigation focusing on the discriminatory impact of PLAs on government projects.

Given the background, it is not surprising that we are seeing new legislation to provide federal agencies with more flexibility in the use of PLAs. See Government Neutrality in Contracting Act (H.R. 436 and S. 109) (introduced January 29, 2013). Proponents of the legislation cite to studies indicating that government-mandated PLAs increase the cost of construction projects between 12 percent and 18 percent.

Similar bills were introduced last year and did not make it out of committee.  We will see what happens in the current Congress.

The Department of Labor has announced that new regulations addressing Nondisplacement of Qualified Workers Under Service Contracts will go into effect on January 18, 2013. (See 77 Fed. Reg. 75780 (Dec. 21, 2012) [pdf].) DOL issued the final regulations in August 2012 after receiving comments on proposed rules published in June. Our comments on the impact of the proposed rules appear here.

The DOL’s action means that all Service Contract Act contracts over the simplified acquisition threshold awarded on or after January 18, 2013 will include a contract clause requiring prime contractors and subcontractors to make good faith offers of employment to SCA-covered employees employed under the predecessor contract.

Here are some of the highlights of the new regulations and the new contract clause:

Continue Reading New regulations on nondisplacement of qualified workers under Service Contracts

The FAR Council has issued final regulations that include changes to the interim regulations concerning executive compensation and first-tier subcontract reporting found in FAR Subpart 4.14. The newly revised FAR Subpart 4.14 [pdf] becomes effective on August 27, 2012.

Continue Reading The latest news on executive compensation and first-tier subcontract reporting requirements

The FAR Council has proposed a new FAR Subpart 22.12 addressing Executive Order 13495 and the Department of Labor’s final rule [pdf] on nondisplacement of qualified workers. The proposed amendments restate the substance of the Executive Order and the DOL rule, omitting only the procedures for investigation and enforcement that do not pertain directly to contract administration. A new mandatory contract clause will incorporate the nondisplacement policy into all contracts and subcontracts at any tier to furnish services in the United States that succeed contracts for the same or similar work in the same location (unless an exemption or waiver applies).

The new FAR language does not address the apparent conflict between the policy requirement for nondisplacement of qualified workers and the requirement to accept the terms of an existing collective bargaining agreement under the NLRB’s “perfectly clear” doctrine. The “perfectly clear” doctrine states that a successor employer is bound by the terms of a collective bargaining agreement when it is “perfectly clear” that the successor will retain all employees in the bargaining unit without changes to the terms and conditions of employment. This differs from a normal successor employer, which is required to bargain with the union but not to comply with the existing collective bargaining agreement. 

Continue Reading Collective bargaining under proposed FAR rules on nondisplacement of qualified workers

BriefcaseThe Contractor’s Perspective is up to three entries on the application of FAR 52.204-10, which requires some federal contractors and first-tier subcontractors to report the compensation of their top-five highest paid executives. Even though it has been almost two years since the requirement first appeared in the FAR, the topic still generates a lot of interest and a lot of questions. Here are answers to some of the questions we received in the executive compensation reporting segment of our recent webinar on Transparency in Government Contracting. We hope you find them useful.

Question: Does FAR 52.204-10 apply only to new contracts or does it also apply retroactively to existing contracts?

Answer: Even though the statutory requirement for reporting executive compensation became law in April 2008 when President Bush signed the Government Funding Transparency Act of 2008, the contractual requirement didn’t go into effect until July 8, 2010, when the FAR Councils published FAR 52.204-10 as an “interim rule.” According to the text of the interim rule, FAR 52.204-10 is required in all contracts over $25,000 that are awarded after July 8, 2010. It does not apply to contracts awarded before on or before July 8, 2010.

Continue Reading The latest on executive compensation reporting under FAR 52.204-10

The James Zadroga 9/11 Health and Compensation Act of 2010, Public Law No. 111-347 (Jan. 2, 2011) [pdf] establishes a program to provide health evaluations and medical treatment to emergency responders and other individuals directly impacted by the September 11, 2001 terrorist attacks on the World Trade Center. Funds for the program are to be generated by a two percent excise tax on any “specified Federal procurement payment” received by a “foreign person.” 26 U.S.C. § 5000C

In addition to imposing the tax, the Act requires federal agencies to make sure that taxes paid under this law are not “reimbursed.”

The FAR Councils published a proposed rule implementing this requirement on February 22, 2011. See 77 Fed. Reg. 10461 (Feb. 22, 2011). The proposed rule changes amend FAR 31.205-41 “to inform the Government and contractors that costs of the 2 percent tax are not allowable.” It also proposes changes to four FAR contract clauses “to provide that the costs for the 2 percent tax are not included in foreign fixed-price contracts . . . .”

Continue Reading Proposed limits on reimbursement of foreign contractor excise tax