Last Friday, the U.S. Department of Labor, Wage and Hour Division (WHD) issued additional guidance to employers and workers about relief and protections offered by the Families First Coronavirus Response Act (FFCRA) which took effect on April 1, 2020. This new guidance provides detailed information on common issues that employers and workers face when responding to COVID-19 and its impact on wages and hours worked under the Fair Labor Standards Act and the Family and Medical Leave Act.
The WHD has included a comprehensive webinar explaining which employers are covered by the new law, which workers are eligible, and what protections and benefits the law provides. They have also added to the Questions and Answers section of their website, which addresses the frequently asked questions received to date. To view the webinar and other guidance materials, visit www.dol.gov/agencies/whd/pandemic.
Additionally, a growing list of compliance assistance materials has been updated and published on the WHD website, including a Fact Sheet for Employees and a Fact Sheet for Employers, available in both English and Spanish, Questions and Answers about posting requirements, and a Field Assistance Bulletin describing WHD’s 30-day non-enforcement policy. For Fact Sheets, visit https://www.dol.gov/agencies/whd/pandemic/ffcra-employee-paid-leave and https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave
Congress passed, and President Trump signed a $2 trillion coronavirus relief bill. The relief package builds on initial emergency response funding and the Families First Coronavirus Response Act, which provides paid family leave benefits, free coronavirus testing, enhanced Unemployment Insurance, and increases federal Medicaid funding to states.
The most recently adopted $2 trillion package touches the most impacted parts of the economy by providing targeted assistance to the most affected workers, industries, and communities.
The package includes:
Members of Congress are already discussing the need for a fourth relief bill to help rebuild. These discussions may address infrastructure spending.
The U.S. Department of Labor Wage and Hour Division published guidance to provide information on the family leave benefits under the Families First Coronavirus Response Act (FFCRA). The family leave benefits take effect April 1, 2020, and goes through December 31, 2020.
FFCRA was passed by Congress to assist the federal government’s response to the coronavirus outbreak. In addition to paid family leave benefits, the law also provides free coronavirus testing, enhances Unemployment Insurance, strengthens food security, and increases federal Medicaid funding to states.
FFCRA will provide employers with 500 employees or less with funding to allow for paid employee leave, either to care for the employee’s own health needs or to care for a family member. The purpose is to ensure employees do not have to choose between working when they are sick, which further spreads the coronavirus and lost wages.
The new law generally provides 80 hours of family and medical leave either at 1) at the employee’s regular rate of pay, because the employee is quarantined or experiencing COVID-19 symptoms and is seeking medical care or 2) at two-thirds of the employee’s regular rate of pay, because the employee is subject to government or health care provider quarantine, or to care for a child because of school or child care provider closure. Employers are entitled to dollar-for-dollar reimbursement through a tax credit for all qualifying wages paid as a result of FFCRA.
The information provided by the U.S. Department of Labor is provided in fact sheets for employees and employers, and FAQs. Links to the family leave information can be found at https://www.dol.gov/newsroom/releases/whd/whd20200324
Federal contractors play a vital role in helping agencies meet the needs of our citizens, including the critical response efforts to COVID-19. The Office of Management and Budget recently put out an Executive Memorandum regarding federal contractors and COVID-19 that we wanted to make sure you reviewed.
We are pleased to report that after submitting a letter to the governor this evening expressing the need for clarity around construction’s essential function during a crisis, the Newsom Administration updated their Executive Order.
Construction, including housing construction, is listed as an essential need during this crisis.
This clarification will allow our industry to continue working on critical infrastructure improvements essential during this time, including hospital construction and upgrades, building schools, and ensuring our roads and bridges are safe for first responders.
The National Labor Relations Board (NLRB) final rule for the joint-employer standard under the National Labor Relations Act is intended to provide well-defined criteria that encourage important collective bargaining and promotes the purpose of the Act. The final rule, which takes effect on April 27, 2020, aims to provide detailed guidance.
The standard established by the final rule restores the joint-employer status that the NLRB applied for several decades before the 2015 decision in Browning-Ferris. The joint-employer standard under the NLRA is essential because it provides the framework by which the NLRB will determine whether a business is an employer of employees directly employed by another employer altogether.
Under the final rule, an employer may be considered a joint employer only if the two employers share or co-determine the employees’ terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. Additionally, the final rule establishes key terms, such as what is considered “essential terms and conditions of employment.” Specifically, noting that the employer must also possess and exercises such substantial and direct and immediate control and that it warrants a finding that it “meaningfully affects matters relating to the employment relationship.”
During the announcement of the final rule, NLRB Chairman John F. Ring stated, that the final rule gives our joint-employer standard the clarity and stability that is essential to any successful labor-management relationship. Ring stated, “With the completion of today’s rule, employers will now have certainty in structuring their business relationships, employees will have a better understanding of their employment circumstances, and unions will have clarity regarding with whom they have a collective-bargaining relationship.”
The coronavirus epidemic, which began in January, has continued to exact a significant human and financial toll. As of the beginning of March, there have been more that 83,000 confirmed cases of persons infected with the virus and over more than 2,800 deaths, surpassing the death toll from the SARS (Severe Acute Respiratory Syndrome) virus in 2003. The World Health Organization has declared the coronavirus a global health emergency. Most of the cases initially occurred in the Chinese province of Hubei, which was quarantined. The virus has since spread to South Korea, Japan, Europe, and the Middle East, and is expected to begin gaining a foothold in the United States. A vaccine is not expected to be available to the public for many months.
How have the financial markets reacted? The US stock market, after an initial rally, has corrected at the fastest pace on record.
Looking back in time, markets generally shrugged off viruses so long as they were perceived as being under control. The SARS virus, after driving an initial selloff in 2003, was largely contained and the S&P 500 index rose nearly 30% for the year.
Are things different this time? The answer has been a resounding yes.
Why have the financial markets reacted so suddenly and violently to the coronavirus epidemic?
US stock prices had been at record highs and had been buoyed by expectations that the Federal Reserve will continue to lower interest rates. However, the coronavirus has more than tested the resilience of the stock market. For investors, portfolio diversification and strategic asset allocation remain important. Although the stock market will rebound at some point, market timing in terms of calling a bottom or “buying the dip” is likely to be futile in this uncertain and volatile environment.
NOTE: Information presented herein is for discussion and illustrative purposes only and is not a recommendation or an offer or solicitation to buy or sell any securities. Past performance is not a guarantee of future investment results.
Frederic P. Slade, CFA
Assistant Vice President and Senior Director, Investments
Pentegra Retirement Services
About Frederic Slade
Fred Slade has over 25 years of experience in the investment management and retirement services industries. He is Senior Director, Investments for Pentegra Retirement Services, a leading provider of retirement services to financial institutions and organizations nationwide, founded by the Federal Home Loan Bank System in 1943. Mr. Slade has managed over $1 billion in internal bond portfolios and provides analytics and strategy for Pentegra’s Defined Benefit and Defined Contribution Plans. Mr. Slade holds a Ph.D. in Economics from the University of Pennsylvania and a CFA, and has presented at a number of seminars and conferences.
2019 was a year of major developments in the US retirement industry. The signing of the SECURE Act at the end of December and state sponsored retirement programs such as CalSavers in California enacted significant changes to qualified retirement plans, as well as how individuals can save for retirement. Below, we will focus on the provisions in those pieces of legislation that most affect you as adopters of The Contractors Plan. Please note, we are awaiting additional guidance on some of the provisions before they can be applied.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law on December 20, 2019 as part of the Further Consolidated Appropriations Act. Most of the provisions in the act are effective in 2020 and require amendments to your plan. The act is over 300 pages in length, so we’ll try to narrow it down to the areas that we feel are the most important and impactful.
State Sponsored Mandatory Retirement Plans
Several states have passed legislation which encourages or mandates small businesses to either have an employer sponsored retirement plan or enroll their employees in a state run program. Many of these programs are still being developed. However, the common theme is that an employer can be exempt from the state sponsored programs if they offer a qualified retirement plan. The Contractors Plan meets these criteria.
CalSavers (CA), Illinois Secure Choice (IL), and OregonSaves (OR) have all enacted mandatory employee savings plans that employers must utilize unless they offer a qualified employer sponsored retirement plan.
Programs in Connecticut, Maryland, and New Jersey are still working on the specifics of their mandates and may be ready later in 2020 or 2021. Massachusetts’ program is for non-profit entities only. Vermont’s Green Mountain Secure Retirement Plan will be a MEP (multiple employer plan) and Washington state offers the Retirement Workplace of which participation is voluntary.
If you have questions about whether your state has passed or is thinking of passing similar legislation, please refer to your state’s treasury website.
A recent Armed Services Board of Contract Appeals’ (ASBCA) decision serves as a reminder of the complexity of successor obligations on Service Contract Act-covered contracts. The appeal involves Alutiiq Commercial Enterprises LLC (ACE), which filed a claim against the Air Force for $1.7 million resulting from a higher cost arising from a Collective Bargaining Agreement.
ACE received a contract to provide base civil engineering support services and operations management at Tinker AFB, OK. Before ACE, Tinker Support Services JV (TSS) had the contract; they also had a collective bargaining agreement.
ACE’s initial contract included a two-month phase-in, in which TSS continued to perform services, and five one-year option periods. During the transition, ACE and the union were negotiating a new CBA to replace the CBA between TSS and the union. Option I of the ACE contract was exercised, but the union was not notified.
The Federal Acquisition Regulation requires interested parties under a CBA to be notified at least 30 days in advance of an option being exercised. However, the Air Force claimed the notification requirements did not apply because ACE did not have service employees during the transition.
ACE and the union eventually reached an agreement, and ACE submitted a request for equitable adjustment, in part, requesting increased costs resulting from the new CBA. The Air Force denied the adjustment.
ACE appealed to the ASBCA, which held “the contracting officer was required to provide written definitive notice of the exercise of the option to both the incumbent contractor and the collective bargaining agent.” The ASBCA recognized that the phase-in period created an unusual situation.
While successor obligations under SCA are usually clear, this was a confusing situation for several reasons. This appeal decision should serve as a reminder to be aware of the many technical issues involved when an SCA-covered contract is awarded, or an option is exercised. This is a link to the decision; https://www.asbca.mil/Decisions/2020/61503%20Alutiiq%20Commercial%20Enterprises,%20LLC%2001.09.2020.pdf
Earlier this week, the Fiscal Year 2021 proposed budget submitted to Congress by the White House requests $1 trillion over 10-years in Direct Federal Investments to support the rebuilding and modernizing of the nation’s infrastructure. The proposal includes two major components that combined would focus on roads, bridges, improvements to existing rail and bus systems, and providing high-speed internet to rural areas.
The principal component is a request for $810 billion to support a 10-year reauthorization of surface transportation programs. Within this amount is $602 billion for highway infrastructure, $155 billion for transit infrastructure, $20 billion for traffic and motor carrier safety, $17 billion for rail infrastructure, $16 billion for Transportation Infrastructure Finance and Innovation Act (TIFIA) loans and Better Utilizing Investments to Leverage Development (BUILD) grants, and about $1 billion for pipeline and hazardous materials safety.
The second component requests $190 billion for a wide range of infrastructure sectors that include broadband and water. More specifically it proposes $60 Billion for a new Building Infrastructure Great grants program, $50 billion for a new Moving America’s Freight Safely and Efficiently program, $35 billion for a Bridge Rebuilding program, $25 billion for a new Revitalizing Rural America program, and $20 billion for a Transit State of Good Repair Sprint program.
The budget request also includes $6.5 billion for a Public Lands Infrastructure Fund to address the deferred maintenance backlog in national parks, forests, wildlife refuges, and other public lands, along with the Bureau of Indian Education schools.
Similar to the recently proposed House Democratic infrastructure plan, the Administration’s request would also require approval by the House, Senate, and White House. However, it serves as another indicator of the importance of addressing infrastructure.