The Government Accountability Office released Federal Contracting: Actions Needed to Improve Department of Labor’s Enforcement of Service Worker Wage Protections (GAO-21-11). This article is Part I, and it covers the background and summarizes enforcement trends. Part II will provide more details on enforcement results such as type of violation, work performed, and agencies involved.
The GAO explained that the U.S. Department of Labor (DOL) conducted more than 5,000 Service Contract Act investigations between 2014 and 2019. These investigations found violations 68 percent of the time, which resulted in $244 million of back wage payments, and 60 debarments.
The purpose of GAO’s report was to look at DOL data about SCA enforcement cases, what challenges DOL faces in enforcing the SCA, and contracting agency implementation of the SCA.
DOL can initiate SCA enforcement for various reasons, including employee, agency, union, or other interested party complaints and directed investigations created by DOL. About 60 percent of cases conducted during the period studied were due to a complaint, and the rest were DOL directed. However, the number of investigations resulting from complaints remained steady during the study period; however, the number of agency-directed investigations increased by 18 percent.
Investigations are carried out across five regions by about 760 investigators. The GAO found that SCA investigations comprise about three percent of DOL’s Wage and Hour Division workload. Cases are unevenly divided among the five regions; about one-third were conducted in the Northeast region, and one-fifth were conducted in the Southwest region.
Part II will provide more information on types of violation, work performed, and agencies involved.
As a follow-on to Executive Order 13950, “Combating Race and Sex Stereotyping,” the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) published a Request for Information (RFI) on October 22, 2020, seeking public comments.
OFCCP’s RFI invites the public to provide information or materials concerning federal contractors’ workplace training that involves stereotyping or scapegoating. The RFI restates many of the Executive Order’s principles and offers methods to report potential violations.
Comments are due on or before December 1, 2020. Click here to see the Federal Register announcement.
On September 22, 2020, the White House issued Executive Order 13950, “Combating Race and Sex Stereotyping.” The sweeping Executive Order states, “it shall be the policy of the United States not to promote race or sex stereotyping or scapegoating” through workforce training.
The Executive Order addresses training for the military, federal employees, grant recipients, and federal contractors. It could have a significant impact on federal contractor training programs.
The Executive Order requires that federal contracts include provisions that
The U.S. Department of Labor’s Office of Federal Contract Compliance Program (OFCCP) is directed to establish a hotline and investigate complaints. OFCCP has already posted FAQs to address some of the questions arising out of the Executive Order, including what constitutes race and sex stereotyping and scapegoating, and what are examples of race and sex stereotyping and scapegoating. Link to OFCCP’s FAQ; https://www.dol.gov/agencies/ofccp/faqs/executive-order-13950
OFCCP published a Request for Information on October 22, 2020, to gather information from federal contractors, subcontractors, and employees (https://www.federalregister.gov/documents/2020/10/22/2020-23339/request-for-information-race-and-sex-stereotyping-and-scapegoating). The White House has indicated, however, that it plans to deviate from standard rulemaking and implement the Executive Order by November 21 without a public comment period.
It is unclear how this Executive Order will apply to state and local contracts that result from federal grants. Agencies are directed to “identify programs for which the agency may, as a condition of receiving such a grant, require the recipient to certify that it will not use Federal funds to promote the concepts.”
It is also not clear if this will be automatically applied to existing contracts or if contract clauses will be applied. Additional information will become available by November 21. You can review the Executive Order at https://www.federalregister.gov/documents/2020/09/28/2020-21534/combating-race-and-sex-stereotyping
We will provide more information as it becomes available.
The U.S. Census Bureau announced construction spending for August 2020 was at a seasonally adjusted annual rate of $ 1,413 billion, 1.4% above the revised estimate in July. Compared to 2019, August 2020 total spending is up 2.5%. Also, during the first eight months of 2020, construction spending amounted to $ 928 billion, 4.2% above the $890 billion for the same period in 2019.
While private construction spending in August was $ 1,061 billion, 1.9% above the revised July estimate of $ 1,042 billion, public construction spending was $351 billion, 0.1% above last month’s revised estimates of $351 billion.
Compared to August 2019, public construction spending was up 5.5%. The most significant contributor on a percentage basis to the increase in public construction for the year is public safety, which was $15 billion, 41% above the $11 billion for the same period in 2019. Additionally, contributing to public spending growth from the previous year is highway construction at a seasonally adjusted annual rate of $101 billion, up 7.2% in 2019. Highway construction also grew 1.9% from the previous month.
More information may be found at:
The U.S. Department of Labor, Wage and Hour Division, published a Notice of proposed rulemaking and request for comments regarding the revision of its interpretation of independent contractor status under the Fair Labor Standards Act (FLSA).
According to the Department of Labor, the purpose of the revision is “to promote certainty for stakeholders, reduce litigation, and encourage innovation in the economy.”
The FLSA requires employers to pay covered employees the federal minimum wage for every hour worked, overtime pay for every hour worked over 40 in a workweek, and maintain employment records. Someone who works for a company as an independent contractor is not subject to the FLSA.
The Department of Labor proposes creating a new section in the Code of Federal Regulations, “setting forth its interpretation of the FLSA as relevant to the question whether workers are ‘employees’ or are independent contractors under the Act.” According to the notice, “The proposed regulations would adopt general interpretations to which courts and the Department have long adhered.”
Comments are due no later than October 26, 2020. This is a link to the notice; https://link.zixcentral.com/u/ff5afbca/Fq5Sv8AI6xGIO665hnsoMg?u=https%3A%2F%2Fwww.govinfo.gov%2Fcontent%2Fpkg%2FFR-2020-09-25%2Fpdf%2F2020-21018.pdf
The Department of Labor’s Wage and Hour Division (WHD) announced effective January 1, 2021, the new minimum wage for federal government contractors will be $10.95/hour as instructed by Executive Order 13658 (the Order), Establishing a Minimum Wage for Contractors.
The Order, adopted in 2014, raised the hourly minimum wage for federal contractor employees beginning on January 1, 2015, with annual adjustments after that. Each year, the WHD conducts an assessment to determine the yearly inflation-based increases to the minimum wage rate. The 2021 rate is an increase of $0.15/hour over the 2020 minimum wage.
The minimum wage for federal contractors applies to four categories of contractual agreements; service contracts covered by the Service Contract Act, construction contracts covered by the Davis-Bacon Act, concession contracts, and contracts connected with federal land use or property under which services are offered. However, any fringe benefits paid to workers may not count towards the wage rate.
The U.S. District Court for Southern District of New York struck down major portions of the U.S. Department of Labor’s (DOL) joint-employer final rule, which was issued earlier this year. The court found DOL’s new interpretation for vertical joint employer liability conflicts with the Fair Labor Standards Act (FLSA), and the DOL violated the Administrative Procedure Act’s (APA’s) rulemaking requirements.
In the joint-employer final rule, DOL revised the interpretation of joint-employer status under the FSLA to promote certainty for employers and employees and uniformity among court decisions, and to reduce litigation. The decision found that the update narrowed the definition of joint-employer, ignoring the FLSA’s broad definitions making it in direct conflict with FLSA.
Additionally, the DOL failed to adequately justify its departure from its prior interpretations, which violates the Administrative Procedure Act (APA). The APA requires agencies to ‘examine the relevant data and articulate a satisfactory explanation for its action, including a rational connection between the facts found and the choice made.
The DOL is expected to appeal this decision, but regardless of the next steps, employers in potential vertical joint employment scenarios should be aware of the decision and prepared to make changes to workforce and staffing arrangements in support of the final rule.
The U.S. Department of Labor’s Wage and Hour Division (WHD) issued Field Assistance Bulletin 2020-5 to clarify an employer’s obligation under the Fair Labor Standards Act (FLSA), to track compensable hours employees work while away from worksites or premises controlled by the employer. This guidance responds to the unprecedented number of telework or remote work arrangements that arose in response to COVID-19.
The guidance reaffirms that employers are obligated to compensate their employees for all hours worked, including work not requested but permitted, and applies equally to work performed at home. Therefore, if the employer has reason to believe that an employee is performing work, the time must be counted as compensable hours worked.
Employers must pay employees the same hourly rate or salary regardless of where the work is taking place; unless the employer has a union contract or other employment contract. Additionally, when the Service Contract Act (SCA) or other state laws regulating the payment of wages also apply, nothing in the guidance nullifies or overrides any higher standards provided by such laws.
The guidance also emphasizes the employer’s obligation to track all compensable hours worked by employees, which could be satisfied by providing a reasonable reporting method that also captures the non-scheduled time and even hours not requested by the employer. Keep in mind that if an employee fails to report unscheduled hours worked through such a method, the employer is then not in violation of the FLSA as the employer has no reason to know about those hours.
The WHD intended this guidance as another tool to help ensure employees receive the wages they have earned and that employers have the means to manage remote workers. This is a link to the Bulletin; https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/fab_2020_5.pdf
On August 3, 2020, the Wage and Hour Division of the U.S. Department of Labor (DOL) released additional Q&A information regarding COVID-Related paid sick leave provided under the Families First Coronavirus Response Act for employees working under the McNamara- O’Hara Service Contract Act (SCA) and the Davis-Bacon Act (DBA).
The DOL’s question and answer information provides clarification to employers working on government contracts on the appropriate use of fringe benefits. Specifically, the DOL clarifies that an employer generally should not include the SCA or DBA health and welfare fringe benefit rate when determining the “regular rate” of pay for purposes of the FFCRA paid leave. This is true even when the employer has opted to pay the fringe amount as cash in lieu of a benefit.
To provide some background, the SCA and DBA include a fringe benefit payment obligation for each wage determination. A contractor must generally meet this benefit payment requirement for each hour worked by an employee working on the government contract. The fringe benefit obligation also applies to hours that an employee takes for vacation, sick leave, and holiday hours up to a maximum of 40-hours per week or 2,080 hours per year on each contract. Separately, Executive Order 13706 (EO 13706) added a requirement for SCA and DBA contractors to provide up to seven (7) days of paid sick leave every year for new and replacement contracts on and after January 1, 2017.
The Families First Coronavirus Response Act (FFCRA), which became law on March 18, 2020, includes a temporary requirement for employers to provide up to 14 days of paid sick leave under certain situations due to an employee’s need to take leave from work due to COVID-19. The amount to be paid the employee for this expanded paid family and medical leave is based on the employee’s ‘regular rate’ for up to the fourteen (14) day period.
For purposes of the FFCRA, an employee’s ‘regular rate’ is the higher of: the employee’s regular rate of pay, the federal minimum wage in effect under the Fair Labor Standards Act, or the applicable State or local minimum wage. Under this recent DOL guidance, an employer need not include the hourly fringe benefit obligation when determining an employee’s regular rate’ for FFCRA-paid leave.
It is important to note that an employer that provides health insurance to the employee must maintain the employee’s health insurance while the employee is taking FFCRA paid leave as if the employee was working. If an employee takes the FFCRA-expanded leave concurrently with other leave provided under the SCA, DBA, or EO 13706, then the health and welfare fringe benefit rate or the monetary equivalent, would apply to the hours taken by the employee.
The U.S. Department of Labor’s Wage and Hour Division (WHD) will offer virtual compliance assistance seminars for contracting agencies, contractors, unions, workers, and other stakeholders to provide information about the legal requirements to pay prevailing wages on federally funded construction and service contracts.
The training is the latest in WHD’s ongoing efforts to increase awareness and improve compliance with federal prevailing wage requirements among employers performing work on federally funded construction or services contracts. The seminars will include video training on a variety of Davis-Bacon Act and Service Contract Act topics that will be provided to participants after registration for self-paced study before live, interactive question and answer sessions. WHD experts will field questions during these live sessions, and lead discussions about topics participants raise.
WHD offers the live portions of these seminars at the following dates and times:
Davis-Bacon Act Virtual Prevailing Wage Seminar
Service Contract Act Virtual Prevailing Wage Seminar
While seminar attendance is free, registration is required.