understanding how the department of labor...

Understanding How the Department of Labor Impacts Your GovernmentwideContract

Jennifer Flickinger, Partner Baker Tilly

Trina Fairley Barlow, Partner Crowell & Moring

Agenda

> SCA

> Overview

> Compliance Requirements

> Issues & Best Practices

> SCA Enforcement

> MAS Contracting

> Davis Bacon

> Equal Opportunity Compliance

> Regulations

> Enforcement Environment

> Internet Applications

> Best Practices

> Executive Orders

> Minimum Wage

> Compensation Data Collection

> Non-Disclosure of Compensation Data

> Affirmative Action

> Fair Pay and Safe Workplaces

Service Contract Act (SCA)

> The McNamara-O’Hara Service Contract Act of 1965 (SCA) requires contractors and subcontractors to pay their service employees no less than the minimum monetary wages and fringe benefits found prevailing in a particular locality in accordance with the applicable wage determination or collective bargaining agreement.

> The SCA applies to contracts:

- in excess of $2,500 with Federal Government

- performed in the U.S., its territories and possessions

- principally for services performed through the use of service employees

> SCA coverage is triggered via inclusion of the SCA clause (FAR 52.222-41) and one or more incorporated Wage Determinations (“WDs”)

Act intended to remove wages as a bidding factor in the competition of federal service contracts and to provide wage protection to service employees.

Overview of the Act: Covered Contracts

> Concessionaires

> Landscaping

> Surveying & mapping

> Guard and security guard services

> Demo & dismantling of government property

> Scheduling and routine maintenance building services agreement

> Contracts for intermittent labor services

> Services and items provided under a single contract

> Contracts with hotels for meal and lodging

> Nursing home services

> Information Technology Services

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Overview of the Act: Exempt Contracts

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>SCA does not apply to all service contracts– Contracts for professional services performed almost exclusively by employees

who meet the exemption under 29 CFR Part 541

– Commercial contracts (maintenance, repairing, etc.) specifically exempted by FAR 22.1003. This exemption does not apply to contracts for commercial items

– Employment contracts providing direct service to a federal agency

– Contracts for leasing of space

– Public Utility Services

– Federally assisted contracts for services entered into by state governments (Medicaid, Medicare programs)

– Work covered by Walsh-Healy Public Contracts Act (Supply or manufacturing)

Overview of the Act: Employee Coverage

> SCA coverage applies to “service employees” – historically non-exempt, “blue collar” workers

– All contract employees may not be covered

> Recent DOL actions highlight a shift to include more professional services under SCA

> Determination of coverage is primarily based on job function, secondarily salary tests

> SCA does not apply to contracts where non-exempt employees are a minor factor in contract performance (29 CFR 4.113(a)(3))

– DOL applies a 10 – 20% range

Overview of the Act: Exempted Employees>Service Contract Act does not apply to the following classes of

employees as defined by 29 CFR Part 541:– Executives/Supervisors: salaried (minimum $455/wk), supervise two or more

workers, exercise authority, and spend most of their time doing so

– Administrative/Managers: salaried, make decisions of importance and significance using independent judgment and discretion, and spend most of their time doing so

– Professionals: salaried or fee-based; perform work primarily requiring advanced knowledge, predominantly intellectual, customarily acquired by a prolonged course of specialized intellectual instruction (e.g., college-level); and exercise independent judgment and discretion

– Primary Duties Test applicable at least for now: Means you must look at all the “facts and circumstances,” no bright-line rule

– The “salary basis” test is going to change soon! See Proposed revisions to the Fair Labor Standards Act

Overview of the Act: Exempted Employees

>Service Contract Act also does not apply to the following classes of employees:

– Teachers: primary duty of teaching, instruction, no salary requirement, work for an educational institution

– Computer employees: perform higher-level duties (e.g., design, development work with greater responsibilities), paid NLT $27.63/hr or $455/wk

– Creative professionals: Salaried ($455/wk) primary duty is the performance of work requiring imagination, invention or originality in a recognized field of artistic or creative endeavor

– Outside salesperson: Primary duty is making sales or obtaining orders or contracts for services or for the use of facilities which a consideration will be paid by the client or customer; customarily engaged away from employer's place of business

Applicability of SCA

> Contracting Officers (not contractors) are required to determine if SCA applies– Contracting officer’s responsibility to insert SCA clauses and

WDs into the solicitation and contract

> DOL has sole and final authority under SCA to determine applicability

Wage Determination (WD)

> Types– Area (Standard) WDs

• Generic issued per locality, reflect locally prevailing wages

• May list over 300 classifications

– Non-Standard WDs• Reflect wages in a particular industry

– SCA 4(c)-covered CBAs supersede any Standard or Non-Standard WD

– Contract Specific

Wage Determination (WD)

• Wages and H&W are stipulated as hourly rates

• Vacation and Holiday require minimum weeks and days, respectively as set forth in WD

• H&W payment requirements are different between standard odd numbered WDs and even WDs

– Odd WDs require H&W payment “per employee” for all hours compensated

– Even WDs require payment by “average cost” for all hours worked by service employees

• Employees must be notified of WDs applicable to their projects

• Sets the minimum wages and fringe benefits for job classifications for a specific geographical region. ALL four must meet minimum.

• Minimum hourly Wage for the job position

• Minimum hourly Health & Welfare (H&W) Benefit

• Minimum annual Vacation Benefit

• Minimum Holiday Benefit

Wage Determination

(WD)

Compliance Requirements: Wages

>Wages may be paid by hourly rate(s), salary, piecework, bonuses, or any combination of these

>Regardless of pay method, employer must maintain a record of all hours worked– And ensure that the proper SCA rate is paid for all covered hours in each

week

– The difference between SCA and DBA is that DBA requires certified payroll

>Pay records must separately report wages paid vs. fringe benefits paid in cash

Compliance Requirements: Health & Welfare

> Under both types of Standard WDs, employers may comply with the required benefits by providing

– Cash payment for the H&W rate

– Or providing bona fide benefits to the workers

– Or paying a combination of cash and bona fide benefits

– Benefits must be provided to part-time and temporary employees on a prorata basis. No exceptions.

> “Bona Fide Benefits” are defined as:

– “a legally-enforceable obligation, communicated in writing to workers, providing payment of benefits under a definite formula for determining amount of contribution and benefits provided, and paid by the employer irrevocably to an independent trustee or third-party administrator pursuant to a fund or plan”

– Reference 29 CFR Part 4, Sec. 4.171

Compliance Requirements: Health & Welfare

> Examples of typical H&W benefit plans are

– Life, disability, health, dental, or vision-care insurance

– Sick leave

– Employer contributions to 401(k) or other retirement savings plans

– Vacation or holiday benefits (in excess of WD requirements)

– Jury duty, bereavement leave

> Examples of benefit plans that are not considered bona fide:

– Unfunded, self-insured fringe benefit plans under which contractors make “out of pocket” payments as expenses arise, rather than making irrevocable contributions – unless DOL approval is obtained

– Benefits required by law

– Payments for conveniences considered to be “business expenses” of the contractor (e.g., relocation expenses)

Compliance Requirements: Holiday

> Wage Determinations specify the number of holidays owed– WD lists specific holidays to be received (e.g., New Year’s, July 4th, etc.)

– Employer may comply by providing a different designated holiday than listed on the WD, if communicated to employees in writing

> Employee is entitled to holiday pay if they work in the week a holiday occurs– Part-time employee is eligible for holiday pay commensurate with their regularly scheduled

hours in the week the holiday occurs

> Employee is not entitled to holiday pay if holiday is not named in WD (e.g., government closes by presidential proclamation)

> Cannot enforce a “use or lose” policy

Compliance Requirements: Vacation

>WDs stipulate “x Wks after x Years of Service” – Employee is vested on his/her anniversary date

– Years of Service is calculated from employee’s service date

– No use or lose. Vested balances must be discharged at next anniversary date, completion of the contract or when employee terminates employment

– May require annual reconciliation if vacation is accrued

>Years of Service is determined by total length of time an employee

– Works continuously for present employer

– Works continuously for predecessor contractors performing similar services at the same facility

SCA Compliance Issues

> Compliance with SCA seems straightforward at face value, but implementation is far more complex

> Contractors face a host of SCA compliance challenges such as:

– Making determinations on SCA coverage of a given contract

– Navigating simultaneous compliance with other labor laws (e.g., Davis Bacon Act)

– Identifying covered personnel

– Properly mapping internal labor categories to Wage Determinations

– Recognizing positions exempt from SCA (e.g., professional employees)

– Calculating fringe benefits in compliance with the regulations

Common SCA Pitfalls / Issues>Contracts contain the SCA clause, but no incorporated WDs

– DOL can retroactively apply SCA coverage and require contractor to pay back wages and benefits

– Contractor can subsequently file for an equitable adjustment

>SCA applicability is established at the IDIQ level, but only the TO is reviewed

>Contractors selecting a WD on their own via www.WDOL.gov

>Complying with a newly published WD before an incorporation

>Employees are performing more than one job, but timekeeping data can’t illustrate when, and to what extent, that is happening

– DOL requires the contractor to pay the highest wage rate of all the functions the employee is performing

Common SCA Pitfalls / Issues

>Part time or temporary employees are mistakenly ignored during the assessment of SCA coverage

>Pay stubs commingle wage and benefit amounts

>Benefits are included that are not “bona-fide”

>The SCA poster and WD, including any conformance actions, are not posted at the site or made available to employees

>Lack of communication between departments

WHD Best Practices

> Include the right people- At a minimum, contracts, finance, legal, human resources, project

management, and accounting

> Train key personnel- Need to understand the key areas of risk

> Implement internal controls- Forms, templates, and automated system controls

> Clearly communicate job responsibilities- Employees should understand how they have been classified

SCA Enforcement

> DOL has sole enforcement authority

> Investigation procedures– Complaints are confidential

– DOL will make information and records requests

– Confirm that contract contains SCA clauses and appropriate WDs

– Maintain log of contact with DOL during investigation

SCA Enforcement

> Potential Penalties and Sanctions– Contract terminations and

– Liability for any resulting costs to the government,

– Withholding of contract payments in sufficient amounts to cover wage and fringe benefit underpayments,

– Legal action to recover the underpayments, and

– Debarment for up to three years.

> Contractors and subcontractors may challenge determinations of violations and debarment before an Administrative Law Judge. Appellate review available.

MAS Contracts With SCA

SCA appears in a number of Federal Supply Schedules including:

> IT Schedule 70

> Mostly exempt labor categories, but help-desk and web development may not be

> Mission Oriented Business Integrated Solutions (MOBIS), Professional Engineering Services (PES), Financial and Business Solutions (FABS), Human Resources and Equal Employment Opportunity (Schedule 738X)

> Most receive professional exemption; administrative personnel are generally covered

> Temporary and Administrative Professional Staffing (TAPS), Allied Healthcare (VA Schedule 621 I)

> VA has stated that doctors are the only exempt classifications among medical community

> Security (Schedule 84), Logistics Worldwide (Schedule 874V), Facilities Maintenance (03FAC), Office, Imaging, and Document Solutions (Schedule 36)

> Significant SCA coverage of labor categories offered

SCA in MAS Contracts

> SCA and MAS contracts have inherent complexities for service contractors on their own

> Compliance with SCA within an MAS contract raises a number of additional complexities unique to this contract environment

– E.g., SCA affects pricing within a contracting vehicle intended for commercial items and services (but SCA is not found in the commercial marketplace)

> The Department of Labor has not issued guidance on how to deal with these increased complexities

– GSA quietly issued internal guidance December 2013

– Further guidance expected soon


Solicitations will contain:> The SCA clause (FAR 52.222-41)

> An “index of wage determinations” – approximately 40 pages of WDs covering various U.S. locations and specific types of work

> Not all solicitation include this. Other WDs are only incorporated at the task order level

> Direction to complete a matrix of:> All SCA eligible labor categories proposed

> Each SCA equivalent labor classification

> The WD the offered prices are based on

> A description of the three price adjustment methods offered


Sample SCA Matrix:

> Contractors are directed to include a statement with the SCA Matrix like the following:> "The Service Contract Act (SCA) is applicable to this contract and it includes SCA

applicable labor categories. The prices for the indicated (**) SCA labor categories are based on the U.S. Department of Labor Wage Determination Number(s) identified in the SCA matrix. The prices offered are based on the preponderance of where work is performed and should the contractor perform in an area with lower SCA rates, resulting in lower wages being paid, the task order prices will be discounted accordingly."

SCA Matrix

SCA Eligible Contract Labor Category SCA Equivalent Code - Title WD Number

Administrative Assistant 01011 - Accounting Clerk I 05-2059

Secretary 01311 - Secretary I 05-2059

Pre-Award Issues

> Prices are negotiated/compared using commercial sales; however, SCA is not a commercial marketplace requirement> WD requirements may be higher than rates and benefits

provided to employees on commercial contracts

> SCA requirements vary by locality whereas GSA rates generally do not

> Often the location where work will be performed is unknown during negotiations, but this information is crucial to pricing decisions.

Pre-Award Issues

> Unless a contractor can successfully eliminate the Price Reductions Clause (PRC) from the contract, some price-discount relationship between the GSA/SCA contract and a commercial customer(s) will likely result

– GSA’s going in position for the Basis of Award is “all commercial customers”

– An SCA contract price may now be tied to a non-SCA contract? At a different location?

> GSA already routinely scrutinizes labor category classifications and the fulfillment of stated qualifications by performing resources. Contractors now must also ensure labor categories are appropriately mapped to WD classifications

– If it is unclear whether or how a labor category on the contract is covered by a wage determination, the contractor should contact the CO to request a conformance

Pre-Award Issues

> Contractors will have three methods for price adjustment :

– Method 1: SCA adjustment clause (52.222-43) for incorporated WD revisions

» Contractors must notify the CO of any increase/decrease from the revised WD or index of WDs within 30 days

– Method 2 : Fixed escalation negotiated prior to award (MAS clause I-FSS-969)\

» This eliminates post-award adjustments from WD revisions and places additional risk on the contractor

» Generally, GSA does not negotiate fixed escalation greater than 3% (health care coverage is increasing by more than 5% per year)

– Method 3 : Adjustments based on a commercial price list refresh (MAS clause 552.216-70)

» Not applicable to many service contractors

Post-Award Issues

>Post-Award compliance will vary based on contract terms negotiated

>SCA rates change based on geographical location, whereas GSA rates usually do not– SCA matrix requires contractors to lower their SCA eligible GSA rates in

locations where lower wages are paid

– This requires an extra tracking mechanism GSA contractors would not otherwise need

>Depending on the PRC clause and BOA customer(s), GSA prices may fall below originally negotiated prices. However, employees must be paid in accordance with minimum wage and benefit requirements

Recommendations for MAS Contracting> Consider use of the cost-build approach for pricing

– Unless commercial rates are both available and more favorable

> May attempt to negotiate a price premium

on the basis of onerous SCA compliance

costs not present in commercial work

> Negotiate price using the highest WD

requirements where work is expected

to be performed, then discount accordingly

after award

– Certain GSA acquisition centers may allow

for the establishment of rates by location as

new work is won

Cost Build-up Model SCA Wage

Health & Welfare

Other Fringes

Overhead

General & Administrative

Target Profit

+ Industrial Funding Fee (0.75%)

= Proposed MAS Pricing

Recommendations for MAS Contracting

>Attempt to negotiate the PRC out of the contract (very difficult task), otherwise:– Request a different trigger for SCA labor categories

– Request a price floor equal to SCA minimums + burdens

– Tie pricing to another customer with SCA labor categories (will not be commercial)

>Price adjustment decisions will be based on contractor circumstances and risk appetite

Guidance

>GSA anticipated to issue guidance on SCA compliance in the GSA/VA schedules in the near future…..

>In the meantime, a contractors’ best recourse is to engage the CO and DOL when questions or issues arise – Obtain responses in writing to demonstrate a good faith effort

to comply

Davis Bacon Act Overview

> Basic requirements– Applies to “laborers” and “mechanics” of contractors and

subcontractors

– Performing work “on site”

– Pay not less than weekly

– Wage Scale must be posted on site

Davis Bacon Act Overview

> Davis-Bacon Related Acts (DBRA) extends coverage to similar, federally-assisted contracts

> Davis-Bacon Prevailing wage provisions apply to approximately 60 additional laws– Where federal agencies assist in construction projects

through grants, loans, loan guarantees, and insurance

> Examples of these “related Acts” include:– Federal-Aid Highway Acts

– Housing and Community Development Act of 1974

– Federal Water Pollution Control Act

Covered Contract Examples

> Construction > Alteration > Repair

– Includes painting and decorating of public buildings or public works – Painting > 199 Square Feet is considered DBA– On mixed SCA/DBA contracts, repair or alteration in excess of 32 hours

is considered DBA

> Applies across all agencies. For example:– VA Hospital– Federal Office Building (GSA)– Military Base Housing (DoD)

> Davis Bacon Related Acts (DBRA) extends coverage to similar contracts such as federally funded highway repair

Davis Bacon Overview: Employee Coverage

> DBA covers “laborers” and “mechanics”– Workers whose duties are manual or physical in nature

> Examples of employee groups subject to DBA include:

– Apprentices and trainees

– Helpers

– Watchmen or guards (when the contract is covered by the Contract Work Hours and Safety Standards Act)

> Employees whose duties are administrative, executive, or clerical as defined in 29 CFR 541 are exempt from DBA coverage

DBA & MAS Schedule Contracting

• To date limited incorporation into schedule contracts

• DBA is not incorporated at the schedule level – Unlike SCA

– Must be incorporated on a task order by task order basis by contracting officer

• Pay special attention with orders under real estate schedules

Comparison of the Acts

Requirements SCA DBA

1) Wages and Fringes mandated via Wage Determinations

2)Wage determinations generally locality based

3) Require compliance with Fair Labor Standards Act

4) Service Contracts over $2,500 in the US and its territories

5) Federal Construction contracts over $2,000

6) Pay no less than weekly

7) Pay no less than bimonthly

8) Fringes & Wages may be combined on pay statement

9)Requires submission of a weekly certified payroll

P

P

P

P

P

P

P

P

PP

P

P

Comparison of the Acts

Requirements SCA DBA

10) WD must be posted

11) DOL has sole enforcement responsibility

12) Contracting Agencies have enforcement responsibility

13) DOL determines wages and establishes wage determinations

14) Wage Determinations vary by type of work (e.g., residential, building, highway, safety)

15) Requirements must be flowed down to subcontractors

P

P

P

P

P

P

P

P P

Break

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Equal Opportunity Compliance

> Office of Federal Contract Compliance Programs (OFCCP) monitors and enforces compliance with:

– Executive Order 11246 (EEO)

– Section 503 & 508 (Disability)

– Vietnam Era Veterans Readjustment Assistance Act

Equal Opportunity Compliance

Regulation Requirement Application

Affirmative Action(EO 11246)

Prohibits discrimination based upon sex, race, gender, national origin.

Contractors with contracts or subcontracts in excess of $10,000

Rehabilitation Act –Section 503

Section 503 Final Rule establishes a 7% utilization goal for Individuals with Disabilities (IWD)

All contractors – application criteria varies by number of contractor employees

Rehabilitation Act –Section 508

Requires accommodations for IWDs in the application process

All contracts unless determined byagency to be exempt

Vietnam Era Veterans Readjustment Assistance Act

Requires affirmative action (and related reporting) for qualified veterans.

Contractors with Prime or subcontracts in excess of $100,000

Current Enforcement Environment

Office of Federal Contractor Compliance Programs

> In FY 2014 OFCCP completed 3,987 compliance evaluations (93% of its goal)– $11.9 million in back pay to more than 23,000 victims of

discrimination

– Created nearly 1,300 job opportunities

> The FY 2016 request for OFCCP is $113,687,000 and 660 FTE– Dedicated funding of $3,300,000 for the continued development of

an improved enforcement case management database system

– $1,147,000 and 10 FTE for targeted work to identify and address pay discrimination.

Audit Focus Area – Internet Application

> EO 11246, Rehabilitation Act and Veterans Act all require tracking of employee characteristics beginning at the time of application. How does DOL define an applicant?– The candidate expresses interest in the job

– The candidate possesses the basic qualifications for the job

– The employer has considered the candidate for the job

– The candidate has not withdrawn interest in the job

OFCCP Best Practices

> Create, document, and communicate company selection policies and processes

> Create, document, and communicate clear definitions of Expressions of Interest and Considered

> EEO collection in the initial application flow> Basic Qualifications = Minimum Qualifications*> Link between qualifications and job performance> Basic qualifications on all job descriptions and on templates and

requisitions> Prescreening questions with automatic scoring> Document and communicate evaluation criteria and process> Require candidate affirmation on corporate policy and privacy

agreements> Require candidates electronically sign their applications

Recent Executive Orders

Name Requirement Issue Date Applies To Status

Executive Order 13658 (Minimum Wage)

Establishes new federal contractor minimum wage

February 2014

SCA & DBA employees and those who support an SCA or DBA contract > 20% of time

Implemented effective 1/1/15. DoL rule published 10/7/14; FAR interim rule published 12/15/14.

Presidential Memo (Advancing Pay Equality through Compensation Data Collection)

Requires submission of compensation data by job category

April 2014

50 employees and a contract or subcontract >$50,000

NPRM issued 8/8/14. Comment period closed 1/5/15

Executive Order 13665 (Non-retaliation for Disclosure of Compensation Data)

Prohibits penalization of employees for disclosure of pay data

April 2014

Contractors covered by EO 11246; contracts> $10,000

NPRM issued 9/17/14.Commentperiod closed 12/16/14

Executive Order 13672(Affirmative Action)

Bans discrimination of lesbian, gay, bisexual & transgendered employees

July 2014 Contractors covered by EO 11246

DoL final rule released 12/3/14; Implementation effective 4/8/15. Interim FAR rule issued 4/10/15.

Executive Order 13673 (Fair Pay & Safe Workplaces)

Collect & Submit data related to employment law violations

July 2014 Contractors bidding on contracts >$500,000

Proposed rule issued and comment period open; expected phased implementation beginning FY 16. Joint OMB/DoL 3/5/15 memo on appointing Labor Compliance Advisors.

Minimum Wage for Federal Contractors (EO 13658)

> Establishes a minimum wage for federal contractors ($10.10 per hour for 2015)

> Applies to (1) new contracts issued after January 1, 2015 and (2) bilateral modifications of existing contracts where remaining duration exceeds 6 months

> Covered contracts include Service Contract Act (SCA) and Davis Bacon Act (DBA) contracts

Minimum Wage for Federal Contractors(EO 13658)

> Covered employees include:– Service Contract Act Employees

– Davis Bacon Act Employees

– Employees who spend >20% of their time “in connection with” a covered SCA or DBA contract

• In other words, intentionally intended to cover “indirect” employees

• 20% factor is calculated on a week by week basis

• Does not expand SCA or DBA H&W requirements to these indirect employees

> Estimated to affect more than 200,000 employees nationwide


What does it mean for contractors?> Contractors must ensure that all covered employees, on

covered contracts, are paid in excess of $10.10 per hour> Requires a careful review of all new contracts & RFPs

> Due to procedural requirements surrounding the preparation of Wage Determinations (WDs), WDs will continue to reflect wage rates less than $10.10 per hour

> Affected labor categories will be identified with a highlight, intended to identify the impact of this new regulation

> Does not relieve contractors from compensating employees at any higher wage rate set by either a WD or by state or local law

> Does not relieve contractors of separately paying H&W benefits where required

Minimum Wage for Federal Contractors(EO 13658)

> What does it mean for contractors?– Contractors must identify all employees who support a covered

contract in excess of 20% of their time

> At least three challenges– Identifying potentially covered employees

– Determining if the employee spent more than 20% of their time in a given week in support of a covered contract

– Tracking time since most indirect employees do not track their time by contract.

> Lack of records could present a compliance problem (and an enforcement opportunity)


What does it mean for contractors?> Annually, contractors may request price adjustments for contracts

affected by changes in the minimum wage based upon the Consumer Price Index for Urban Wage Earners and Clerical workers > DoL notification of increase to be published 90 days before the 1/1

effective date> Adjustments must be prepared on a contract by contract basis – including

GSA contracts> Price adjustments are not “phased” – all contractors must submit at the

same time> Will likely overwhelm contracting officers in geographies most affected by the minimum> Unprocessed price adjustment requests do not relieve the contractor of paying increases

in minimum wage

> Potentially requires contractors to submit TWO price adjustment requests per year per covered contract

Advancing Pay Equality through Compensation Data Collection (Presidential Memo)

> Supplements EEO-1 report with summary information on compensation – Consistent with W-2 reporting

– Broken down by sex, race, ethnicity and job category

– Includes hours and number of employees

> Will allow OFCCP to direct enforcement resources– OFCCP expects regulations to deter non-compliances

Advancing Pay Equality through Compensation Data Collection (Presidential Memo)

> What does it mean for contractors?– Report compiles summary data which could trigger reviews

and audits due to its lack of specificity• Report aggregates exempt and non-exempt labor categories.

• Provide hours worked and number of employees

> DoL anticipates the report will be a “critical tool” in eradicating pay disparities– Will be used to identify bad actors and direct enforcement

activity

Advancing Pay Equality through Compensation Data Collection (Presidential Memo)What does it mean for contractors?

> OFCCP’s plan to compare contractor data by industry will likely result in increased audit activity – Summary data does not allow explanation or description of the

many differences in employee labor classifications

– Does not take into account variances in length of service and meritorious performance

> Contractors should be prepared to maintain significant documentation detailing pay practices, including information justifying employee labor classifications and salary differences

Non-retaliation (EO 13665)

> Amends the Equal Opportunity Clause of Executive Order 11246.

> Prohibits contractors and subcontractors from discharging, or otherwise discriminating against, employees or applicants who inquire about, discuss, or disclose their compensation or the compensation of other employees or applicants.– Excludes employees or applicants who make the disclosure

based on information obtained when performing essential job functions.

> Belief is that pay secrecy leads to disparity of pay

Non-retaliation (EO 13665)

What does it mean to contractors?

> Requires that Federal contractors incorporate the nondiscrimination provision into their existing employee manuals or handbooks.

> Contractors must disseminate the nondiscrimination provision to employees and to job applicants.

> Comment period expired 12/16/14– OFCCP requested comment related to requiring contractors with

manager training programs or meetings to include a regular review of the nondiscrimination provision

Affirmative Action (EO 13672)

> Interim FAR rule issued 4/10/15– Applies to solicitations and modifications issued on or after

this date

> Clarifies that EO 11246 includes protection from discrimination related to “gender identity” or “sexual orientation”– Previous language “race, color, religion, sex and national

origin”

> Does not redefine these terms but relies upon DOL OFCCP definitions

Affirmative Action (EO 13672)

> What does it mean to contractors?– Does not significantly change reporting requirements for

contractors– Unlike other categories covered by EO 11246, the Final Rule does

not require contractors to collect any information about applicants’ or employees’ sexual orientation or gender identity or perform data analytics

– Contractors are not prohibited from doing so BUT they need to be aware of state and local laws which may prohibit doing so

– Information gathered may not be used to discriminate against contractors

> Could present logistical issues for contractors– Contractors must carefully consider issues such as bathroom facility

access

Fair Pay and Safe Workplaces (EO 13673)

> Proposed FAR rule and DOL guidance implementing EO published on May 28, 2015

> 60 day comment period closes on July 27th

> Implementation of final rule expected late 2015/early 2016


> Requires that contractors report data on violations of 14 covered statutes and equivalent state laws – Report in conjunction with proposals in excess of $500,000

(and semiannually after contract award)

– Report covers the prior 3 years

– Includes subcontractors


> Contractor bidding on covered contracts must certify to “best of [its] knowledge and belief:– [ ] “There has been no administrative merits determination,

arbitral award or decision, or civil judgment rendered against offeror” for “violations of labor laws” within the three years preceding the bid

– [ ] “There has been an administrative merits determination, arbitration award or decision, or civil judgment rendered against offer” for “violations of labor laws” within the three years preceding the bid


> Requires each agency to designate a Labor Compliance Advisor to assist agencies with evaluating contractor compliance– Advisors will have authority to monitor contractor

compliance and enforce labor law compliance

– They will strongly influence the evaluation of a contractor as a “responsible” contractor


> Contracting Officer (CO) must make a “responsibility determination”– Seeks advice from ALCA

• ALCA may make one of three recommendations

• CO must make final determination

• CO must consider “mitigating circumstances and remedial measures such as labor compliance agreements”


> Other issues> 14 Labor laws at issue

> “Equivalent State Law” Not Defined

> Open questions remain about implementation of rule for subcontractors


> What Labor Law “Violations” Must Be Considered When “Checking the Box” or “Not?”– Three Categories

• “Administrative Merits Determination”

– Broadest and most problematic

• “Civil Judgments”

• “Arbitral Awards or Decisions”


> Seven categories of “notices/findings” – exhaustive

> Issued by enforcement agencies after “investigation” – not necessarily after hearing


> Administrative Merits Determinations– DOL Wage and Hour Division

• E.g., WH-56 “Summary of Unpaid Wages,” WH-103 “Employment of Minors,” violation of FMLA, SCA, DBA, EO 13658

– OSHA or state agency with OSHA-Approved Plan• Citation, imminent danger notice, or notice of failure to abate or any State

equivalent


> OFCCP

– Show cause notice for failure to comply with EO 11246, Section 503 of the Rehabilitation Act, or VEVRAA

> EEOC– Reasonable cause determination

> NLRB

– Complaint by any Regional Director

> Complaint with a court or ALJ

> Order or finding of violation by an ALJ, DOL’s Administrative Review Board, OSH Review Commission or state equivalent, NLRB


> “Civil Judgment”

– Any judgment or order entered by any federal or state

court” finding a violation of the Labor Laws

> “Arbitral Award of Decision”

– “Any award or order by an arbitrator or any arbitral

panel” finding a violation of any provision of the Labor

Laws


> Violations that can trigger a negative responsibility determination– Serious

– Willful

– Repeated

– Pervasive

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