VB CGC Practice Group

VB CGC Practice Group
Vandeventer Black's Construction and Government Contracts Practice Group focuses on serving our business clients in the construction industry. We currently have offices in Norfolk and Richmond, VA, the OBX and Raleigh, NC, and Hamburg, Germany. For more information about Vandeventer Black, clink on the VB logo.

Monday, June 27, 2016

New Legislation Prohibiting Use of Experience Modification Factor For Contractor Eligibility

One of the new legislative changes that goes into effect in Virginia on July 1, 2016 is a prohibition against using any experience modification factor as a condition of any bidder's or offeror's eligibility to participate in a solicitation for construction. Interestingly, while the prohibition was added to the Virginia Public Procurement Act (VPPA), the language in the act expands application to both VPPA and non-VPPA offers to contract issued on or after July 1, 2016. As defined in the adopted bill, "experience modification factor" is defined as "a value assigned to an employer as determined by a rate service organization in accordance with its uniform experience rating plan required to be filed pursuant to subsection D of [Virginia Code Section] 38.2-1913."

Thursday, June 23, 2016

Virginia Supreme Court Confirms Employee Firings on the Spot

My law partner Anne Bibeau, who focuses her law practice on employment and labor law matters, provided this summary of the Virginia Supreme Court's recent decision in the case of Johnson v. William E. Wood & Associates, Inc.:




In a recent opinion involving a fired realtor, the Virginia Supreme Court confirmed that at-will employees can be fired on the spot, without any prior notice to the employee. The decision was unanimous, and noted that while the firing notice “must be reasonable,” advance notice was not required because, among other things, that would be contrary to the flexibility at the heart of the at-will employment doctrine and undermine the indefinite duration which is implicitly an element of at-will employment.

In Virginia, unless the employer and employee agree otherwise, employment is “at will,” meaning that either the employer or employee may end the employment relationship at any time and for any (legal) reason, upon “reasonable notice.” The plaintiff in that case, Johnston v. William E. Wood & Associates, Inc., argued that “reasonable notice” meant advanced notice. The Virginia Supreme Court shot down that argument, holding that to be “reasonable,” notice of the termination need only be effective notice. In other words, the employer only has to make clear to the employee that the employment relationship has ended, so that the employee knows to stop work. Advance notice of the termination is not required unless the employer has promised to give advance notice or the federal WARN Act, which addresses mass layoffs and plant closings, applies.

The court’s decision was not a change in the law, but blocked a determined effort by plaintiffs’ attorneys to chip away at the at-will employment doctrine, which is already circumscribed by other laws limiting the reasons for employment termination. As before, employers need to be mindful that their employee policies, handbooks, offer letters, and other communications with their employees—both written and oral—do not promise or imply that the employment relationship will last for a particular period, or that the employee will only be fired for cause or after advanced notice. Employers should consult with an employment attorney about whether to require employees give advance notice of resignation. The best practice is to emphasize that the employment is at-will and can end at any time and for any reason.

Wednesday, June 8, 2016

SBA Issues Final Rule Regarding Affiliation, Calculation of Annual Receipts, Limitations on Subcontracting, and Joint Ventures


In its Final Rule issued May 31, 2016, the Small Business Administration issued rules implementing the 2013 National Defense Authorization Act. The Final Rule has a myriad of aspects applicable to awards in various small business programs, and this short summary is not intended to address them all; but rather instead this summarizes some of the provisions regarding affiliation, calculation of annual receipts, limitations on subcontracting and joint ventures.

Affiliation:
The Final Rule expressly allows certain arrangements without establishing affiliation, while precluding others subject to rebuttable presumptions; including:

  • Small Business Teaming Arrangements are allowable without regard to affiliation for “bundled contracts” so long as each team member is small for the size standard assigned to the contract or subcontract.
  • Firms owned or controlled by married couples, parties to a civil union, parents, children, and siblings are presumed affiliated if they conduct business with each other or share or provide loans, resources, equipment, locations, or employees; although the presumption can be overcome by showing clear lines of fracture between the concerns.
  • SBA may presume identity of interest based on economic dependence if 70% or more of receipts over the previous 3 fiscal years are derived from another concern; although
    • the presumption is rebuttable by showing lack of sole dependence; and
    • business concerns owned and controlled by an Indian Tribe, ANC, NHO, CDC, or wholly owned entities of an Indian Tribe, ANC, NHO, or CDS, are not considered affiliated by another concern owned by that entity based solely on the contractual relationship between the two concerns.

Calculation of Annual Receipts:
The Final Rule defines how SBA will calculate annual receipts when determining size. In short, receipts include all revenue (including passive income) from whatever source received or accrued; generally meaning the concern's total income (or gross income for sole proprietorships) plus the cost of goods sold as defined and reported to the IRS. Exclusions are identified in the Final Rule.

Limitations on Subcontracting:
Compliance is now determined by a percentage cap on the total amount of the prime contract paid to first tier subcontractors that are not “similarly situated” entities, instead of the previous limitation based on  costs. A similarly situated entity is a small business that participates in the same SBA program that qualified the prime contractor as an eligible offeror.

There is no requirement to apply the prime contract NAICs code to subcontracts. Instead, the prime contractor assigns the code applicable to the scope of work on each subcontract. The percentage limits set by statute are:

  • 85% for general construction contracts;
  • 75% for specialty trade construction contracts; and
  • 50% for service and supply contracts.

The method for calculating compliance with the limitations is complex, depends on whether the contract is for construction, supplies or services, or mixed supplies and services. Among other things, the cost of materials is typically not included, and there are exceptions when “nonmanufacturers” supply the product of a domestic small business manufacturer or processor.

While work done by a similarly situated first tier subcontractor does not count toward the limitations, any work that a similarly situated subcontractor further subcontracts will count towards the limitation.

Joint Ventures
The Final Rule allows a joint venture to qualify as small for any government procurement when each partner to the joint venture qualifies individually as small under the size standard corresponding to the NAICS code assigned by the government in the solicitation.

Recertification:
Under this Final Rule, when an acquisition or merger occurs after the offer date but prior to award the offeror must recertify its size to the contracting officer prior to award.


This article is for educational purposes only and is not intended as legal advice. For more information about this or other construction or government contracts topics, please contact the authors of this article, Neil Lowenstein and Mike Sterling, or any of the other members of the Vandeventer Black Construction and Public Contracts Law Team at www.vanblacklaw.com.

Wednesday, May 18, 2016

UPDATE: DOL Announces Final Overtime Rule

In our May 9, 2016 blog post we discussed the pendency of expected Department of Labor (DOL) regulations updating the Fair Labor Standards Act (FLSA), including overtime rules. This blog post updates our earlier post as yesterday, May 17, 2016, DOL announced its final rule.

The rule's effective date is December 1, 2016. Some highlights of the final rule that vary from the earlier notice expectations as provided by Vandeventer Black Labor Attorney Anne Bibeau are:

  1. The new salary threshold is $913/week or $47,476/year.
  2. The highly compensated employees total annual compensation exemption was raised to $134,000.
  3. Those amounts will automatically increase every three (3) years beginning January 1, 2020.
  4. The salary basis test has been amended to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the new salary threshold.
  5. There were no changes to the duties test.
For more information about the final rule, contact Anne (abibeau@vanblacklaw.com) or any of the other Vandeventer labor team or government contract team members. Contracts and more information on related issues are available at our website: www.vanblacklaw.com.

Tuesday, May 17, 2016

GSA Targets Schedule Contract Holders Regarding Countries of Origin for Products

The General Services Administration recently targeted nearly 3,000 GSA schedule contract holders earlier this month regarding the countries of origin for the schedule contract holders' offered products. This targeting comes after numerous congressional inquires and FOIA requests alleging product violations of both the Trade Agreements Act and the Buy American Act.

Schedule contract holders were given a very short 5 days to review their total offering of products, submit spreadsheets verifying the products' countries of origin, and provide copies of Certificates of Origin or other certification from manufacturers. GSA threatened severe penalties for non-compliance, including removal of the vendor's entire GSA Advantage file.

GSA has confirmed its targeting of those vendors based on the congressional and other complaints about those specific schedules and product. It seems likely, however, that GSA will continue to expand the scope of its targeting to all contractors.

County of origin law compliance entails an often complicated analysis of products' manufacturing processes, including for many products transformation analysis from product origin to the product's later actual commercial use. Despite such complications, both TAA and BAA compliance are vendor responsibilities.

To what extent GSA extends its targeting, and also to what extent other agencies take similar actions to insure TAA and BAA compliance by their vendors and contractors remain to be seen. Vendors and contractors should, however, consider GSA's warning letters as advance notice to evaluate their TAA and BAA compliance, take any necessary corrective actions discovered, and be prepared to promptly address similar future agency notices.

President Obama Signs Defend Trade Secrets Act

On May 11, President Obama signed the Defend Trade Secrets Act (DTSA), providing federal protection respecting trade secret misappropriation. Among key aspects of this new federal law:

  1. Federal district courts are given jurisdiction for civil actions under DTSA, although not exclusive jurisdiction. In order for federal jurisdiction to lie, claimants need to show that the trade secret related to a product or service used in or intended for use in interstate or foreign commerce.
  2. DTSA allows for ex parte seizure provisions, allowing courts to order the seizure of property if deemed necessary to prevent wrongful propagation or dissemination of the trade secret. However, the moving party has to demonstrate extraordinary circumstances warranting the seizure, and provides for defendants to seek damages for abusive or wrongfully-acquired seizure orders.
  3. DTSA has whistleblower provisions precluding civil or criminal liability under any federal or state trade secret law for disclosures made "in confidence" to a federal, state or local government official, or to an attorney, if solely for the purposes of reporting or investigating suspected violations or in a complaint or other litigation document, if the filing is made under seal.
  4. Employers are required to provide notice of DTSA's immunity provision in any contract or agreement with an employee that contains provisions governing the use of a trade secrete or other confidential information; applying to all contracts entered into or amended after May 11, 2016. Employee is broadly defined to include independent contractors and consultants.
  5. DTSA includes provisions intended to address international trade secret theft, including private rights of action.
  6. DTSA requires the Attorney General to biannually report to the House and Judiciary Committees on international trade secret theft affecting U.S. companies.
DTSA is sure to have immediate impacts. To what extent it helps deter trade secret theft will remain to be seen, but most immediately is certainly has important impacts upon companies' efforts to establish and maintain confidentiality policies and enforcement.

Monday, May 9, 2016

Important Changes Pending to FLSA Exempt Status and Overtime Regulations


The Vandeventer Black Construction and Government Contracts and Labor and Employment Law Groups have noted some important pending changes to the FLSA Exempt Status and Overtime Regulations.

The Changes:
The U.S. Department of Labor (DOL) is issuing regulations updating the Fair Labor Standards Act (FLSA). We anticipate that the final regulations will be issued this summer, likely with a 60-day compliance requirement. Under the proposed new regulations, any employee who is paid less than $50,440 per year will be entitled to overtime pay. This change will have a major impact on overtime pay obligations. Companies need to review current policies and procedures now to prepare for timely compliance, and to limit the cost impact of the new regulations.

The FLSA provides for a federal minimum wage, a standard 40-hour workweek, and pay at time-and-a-half for all overtime hours.  The law also includes several exemptions under which certain employees are not entitled to overtime pay. Currently, for most exemptions, in addition to meeting a duties test an employee must be paid on a salary basis at least $455 per week ($23,600 annually). The proposed regulations will more than double that minimum salary to approximately $970 per week ($50,440 annually).  Likewise, the minimum annual compensation for the “highly compensated” exemption will increase from $100,000 to $122,148. These amounts will be adjusted annually.

Common Exemption Misconceptions:
There is a common misconception that payment of a salary is the only requirement to avoid overtime pay obligations. This is wrong as there are other mandatory requirements: in order to be exempt from overtime, the employee also must perform duties that meet certain tests set forth by the DOL.

For example, to qualify as an exempt “executive” an employee, in addition to being paid a salary, must (i) have the primary duty of management of the business or a department, (ii) customarily and regularly supervise at least two other full-time employees, and (iii) have authority or significant influence over decisions to hire or fire.

Under current economic conditions many employers have reduced staff without consideration of the requirement that the exempt employee must supervise at least two other full-time employees. Supervision of workers furnished by a temporary labor agency or workers from another company, such as a subcontractor, does not meet the requirement.

Another common misconception is that payment of a minimum wage under a Davis Bacon Act or Service Contract Act wage determination is sufficient. However, all employers—even those with federal contracts—must comply with the FLSA.