OSHA Fine "Catch Up" Provision Included as Part of 2015 Bipartisan Budget Act

Among the things included in November 2015's Bipartisan Budget Act is Section 701, which is referenced as the "Federal Civil Penalties Adjustment Act Improvements Act of 2015." In short, the purported purpose is to "catch up" OSHA fines for inflation over the last 25 years. That will translate into an as much as 80% increase for OSHA fines. The initial adjustments are currently slated for August 1, 2016, and OSHA is expected to publish related rules for public comment early this year. Job safety is its own incentive of course, but this new provision adds an additional layer of economic incentives as well.

Provision Agreeing to Not Challenge Arbitration Award Voided by Georgia Court

An increasingly popular arbitration clause provision is language purporting to waive later challenge to the arbitration award. In a recent decision in Atlanta Flooring Design Centers, Inc. v. R.G. Williams Constr., Inc., 733 S.E.2d 868 (April 2015), the Georgia Court of Appeals held such waiver void and unenforceable.

While that court recognized the general fundamental principle that parties have the right to freely contract, it rationalized that Georgia's arbitration act does not permit such waiver or elimination of right to seek to vacate or modify an arbitrator's award. The court also relied upon federal case law interpreting the Federal Arbitration Act similarly holding.

Virginia's arbitration statutes are similar to those of Georgia and the Federal Arbitration Act. So, would a Virginia court rule similarly? That remains to be seen.

For example, compare the Atlanta Flooring analysis with the Virginia Supreme Court's holdings in Gordonsville Energy v. Virginia Electric and Power Company, 257 Va. 344 (1999) enforcing a contractual provision waiving the right to challenge a contract's liquidated damages provisions. But one can certainly distinguish waiving another contractual provision (in that case for LDs) from a statutory judicial review statute such as applies to an arbitration award.

Time, and someone's judicial challenge, will tell.

Changes . . . New Overtime Rules Published by Department of Labor

Earlier this year, the Department of Labor (DOL) published new proposed rules for FLSA overtime requirements. Among the proposed rules, DOL has proposed:

• Increasing the salary threshold from $23,660/year to $50,400/year [40th percentile].

• Increasing the "highly compensated" threshold from $100,000/year to $122,148/year [90th percentile]; and

• Automatically increasing the thresholds to "keep pace with inflation."

The new rules will go into effect in 2016 absent further change.

Vandeventer Black's Anne Bibeau regularly address these and related employment matters, both involving overtime issues and employment issues for broadly. For more information about these changes or any other employment law matter, please contact her or any of the other Vandeventer Black Employment Law Group team members - www.vanblacklaw.com or (757) 446-8600.

HACKED: 5 THINGS TO KNOW ABOUT NEW DOD CYBERSECURITY REGULATIONS

In 2007, a preeminent American defense contractor first reported cyber attacks emanating from China. Four years later, upon a visit by then Secretary of Defense Robert Gates, the Chinese Air Force revealed a fighter jet unnervingly similar to the one manufactured by the hacked American contractor. More recently, the FBI reported in July 2015 that hackers accessed the personnel files and security clearances of over 22 million federal employees and contractors.

Accordingly, the Department of Defense (DOD) moved to strengthen the Defense Federal Acquisition Regulation Supplement (DFARS) concerning cybersecurity. The interim rule alters the contractual duties of government contractors and subcontractors in a significant manner. Thus, every government contractor and subcontractor ought to consider the following 5 highlights of the interim rule.

(1) Seriousness. The regulation is effective immediately. The DOD invoked “urgent and compelling reasons” to impose the change without the typical comment period. The comment period before final form remains open until October 26, 2015, however.

(2) Scope. First, the interim rule requires “adequate security” from “unauthorized access and disclosure,” an imposition yet undetermined in breadth. Second, the addition compels contractors to report to the DOD any cyber incident “adverse or potentially adverse” to the contractor’s information technology (IT) systems. The scope of what defines “adverse or potentially adverse” is unknown. Once a contractor or subcontractor reports an incident, the company must make all affected “media” available to government inspection. This includes physical devices such as laptops and cell phones as well as paper archives.

The DOD did clarify that the rule includes contracts for commercial items. Likewise, it covers non-confidential and proprietary information. Regulations applicable to confidential data remain unchanged. 

(3) Speed. The new regulation requires contractors and subcontractors to report cyber incidents within 72 hours of the attack.  The contractors owe their report to the DOD while the subcontractor must account to the prime contractor and to the DOD. Fortunately, though, the DOD will not consider such reporting, by itself, as evidence that a company has failed the rule’s security requirements.

(4) Savings? The DFARS modifications are similar in language and intent to those of another federal agency, one created specifically for IT security. As such, the interim rule is “tailored for use in protecting sensitive information residing in contractor information systems,” which could indicate potential savings for certain companies. Other companies, however, especially those without IT departments or IT experts, could experience increased costs. The DOD even admits that some 10,000 small businesses will require the help of IT experts to decipher cyber incidents, to determine the information affected, and to author the government report.  

(5) Service impact. Many contractors and subcontractors are moving their IT services to cloud computing. The interim rule applies to cloud computing, too. In fact, it compels companies to monitor their cloud to confirm the appropriate “administrative, technical, and physical safeguards.”

The broad nature of these DOD security requirements necessitates a precise and professional approach for government contractors. Vandeventer Black's Construction and Government Contracts Team attorneys are poised to help navigate those needs for our clients. Please visit the firm's website to learn more about the firm and our professionals at www.vanblacklaw.com.

 

New Minimum Wage Requirements under FAR 52.222-55

Below is a summary of the new minimum wage requirements of FAR Part 52.222-55 prepared by my law partner, Mike Sterling. The new requirements apply to all prime contractors and subcontractors working on new federal contracts after January 1, 2015.

 

 

Minimum Wages Under Executive Order 13658

You need to be aware of the new minimum wage requirements of FAR 52.222-55. This clause applies when it is included in a contract or modification by the agency as directed by FAR 22.1906. If the agency fails to include it there is a provision for retroactive application of the clause. FAR 22.1905(d)(4).

FAR 52.222-55 applies to almost all prime contractors and subcontractors working under “new” federal contracts after 1/1/15. The minimum wage is generally not retroactive to “old” contracts. However, it appears that the government views a bilateral modification extending a contract more than 6 months to be a new contact. Likewise, the government may also apply the clause to IDIQ contracts with more than 6 months of task or delivery orders remaining.

If you believe that the agency improperly included the clause you may ask the agency to remove it, but if included you must comply with it.  

If FAR 52.222-55 is included you must flow it down to subcontractors at every tier, and if added after award by modification you should take steps to obtain an equitable adjustment for you and your subcontractors. You should not sign a modification that waives your right to an adjustment.

The minimum wage applies to all contractor employees that spend more than 20% of their weekly hours working in “connection” with a federal contract, and regardless of the contractual relationship. Therefore, it may apply to someone in general administration or a 1099 independent contractor.

The minimum wage takes precedence over lower rates in wage determinations, collective bargaining agreements or apprentice programs. You cannot make up short wages with fringe or other benefits.

You must notify all workers of the requirements of the clause.

Asking about union affiliation deemed unlawful interrogation by NLRB

The word interrogation may give one the visual image of something akin to a police interrogation; but in a recent NLRB decision, the NLRB held that when a non-union shop subcontractor asked individual union member workers about their union affiliation in discussions about hiring those workers, the subcontractor violated the National Labor Relations Act. That decision is Euro Buildings, Ltd and International Union of Bricklayers & Allied Craftsworkers, Ohio-Kentucky Administrative Council, Local 22 Ohio, 2014 WL 5410010 (N.L.R.B. Div. of Judges 2014, adopted 2014 WL 6969677 (N.L.R.B. 2014).

The NLRB discussed that whether discussions amounted to interrogation required the NLRB to consider whether all of the associated circumstances of the discussions reasonably tended to evidence restraint, coercion, or interference with rights guaranteed by the Act. The NLRB identified related factors as including the identity of the questioner, the place and method of the questions, the background of the questioning, the nature of the information sought, and whether the employee is an open union supporter.

For that case, the NLRB judge found that the non-union subcontractor's questions of the applicants about their union affiliation and membership was clearly coercive in nature and reasonably tended to coerce the applicants, and as such interfered with their rights under the Act. His decision seems to suggest any inquiry during the interview process about affiliation would similarly qualify as an coercive interrogation - the indirect threat being if you say you are affiliated as an applicant then you can't get the job.

Insurance Coverage For Subcontractor Non-complaince With Prevailing Wage Laws? - One Court Says There's At Least a Duty to Defend

Subcontractor non-compliance with prevailing wage laws is unfortunately not uncommon. But might that be covered by the General Contractor's insurance? For one design-build project that included coverage for professional liability a federal court in Washington has said there's at least a duty to defend on the part of the insurer under that particular policy. The case is Bayley Constr. v. Great American E & S Ins. Co. 980 F. Supp. 2d 1281 (W.D. Wash. 2013). In reaching its conclusion, the court noted that the duty to defend was governed by liberal construction principles and that under those principles the General Contractor's obligation to ensure subcontractor compliance with prevailing wage laws required professional skill and judgment, and so within that particular policy's coverage. While results will necessary vary depending upon each policy, this case suggests any General Contractor required to address subcontractor prevailing wage law non-compliance should consider triggering policy coverage, and when in doubt timely notify its carrier of related claims per the terms of the contractor's insurance policy or policies.