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.

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.

 

 

 

GAO Proposing Fee for E-Filing Protests

This post provides a summary of a new GAO rule change proposal prepared by Vandeventer Black Construction and Government Contracts Team attorney Blake Christopher.

Dissatisfied bidders and offerors can currently file protests for free electronically, but the General Accountability Office (GAO) is now proposing a $350 fee. The reasons given for the change are to finance the program, including a new system, and seemingly to discourage what the GAO’s considers unnecessary filings that result from the current free and easy to use system.

 

2,639 protests were filed last year, and the GAO argues many of them unnecessary. Critics of the proposal note that the current system allows access regardless of financial circumstances, and that charging a fee will discourage protests. While the U.S. Court of Federal Claims charges a fee for protests, it has a program in place that considers ability to pay when collecting its filing fee; and it is unknown whether the GAO will do the same.

 

The GAO determined the proposed fee level, in part, by figuring the price of building and running a new filing system called the Electronic Protest Docket System (EPDS). Separate from the proposed filing fee there are additional concerns that EPDS will be publicly available, meaning every document filed in the system could be accessed by the general public. This would require contractors and attorneys to redact a greater amount of material, further increasing filing costs and affecting filing strategies. GAO has not yet addressed the EPDS confidentiality concerns.

 

Copy of the April 16, 2016 proposed rule is available at the following Federal Register website:

https://www.federalregister.gov/articles/2016/04/15/2016-08622/government-accountability-office-administrative-practice-and-procedure-bid-protest-regulations

 

The new rule is not officially subject to a comment period, but the GAO is accepting comments to the proposed through May 16, 2016.

 

For more information on the proposed rule changes, contact Blake Christopher (bchristopher@vanblacklaw.com) or any of the other Construction and Government Contracts Team members at Vandeventer Black (www.vanblacklaw.com).

Part 2: Paid Sick Leave Mandate Proposed by DOL for Contractors

As an adjunct to our earlier summary blog on DOL's proposed sick leave mandate for federal contractors, below is the overview of the proposed rule by Vandeventer Black partner and employment law practitioner Anne Bibeau which more fully expands upon the proposed rule and its implications. Please contact Anne for more information at 757.446.8600 or abibeau@vanblacklaw.com, or visit our firm's website at www.vanblacklaw.com.

U.S. Department of Labor Issues Proposed Rule on Mandatory Paid Sick Leave for Federal Contractors

By Anne G. Bibeau, Esq.

The U.S. Department of Labor (DOL) has published a Notice of Proposed Rulemaking (NPRM) to implement President Obama’s Executive Order (EO) 13706, “Establishing Paid Sick Leave for Federal Contractors.” The EO requires that for federal contracts issued on or after January 1, 2017, federal contractors and subcontractors must provide their employees “not less than 1 hour of paid sick leave for every 30 hours worked on or in connection with covered contracts,” up to 56 hours of paid sick leave per year. In the NPRM, DOL describes the rules and restrictions regarding the accrual and use of paid sick leave. The public is invited to submit comments on the NPRM to DOL by March 28, 2016.

The EO’s paid sick leave requirement applies to work on or in connection with “covered contracts,” meaning federal contracts and subcontracts subject to the Davis-Bacon Act (DBA) and the Service Contract Act (SCA), as well as federal contracts for concessions and for services on federal property. Employers must provide the paid sick leave to both FLSA-exempt and non-exempt employees. Recognizing that employers typically do not track hours exempt employees’ hours worked, the NPRM provides that the employer may assume that for purposes of calculating paid sick leave its exempt employees worked 40 hours on or in connection with a covered contract each week.

Significantly, the paid sick leave required by the EO is in addition to the contractor’s obligations under the SCA and DBA. The contractor will receive no credit toward its fringe benefit or prevailing wage obligations under those laws for providing the paid sick leave mandated by this EO. A contractor’s existing paid time off policy may satisfy the requirements of the EO only if the paid time off meets all of the EO’s requirements for paid sick leave.

Under the NPRM, any unused paid sick leave must carry over from one accrual year to the next. A contractor is permitted to, but not required, to pay out used paid sick leave upon termination of employment; however, if the contractor rehires the employee within 12 months, the contractor must reinstate his or her accrued paid sick leave regardless of whether it was paid out previously.

The employee is entitled to use the paid sick leave for: their own illnesses and other health care needs; the care of a family member or loved one who is ill or needs health care; purposes resulting from being the victim of domestic violence, sexual assault, or stalking; or to assist a family member or loved one who is such a victim. The NPRM broadly defines the relations for whom an employee may use paid sick leave to include the employee’s child, parent, spouse, domestic partner, or “any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.”  

An employee who wants to use accrued paid sick leave should make a request at least 7 calendar days in advance, if the need for leave is foreseeable, or as soon as practicable if the need is not foreseeable. The employer can require that the employee provide information to establish that the absence qualifies for paid sick leave, and if feasible, the anticipated duration of the leave. However, the employer may not require certification from a health care provider or documentation to prove a claim of domestic violence, sexual assault, or stalking unless the employee uses 3 or more full days of leave consecutively.

The DOL will publish a notice that employers must post notifying their employees of their rights to paid sick leave. In addition, the NPRM requires that employers notify their employees of their accrued paid sick leave balances at least once a month, as well as whenever the employee asks for that information or asks to use paid sick leave and when the employment is terminated.

Federal contractors should review their leave policies now to minimize any conflicts with the EO’s requirements and to prepare for the EO’s implementation in 2017.

Paid Sick Leave Mandate Proposed by DOL for Contractors

DOL has recently (Feb 24) proposed a rule requiring federal contractors to provide workers with up to seven days of paid sick leave per year. The proposal is for contractors to offer one hour of paid leave for every 30 hours of work. Employees could use the time to care for themselves or family members and for absences resulting from sexual assault, domestic violence or stalking.

The proposed paid leave requirement would apply to new or renewed contracts beginning in 2017. There are some limited exceptions proposed, including for arrangements with Indian tribes and construction contracts under $2,000, and the proposed rule further exempts contractor employees who perform work on a federal contract but also spend at least 80 percent of their weekly hours on other non-contract work.

Also of note, sick leave would carry over from year to year. Service Contract Act and concession contracts are within coverage of the proposed rule, and not just construction contracts.

There is a 30-day public comment period, after which DOL has until Sept 30 to issue a final rule. As of the posting of this blog, the proposed rule is available at the Federal Register website at this link:

https://www.federalregister.gov/articles/2016/02/25/2016-03722/establishing-paid-sick-leave-for-federal-contractors

Temporary Staffing: Contractor Licensure Depends on Project Location, and the Virginia Requirement Remains Unclear

LEGAL ALERT^©: Temporary staffing agencies may require contractor licensure, depending upon project location, and the answer in Virginia remains unclear

This alert summarizes a complex issue that is the subject of a more detailed overview prepared by Gretchen Ostroff, a member of the Vandeventer Black Construction and Government Contracts Practice Group. Gretchen’s detailed overview is available on the firm website.

THE ISSUE:           

Virginia’s contractor licensing requirements do not specifically address licensure of temporary staffing agencies; but several other states with similar licensing requirements have held that temporary staffing agencies must be licensed as contractors if they supply laborers to construction projects. Lack of licensure subjects the temporary staffing agencies, those hiring them, and potentially contractors at higher tiers, to potential criminal violations, as well as administrative penalties such as fines, suspension, or license revocation.  

WHY NOW?        

Responding to the Governor’s earlier Executive Order, the Virginia Department of Labor and Industry (“VDOL”) recently issued a policy memorandum outlining its commitment to prevent “worker misclassification” for “independent contractors”, who VDOL interpreted as actually being “employees”. An inter-agency task force was established in conjunction with that worker misclassification prevention effort, which includes the Virginia Department of Professional and Occupational Regulation (“DPOR”). 

Associated new policy requires a contractor working in a “multi-employer worksite situation” to provide proof of its DPOR contractor’s license and proof of the DPOR license for all subcontractors. The policy also eliminates penalty reductions for small companies and companies acting in good faith. While independent contractors were specifically targeted, temporary laborers were not specifically addressed.

The prevalence of temporary labor in the construction industry is nothing new. Skilled or unskilled, temporary workers perform numerous roles on construction jobsites. Various contractors at all tier levels often wholly or partially outsource project labor, among other things enabling them to reduce overhead while maintaining a ready supply of workers on an as-needed basis. Because most temporary staffing agencies do not consider themselves “contractors”, they typically do not hold contractor licenses through DPOR. 

WHAT ABOUT VIRGINIA? 

There are some states that statutorily address temporary labor services for contracting purposes. For example, California law defines “contractor” as including temporary labor services. Typically, though, even if addressed such as in California, licensure is not required for the temporary labor company if the temporary employees work under the supervision of a licensed contractor. 

Two recent state courts, West Virginia and Alabama, have looked at the question where temporary labor services were not statutorily addressed. While using different analyses, both courts held that temporary staffing agencies required contractor licensure.  Of note, the contracting licensure requirements of those states were similar to Virginia’s statutes and regulations.

In the West Virginia case, the court took a broad view of temporary laborers, and concluded that since the temporary workers were engaged in construction work, it did not matter in what particular trade they were performing – licensure was required. The Alabama court took a more narrow view that focused on the particular “construction activity” involved, and indicated that, for example, menial labor might not require temporary agency licensure, but that for typical construction activities, licensure was required.

So where does that leave Virginia? That remains the unanswered question. In contrast to states like California, Virginia’s statutes and regulations are silent regarding temporary staffing and, unlike West Virginia or Alabama, there are no reported cases yet addressing this question. Nor, yet, has either VDOL or DPOR stated their positions. But it should be noted that the stated rationales of the task force for its worker misclassification concerns included similar rationales to those used by both the West Virginia and Alabama courts.

Until Virginia addresses the issue by statute, regulation, or case holding, the outcome in Virginia remains uncertain-- putting both temporary labor agencies and the contractors that use/allow them at risk.

THE OPTIONS:

Short of advocating for legislative or regulatory change, the options are limited. One option is for temporary labor agencies to obtain licensure. That is the most certain approach for both the temporary labor agency and any contractor using temporary labor. A second option is to presume licensure is not required until a contrary ruling is made, and hope licensure is deemed not required.

However, that second approach places both the temporary labor agency and the hiring contractor (and higher tier contractors) at significant risk. Even if the temporary labor agency and the contractor determine licensure is not required, DPOR may not agree. That puts them, and potentially contractors at higher tiers, at risk for violating the law; for which the fines and punishments can be severe, in addition to putting them at risk for associated contract breach damages.

FOR MORE INFORMATION:

This is just one more example of the complexities and risks associated with contracting. For more information about this issue, or any other government or construction contracting matters, Vandeventer Black’s Construction and Government Contracts Group team of attorneys are poised to help navigate those needs. Please visit the firm’s website to learn more about the firm and our professionals at www.vanblacklaw.com.


SUPPLEMENT - February 15, 2016:

As a follow up to this recent blog, we thought it of interest to note that we received comment back from one of our recipients that a VDOL representative had informally expressed the view that the worker misclassification policy was going to be interpreted by VDOL as meaning that the individual works hired from temporary employment agencies did not require licensure.

If that becomes VDOL’s formal policy that helps clarify one aspects of the misclassification and licensure issues we noted. But even if so it still remains currently unclear whether that view, if applied by DDOL, will apply the individual workers only, or also to the temporary employment agencies providing them, and also whether DPOR will take a similar position or positions since agencies unfortunately at times take dissimilar positions on similar issues.

Our team will continue to try and provide update respecting this issue as new information develops.