Six months into Trump’s presidency, we wrote about how Trump’s $1 trillion infrastructure plan was likely to include more federal deregulation, including possible repeal or suspension of the Davis Bacon Act (DBA).  Two months after that article, comments from the House Transportation and Infrastructure Committee suggested Trump had changed his tune and would retain the DBA protections perhaps in part to gain support from typically pro-DBA democrats for the administration’s infrastructure plan.

While media sources have reported that the administration’s infrastructure plan all but “died” several months ago, Trump’s Supreme Court nominee somewhat refocuses on the DBA and other government contract industry related legislation.  And while nominee Brett Kavanaugh’s confirmation won’t mean repeal of the DBA, his confirmation could mean the reach and application of the Act (and other related legislation) to federally funded projects could be even further limited.

Such potential limitations are foreshadowed in a decision Kavanaugh issued during his time on the D.C. Circuit in the case of District of Columbia v. Dep’t of Labor, 819 F.3d 444 (D.C. Cir. 2016).  There, the contract at issue was one for the lease of certain property that would be used to construct a privately-funded mixed-use development, known as CityCenterDC.  The Department of Labor made the determination that CityCenterDC was a “public work” within the meaning of the DBA, and thus the contract – between the property lessor and the private developer – was subject to the prevailing wage requirements of the Act.  Finding that the lease agreement was not one “for construction,” and was separate and apart from the construction agreements that would follow between the developers and general contractors, Kavanaugh found the DBA was not intended to have such far-reaching application:

The text of the Act is straightforward.  As relevant here, the Act covers contracts “for construction” to which the District Columbia is a party. . . Contrary to the U.S. Department of Labor’s suggestion, moreover, neither the lease agreements nor the development agreements between D.C. and the developers are themselves contracts for construction to which D.C. is a party. . .

The Department’s interpretation of the statutory term “contract…for construction” would significantly enlarge the scope of the Davis-Bacon Act.  The Department’s interpretation would embrace any lease, land-sale, or development contract between the Federal Government or D.C. and another party, so long as to the agreements required the counterparty in turn to undertake more than an incidental amount of construction.  The terms of the Davis-Bacon Act are not so malleable.  A contract for construction is a contract for construction.  And a lease, land-sale, or development agreement that contemplates one of the parties entering into a future contract for construction with a third party construction contractor is not itself a contract for construction.

In applying his hallmark strict constructionist views, Kavanaugh’s decision in District of Columbia could be a sign of what’s to come – i.e., more limitations on what some in the industry consider bureaucratic overreach.  While it is rare that a decision directly impacting the government contracting industry reaches the United States’ highest court, Kavanaugh’s judicial “style” could mean legislation such as the DBA and other, ancillary legislation becomes more limited in its reach.

On July 25, 2017, the U.S. Department of Labor (DOL), Wage and Hour Division, issued a memorandum increasing the health and welfare fringe benefits rate for contracts covered by the McNamara-O’Hara Service Contract Act (SCA).

The SCA requires contractors and subcontractors performing work on federally funded prime contracts in excess of $2,500 to pay service employees no less than the wage rates and fringe benefits required by the locality in which the contract is being performed or the rates and benefits included in a contractor’s collective bargaining agreement.  Each year the DOL adjusts its health and welfare fringe benefits rates, referred to as “wage determinations.”  This year, the DOL issued two adjustments – one for SCA covered contracts, and another for SCA covered contracts that are also covered by Executive Order 13706.

As to the former category, the DOL increased the benefits level from $4.27 per hour to $4.41 per hour.  Hawaii’s rates – set differently pursuant to § 2(a)(2) of the SCA because it already provides certain benefits under its individual state law health care law, the Hawaii Prepaid Health Care Act (HPHCA) – increased from $1.78 to $1.91 per hour.

For those contracts covered by Executive Order 13706, the health and welfare rates will be slightly lower.  Nearly two years ago, President Obama signed Executive Order 13706, requiring contractors that enter into certain federally funded contracts provide covered employees with up to 56 hours (seven days) of paid sick leave in addition to paid leave for family care.  The DOL issued a Final Rule in accordance with the Executive Order on Sept. 30, 2016.  To help offset the costs of complying with EO 13706, the DOL set the health and welfare fringe benefits rates to $4.13 per hour, and $1.63 per hour for contractors required to comply with the HPHCA.

The new rates go into effect for service contracts awarded after Aug. 1, 2017.

In April, we wrote about  how President Trump’s estimated $1 trillion infrastructure plan may come with possible repeal or suspension of the Davis Bacon Act (DBA).  A few months later, and the Trump Administration seems to be singing a different tune.  More recently, comments from Transportation Secretary Elaine Chao suggest that the administration’s rebuilding package will maintain wage requirements mandated by the DBA.

At a June 8, 2017, House Transportation and Infrastructure Committee hearing, Secretary Chao answered questions related primarily to proposed plans to update the nation’s airports and corresponding changes to the Federal Aviation Administration.  When Congressman Scott Perry (R-PA) inquired about raising the monetary threshold for the Davis-Bacon prevailing wage requirements, Secretary Chao responded that for the “infrastructure projects … the administration’s proposal is to include Davis-Bacon.”  The Secretary added she would “like to see it passed,” and understood “that without the provision, the minority would not sign on.”  When Rep. Perry pushed further, asking “no changes at all?” Secretary Chao simply responded “I’m interested in getting the infrastructure bill passed.”  As mentioned in the previous article, Trump may choose to include DBA protections in order to gain support from typically pro-DBA Democrats for the administration’s infrastructure plan.

While Trump made a number of veiled comments surrounding his infrastructure plan during what the White House termed “Infrastructure Week,” federal contractors are still standing by waiting to see which (if any) of the DBA requirements will survive.

25927634816_d55644f384_kNearly 100 days into the new presidency, all eyes are on which of his campaign promises President Trump will implement next.  One such promise put into motion is the President’s estimated $1 trillion infrastructure plan.  Touted during his campaign as a means to stimulate job growth, the President’s plan may come with more federal deregulation than the construction and government contracting industries anticipated, including possible repeal or suspension of the Davis Bacon Act (DBA).

Introduced in the midst of the Great Depression, Congress enacted the DBA as a means to prevent failing wages.  Eighty years later, the DBA has become synonymous with federal contracting.  Also known as the federal prevailing wage statue, the DBA requires payment of prevailing wages on federally funded or assisted construction projects for contracts in excess of $2,000.  Critics of the DBA argue that the prevailing rates artificially and unreasonably increase project costs, and that the U.S. Department of Labor is unable to develop an efficient process for determining market-rate wages.  Proponents – particularly labor unions – argue the DBA prevents a “race to the bottom,” increasing productivity and improving local economies. Continue Reading President Trump’s Comments Stir Rumors of Possible Repeal or Suspension of the Davis Bacon Act

Last month, we wrote about the House passing a resolution (H.J. Res. 37) pursuant to the Congressional Review Act to repeal the Fair Pay and Safe Workplaces rule (commonly known as the contractor “Blacklisting” rule). At the time we predicted the resolution would also pass the Senate and be signed by President Trump. On March 6, 2017, the Senate passed the joint resolution, and joint resolution was signed by President Trump yesterday, permanently nullifying the Blacklisting rule before it ever took effect. Continue Reading President Trump Signs H.J. Res. 37 Canceling the Fair Pay and Safe Workplaces (“Blacklisting”) Rule

logo-titleBack in October 2016, we wrote about the Fair Pay and Safe Workplaces rule (commonly known as the contractor “Blacklisting” rule) and how its implementation had been temporarily halted by a federal court in Texas.  The Blacklisting rule would have allowed agencies to essentially debar contractors on a contract-by-contract basis if a contractor had a labor law violation on its record.  Many in the contracting community lobbied hard against this rule, arguing (among other things) that the Blacklisting rule would put contractors at risk of inconsistent disqualification from procurements without the same due process rights that go along with agency suspension and debarment programs.  Well, it now looks like Congress has decided to step in and flex a rarely used law to get rid of the Blacklisting rule for good.

Today, by a vote of 236-187, the House of Representatives passed a disapproval resolution pursuant to the Congressional Review Act to repeal the Blacklisting rule.   Continue Reading House Votes to Repeal the Fair Pay and Safe Workplaces (“Blacklisting”) Rule

logo-titleStarting October 25th many new federal government contract solicitations were to contain the clauses required under the Fair Pay and Safe Workplaces Final Rule based on the Executive Order put in place by the Obama administration.  These clauses would impose significant new compliance and reporting obligations on federal contractors (and eventually on subcontractors). The stated goal is to ensure that companies contracting with the Federal Government understand and comply with labor laws.

However, contractors can breathe a bit easier (for now). On October 24th, the U.S. District Court for the Eastern District of Texas granted a preliminary injunction temporarily stopping the majority of the final rule from going in to effect. In accordance with the preliminary injunction, federal contractors will not be required, at this time, to report labor law violations with their bids and proposals on federal contract solicitations. The court also enjoined the government from enforcing the requirement regarding contractor arbitration agreements with employees covering disputes arising out of Title VII of the Civil Rights Act or from torts related to sexual assault or harassment. The court did not bar implementation of the paycheck transparency requirement scheduled to take effect on January 1, 2017.

The reporting requirements in the final rule have been described as having the potential of “blacklisting” companies from award of government contracts due to the many burdens imposed by compliance with the 14 applicable labor laws. These burdens are the reason for the pending litigation in Texas.  Since the final rule is now in litigation, government contractors may be able to put off preparations for compliance if the injunction remains in place, and therefore should closely monitor this case to see if the injunction is lifted while the litigation proceeds.  However, contractors should not assume that the this injunction will remain in place forever.  While this case is pending, it would be wise for contractors to proactively review labor law violations that have had in the past year in order to be prepared in the event the injunction is lifted.  Most importantly, contractors have to consider whether any violations are “willful,” “serious,” “pervasive” or “repeated.”  Contractors need to identify any such violations early so that they may provide evidence of mitigating factors and remedial actions the company has taken since the violation.

Ali_al_Salem_WelcomeIn the recent ASBCA case Appeal of SupplyCore, Inc., ASBCA No. 58676, the government successfully defended against a claim for post-termination labor costs, where the contractor argued that the government had violated the duty of good faith and fair dealing with regard to the timing of the Army’s decision to not exercise a contract option.

In 2008, the Army had awarded SupplyCore a one year fixed price contract for warehouse management at Camp Ali Al Salem in Kuwait. The contract contained 4 one year options.  The options were to be extended on written notice to SupplyCore within 30 days, so long as the Army had provided a (nonbinding) written notice of intent to extend at least 60 days before the contract expired.  The contract also required SupplyCore to comply with local labor laws pursuant to DFARS 252.222-7002.  At the time the contract was entered in 2008, Kuwaiti labor laws required only a 15-day notice of termination of employment.  However, in 2010, that changed to a 90-day notice.

After initially extending the contract for the first three options, the Army gave notice of intent to exercise the fourth option 60 days prior to contract expiration.  Subsequent to the notice, the Army decided due to a reduction in activity at the base, it was more cost-effective to staff the warehouse with soldiers.  Consequently, 9 days after sending the intent to extend letter to SupplyCore, the Army informed SupplyCore that the contract would not be extended.

Supplycore then filed a claim for $145,634.80 from the Army for labor costs required to be paid for the 39 days after contract expiration that SupplyCore was responsible to pay under Kuwaiti labor laws (90-day notice of termination to employees, less 51-day notice provide by Army prior to end of contract).  When the Army denied the claim, SupplyCore filed its appeal, asserting in part breach of the duty of good faith for failing to give a 90-day notice.  On the Army’s Summary Judgment Motion, the Board found that the only reasonable assumption on the part of SupplyCore was that the contract was set to expire, and it was unreasonable to presume 90 days prior, or even 60 days prior with the written notice, that the contract would continue. Continue Reading Government’s Duty of Good Faith and Fair Dealing Does Not Absolve Contractor of Costs of Complying with Kuwaiti Labor Laws

On December 9, 2014, the U.S Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) published a final rule implementing Executive Order (EO) 13672 effectively amending EO 11246, which previously only prohibited discrimination by federal contractors and subcontractors on the bases of race, color, religion, sex, and national origin.  EO 13672 now extends sexual orientation and gender identity protections to employees and applicants in the federal contracting workplace.  The final rule does not take effect until April 8, 2015 and applies to all covered contracts entered into or modified on or after that date.  The new rule does not define “sexual orientation” or “gender identity,” however according to OFCCP, the agency will utilize the same definitions used by the Equal Employment Opportunity Commission and developed under Title VII case law.

The new rule will affect several aspects of the federal contracting workplace including the following:

  • New Equal Opportunity Clause Required.  Currently, 41 C.F.R. § 60-1.4 requires that government contracts include an equal opportunity clause which in part prohibits a federal government contractor from discriminating any employee or applicant on the basis of race, color, religion, sex, or national origin.  When the rule takes effect in April 2015, covered contracts entered into or modified after that date must contain the new equal opportunity clause which adds reference to sexual orientation and gender identity.
  • New Taglines for Federal Government Contract “Advertising.”  The final rule also requires that in all solicitations or advertisements for employees or applicants, contractors must state that “all qualified applicants will receive consideration for employment without regard to race, color, religion, sexual orientation, gender identity, or national origin.”  According to OFCCP, this requirement may also be satisfied by simply including that the contractor is an “Equal Opportunity Employer.”
  • Compliance Reporting Requirements.  EO 13672 broadens the requirement that prospective contractors may be required by the Secretary of Labor to provide a statement from any labor union or agency referring workers to the contractor stating that the contractor’s practices and policies do not discriminate on the basis of sexual orientation or gender identity as part of its Compliance Report.

Notwithstanding these new requirements, EO 13672 does not impose several requirements that are usually par for the course in equal opportunity amendments: Continue Reading OFCCP Extends Equal Protection Rights Prohibiting Discrimination Based on Sexual Orientation and Gender Identity

As Congress reconvenes it will consider a new bill that would direct federal agencies to give preferential points in the bidding process to federal government contractors based on their labor practices. The bill, proposed by Rep. Eleanor Holmes Norton (D-D.C.), would give points to companies that pay their employees a living wage with benefits and those that permit workers to unionize without passing on additional costs to the federal government. According to Norton, these preferential points will help level the playing field and encourage private contractors and concessionaires to treat their workforce with the “dignity they deserve.”

If Norton’s previous bill is any indication, Norton’s newest endeavor will likely be very controversial. In July, she introduced the Restore Opportunity Strengthen, and Improve the Economy (ROSIE) Act which incentivizes federal government contractors to support collective bargaining, pay living wages and benefits, stop wage theft, and avoid paying CEO’s excessive salaries. The bill was immediately met with resistance, and to date has yet to move in the House. While President Obama has put components of the ROSIE Act into an Executive Order, Rep. Holmes Norton has continued to press the president to issue an executive order that includes the entire ROSIE Act.

Norton’s newly proposed bill and ROSIE Act aren’t the only developments when it comes to federal contracting labor issues. Champions for federal contracting employees scored a major victory last month when President Obama issued an Executive Order increasing the federal contracting minimum wage to $10.10 per hour effective January 1, 2015. However, these pro-employee measures may soon be met with more resistance. At a post-election gathering, former Virginia GOP congressman Tom Davis commented that the new Republican-controlled Congress will be more “pro-contractor.” While Davis noted that getting appropriations pushed through will be an uphill battle, the Republican party is inherently more market-oriented and permissive on defense spending, even if less so to spending overall. While Americans always expect some amount of gridlock in Congress, it is likely that federal government contracting issues will only add to the proverbial tug o’ war.

Image Courtesy of Flickr (licensed) by Doug Brown