Federal Contractors: OFCCP Issues Directive on Religious Freedom

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The OFCCP issued a directive requiring recognition of religious freedom.

The Office of Federal Contract Compliance Programs (“OFCCP”) has issued a new directive reminding its staff members of their obligation to recognize the religious freedom of federal contractors.  Here’s a link to the new directive:  Directive 2018-3.  Here’s a link the OFCCP press release about the directive:  Press Release.

The directive was issued in response to several recent decisions from the United States Supreme Court on religious freedom, and President Trump’s executive order which “reminded the federal government of its duty to protect religious exercise — and not to impede it.”  Thus, the OFFCP reminded its staff that:

• They “cannot act in a manner that passes judgment upon or presupposes the
illegitimacy ofreligious beliefs and practices” and must “proceed in a manner
neutral toward and tolerant of … religious beliefs.”
• They cannot “condition the availability of [opportunities] upon a recipient’s
willingness to surrender his [ or her] religiously impelled status. ”
• “[A] federal regulation’s restriction on the activities of a for-profit closely held
corporation must comply with [the Religious Freedom Restoration Act].”
• They must permit “faith-based and community organizations, to the fullest
opportunity permitted by law, to compete on a level playing field for …
[Federal] contracts.”
• They must respect the right of “religious people and institutions … to practice
their faith without fear of discrimination or retaliation by the Federal
Government. “

As a practical matter, the new OFCCP directive does not provide much clarity on a key religious issue:  whether government contractors can discriminate against LGBT persons based upon religious beliefs.  Indeed, I previously wrote that President Trump will not rescind President Obama’s Executive Order prohibiting LGBT discrimination:  Trump and LGBT.  For now, government contractors should proceed cautiously if they want take employment actions based upon religious beliefs.

Service Contract Act: Non-Compliance Can Be Costly

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Failure to comply with the Service Contract Act can be expensive for government contractors.

My firm helps government contractors comply with a broad array of regulations imposed by the federal government.  Here is a link to our firm’s new Government Contracts Lawyers web site:  Wilmer & Lee Government Contracts.  Within our government contracts group, I am frequently tasked with assisting government contractors in their efforts to comply with the McNamara-O’Hara Service Contract Act (“SCA”).

The United States Department of Labor (“DOL”) enforces the SCA.  Frequently, the DOL issues press releases when companies agree to pay for violations of the SCA.  Following are a series of press releases issued by DOL this Spring.  Hopefully, they can provide you with some guidance on what not to do in administering an SCA contract.  The title of each release links to the DOL web site.

18-630-ATL.  May 8, 2018.  A company based in my hometown of Huntsville, Alabama agreed to pay $95,000 in back wages to 12 employee for failure to pay prevailing wage rates for work performed on a federal contract.  Y-Tech Services, Inc. categorized employees as aircraft workers when they actually performed the duties of sheet metal employees, which required higher rates.

18-625-BOS. May 8, 2018.  This is actually a Davis-Bacon Act case and not an SCA case.  Gilliam Co. LLC of Franklin, Connecticut was debarred from future federal construction contracts.  Gilliam failed to make required fringe-benefit payments — primarily 401(k) contributions.  Gilliam also took payroll deductions from a non-existent vacation fund, failed to pay employees for their last two weeks of work, and submitted falsified payroll records.  The total amount paid to 12 employees was $125,348.

18-0658-SAN.  May 1, 2018.  United States Auto Club, Inc. (“USAC”) provides emergency roadside assistance to the United States Postal Service.  The SCA contract required that employees be paid $20.84 per hour.  USAC subcontracted the work to Norbert’s Towing Service, which only paid employees half that rate.  As a result, USAC owed 29 employees $377,512 in unpaid prevailing wages; $165,116 in required health and welfare benefits; and, $107,367 in overtime.

18-04650-ATL.  March 29, 2018.  Insight Global, LLC worked as a subcontractor for Hewlett Packard on an information technology contract with the U.S. Department of the Navy.  Insight Global erroneously categorized and paid 14 employee as computer operators, when they actually performed the work of personal computer support technicians.  As a result, Insight Global agreed to pay $354,978 in back wages.

OFCCP: TRICARE Moratorium Extended to 2021

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The OFCCP extended a moratorium which excuses TRICARE providers from compliance with affirmative action obligations.

Should TRICARE providers be required to implement affirmative action?  That’s the issue that the United States Department of Labor raised when it issued Directive 2014-01 on March 7, 2014.  Here’s a link to that directive:  DOL Directive 2014-01.  TRICARE is a federal healthcare program that provides benefits to American veterans.  The DOL’s Office of Federal Contract Compliance Programs (“OFCCP”) is responsible for enforcement of the affirmative action obligations imposed upon federal contractors.  Directive 2014-01 effectively imposed a five-year moratorium on requiring TRICARE subcontractors to comply with those obligations.  On May 18, 2018, OFCCP extended that moratorium to May 7, 2021.

Federal laws and regulations require federal contractors and subcontractors to take affirmative steps to ensure equal employment opportunity in their employment processes. When it issued Directive 2014-01, the DOL  recognized a difference of opinion as to who is a covered subcontractor under the law and what obligations the TRICARE subcontractor community has under the law.  Because of that difference of opinion, DOL decided that it would impose the moratorium on enforcement.

The moratorium, however, was set to expire in 2019.  OFCCP’s May 18, 2018 press release extended the moratorium.  Here’s a link to the press release:  May 18, 2018 Press Release.  OFCCP provided the following rationale for extending the affirmative action moratorium:  “Active-duty and retired service members, and their families, too often have difficulty accessing health care. There is evidence suggesting that continued uncertainty regarding the extent to which OFCCP requirements apply to TRICARE providers exacerbates these challenges. With the approaching expiration of the moratorium adding additional uncertainty, this extension will provide OFCCP time to receive feedback from stakeholders, relieve uncertainty, and give OFCCP an opportunity to evaluate and address legislation that may be enacted on this issue.”

 

Government Contracts: OFCCP Compensation Audits Might Change

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The OFCCP might make compensation audits more fair for government contractors.

Recent discussions inside the Office of Federal Contractor Compliance Programs (“OFCCP”) indicate that compensation audits of federal contractors might become more fair for employers.  On April 19, 2018, Bloomberg News released an article indicating that OFCCP was contemplating significant changes to its audit rules.  Here’s a link to the Bloomberg article: Bloomberg OFCCP Article.  The OFCCP conducts audits of government contracts and federal contractors to ensure that employers are complying with federal laws and regulations prohibiting pay discrimination.  Under the Obama Administration, the OFCCP issued Directive 307, which allows auditors to compare compensation of employees even if they perform different work.  For example, auditors might find discrimination by comparing the compensation of two “managers,” even though one manager works in accounting and the other in human resources.

Comparisons of dissimilar employees are generally not permitted in discrimination cases arising under Title VII of the Civil Rights Act of 1964.  Instead, an employee suing for pay discrimination must usually compare themselves to another employee doing the same work, in the same location, with the same supervisors.  Because of the discrepancies between OFCCP’s enforcement efforts and traditional employment law, the U.S. Chamber of Commerce released a report in late 2017 critical of the OFCCP.  It’s report, “OFCCP, Right Mission, Wrong Tactics” can be found here.

The Bloomberg article indicates that the OFCCP is about to scrap or significantly change Directive 307.  That’s good news for federal contractors, who need consistency in the law to succeed in business.  Unfortunately, the Bloomberg article caused some concern among civil rights groups, and an article from the Society for Human Resource Management (which can be found here) indicates the OFCCP’s plans may be delayed.  Even with the delays, the information coming from OFCCP is good news for government contractors, because it indicates a willingness by OFCCP to address employer concerns.

Defense Contractor Whistleblower Protection Act Could Impact Alabama Employers

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The Defense Contractor Whistleblower Protection Act could impact many employers in Alabama.

Alabama employers need to know about the Defense Contractor Whistleblower Protection Act, 10 U.S.C. § 2409.  Off the top of my head, I can identify major military bases at Redstone Arsenal, Maxwell Air Force Base and Fort Rucker.  Private defense contractors will be an integral part of each such base.  Moreover, many of my defense contractor clients based in Huntsville have employees outside Alabama.  Thus, they need to be aware of this Act.

In short, the Whistleblower Protection Act protects employees from retaliation if they make complaints about violations related to Department of Defense or NASA contracts, or dangers to public safety.  More particularly, the Act provides:

(1)An employee of a contractor, subcontractor, grantee, or subgrantee or personal services contractor may not be discharged, demoted, or otherwise discriminated against as a reprisal for disclosing to a person or body described in paragraph (2) information that the employee reasonably believes is evidence of the following:

(A) Gross mismanagement of a Department of Defense contract or grant, a gross waste of Department funds, an abuse of authority relating to a Department contract or grant, or a violation of law, rule, or regulation related to a Department contract (including the competition for or negotiation of a contract) or grant.

(B) Gross mismanagement of a National Aeronautics and Space Administration contract or grant, a gross waste of Administration funds, an abuse of authority relating to an Administration contract or grant, or a violation of law, rule, or regulation related to an Administration contract (including the competition for or negotiation of a contract) or grant.

(C) A substantial and specific danger to public health or safety.

10 U.S.C. § 2409(a)(1).  The list of persons/entities to whom an employee can complain is extensive.  See 10 U.S.c. § 2409(a)(2).  Most importantly, employees are protected if they make an internal company complaint to a “management official or other employee of the contractor or subcontractor who has the responsibility to investigate, discover, or address misconduct.”
There have only been a handful of trial court cased dealing with the Whistleblower Protection Act.   Even so, one of those case was issued by Judge Abdul Kallon in the Northern District of Alabama late last year.  See Devillo v. Vision Centric, Inc., No. 5:15-cv-02211-AKK, 2017 WL 3425465 (N.D. Ala. Aug. 9, 2017).
For any lawyers reading this, there is a slight divergence of authority on the proper method for analyzing Whistleblower Protection Act claims.  Judge Kallon followed the lead of other District Court judges and applied the traditional burden-shifting scheme for retaliation claims arising under Title VII of the Civil Rights Act.  But, recently, Magistrate Judge Michael Hegarty in Colorado found that the Whistleblower Protection Act contained a statutorily-mandated analysis, which he summarized as follows:
[An employee] will succeed on his claim for retaliation in violation of 10 U.S.C. § 2409 if he demonstrates (1) he engaged in protected activity as described in the statute, (2) the [employer’s] decision maker knew he engaged in protected activity, and (3) his protected activity was a contributing factor in the adverse employment action taken against him, unless (4) [the employer] shows by clear and convincing evidence that it would have taken the employment action despite [the employee’s] protected activity.
Cejka v. Vectrus Sys. Corp., No. 15–cv–02418–MEH, 2018 WL 879522 at *14 (D. Col. Feb. 14, 2018).

Taxpayer Can Sue to Void “Illegal” Government Employment Contract

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If a governmental entity enters into a “illegal” employment contract, Alabama taxpayers can sue to void it.

Last week, the Alabama Supreme Court ruled that Alabama taxpayers can sue to void “illegal” government employment contracts.  Ingle v. Adkins, No. 1160671, 2017 WL 5185288 (Ala. Nov. 9, 2017).  At issue was an employment contract between the Walker County Board of Education and the Superintendent of the Walker County Schools.  After he was re-elected as Superintendent in 2014, Jason Frank Adkins signed an employment contract with the Walker County school board.  The contract provided:  a $159,500 salary with annual pay raises; a $1,000 per month travel stipend; reimbursement for a cell phone; and, a promise to allow him to return to his previous job as a tenured employee.

Apparently, Sheila Mote Ingle thought that contract was excessive.  So, she sued, claiming that, as a taxpayer, she was entitled to have the “unconstitutional, illegal and void” contract vacated.   Ms. Ingle also sought to recover monetary amounts that she claimed were improperly paid to Mr. Adkins.  Mr. Adkins and the school board immediately moved to dismiss Ingle’s law suit.  They claimed that the Alabama Constitution of 1901 confers immunity from law suits to them, and that Ms. Ingle had no “standing” to challenge the contract, because she was not a party to it.  Without giving a specific reason, a trial court in Walker County granted that motion to dismiss and Ms. Ingle appealed.

The Alabama Supreme Court found that Ms. Ingle was entitled to pursue her claims to vacate the contract, but not her claims for money.  The Court reiterated a string of cases holding that Alabama School Boards and Superintendents are absolutely immune from claims for money damages under the Alabama Constitution.  But, the Court refused to extend that immunity to claims for declaratory and injunctive relief.  In short, the Court found that immunity could not bar Ms. Ingle’s claim to have the employment contract declared invalid.

The Supreme Court also rejected the Board’s standing defense.  The Court found that its cases have “continually held that taxpayers have standing to seek an injunction against public officials to prevent illegal payments from public funds.”

Accordingly, the Supreme Court reversed dismissal of Ms. Ingle’s case to allow her to pursue her theory that the contract between Mr. Adkins and the School Board is illegal.  At the same time, the Court refused to comment on whether her actual theories had any merit.  That decision will come at a later date after the parties fully litigate the issue.

Federal Contractors: Blacklisting Rules Enjoined

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A preliminary injunction saves federal contractors from the “blacklisting rules.”

Yesterday, federal contractors received a reprieve from one of President Obama’s executive orders.  Late on October 24, 2016, a federal judge in the Eastern District of Texas granted a preliminary injunction halting implementation of certain provisions of the Fair Pay and Safe Workplaces Executive Order (E.O. 13637) and the Final Rule implementing that order.  The injunction applies nationwide and blocks two key provisions of the Final Rule which affected government contractors: (1) disclosure and disqualification requirements; and, (2) a prohibition on pre-dispute arbitration agreements.

The preliminary injunction blocks the portions of E.O. 13637 and its Final Rule, which are also known as “blacklisting rules.”  Those rules require federal contractors to disclose adverse findings and decisions related to their compliance with federal and state labor and employment laws.  The blacklisting rules also allow federal agencies to deny contracts to employers who are deemed to lack a satisfactory record of integrity and business ethics based on such disclosures.  The blacklisting rules were supposed to take effect on October 25, 2016.

E.O. 13637 and its Final Rule also prohibit certain federal contractors from requiring pre-dispute arbitration agreements from its employees for disputes under Title VII of the Civil Rights Act of 1964, or claims arising out of or related to sexual harassment.  The injunction also blocked those arbitration restrictions.

Importantly, the federal judge did not issue an injunction related to “paycheck transparency” provisions of E.O. 13637 and its Final Rule.  Those provisions will go into effect for solicitations or contract amendments made on or after January 1, 2017. Under the “paycheck transparency” provisions, covered contractors and subcontractors must provide wage statements to covered workers.  Those statements must give workers information concerning hours worked, overtime hours, pay, and any additions to or deductions made from pay.