Nondiscrimination Rules for Spouses of Protected Veterans

Here's something else to be mindful of when the Labor Department shows up to perform compliance reviews.

The Labor Department's Office of Federal Contract Compliance Program (OFCCP) released a new directive related to the employment of military spouses, to ensure that federal contractors are not discriminating against spouses of protected veterans.

Protected veteran are those who are disabled, recently separated, active duty wartime or campaign badge, or an Armed Forces service medal veteran.

Military service usually requires multiple and frequent relocation, often creating an employment history that can add challenges to a spouse's ability to obtain and maintain employment and to achieve career goals. While discrimination safeguards for spouses of protected veterans are not new, they can be overlooked. That is why the OFCCP will require its compliance officers to inquire with federal contractors during onsite investigations about their treatment of veteran spouses.

Here are the questions that employees of federal contractors can expect during a compliance examination.

1. Are you a spouse of a protected veteran?
2. Do you have any coworkers who are spouses of protected veterans?
3. Do you have any observations concerning the treatment of spouses of protected veterans?

In addition, the OFCCP's compliance officer (CO) will offer compliance assistance with drafting a written policy and ensure that the contractor understands its obligations with respect to spouses of protected veterans.

The sample compliance policy provided with the new directive reads as follows:

It is [Federal Contractor, Inc.’s] policy not to discriminate because of a person’s relationship or association with a protected veteran. This includes spouses and other family members. Also, [Federal Contractor, Inc.] will safeguard the fair and equitable treatment of protected veteran spouses and family members with regard to all employment actions and prohibit harassment of applicants and employees because of their relationship or association with a protected veteran.

New Executive Order Rescinds Rules on Offering Incumbent Employees Right of First Refusal

Last week, the President issued an Executive Order (EO) that revoked one of President Obama's first Executive Orders; Nondisplacement of Qualified Workers Under Service Contracts.

This EO is called "Improving Federal Contractor Operations by Revoking Executive Order 13495.

The now rescinded EO required that successor Federal contractors in certain circumstances offer a right of first refusal of employment to employees employed under the predecessor contract.

The new EO requires the Labor Department, the FAR Councils and heads of all executive departments and agencies to promptly move to rescind any orders, rules, regulations, guielines, programs, or policies implementing or enforcing the old EO. Also, the Labor Department must terminate, effective immediately, any investigations or compliance actions based on the old EO.

The 'right of first refusal' has been criticized by some contractors for being unnecessary. As a matter of practice, successor contractors would naturally want to hire qualified employees of the incumbent contractor. However, the rule also discouraged contractors from hiring workers that might be better suited for a particular job. Additionally, successor contractors felt compelled to offer employment to unsuitable candidates just to avoid a Labor Department investigation.  That concern was born out by some extreme Labor Department enforcement actions.

Since this EO has immediate application, it is likely that there are solicitations on the street that contain the old EO provisions and FAR provisions implementing that EO. The now rescinded rules might have an impact on what offerors are willing to bid.

Contractor Pays Nearly $1 Million in Back Wages for Labor Law Violations

A division of the Labor Department, this time the Wage and Hour Division (WHD), announced the results of its investigation of General Atomics for compliance with Federal labor laws. The company, a California-based contractor providing aircraft systems and services to the Army, agreed to pay nearly $1 million to 1,100 employees for violating the Service Contracting Act (SCA).

According to the Labor Department, General Atomics failed to pay prevailing wages and required health and welfare benefits to employees performing services under several Government contracts. General Atomics paid aircraft mechanics and engineering technicians at hourly rates below the SCA minimums and also failed to pay minimum fringe benefits required by the SCA.

In making the announcement, the Labor Department reminded employers doing business with the Federal Government that they need to understand and abide by all applicable laws and to ensure that employees receive legally required pay and benefits. Easy to say but difficult to implement, we suppose.

Three Companies Agree to Pay $630 Thousand to Settle Labor Related Violations

The Labor Department has been busy lately prosecuting companies for discrimination, and failing to pay prevailing wages. Last Monday, the Department rolled out three separate press releases detailing the findings of their investigations.

In the first case, a contractor agreed to pay $350 thousand in back wages to 185 female applicants to settle allegations of hiring discrimination found during a routine investigation by the Department's Office of Federal Contract Compliance Programs (OFCCP). The press release doesn't explain exactly what the contractor did to lead to OFCCP's conclusions other than the firm discriminated against females during the hiring process.

In the second case, an investigation by the Labor Department's Wage and Hour Division (WHD) led to a $40 thousand settlement for violating SCA (Service Contracting Act) prevailing wage requirements. The security contractor failed to pay required vacation, holiday, and health and welfare benefits to employees performing work on a FEMA contract. The contractor also violated FLSA (Fair Labor Standards Act) record keeping requirements.

The third case also investigated by WHD, involved a Navy contractor in Honolulu who "erroneously" classified workers as laborers while they performed the duties of more highly skilled and higher paid positions such as boilermakers and painters. As a result, the company failed to pay employees the correct prevailing wages rates under the Davis-Bacon Act (DBA). The company agreed to pay $239 thousand to 47 employees to settle the allegations.

The Labor Department has a solution to falling afoul of its rules and regulations:

Government contractors must familiarize themselves with all employee pay and benefits requirements. The (Labor Department) encourages employers and employees to contact us if they have questions about how workers must be paid for regular and overtime wages, and fringe benefits on federal contracts. They can also consult the numerous resources we offer online to help them understand their responsibilities.

Ah yes, the old "I'm from the Government and I'm here to help you" line.

A Compendium of Labor Department Settlements with Government Contractors

The Department of Labor's Wage and Hour Division (WHD) and its Office of Federal Contract Compliance Programs (OFCCP) have been posting a lot of investigation results lately. We don't know how many investigators and auditors are employed there but there must be many based on the number of audits/investigations they're completing.

The WHD investigates contractor and subcontractor compliance with prevailing wage statutes such as the Davis-Bacon Act and the Service Contracting Act. The OFCCP focuses on contractor and subcontractor compliance with federal prohibitions against discriminatory hiring and promoting practices. Both the WHD and the OFCCP initiate their own randomly selected audits but also respond to hotline complaints, congressional inquiries, and other allegations of impropriety.

Monday, the OFCCP announced a settlement with Cintas Corp for $424 thousand because Cintas allegedly discrimnated against female production workers with regard to their compensation and discriminated against black and make applicants for garment inspector/hanger positions and against minority applicants for service sales representative positions.

Also Monday, the WHD announced a settlement with Lockheed Martin for $327 thousand for alleging classifying some employees as exempt from FLSA  overtime requirements. Lockheed also violated the record-keeping requirements of the FLSA.

A week ago Tuesday, the WHD announced a settlement of $1.3 million in back wages for 1,8534 employees to resolve alleged violations of the prevailing wage acts. These employees were engaged in disaster recovery efforts in Puerto Rico. The contractor failed to pay overtime.

Yesterday, the WHD announced a settlement with an electrical contractor working on a VA (Veterans Affairs) construction project. WHD found that the contractor had exceed the journeyman to apprentice ratio and should have classed some of the apprentices as journeymen. That cost the contractor $37 thousand.

It is very difficult for small contractors to know, understand, and implement the myriad labor regulations on the books just like its difficult for small contractors to know and understand procurement regulations. Contractors need to know what they're signing up to before entering into federal contracting.

$435 Thousand Settlement for Violating Prevailing Wage Law

The Department of Labor's Wage and Hour Division (WHD) and Office of Federal Contract Compliance Programs (OFCCP) are two Departments that focus their compliance efforts and investigations almost entirely upon Government contractors. The WHD wants to ensure that contractors meet minimum compensation levels, especially those required by the Davis-Bacon and Service Contracting Acts while the OFCCP makes sure that contractors comply with laws and regulations requiring nondiscrimination in all its various forms.

We've reported on a number of Labor Department settlements where contractors have been found to be in noncompliance with one or more of the many labor related regulations. Most of these settlements have been small or have been a promise to correct a record-keeping deficiency, perhaps. And most of them, to us, have appeared to be the result of an oversight on the part of the contractor or a failure to know all the intricacies embedded into a particular regulation.

Sometimes however, we find examples where contractors intentionally violate labor laws. Take the case of Nagan Construction of New York where the Justice Department just announced the settlement of a civil fraud lawsuit against the company.

Nagan admitted to violating federal prevailing wage requirements (i.e. the Davis-Bacon Act) by paying 20 employees the wage rate applicable to 'laborer' work when in fact, the employees performed skilled work, such as carpentry and bricklayer tasks. Obviously, skilled workers will justify higher wages than common laborers. As part of a settlement with the Justice Department, Nagan agreed to pay the Government $435 thousand of which $242 thousand will be distributed to current and former Nagan employees who were underpaid. The remainder, we presume, was a penalty for violating the law. Nagan also agreed to implement specific measures designed to ensure future compliance with applicable federal prevailing waage laws, including internal compliance audits and training its supervisors on how to comply with federal labor standards.

One bit of irony here is that one of the federal construction projects for which Nagan submitted false certified payrolls for was a Department of Labor contract for renovating a Job Corps Center.

In this case, Nagan knew there were contractual requirements to pay workers prevailing wages but falsified payroll records when submitting invoices for payment. The settlement agreement pointed out that this was not an inadvertent oversight but a deliberate act. The implication here is that the company did so in order to enhance its profits.

The full Justice Department press release on this settlement can be accessed here.

Contractor Agrees to Pay $50 Thousand in Back Wages to Resolve Discrimination Allegations

The Department of Labor has a number of divisions tasked with contractor compliance with various labor laws. In the past few months, we have reported on actions by the Labor Department's Wage and Hour Division (WHD) to ensure compliance with primarily the Davis-Bacon Act and the Service Contracting Act. Where violations (or noncompliances) are found, contractors usually agree to make up for shortages in wages and fringe benefits. Occasionally, especially in the case of repeat offenders, the WHD can take more drastic action such as 'debarment' where, for a period of time, recalcitrant contractors can no more Government contracts.

A second Labor Department division tasked with compliance is the Office of Federal Contract Compliance Programs (OFCCP). This division, as the name implies, is only interested in Government contractors and grantees. Its primary focus is not a law at all but an Executive Order (EO No. 11246) which prohibits federal contractors and federally-assisted construction contractors and subcontractors, who do over $10 thousand in Government business in one year from discriminating in employment decisions on the basis of race, color, religion, sex, sexual orientation, gender identity, or national origin. The EO also requires Government contractors to take affirmative action to ensure that equal opportunity is provided in all aspects of their employment.

Most of the compliance evaluations performed by OFCCP are routine, probably randomly selected, however there is nothing to prevent the Office from following up on leads and/or hotline complaints.
Recently, after a routine compliance evaluation of a federal contractors subsidiary of Cummins Diesel, the contractor, Consolidated Diesel Inc. agreed to pay $50 thousand in back wages for 'alleged' pay discrimination against African-American managers at its manufacturing facility. OFCCP alleged that since at least 2013, Consolidated Diesel paid 11 African-American managers less than white managers in similar roles.

Fifty thousand dollars for eleven employees over a six year period is not a lot of money. That amount works out to an average of $63 per month. Consolidated Diesel did not admit liability however agreed to pay it to resolve OFCCP's alleged discrimination findings. Consolidated Diesel also agreed to take steps to ensure that its pay practices meet the legal requirements.

Contractor Pays $200 Thousand in Back Wages for Failing to Pay Prevailing Wages

The Department of Labor's Wage and Hour Division (WHD) announced late last week that a Government contractor violated the Fair Labor Standards Act (FLSA) and the Service Contract Act (SCA) and has agreed to pay nearly $200 thousand in wages and fringe benefits to twenty-two of its current and former employees.

The contractor, Day & Zimmerman Federal Services holds contracts for IT (Information Technology) services at two Marine Corps installations. Their contracts required them to pay prevailing wages for the skill sets required by the contracts. As a result of WHD's investigation, Day & Zimmerman was found to have misclassified those 22 employees resulting in the company paying less than prevailing wage.

As a result of failing to pay prevailing wages, Day & Zimmerman also short-changed these employees their overtime entitlements. And finally, WHD also charged Day & Zimmerman with failing to keep accurate records reflecting the required SCA wage rates and correct work classifications.

The WHD was hardly sympathetic to what appears to have been a misunderstanding or unintentional oversight by Day & Zimmerman. WHD stated that it is the contractor's responsibility to ensure compliance with all the statutes, rules and regulations applying to Government contractors.

The WHD offers quite a number of compliance tools. These can be accessed at www.dol.gov/whd/.

$1.6 Million Settlement for Violations of the Service Contract Act

In yet another settlement involving failure to pay minimum wages - this one larger than other recent announcements - the Labor Department's Wage and Hour Division (WHD) announced that a California company agreed to pay $1.6 million in back wages and benefits.

This settlement was also unique in that the company, McKesson Specialty Distribution contacted WHD to self-report the infraction. WHD investigated and confirmed that McKesson failed to pay required prevailing wage rates to employees performing wok on a federal service contract. This meant that the company also failed to pay the correct overtime rates and the correct fringe benefits.

The Services Contracting Act (SCA) requires contractors and subcontractors performing services on prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates, including prospective increases, contained in a predecessor contractor's collective bargaining agreement.

The Labor Department lauded McKesson for coming forward and self-reporting the violations and encouraged all employers to review their pay practices and to contact the WHD for compliance assistance.

You can read more about this case here.

Labor Department Looking Into Discrimination at Law Firms

The substance of the following post come from an article published by Bloomberg Law on April 10th.

The Labor Department's Office of Federal Contract Compliance Programs (OFCCP) plans to take a closer look at diversity and discrimination at law firms. According to OFCCP's Director, "There is a big problem at law firms for women and women of color. Law firms need to get their houses in order". Six lawyers at one large law firm sued the firm alleging female attorneys are systemically paid less than their male colleagues for the same work. Similar lawsuits have been filed against two other large law firms.

The OFCCP enforces pay, hiring, promotion, and other discrimination protections for workers employed by Government contractors. Enforcement is done primarily through random audits but are also initiated when there are whistleblower or hotline complaints. Several national law firms were among the 3,500 Government contractors notified by OFCC that they could be selected for random audits in fiscal year 2019.

According to OFCCP, the issue of promotion will be a key focus of future reviews, not only at law firms but also financial firms, universities, and tech companies. It seems like the OFCCP has already reached foregone conclusions. The agency stated that discrimination and paid family leave issues are likely to blame for the relatively low share of female partners in many firms. Really? Perhaps they should perform their audits first and then report on the results.

Some firms that do business with the Government argue that OFCCP has no jurisdiction to investigate potential discrimination against partners since partners are consider owners of the firm and not employees. OFCCP counters this arguments by saying they have jurisdiction over employees who are not being promoted.

The OFCCP also intends to look at contractors for possible discrimination against workers with disabilities. OFCCP's director stated that the average law firm has no disabled partners.

Violations of Davis-Bacon Results in Three-Year Suspension for One Contractor

The Labor Department's Wage and Hour Division (WHD) who routinely conducts 'audits' of contractor compliance with various labor laws including the DBRA (Davis-Bacon and Related Acts) recently found four contractors working on a construction project in violation of the DBRA. Each of the four contractors were found to have shorted employees and all have agreed to pay those employees affected by the violations.

One of the contractors agreed to pay $69 thousand to 19 employees for failing to pay finishers, painters, and carpenters prevailing wage rates required by the DBRA. The contractor also failed to pay the required fringe benefits. This wasn't the first time this particular contractor ran afoul of the WHD investigators. Back in 2017, WHD investigators found other violations of DBRA and  had to pay back $99 thousand to 95 employees. Because of the repeat and willful nature of the violations, the contractor and its owner have been declared ineligible to bid on federal DBRA contracts for a period of three years. We didn't know that WHD had such authority but evidently someone other than a contracting officer can make such decisions.

The other three contractors caught up in this investigation each agreed to pay back wages and fringe benefits as well. In total, these payments reached a quarter of a million dollars.

Government contractors receive detailed agreements that include prevailing wage and fringe benefits rates, required to be paid by all contractors working on a federally funded project. Prime contractors must assure that their subcontractors adhere to these rules as well. Many times, violations are the result of contractors (and subcontractors) down-grading the skill classification of their employees and paying them lesser amounts.

The WHD press release on this case can be found here.

New Reference Guide to the Fair Labor Standards Act

Those of you who regularly follow this blog will recall several recent accounts where contractors have been fined and have had to make restitution to employees for a variety of labor law violations. Some of these violations were no doubt intentional to save costs but some, no doubt, were inadvertent because the company was not fully versed on applicable labor laws. Some violations were uncovered during routine (random?) audits by the Labor Department's Wage and Hour Division (WHD) while others came about because of whistleblower activity. In many cases, employees know their "rights" better than their employers and that makes it doubly hard on small companies and contractors who cannot afford a dedicated HR (Human Resources) position or department.

To assist employers in understanding their duties and obligations, the WHD recently launched an online version of its "Handy Reference Gide to the Fair Labor Standards Act (FSLA)". It covers minimum wage, overtime pay, record keeping, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments.

The chapters include:

• Basic wage standards
• Who is covered
• Minimum wage
• Exemptions
• Youth employment
• Record keeping
• Nursing mothers
• Overtime
• Enforcement
• Prohibitions against retaliation, and more

The Reference Guide is a PDF but contains dozens of links to other source documents, tools, videos, and instructions. 

It should be noted that in addition to the labor laws covered here, each state has its own spate of laws that in some cases are even more stringent that those enforced by the Labor Department. Sick leave and minimum wages are two that come to mind where many states have been more liberal than Federal laws.

Labor Department Compliance Audits

The Department of Labor's Wage and Hour Division (WHD) investigators have been pretty busy lately, investigating contractor violations of certain labor related regulations. For contractors subject to the minimum wage and reporting requirements of Davis-Bacon (DB) and the Service Contracting Act (SCA), the probability of being audited for compliance is actually quite high and the consequences for failing to comply can be significant. The Labor Department recently sent out press releases concerning the outcome of two such investigations.

In the first case, a roofing contractor out of Tuscaloosa Alabama agreed to pay $57 thousand in back wages, overtime and fringe benefits to 41 employees after the Labor Department investigation found the company (employer) violated requirements of the Davis-Bacon Act (DBA), the Contract Work Hours and Safety Standards Act (CWHSSA) and the Fair Labor Standards Act (FLSA). The company failed to pay one employee for overtime hours on a DBA project and several employees for overtime when they worked more than 40 hours on a commercial project. Additionally, the roofing company failed to submit accurate certified payroll records and maintain accurate daily records of the number of hours employees worked.

In the second case, a Texas-based contractor paid $24 thousand in back wages to ten employees after investigators found the company had inaccurately classified several employees as exempt from the overtime requirements of the FLSA when none met the requirements for exemption. The company paid the affected employees flat weekly salaries regardless of the number of hours they worked, resulting in overtime violations when they worked more than 40 hours per week without overtime payment.

These two cases almost sound like "honest mistakes" where very small contractors did not have the internal resources to know all the rules and regulations that applied. We see honest mistakes happen frequently in our consulting business. However, when it comes to labor law, employees are often more informed about such matters than their employers and with the abundance of hotlines and other avenues for whistleblowing, the , it only takes a phone call to have investigators show up on your doorstep.

OFCCP's Help Desk

The Labor Department's Office of Federal Contract Compliance Programs (OFCCP) mission is to protect workers, promote diversity. It performs audits of companies with Federal Government contracts to ensure compliance with requirements to take affirmative action and to not discriminate. We have written about the Office several times in past year or so, usually in the context where the Office has taken punitive action against a contractor for failing to follow a law or regulation.

OFCCP issued a new directive last week (see Directive 2019-03) for the purpose of providing compliance assistance and guidance in a manner that employees and employers can easily access and reasonably rely upon as they seek to understand their rights and obligations.

Specifically the OFCCP is enhancing its existing "Help Desk" which will allow contractors to make inquiries by phone or email regarding a variety of topics. Think of it as a "knowledge base". The OFCCP wants to make certain Help Desk inquiries and responses dynamically available and searchable as a self-service option on OFCCP's website. This self-service option would allow contractors (or contractor employees) to benefit from prior inquiries and lead to greater efficiencies in OFCCP Help Desk operations.

OFCCP also plans to incorporate the use of opinion letters as part of guidance to employers, employees and the public. It hopes that by making fact-specific guidance in opinion letters about OFCCP's jurisdictional coverage or application of regulations or guidance will provide more certainty about how the Agency exercises its authority.

Any one having experience using "knowledge base" information to solve a problem knows full well that solutions can be difficult to find and even then, are not sufficient or specific enough to take "bullet proof" actions. Let us know your experiences.

Too Many Minority Employees?

We wonder how many companies survey their workforce and think that there is no way they could be in noncompliance with any form of employment discrimination. They might conclude that since they employ a ton of this minority and a ton of that minority and plenty of women employees, what could go wrong? Plenty, as one Government contractor found out. If you're a Government contractor, beware of "routine compliance evaluations" by OFCCP (Labor Department's Office of Federal Compliance Programs).

During one such "routine evaluation", the OFCCP observed that a Government contractor, Oldcastle Building Envelope (Oldcastle) seemingly had a significant ratio of make Hispanic employees. Upon further evaluation, the OFCCP determined that Oldcastle was discriminating against white, black, and female applicants in favor of Hispanic males. OFCCP found that Oldcastle's hiring practices violated relevant Federal laws which prohibit federal contractors from discriminating in employment based on race, national origin, religion, or gender.

What was the penalty for this violation? Oldcastle must pay $395 thousand in back wages and interest to "eligible class members" - presumably those who had applied but were turned down for employment based on discriminatory practices. Additionally, the company had to agree to provide job opportunities to 38 affected white makes, black males and female applicants as positions become available. Thirdly, Oldcastle must take steps to ensure its personnel practices, including recruitment, record-keeping, and internal audit procedures, comply with laws. Finally, Oldcastle must conduct anti-discriminatory training for its HR (human resources) training.

The Oldcastle settlement was the result of a routine evaluation. In other words, there was not whistleblower involved or anything else that might draw the OFCCP's attention to this company. OFCCP also actively solicits whistleblowers to come forward and report allegations of discriminatory hiring practices.