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.
Showing posts with label SCA. Show all posts
Showing posts with label SCA. Show all posts
Monday, April 22, 2019
Wednesday, January 16, 2019
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.
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.
Friday, July 5, 2013
Service Contracts and Incumbent Employees
This is an update to our posting of May 3, 2012 wherein we described the proposed regulations to implement Executive Order (EO) 13495, "Non-displacement of Qualified Workers Under Service Contracts", issued by the President back in January 2009. Those regulations were finalized and became effective on solicitations issued after January 18, 2013. The regulations require that workers on a federal service contract who would otherwise lose their jobs as a result of the completion or expiration of a contract be given the right of first refusal for employment with the successor contractor. The regulations apply to all service contracts (both prime contracts and subcontracts) above the simplified acquisition threshold (currently $150,000) that succeed contracts for the same or similar services at the same location.
Virginia thinks this new rule is a good one. She was 62 years old and described herself as an excellent worker with good appraisals and extremely reliable. She and everyone else over 60 years old were not offered their jobs by a successor contractor. Stan thinks its a bad rule. Stan says that this rule denies companies who have full responsibility for performance under the contract, their ability to select a worforce they believe is best suited to meeting the contract requirements.
According to the Department of Labor, the Federal Government's procurement interests in economy and efficiency are served when the successor contractor hires the predecessor's employees. A carryover work force reduces disruption to the delivery of services during the period of transition between contractors and provides the Federal Government the benefits of an experienced and trained work force that is familiar with the Federal Government's personnel, facilities, and requirements. The EO recognizes that successor contractors or subcontractors already often hire the majority of the predecessor's employees when a service contract expires and follow-on contract is awarded for the same or similar services at the same location. Sometimes, however, a successor contractor or subcontractor displaces the predecessor's employees and hires a new workforce.
Contracts under the $150,000 simplified acquisition threshold are exempt from this EO. So are contracts awarded for services produced or provided by persons who are blind or have severe disabilities. Agency can also exclude contracts and subcontracts if the head of a contracting department or agency finds that the application of any of its requirements would not serve the purposes of the EO or would impair the ability of the Federal Government to procure services on an economical and efficient basis (the so-called "union-busting" provision). Any such decision must be made no later than the contract solicitation date, and incumbent workers and their collective bargaining representatives are to be notified in writing of the agency determination no later than 5 business days after the solicitation date.
Service employees must be advised of their right of first refusal by either a poster or individual notice. DOL has a poster here. The predecessor contractor must provide the contracting officer a list of all service employees working under the contract (and subcontracts) within 30 days before the end of the contract. The contracting officer will furnish the list to the successor contractor. The successor contractor is required to offer the right of first refusal of employment to all qualified employees whose names appear on the predecessor's list except that the successor contractor may employ on the contract employees who worked for that contractor for at least three months immediately preceding commencement of the contract and who would otherwise face lay-off or discharge.
Successor contractors have the discretion to determine how many employees are needed for efficient performance of the contract. They may employ fewer employees than the predecessor contract. Also, offers made to employees of predecessor contractors must be "bona fide" offers. There is nothing in the regulation that requires successor contractors to match the pay or benefits of the predecessor contractors but contractors won't be permitted to "low-ball" employment offers simply to discourage incumbents from accepting positions (more on what constitutes "bona fide" offers of employment in 29 CFR 9.12).
Virginia thinks this new rule is a good one. She was 62 years old and described herself as an excellent worker with good appraisals and extremely reliable. She and everyone else over 60 years old were not offered their jobs by a successor contractor. Stan thinks its a bad rule. Stan says that this rule denies companies who have full responsibility for performance under the contract, their ability to select a worforce they believe is best suited to meeting the contract requirements.
According to the Department of Labor, the Federal Government's procurement interests in economy and efficiency are served when the successor contractor hires the predecessor's employees. A carryover work force reduces disruption to the delivery of services during the period of transition between contractors and provides the Federal Government the benefits of an experienced and trained work force that is familiar with the Federal Government's personnel, facilities, and requirements. The EO recognizes that successor contractors or subcontractors already often hire the majority of the predecessor's employees when a service contract expires and follow-on contract is awarded for the same or similar services at the same location. Sometimes, however, a successor contractor or subcontractor displaces the predecessor's employees and hires a new workforce.
Contracts under the $150,000 simplified acquisition threshold are exempt from this EO. So are contracts awarded for services produced or provided by persons who are blind or have severe disabilities. Agency can also exclude contracts and subcontracts if the head of a contracting department or agency finds that the application of any of its requirements would not serve the purposes of the EO or would impair the ability of the Federal Government to procure services on an economical and efficient basis (the so-called "union-busting" provision). Any such decision must be made no later than the contract solicitation date, and incumbent workers and their collective bargaining representatives are to be notified in writing of the agency determination no later than 5 business days after the solicitation date.
Service employees must be advised of their right of first refusal by either a poster or individual notice. DOL has a poster here. The predecessor contractor must provide the contracting officer a list of all service employees working under the contract (and subcontracts) within 30 days before the end of the contract. The contracting officer will furnish the list to the successor contractor. The successor contractor is required to offer the right of first refusal of employment to all qualified employees whose names appear on the predecessor's list except that the successor contractor may employ on the contract employees who worked for that contractor for at least three months immediately preceding commencement of the contract and who would otherwise face lay-off or discharge.
Successor contractors have the discretion to determine how many employees are needed for efficient performance of the contract. They may employ fewer employees than the predecessor contract. Also, offers made to employees of predecessor contractors must be "bona fide" offers. There is nothing in the regulation that requires successor contractors to match the pay or benefits of the predecessor contractors but contractors won't be permitted to "low-ball" employment offers simply to discourage incumbents from accepting positions (more on what constitutes "bona fide" offers of employment in 29 CFR 9.12).
Thursday, May 3, 2012
Service Contractors Must Hire Incumbent Employees
There is a proposed rule published today that will require, under "service contracts", successor contractors to hire the incumbent employees. A service contract is any Government contract where the principal purpose is to furnish services through the use of service employees.
Specifically, the proposed rule states that
This proposed regulation is being formulated to implement an Executive order for non-displacement of qualified workers under service contracts (E.O. 13495 dated January 30, 2009).
There would be a few limited exceptions to this proposed rule and there is also a waiver authority when the application of it would "impair the ability of the Government to procure services on an economical and efficient basis or would not serve the purposes of the Executive Order.
Thirty days before the old contract ends, the old contractor must provide a listing of employees qualified to work on the successor contract. The contracting officer, in turn, must provide the listing to the new contractor. There is also a lot of verbiage concerning the rights of the incumbent employees and avenues of recourse if they feel they have inappropriately lost their jobs.
We didn't see anything in the proposed rule that requires a successor contractor to match the pay and benefit levels of the old contractor but other rules might apply (such as Service Contracting Act) in some circumstances.
Specifically, the proposed rule states that
When a service contract succeeds a contract for performance of the same or similar services at the sale location, the successor contractor and its subcontractors are required to offer those employees (other than managerial and supervisory employees) that are employed under the predecessor contract, and whose employment will be terminated as a result of the award of the successor contract, a right of first refusal of employment under the contract in positions for which they are qualified.
This proposed regulation is being formulated to implement an Executive order for non-displacement of qualified workers under service contracts (E.O. 13495 dated January 30, 2009).
There would be a few limited exceptions to this proposed rule and there is also a waiver authority when the application of it would "impair the ability of the Government to procure services on an economical and efficient basis or would not serve the purposes of the Executive Order.
Thirty days before the old contract ends, the old contractor must provide a listing of employees qualified to work on the successor contract. The contracting officer, in turn, must provide the listing to the new contractor. There is also a lot of verbiage concerning the rights of the incumbent employees and avenues of recourse if they feel they have inappropriately lost their jobs.
We didn't see anything in the proposed rule that requires a successor contractor to match the pay and benefit levels of the old contractor but other rules might apply (such as Service Contracting Act) in some circumstances.
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