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Learning from the Legacy, Focused on the Future 2014 ILG Annual Conference: Beyond the AAP August 6, 2014 Connie N. Bertram Proskauer Rose LLP [email protected] Katharine Parker Proskauer Rose LLP [email protected]

2014 ILG Annual Conference: Beyond the AAP

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2014 ILG Annual Conference: Beyond the AAP. August 6, 2014 Connie N. Bertram Proskauer Rose LLP [email protected] Katharine Parker Proskauer Rose LLP [email protected]. Topics for Discussion. Whistleblower protections for contractor employees Drug-free workplace obligations - PowerPoint PPT Presentation

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Page 1: 2014 ILG Annual Conference:  Beyond the AAP

Learning from the Legacy, Focused on the Future

2014 ILG Annual Conference: Beyond the AAP

August 6, 2014

Connie N. BertramProskauer Rose LLP

[email protected]

Katharine ParkerProskauer Rose LLP

[email protected]

Page 2: 2014 ILG Annual Conference:  Beyond the AAP

Topics for Discussion

Whistleblower protections for contractor employees

Drug-free workplace obligations Restrictions on arbitration agreements

and programs New FAR provision concerning Human

Trafficking Wage and hour developments Enforcement of restrictive covenants Defending litigation claims by contractor

employees

Page 3: 2014 ILG Annual Conference:  Beyond the AAP

Whistleblower Protections for Contractor Employees

Page 4: 2014 ILG Annual Conference:  Beyond the AAP

Renewed Focus on Whistleblower Claims

New amendments and legislation Recent developments may make dismissal

and summary judgment less likely Pleading standards Expansion of definition of protected activity Nexus to scope of statute

Believed to have more “traction” with juries Awards generally higher than EEO

discrimination and state law claims Generally provide for reinstatement, “make-

whole” remedies, punitive and/or liquidated damages, and attorneys’ fees

Alternative claims/remedies and forums available, including bounty claims

Page 5: 2014 ILG Annual Conference:  Beyond the AAP

Three Prongs of FCA Enforcement

Page 6: 2014 ILG Annual Conference:  Beyond the AAP

“Qui Tam” Cases Under the FCA

The False Claims Act (FCA) imposes liability for treble damages plus penalties for knowingly submitting or causing the submission of false claims to the U.S. Government

A “qui tam” suit is an FCA suit initiated by a whistleblower or “relator” who sues on behalf of the United States Whistleblower files lawsuit under seal DOJ investigates and decides whether to

intervene Relator can proceed without DOJ involvement Relator receives a 15% to 30% share of

government recovery

Page 7: 2014 ILG Annual Conference:  Beyond the AAP

FCA Also Prohibits Retaliation Against Employees

Prima Facie case: Protected activity Adverse action Because of protected activity

Burden shifts to articulate legitimate, non-retaliatory reasons

Can overcome by showing pretext and intent to retaliate

Business judgment rule a key factor in many rulings

Remedies: Reinstatement, double back pay, and special

damages including attorneys’ fees Compensatory damages in some courts

Page 8: 2014 ILG Annual Conference:  Beyond the AAP

Developing Issues – Protected Activity

Protected activity prior to FERA (2009) amendments: Section 3730(h) protected “acts … in furtherance of” a

qui tam action Plaintiff need not prove actual violations of FCA Courts required notice of “distinct possibility” of qui tam

litigation (Glynn v. EDO Corp., 710 F.3d 209 (4th Cir. 2013))

Protected Activity after amendments: Section 3730(h) now protects “… lawful acts … in furtherance of an action … or other efforts to stop one or more violations” of the FCA

Must plaintiff still notify employer of “distinct possibility” of qui tam suit?

Page 9: 2014 ILG Annual Conference:  Beyond the AAP

National Defense Authorization Act

DOD Contractor Protections Prior to NDAA Applied to employees of contractors, not

subcontractors Regarding DOD contracts only Protected external reporting only Narrow definition of appropriate DOD official

New NDAA Protections (effective July 1, 2013) Apply to employees of both contractors and

subcontractors Regarding contracts with most federal agencies Now protects:

Internal complaints to management official with responsibility to investigate, discover or address misconduct

Protect participation in government investigation Provide for reinstatement, back pay, compensatory

damages and attorneys’ fees

Page 10: 2014 ILG Annual Conference:  Beyond the AAP

National Defense Authorization Act

Protects disclosure of reasonable belief of: Gross mismanagement of federal contract/grant Gross waste of federal funds Abuse of authority concerning federal contract/grant Substantial and specific danger to public health/safety Violation of law/rule/regulation regarding federal

contract/grant (including the competition for same)

If disclosed to: Congress, IG of agency, GAO, federal employees with

oversight, law enforcement Company employee with responsibility to

investigate/address misconduct

Causation Standard: Contributing factor, not “but for” or “motivating” factor

Page 11: 2014 ILG Annual Conference:  Beyond the AAP

NDAA Procedure and Remedies

Procedure Three-year statute of limitations Employee files with OIG OIG investigates Agency head issues decision Employee can file in federal district court if

no decision from OIG in 210 days Agency decision subject to review by

federal court of appeals Remedies: Reinstatement, back pay,

compensatory damages, attorneys’ fees and costs

Page 12: 2014 ILG Annual Conference:  Beyond the AAP

Industries in the Line of Fire

• DOD and other traditional procurement contractors

• GSA schedule sales• Colleges and universities• Health care industry

• Medicare/Medicaid reimbursement• Research funding• Sales to VA

• Banking and financial industry• Retailers with sales to military and BX/PX• Subcontractors

Page 13: 2014 ILG Annual Conference:  Beyond the AAP

Develop Effective Internal Policies

Update anti-retaliation policies and code of conduct to include additional and expanded claims Address additional categories of protected conduct Develop effective protocol for handling hotline calls and

complaints Confirm that confidentiality agreements, non-

disparagement provisions and settlement agreements do not restrict or impede reporting

Conduct frequent and effective management training Audit compliance

Incentivize internal complaints Effective and timely reporting mechanism Culture “driven from the top” that supports reporting Provide frequent updates to complainants Develop strong anti-retaliation policies and protections

Page 14: 2014 ILG Annual Conference:  Beyond the AAP

Conduct Effective Internal Investigations

Develop effective procedures for investigating whistleblower claims Document and confirm the employee’s complaint Engage subject matter experts Break down the silos between HR, legal and

compliance Always consider and investigate self-help discovery,

including a forensic review of computers, devices and accounts

Be mindful of mandatory reporting obligations Ensure that treatment and results are consistent with

prior situations

Ensure objectivity in reviewing and managing the performance of whistleblowers who are current employees

Page 15: 2014 ILG Annual Conference:  Beyond the AAP

Consider Mandatory Disclosure Obligations Throughout Process

Two separate considerations: Do the allegations of fraud of the whistleblower

trigger the duty to disclose Does the whistleblower’s own conduct or

performance trigger the obligations to disclose

Timing a key consideration Rules contemplate a reasonable investigation prior

to disclosure Swift disclosure can enhance client relationship and

deflate the impact of the whistleblower’s own filing or claim

Consider whether company has obligation to disclose whistleblower’s own misconduct

Page 16: 2014 ILG Annual Conference:  Beyond the AAP

Drug Free Workplace Obligations

Page 17: 2014 ILG Annual Conference:  Beyond the AAP

DFWA Coverage

Requires some contractors and all grantees to provide drug-free workplaces as a condition of receipt of contract or grant Generally applies to contractors if the value of a single contract

is $100,000 or more, other than acquisition of commercial goods Does not apply to subcontractors or subgrantees Only applies to performance inside of the United States

Requirement or indefinite quantity contracts covered if reasonably expected to exceed $100,000

Act requirements only apply to employees working on the covered grant or contract On payroll Works on any activity under the grant or contract (“direct” or

“indirect” charge) Temporary employees covered if meet criteria

Page 18: 2014 ILG Annual Conference:  Beyond the AAP

Developing Issues – Protected Activity

Type of Contract/Grant Coverage

Students and recipients of Pell Grants Yes

Medicare third-party reimbursements to hospitals No

Hospitals that receive procurement contracts or grants

Yes

Banks and financial institutions selling US Treasury Bonds

No

Contractors and grantees performing work in federal facilities

Yes

Employees subject to drug testing requirements for security clearances

Yes, they co-exist

Page 19: 2014 ILG Annual Conference:  Beyond the AAP

DFWA Requirements Vary

Requirements of FAR provisions adopted by agencies and departments vary For example, most do not require affirmative

provision of treatment or rehabilitation services Certain NASA contracts require contractors to

establish and maintain an appropriate rehabilitation program that requires, at minimum, identification and treatment of employees responsible for safety-sensitive, security or National security functions

Because Act applies on case-by-case basis, contractors must determine coverage and obligations imposed by each contract or grant (or for which they will be applying)

Page 20: 2014 ILG Annual Conference:  Beyond the AAP

DFWA Requirements – Policy and Program

Publish and provide a policy to all covered employees that: States that the unlawful manufacture, distribution,

dispensation, possession or use of a controlled substance is prohibited in the workplace and

Identifies the actions that will be taken against employee who violate the policy

Requires establishment of drug-free awareness program to notify employees of: Dangers of drug abuse in the workplace Policy of maintaining a drug-free workplace Any available drug counseling, rehabilitation and

employee assistance programs The penalties that may be imposed on employees

for drug abuse violations

Page 21: 2014 ILG Annual Conference:  Beyond the AAP

Notification Requirement

Each employee must be informed in writing of the policy and his or her responsibilities

Although contractors are not required to provide a notification each time a contract or grant is received, the program must be ongoing

Contractors are not required to obtain verification of receipt

Notification cannot be provided through collective bargaining representative or other agent

Page 22: 2014 ILG Annual Conference:  Beyond the AAP

DFWA Requirements – Notification and Penalty

Also must notify employees that, as a condition of their employment on the contract or grant, the employee must: Abide by the terms of the policy statement; and Notify the employer, within five calendar days, if he or she is

convicted of a criminal drug violation in the workplace

Notify the contracting or granting agency within 10 days after receiving notice that a covered employee has been convicted of a criminal drug violation in the workplace

Impose a penalty on or requirement satisfactory participation in a drug abuse assistance or rehabilitation program by any employee who is convicted of reportable workplace drug conviction

Make an ongoing, good faith effort to maintain a drug-free workplace

Page 23: 2014 ILG Annual Conference:  Beyond the AAP

What the DFWA Does NOT Require

Program not required to address alcohol and nonprescription drug abuse in programs

Does not require establishment of an EAP or special training for supervisors

Drug testing is not authorized or required

Page 24: 2014 ILG Annual Conference:  Beyond the AAP

DFWA Enforcement

Compliance reviewed as part of the normal Federal contract and grant administration and auditing process

Federal agency head determines whether violation occurred

If determines that cause exists, action initiated and conducted in accordance with applicable FAR regulation and agency procedures

Contractors and grantees that violate the Act can receive one or more of the following penalties: Payments suspended Contract or grant suspended Barred from receiving additional contracts or grants

for up to five years

Page 25: 2014 ILG Annual Conference:  Beyond the AAP

Restrictions on Arbitration Agreements and Programs

Page 26: 2014 ILG Annual Conference:  Beyond the AAP

General Rules Regarding Mandatory Arbitration Agreements Federal Arbitration Act – arbitration encouraged Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758

(2010) – an arbitration agreement that is silent regarding arbitrability of class actions implies class claims cannot be arbitrated

AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011) – FAA preempts CA court decisions refusing to enforce class action waivers on grounds of unconscionability Iskanian v. CLS Transp. Los Angeles, LLC, Case No. S204032

(6/26/14), upholding class action waivers in employment arbitration agreements

CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012) – FAA requires courts to enforce arbitration agreements according to their terms even where underlying statute states that a plaintiff has the “right to sue”

American Express v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013) – Arbitration agreements must be enforced as written; unavailability of class action procedure is not a barrier to enforcement of otherwise valid arbitration agreement; rejects “vindication of statutory rights” theory

Page 27: 2014 ILG Annual Conference:  Beyond the AAP

Class Arbitration and Class Action Waivers

Summary from the Supreme Court Class arbitration is not consistent with the

underlying premises of the FAA Class action waivers are generally consistent with

the underlying premises of the FAA Class action waivers may be invalidated through

normally applicable contractual defenses (failure to agree, outside the scope, fraud) and state unconscionability standards so long as the standards are uniformly applicable, neutral in effect and consistent with federal arbitration policy

The same principles apply to federal statutory claims

None of this matters if an arbitrator has ruled that class actions were agreed upon, so long as there is some evidence of intent to agree

Page 28: 2014 ILG Annual Conference:  Beyond the AAP

Class Arbitration and Class Action Waivers

Do these principles apply to Fair Labor Standards Act claims?

Yes: Sutherland v. Ernst & Young LLP, 726 F. 3d 290 (2d Cir. 2013) Question was whether Congress decreed that

collective actions are required for FLSA claims Plaintiffs claimed Section 216(b) collective actions

are a prescribed statutory procedure and thus evidence a congressional command not to allow class action waivers

Circuit concluded that while Congress authorized FLSA collective actions, it did not require them and did not foreclose an individual waiver of them

Second Circuit applied American Express (Supreme Court version) and rejected “effective vindication argument: Raniere v. Citigroup reaches the same conclusion

Other circuits have agreed: Richards v Ernst & Young, 2013 WL 4437601 (9th Cir. 2013)

Page 29: 2014 ILG Annual Conference:  Beyond the AAP

Class Arbitration and Class Action Waivers

Do these principles apply to Title VII disparate treatment claims?

Second Circuit holds that they do in Parisi v. Goldman, Sachs & Co. 710 F. 3d 483

District Court (affirming Magistrate Judge Francis) had relied on effective vindication theory Judicial holdings in SDNY find that pattern or

practice claims may not be litigated in individual Title VII actions

Assuming an arbitrator would follow these cases, remitting a potential class plaintiff to individual arbitration would prevent her from litigating a pattern or practice claim

Therefore an arbitration agreement is not enforceable because its silent clause would bar class arbitration of a substantive right, the right to bring a pattern or practice claim

Page 30: 2014 ILG Annual Conference:  Beyond the AAP

Class Arbitration and Class Action Waivers

Is a class action waiver lawful under the National Labor Relations Act?

In D.R. Horton, Inc., 357 N.L.R.B. No. 184 (2012), the employer required employees as a condition of employment to sign a Mutual Arbitration Agreement (“MAA”), which contained a class and collective action waiver

The Board found that employees have a § 7 right that forbids class action waivers, even where employees were not discharged or disciplined for filing a class action

Board held that the class action waiver in and of itself limited employees’ ability to engage in protected concerted activity, which included the filing of class or collective actions

But Fifth Circuit overruled in December 2013 holding that FAA required arbitration agreements to be enforced according to their terms

But – NLRB not bound by Fifth Circuit and continues to press its view (Leslie’s Poolmart and Sprouts Farmers Markets)

Page 31: 2014 ILG Annual Conference:  Beyond the AAP

Franken Amendment

Provision of 2010 Department of Defense Appropriations Act that prohibits: The use of appropriated funds for any contract in

excess of $1 million If the contractor requires its employees to arbitrate:

All claims under Title VII of the Civil Rights Act of 1964 Tort claims related to or arising out of sexual assault or

harassment including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision or retention

In the guidance published with the interim rule, DoD explained that the Franken Amendment does not affect the use or enforcement of mandatory arbitration agreements for non-covered claims

Page 32: 2014 ILG Annual Conference:  Beyond the AAP

Franken Amendment Coverage

To be covered by the Amendment, a contractor must receive funds from the DoD

In final rule, DoD stated that the term “contractor” is to be construed narrowly Only refers to the specific entity that has the

contract Does not encompass a parent or subsidiary

corporation unless that parent or subsidiary is a party to the contract

The Amendment also does not apply to contracts for the acquisition of commercial items, including commercially available off-the-shelf items.

Page 33: 2014 ILG Annual Conference:  Beyond the AAP

Franken Amendment Subcontractor Coverage

A “covered subcontractor” is any entity with subcontract valued in excess of $1 million, other than subcontracts for acquisition of commercial items

To receive funds from DoD, covered contractor must certify that it requires each “covered subcontractor” to agree not to enter into or enforce mandatory arbitration agreements requiring arbitration of covered claims by employees or independent contractors performing work relating to that subcontract Limited to those contracts placed by the contractor or

higher-tier subcontractors specifically for supplies or services for the performance of the contract

Does not apply to supplies or services a contractor or higher-tier subcontractor might purchase for other purposes

Page 34: 2014 ILG Annual Conference:  Beyond the AAP

Franken Amendment Exceptions

There are three other exceptions to these restrictions on the use of mandatory arbitration. They do not apply to agreements that cannot be

enforced in this country The Secretary of Defense may waive these

restrictions on a case-by-case basis if the Secretary or the Deputy Secretary personally determines that the waiver is necessary to avoid harm to national security interest of the United States, and that the term of the contract or subcontract is no longer than necessary to avoid such harm

They do not apply to contracts for the acquisition of commercial items, including commercially available off-the-shelf items

Page 35: 2014 ILG Annual Conference:  Beyond the AAP

Enforcement of Franken Amendment

There is very little case law on the applicability of the Amendment in general or on its ability to preclude arbitration.

In addition, the Amendment has not been used successfully to avoid arbitration.

In the only federal court decision addressing the Amendment, the court rejected the plaintiff’s argument that it precluded arbitration of his hostile work environment, race discrimination and retaliation claims. See Phifer v. Mich. Sporting Goods Distribs., Inc., 2010 U.S. Dist. LEXIS 93839 (W.D. Mich. July 28, 2010).

In a state case, a Texas appeals court ruled that employee’s personal injury claims, arising out of negligent hiring, supervision or retention were not covered by the amendment because they did not arise out of or relate to sexual assault or harassment. See In re ReadyOne Indus., 2012 Tex. App. LEXIS 10652 (Dec. 21, 2012).

Page 36: 2014 ILG Annual Conference:  Beyond the AAP

Breaking News: July 31, 2014 Executive Order Fair Pay and Safe Workplaces New anti-arbitration provision applies to supply

and service contracts and subcontracts > $1 million

Excludes contracts for COTS Prohibits mandatory pre-dispute arbitration

agreements with respect to claims arising under Title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment

Applies to employees and independent contractors

Doesn’t apply to arbitration provisions in CBAs Doesn’t apply to preexisting arbitration

agreements so long as such agreements aren’t subject to change by the employer or renegotiated

Page 37: 2014 ILG Annual Conference:  Beyond the AAP

Breaking News: July 31, 2014 Executive Order Fair Pay and Safe Workplaces Contractors must include clause in covered

subcontracts Permits voluntary post-dispute agreements to

arbitrate DOL estimates 24,000 businesses employing

about 28 million workers impacted Will be implemented on new contracts in

stages, on a prioritized basis in 2016 following issuance of implementing regulations by the Federal Acquisition Regulation (FAR) Council and guidance by the U.S. Department of Labor (DOL)

No provision for waiver by agency like for Franken Amendment

Page 38: 2014 ILG Annual Conference:  Beyond the AAP

Breaking News: July 31, 2014 Executive Order Fair Pay and Safe Workplaces Anti-arbitration rule is contrary to well-established

policy favoring arbitration Also inconsistent with employee interests

Median arbitration awards for all types of employment claims rose 60% from 2009-2010, from $208,000 to $241,119. Douglas Ashman, The Impact of Alternative Dispute Resolution in Employment Law, Purdue Univ. Coll. Of Tech. Masters Theses, Paper 56, p. 5 (2011)

In a study of 1,213 AAA cases from 2003-2007, the mean time for disposition in arbitration was 284.4 days for cases that settled, and 361.5 days for cases decided after a hearing, which is substantially shorter than the general two to two-and-a-half years that it takes to reach trial in federal and state courts. Alexander Colvin, An Empirical Study of Employment Arbitration Case Outcomes and Processes, Cornell Univ. ILR Sch., p. 12 (2011).

Page 39: 2014 ILG Annual Conference:  Beyond the AAP

Breaking News: July 31, 2014 Executive Order Fair Pay and Safe Workplaces In a study of 1,213 AAA cases from 2003-2007, the mean arbitration

fees were $6,340 per case, $11,070 for cases disposed of by an award following a hearing, and in 97% of these cases the employer paid 100% of the arbitration fees beyond a small filing fee, pursuant to AAA procedures. Alexander Colvin, An Empirical Study of Employment Arbitration Case Outcomes and Processes, Cornell Univ. ILR Sch., p. 1, 13-14 (2011).

In a study of 1,213 AAA cases from 2003-2007, 82.5% of claimants had salaries under $100,000; 13.9% had salaries between $100,001 and $250,000; and 3.7% had salaries over $250,001. Alexander Colvin, An Empirical Study of Employment Arbitration Case Outcomes and Processes, Cornell Univ. ILR Sch., p. 1, 15 (2011).

Anecdotal reports from plaintiff attorneys state that potential claim amounts as much as $60,000 may be necessary to justify bringing a case forward in litigation. Alexander Colvin, An Empirical Study of Employment Arbitration Case Outcomes and Processes, Cornell Univ. ILR Sch., p. 15 (2011).

A 1995 article reported that 83% of works support arbitration over lawsuits or appealing to a federal agency. Jim Tyson, Workers Spurn Courts, Favor Arbitration, Christian Science Monitor (June 2, 1995) (citing “Worker Representation and Participation Survey: Wave Two”).

Page 40: 2014 ILG Annual Conference:  Beyond the AAP

Compliance with FAR Provision Regarding Human Trafficking

Page 41: 2014 ILG Annual Conference:  Beyond the AAP

FAR Subpart 22.17

The proposed rule prohibits federal contractors, contractor employees, subcontractors and subcontractor employees from engaging in any activities related to human trafficking, such as forced labor and prostitution

The following specific activities also prohibited:

Denying an employee access to his/her identity or immigration documents

Using misleading or fraudulent recruitment practices or charging recruitment fees

Providing or arranging housing that fails to meet the host country’s minimum housing and safety standards

Failing to provide return transportation or requiring payment for the cost of return transportation for certain employees

Page 42: 2014 ILG Annual Conference:  Beyond the AAP

Compliance Plans and Certifications of Compliance

For contracts where a portion of the contract is performed overseas, a compliance plan and certification of compliance will be required

Will be required to certify:

Compliance plan has been implemented Neither the contractor, nor any of its agents,

subcontractors or their agents are engaged in human trafficking activities and

If abuses have been found, appropriate remedial and referral actions have been taken

Will impose strict reporting requirements Will be required to flowed down requirements

to subcontractors

Page 43: 2014 ILG Annual Conference:  Beyond the AAP

Potential Remedies for a Violation of FAR subpart 22.18

Potential Remedies: Removal of employees involved in the allegations

from the contract Suspension of contract payments Withholding of award fees Refusal to exercise contract options Termination of contract or subcontract and/or Suspension or debarment

Must report violations to contracting officer and agency IG

In addition, the Government contracting officer must enter any violations in the Federal Awardee Performance and Integrity Information System (FAPIIS)

Page 44: 2014 ILG Annual Conference:  Beyond the AAP

Wage and Hour Developments: Minimum Wage Increase for Contractor Employees

Page 45: 2014 ILG Annual Conference:  Beyond the AAP

Wage and Hour Obligations of Contractors Generally

Recipients of government contracts, grants or financial aid are subject to additional wage, hour and benefits standards under: The Davis-Bacon Act (DBA), which requires payment

of prevailing wages and benefits to employees of contractors engaged in federal government construction projects

The McNamara-O'Hara Service Contract Act (SCA), which sets wage rates and other labor standards for employees of contractors furnishing services to the federal government

The Walsh-Healey Public Contracts Act (PCA), which requires payment of minimum wages and other labor standards by contractors providing materials and supplies to the federal government

The Wage and Hour Division of DOL administers and enforces these laws

Page 46: 2014 ILG Annual Conference:  Beyond the AAP

Background of Executive Order 13658

Signed Executive Order February 12, 2014 Minimum wage $10.10/hour starting on

January 1, 2015 Will be increased each year based on the CPI Applies to contracts issued for solicitations

on or after January 1, 2015 Covered contracts must include a clause

increasing the minimum wage Contractors must incorporate that clause into

lower-tier subcontracts Proposed Final Rules issued on June 17, 2014 FAR provision will be issued

Page 47: 2014 ILG Annual Conference:  Beyond the AAP

Proposed Final Rules – Contracts Covered

Will apply to: Procurement contracts for construction covered by

the DBA Service contracts exceeding $2,500 covered by the

SCA Concessions contracts with the federal government,

including contracts excluded from SCA coverage by regulation

Contracts to provide services to federal employees, their dependents or the general public on federal property or lands

Excludes the following from coverage: grants, procurement contracts for construction not subject to DBA, certain contracts with Indian Tribes, and service contracts that are exempt from SCA

Page 48: 2014 ILG Annual Conference:  Beyond the AAP

Proposed Final Rules – Employees Covered

Employees entitled to at least the specified minimum wage for: All hours spend working on a covered contract All time spent providing support work necessary for

covered contracts Employees are entitled to coverage under the EO

even if they are not covered by the DBA or SCA Special rules apply to tipped employees

Must receive a minimum hourly wage of $4.90/hour, plus the amount earned in tips

If the combination does not total at least $10.10/hour, employer must make up the balance

Each year, the wage will increase 95 cents until the tipped minimum wage equals 70 percent of the wage for non-tipped employees

Page 49: 2014 ILG Annual Conference:  Beyond the AAP

Additional Counseling and Litigation Issues

Page 50: 2014 ILG Annual Conference:  Beyond the AAP

Enforcement of Restrictive Covenants

Restrictions on use and disclosure of trade secrets and other confidential information of company and government customers critical in government contracting context

In addition to traditional NDAs, many contractors use post-employment restrictions, such as non-competes and non-solicitation provisions

Contractors efforts to enforce these restrictions have faced some challenges: Does the contractor have a sufficient ownership interest in the

protected information/data to support the restrictions? Can employees “prepare to compete” by allowing their resume

to be submitted on a blind basis in connection with a competing bid?

Does the government’s interests in having experienced workers on their contracts trump the employer’s interests, particularly when SCA contracts are involved?

Page 51: 2014 ILG Annual Conference:  Beyond the AAP

Increasing the Likelihood of Enforcement

Consider implications of forum selection and choice of law provisions

Narrowly tailor the restrictions to the interests sought to be protected Traditional restrictions:

Time period Geography Definition of competitor or competitive activity

Additional restrictions to consider: Identifying specific conduct prohibited (i.e., submission

of resume) Tie to specific contracts and customer contacts

Tie restrictions to confidential and proprietary information of the contractor (as opposed to the customer)

Page 52: 2014 ILG Annual Conference:  Beyond the AAP

Litigation Procedures and Defenses that MAY be Available to Contractors Government Contractor Defense – Contractor

followed contract specifications and warned government

Defense Base Act – Exclusive remedy for federal contractor employees who suffer injury oversees while working on contract

Derivative Sovereign Immunity – Contractor had discretion to act in area that required balancing of federal public policy considerations

Immunity for Compelled Disclosure – Contractor required to inform government of suspected activity or respond to government inquiry

Government Actor Defense – If government supervisor made challenged employment action, contractor employee may be required to pursue EEO remedies through MSPB procedures

Page 53: 2014 ILG Annual Conference:  Beyond the AAP

Additional Compliance Obligations Imposed by July 31, 2014 Executive Order

Page 54: 2014 ILG Annual Conference:  Beyond the AAP

General Requirements

Applies a wide range of new requirements on federal contractors

Most provisions apply to contracts over $500,000

Will be implemented throughout 2016 Department of Labor will issue regulations

implementing the Order

Page 55: 2014 ILG Annual Conference:  Beyond the AAP

Mandatory Disclosure of Violations

Mandatory disclosure of labor law violations

As part of a bid, contractor must disclose “administrative merits determination, arbitral award or decision, or civil judgment” of the following: FLSA, OSHA NLRA, Davis-Bacon Act, Service

Contract Act, Section 503 of Rehabilitation Act, VEVRRA, FMLA, Title VII of Civil Rights Act, Executive Orders 11246 (equal employment opportunity) and 13658 (minimum wage) and Migrant and Seasonal Agricultural Worker Protection Act

“Equivalent State laws” to the list above

Page 56: 2014 ILG Annual Conference:  Beyond the AAP

Mandatory Disclosure of Violations

Agencies will use disclosures to determine whether contractor acts with integrity and complies with business ethics to either obtain a federal contract or to continue operating under a federal contract

In addition: Must update disclosures every six months Must obtain similar disclosures from

subcontractors

Agencies must designate a senior official to subject the worst violators to penalties, including disbarment

Page 57: 2014 ILG Annual Conference:  Beyond the AAP

Pay Disclosure Obligations

Contractors must provide workers with specific information on their paycheck, including hours worked, overtime hours worked, total pay, and any additions or deductions made to employees’ pay

If a contractor is treating a worker as an independent contractor, the contractor must inform the individual of their status as an independent contractor

Page 58: 2014 ILG Annual Conference:  Beyond the AAP

Learning from the Legacy, Focused on the Future

Proskauer Blog:Government Contractor Compliance &

Regulatory Update

Proskauer’s Government Contractor Compliance & Regulatory Update Blog – Track the Developments

Government contractors and subcontractors face unique compliance, employment, and contractual issues when managing government contracts. Follow the near-daily

developments in the government contract compliance arena, with a particular focus on updates involving the OFCCP and related agencies and departments. For the latest

insights, check out our blog – Proskauer’s Government Contractor Compliance & Regulatory Update at:

http://www.governmentcontractorcomplianceupdate.com/