Tag: contractors

Will Religiously Based Federal Contractors Challenge OFCCP's New LGBT Regulations?

Gonzalez Saggio & Harlan logo

As 2014 headed toward close, the Office of Federal Contract Compliance Programs (“OFCCP”) gave the federal contractor community, already presented with five Executive Orders in 2014, one last compliance gift. On December 9, 2014, without notice or an opportunity for public comment, OFCCP issued its final rule (“Rule”) implementing Executive Order (“EO”) 13672. President Obama signed EO 13672 on July 14, 2014, extending protections against workplace discrimination to members of the lesbian, gay, bisexual, and transgender (“LGBT”) community by amending Executive Order 11246 to add sexual orientation and gender identity as protected characteristics. It also requires contractor employers to take affirmative action to ensure that applicants and employees are treated without regard to their sexual orientation or gender identity during their employment. The Executive Order was effective immediately. The Rule is effective April 8, 2015, and applies to all new or modified federal contracts and subcontracts after that date.

The issuance of EO 13672 and the requirements of its implementing Rule highlight OFCCP’s intention to focus on LGBT protections and might be seen as steps to squarely tee up the issue of enforcement of LGBT protections in the post-Hobby Lobby era. First, and seemingly to leave no doubt of its intention, OFCCP had also issued Directive 2014-02 in August 2014, with its stated purpose, “[t]o clarify that existing agency guidance on discrimination on the basis of sex under Executive Order 11246, as amended, includes discrimination on the bases of gender identity and transgender status.” The directive explicitly piggybacked off of the EEOC’s 2012 decision in Macy v. Holder, where the EEOC concluded that gender identity and transgender status did not need to be specifically addressed in Title VII in order to be protected bases of discrimination, as they are simply part of the protected category of “sex” under Title VII. Anticipating the question of why EO 13672 was then necessary if already protected under Title VII, OFCCP offered a questionable explanation that the directive “does not address gender identity as a stand-alone protected category, which (along with sexual orientation) is the subject of Executive Order 13672.”

Second, as written, the Rule is relatively straightforward. It amends EO 11246’s implementing regulations by replacing the phrase “sex or national origin” with the phrase “sex, sexual orientation, gender identity, or national origin” wherever the former appears in the regulations.  The Rule also places the following obligations on employers:

  1. Ensure that applicants and employees are not discriminated against based on their sexual orientation or gender identity.

  2. Update existing affirmative action plans and all equal opportunity, harassment, and nondiscrimination policies to reflect the additional protected categories.

  3. Make available to applicants and employees a revised version of the “EEO is the Law” poster that includes a notice regarding the protections for LGBT workers.

  4. Include “sexual orientation” and “gender identity” as protected traits in the equal opportunity job solicitation taglines. (OFCCP suggested in the Rule preamble that “equal opportunity employer” may be sufficient to cover all protected categories of EO 11246.)

  5. Incorporate the new categories into new or modified subcontracts and purchase orders.

  6. Report to OFCCP and the Department of State any suspicion that it cannot obtain a visa for an employee, from another country with which it does business, due to the employee’s sexual orientation.

  7. Ensure that facilities (e.g., restrooms, locker rooms, and dressing areas) provided for employees are not segregated on the basis of sexual orientation and gender identity.

The Rule does not burden contractor employers with the same data collection and analysis obligations that are required with respect to females and minorities and does not require contractor employers to set placement goals on the bases of sexual orientation or gender identity, nor does it require them to collect or analyze any data with respect to the sexual orientation or gender identity of their applicants or employees. Contractor employers are also not required to, or prohibited from, soliciting applicants or employees to self-identify regarding their sexual orientation or gender identity.

Finally, it is notable that EO 13672 and its implementing Rule were issued despite the growing number of states (currently 20 states plus the District of Columbia) that have implemented protections against sexual orientation and/or gender identity discrimination. And further, that they are set within the larger context of the legalization of same sex marriage by, as of this article, 37 states, as well as the US Supreme Court’s consideration of the status of same sex marriage this year. Thus, the issue brought to focus by these OFCCP actions and the Executive Order may be more pointed than an identification of sexual orientation and gender identity as protected traits and may go towards whether a religious contractor employer may base employment decisions on the LGBT status of an applicant or employee.

EO 13672 contains no exemption for religiously affiliated federal contractors. Section 204(c) of EO 11246, which allows a religious corporation, association, educational institution or society, to base employment decisions on the religious membership of a particular individual (rather than on the beliefs of the organization), was specifically not amended by EO 13672. Possibly by design, this may result in a test of the reach of the Supreme Court’s 2014 decision in Burwell v. Hobby Lobby Stores, Inc., which, broadly speaking, allowed a closely-held, for-profit corporation to be exempt from the Affordable Care Act’s birth control mandate based upon its owners’ religious objection because it found that there was a less restrictive means of furthering the law’s interest.

A similar legal challenge may play out in the arena of employee benefits governed by EO 13672. OFCCP enforcement of the new Rule’s nondiscrimination prohibitions would bring within OFCCP’s purview the provision of benefits to an employee’s same sex spouse. Title VII and Supreme Court precedent require employers to make available the same benefits for spouses regardless of the gender of the employee. Closely-held contractor employers who oppose same sex marriage as a violation of religious belief may object to this requirement’s enforcement as a burden on their religious beliefs, similar to the arguments made by Hobby Lobby. While the Hobby Lobby majority attempted to dismiss the idea that its decision might allow an employer to “cloak as religious practice” prohibited acts, such as racial discrimination in hiring, the reach of the Hobby Lobby decision is far from settled, and the next batch of cases may seek to extend that decision to regulations requiring equal benefits based upon sexual orientation or gender identity.

And, lest employers think that the OFCCP was done, just today it announced that on January 30, 2015, it will publish a Notice of Proposed Rulemaking to update contractors’ obligations to not discriminate on the basis of sex under EO 11246 to “reflect present-day workplace realities and align OFCCP’s rules with current law under Title VII.” The new rules will touch on “compensation discrimination, sexual harassment, failure to provide workplace accommodations for pregnancy, and gender identity and family caregiver discrimination, among other topics.” The regulatory landscape for federal contractors saw many changes in 2014, and it seems 2015 is shaping up to be no different.

ARTICLE BY

Jill Pedigo Hall
Gonzalez Saggio & Harlan LLP

California Labor Laws for the New Year

Drinker Biddle Law Firm

If only the Beatles’ call to “Let it Be” was heard by the California Legislature. Instead, employer regulation is on the rise again. In 2014, 574 bills introduced mentioned “employer,” compared to 186 in 2013. Most of those 500-plus bills did not pass, and several that did pass were not signed into law by the governor. One veto blocked a bill that would have penalized employers for limiting job prospects of, or discriminating against, job applicants who aren’t currently employed.

A sampling of significant new laws affecting private employers, effective Jan. 1, 2015, unless otherwise mentioned, follows.

Shared Liability for Employers Who Use Labor Contractors

AB 1897 mandates that companies provided with workers from a labor contractor to perform labor within its “usual course of business” at its premises or worksite will “share with the labor contractor all civil legal responsibility and civil liability” for the labor contractor’s failure to pay wages required by law or secure valid workers compensation insurance, for the workers supplied.

The law applies regardless of whether the company knew about the violations and whether the company hiring the labor contractor (recast by the new law as a “client employer”) and labor contractor are deemed joint employers. This liability sharing is in addition to any other theories of liability or requirements established by statutes or common law.

The client employer will not, however, share liability under this new law if it has a workforce of less than 25 employees (including those obtained through the labor contractor), or is supplied by the labor contractor with five or fewer workers at any given time.

A labor contractor is defined as an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business, unless the specific labor falls under the exclusion clause in AB 1897. Excluded are bona fide nonprofits, bona fide labor organizations, apprenticeship programs, hiring halls operated pursuant to a collective bargaining agreement, motion picture payroll services companies and certain employee leasing arrangements that contractually obligate the client employer to assume all civil legal responsibility and civil liability for securing workers’ compensation insurance.

This bill is a significant expansion of existing law—which is limited to prohibiting employers from entering into a contract for labor or services with a construction, farm labor, garment, janitorial, security guard or warehouse contractor—if the employer knows or should know that the agreement does not include sufficient funds.

In light of the new law, labor services contractor engagements should be evaluated with an eye toward limiting the risk of retaining non-compliant contractors, including indemnity, insurance, termination provisions and compliance verification protocols.

Wage and Hour Changes

California’s $9 hourly minimum wage is due to increase to $10 Jan. 1, 2016. Defeated by the California Legislature, however, was a bill to raise the hourly minimum wage to $11 in 2015, $12 in 2016, $13 in 2017 and then adjust annually for inflation starting in 2018.

Undeterred, several municipalities have increased their respective minimum wage for companies who employ workers in their jurisdiction. For example, employees who work in San Francisco more than two hours per week, including part-time and temporary workers, are entitled to the San Francisco hourly minimum wage, which increased Jan. 1 from $10.74 to $11.05 and will increase to $12.25 by May 1. Hourly minimum wages also increased Jan. 1 in San Jose ($10.30).

The minimum wage will increase in Oakland March 2 ($12.25) and in Berkeley Oct. 1 ($11). Many other cities have either enacted, or have pending, minimum wage laws.

Federal minimum wage continues to lag behind California, but no longer for federal contractors. President Obama issued Executive Order 13658 in 2014 which established that workers under federal contracts must be paid at least $10.10 per hour. This applies to new contracts and replacements for expiring federal contracts that resulted from solicitations issued on or after Jan. 1, 2015, or to contracts that were awarded outside the solicitation process on or after Jan. 1, 2015. There are prevailing wage requirements for many state and local government and agency contractors as well.

Employers should monitor each of the requirements, including those in the jurisdiction in which they do business, to assure compliance.

Paid Sick Days Now Required

Effective July 1, AB 1522 is the first statewide law that requires employers to provide paid sick days to employees. The new law grants employees, who worked at least 30 days since the commencement of their employment, the right to accrue one hour of paid sick time off for each 30 hours worked—up to 24 hours (three days) in a year of employment. Exempt employees are presumed to work a 40-hour normal workweek; but, if their normal workweek is less, the lower amount could be used for accrual purposes.

An employer may cap accrual at 48 hours (six days) and also may limit the use of paid sick days in a year to 24 hours. Unused paid sick days normally carry-over from year to year, though no carry-over is required if 24 hours of paid sick days is accrued to the employee at the beginning of a year. No payout is required at termination of employment.

The paid sick days may be used for the employee’s own health condition or preventative care; a family member’s health condition or preventative care; if the employee is a victim of domestic assault or sexual violence; and stalking. “Family member” means a child, regardless of age or dependency (including adopted, foster, step or legal ward), parent (biological, adoptive, foster, step, in-law or registered domestic partner’s parent), spouse, registered domestic partner, grandparent, grandchild or siblings.

The law applies to all employers, regardless of size, except for a few categories of employees that are not covered—such as those governed by a collective bargaining agreement that contains certain provisions, in-home supportive services providers and certain air carrier personnel.

Employers must keep records for at least three years, a new workplace poster is required and employers are barred from retaliating against employees who assert rights under this new law.

Failure of an employer to comply with AB 1522 can result in significant monetary fines and penalties in addition to pay for the sick days withheld, reinstatement and back pay if employment was ended, and attorneys fees and costs.

Employers should beware to integrate city specific paid sick leave laws with the new state law. For example, the pre-existing San Francisco paid sick day law has some provisions that are similar and some that are different from AB 1522. As a general rule, where multiple laws afford employee rights on a common topic, the employee is entitled to the law benefits that favors the employee most.

Discrimination Law and Training Requirements Expanded

AB 1443 amends the California Fair Employment and Housing Act (FEHA) to make its anti-discrimination, anti-harassment and religious accommodation provisions apply to unpaid interns. It also amends FEHA’s anti-harassment, and religious belief or observance accommodation provisions, to apply to volunteers. This new law appears to respond to, and trump, courts that have not classified these workers as employees and, in turn, found them not eligible for legal protections afforded to employees.

Prior law requires the California Department of Motor Vehicles to commence issuing special drivers licenses in January to applicants who meet other requirements to obtain a license, but cannot submit satisfactory proof of lawful presence in the United States. AB 1660 amends FEHA to prohibit discrimination against holders of these special drivers licenses; adverse action by an employer because an employee or applicant holds a special license can be a form of national origin discrimination. Employer compliance with any requirement or prohibition of federal immigration law is not a violation of FEHA.

Since 2006, employers of 50 or more employees have been required to provide supervisors with two hours of classroom or other effective interactive anti-sexual harassment training, every two years. New supervisors are to receive the training within six months after they start a supervisory position. This is commonly known as “AB 1825” training.

In apparent response to societal concerns about the impacts of bullying in general, AB 2053 requires that AB 1825 training include a component on abusive conduct prevention. Under the new law, abusive conduct means “conduct of an employer or employee in the workplace, with malice, that a reasonable person would find hostile, offensive and unrelated to an employer’s legitimate business interests.

Abusive conduct may include repeated infliction of verbal abuse—such as the use of derogatory remarks, insults and epithets; verbal or physical conduct that a reasonable person would find threatening, intimidating or humiliating; or the gratuitous sabotage or undermining of a person’s work performance. A single act shall not constitute abusive conduct, unless especially severe and egregious.”

The new law does not make abusive conduct unlawful in and of itself, but it’s common for plaintiffs’ counsel to try, in attempts to win cases, to tether abusive behavior by a supervisor to conduct that is alleged to be unlawful.

SB 1087 requires farm labor contractors to provide sexual harassment prevention and complaint process training annually to supervisory employees and at the time of hire and each two years thereafter to non-supervisory employees. The new law also blocks state licensing of farm labor contractors who have been found by a court or administrative agency to have engaged in sexual harassment in the past three years, or who knew— or should have known—that a supervisor had been found by a court or administrative agency to have engaged in sexual harassment in the past three years.

Child Labor Laws Enhanced

AB 2288, the Child Labor Protection Act of 2014, accomplishes three things.

1. It confirms existing law that “tolls” or suspends the running of statutes of limitation on a minor’s claims for unlawful employment practices until the minor reaches the age of 18.

2. Treble damages are now available—in addition to other remedies—to an individual who is discharged, threatened with discharge, demoted, suspended, retaliated or discriminated against, or subjected to adverse action in the terms or conditions employment because the individual filed a claim or civil action alleging a violation of the Labor Code that arose while the individual was a minor.

3. For Class “A” child labor law violations involving minors at or under the age of 12, the required range of civil penalties increases to $25,000 to $50,000. Class A violations include employing certain minors in dangerous or prohibited occupations under the Labor Code, acting unlawfully or under conditions that present an imminent danger to the minor employee, and three or more violations of child work permit or hours requirements.

Immigration and Retaliation

Several new California laws involving immigration issues surfaced last year. All were premised on existing law that all workers are entitled to the rights and protections of state employment law regardless of immigration status, and that employers must not leverage immigration status against applicants, employees or their families.

This year, AB 2751 adds to and clarifies these existing laws.

For example, actionable “unfair immigration- related practices” now include threatening or filing a false report to any government agency. The bill also clarifies that a court has authority to order the suspension of business licenses of an offending employer to block otherwise lawful operations at worksites where the offenses occurred.

What’s Next?

Employers should consider how these new laws impact their workplaces, and then review and update their personnel practices and policies with the advice of experienced attorneys or human resource professionals.

*Originally published by CalCPA in the January/February 2015 issue of California CPA.

ARTICLE BY

Mark E. Terman
Drinker Biddle & Reath LLP

Recent Changes to the Law of Private Construction Contracts – Your Government is Here to Help You Again – Massachusetts

As part of the end-of-session rush at the Massachusetts General Court this summer, significant changes were made to Massachusetts law governing private construction contracts at the urging of general contractor and subcontractor industry groups. Members of the development and lending community were largely taken unaware as the bill moved forward, and unsuccessfully attempted in the later stages of the process to modify or defeat the legislation. Consequently, developers, lenders, contractors, sub-contractors, design professionals and attorneys need to be aware of substantial changes (and many unanswered questions) created by the new statute in the areas of withholding and release of retainage, defining substantial completion, and preparation of punchlists.

Key highlights of Chapter 276 of the Acts of 2014, to be codified at M.G.L. c. 149, sec. 29F:

  • Applicability: All contracts on projects on which the prime contract (a) is entered into after November 6, 2014, and (b) has a contract price of $3 million or more, except projects of 1 to 4 dwelling units.

  • Withholding of Retainage:  Caps retainage to be withheld from progress payments at 5% (long-standing practice has been to retain 10% of each progress payment, with reduced (or no) withholding of further retainage after the project achieves some level (typically 50%) of completion).

  • New Definition of “substantial completion”: “The stage in the progress of the project when the work… is sufficiently complete in accordance with the contract for construction so that the project owner may occupy or utilize the work for its intended use…”  Parties may divide a project into phases and apply the statutory scheme applicable to “substantial completion” separately to each designated project phase.

Process for determining substantial completion:

  • Within 14 days after achieving substantial completion, the prime contractor submits a notice of substantial completion to the owner (form provided in the statute) with contractor’s determination of the date of substantial completion.

  • Within 14 days after receiving this notice, the owner must accept or reject it and return it to the contractor.  If the owner does neither, the notice is deemed accepted and the date of substantial completion determined by the contractor is binding.

  • If the owner rejects the notice, it must notify the prime contractor within this 14-day period, including the “factual and contractual basis for the rejection”, which must be certified as made in good faith.  The dispute is then governed by the contractual dispute resolution provisions, which the contractor must commence within 7 days of its receipt of the owner’s rejection notice.

Punchlist:

  • Within 14 days after the date of substantial completion is established (either through the notice process described above or the applicable dispute resolution proceeding), the owner must submit to the prime contractor a list (certified as made in good faith) of (a) all defective or incomplete work and (b) all outstanding deliverables required under the prime contract.

  • Within 7 days after the prime contractor’s receipt of that list, it must submit a similar list (certified as made in good faith) of all defective or incomplete work and outstanding required deliverables to each sub from whom it is withholding retainage.

Release of Retainage:

  • Applications for release of retainage can be submitted starting 60 days after the date of substantial completion (unless the contract provides for earlier submission), and each application must be accompanied by a list (certified as made in good faith) identifying the defective or incomplete work and deliverables on that party’s punchlist which have been completed, repaired and delivered.

  • Contract must permit applications for release of retainage at least monthly.

  • Retainage (other than that withheld in accordance with the new statute) must be released within 30 days of submission of the application for release, with an additional 7 days added for each tier of subcontractor.

Withholding Release of Retainage:

  • Only the following amounts can be withheld from retainage in response to an application for its release:

    • For incomplete, incorrect or missing deliverables, either (a) the value of the deliverables as mutually agreed to by the contracting parties, or (b) if no value has been agreed to, the reasonable value of the deliverables (not to exceed 2.5% of the total adjusted contract price of the party seeking release of retainage);

    • 150% of the reasonable cost to complete or correct incomplete or defective work; and

    • Reasonable value of any claims, costs, expenses and, where permitted under the contract of the party seeking release of retainage, attorneys’ fees.

  • No retainage can be withheld unless the withholding party provides to the party seeking the retainage, before the date payment is due, a notice (certified as made in good faith) (i) identifying the defective or incomplete work and the incomplete, incorrect or missing deliverables, (ii) the “factual and contractual basis” for any claims, and (iii) the value attributable to each item of incomplete or defective work, deliverable, and claim.

  • Multiple sequential applications for release of retainage are permitted as work is completed or corrected/deliverables are delivered/claims are resolved.

  • Unless the owner has declared the prime contractor in default under its contract, the owner cannot withhold retainage owed by the contractor to a subcontractor except for withholding based on a default by that sub.

  • Rejection of an application for release of retainage is subject to contractual dispute resolution procedures.  Contract provisions requiring a party to wait more than 30 days after rejection of an application for release of retainage before being permitted to commence dispute resolution procedures are void and unenforceable.

Additional Provisions:

  • All communications provided for in the new statute may be made electronically.

  • Section 29F(l) provides that any provision in a contract “which purports to waive, limit or subvert this section or redefine or expand the conditions for achievement of substantial completion for payment of retainage, shall be void and unenforceable.”

The new statute creates major areas of uncertainty for all parties on private construction projects, including:

  • How far an owner can go in adding requirements for deliverables, issuance of permanent C of Os, completion of commissioning, etc. as conditions to achieving “substantial completion”, in light of the new statutory definition of that term and the limitations imposed by Section 29F(l);

  • How an owner can mobilize its design professionals, its lender’s construction inspector, and its own construction team to respond to the prime contractor’s notice of substantial completion in the detailed manner required by the statute within the very short (but required) 14-day period;

  • How disputes over whether substantial completion has been achieved can be resolved through contractual dispute resolution procedures without jeopardizing project delivery deadlines;

  • What constitutes the “factual and contractual basis” required for various actions by the owner; and

  • How lenders will respond to the mandatory reduction in retainage to 5% (some are already saying that they will require an additional 5% in equity from the owner to make up the 10% retainage traditionally withheld by owners).

Although the consequences (intended or otherwise) of this new statute for the real estate lending, development and construction industries in Massachusetts remain to be seen over the coming months and years, they are likely to include:

  • Owners requiring retainage to be withheld on components of the contract price that previously may not have been subject to retainage (e.g., contractor’s fee, general conditions); exercising much greater control over a contractor’s use of contingency funds; requiring bonds from prime contractors and subs more regularly; and policing variations from the project schedule and/or the contract documents more strictly earlier in the project; and

  • Owners being much more selective in the choice of prime contractors and subs, tending towards repeat relationships, leading to greater consolidation within the industry and raising the barriers to entry by new companies.

There is already discussion underway about efforts to amend, limit or repeal this statute, so this will be something to watch for in 2015.

© 2014 SHERIN AND LODGEN LLP
ARTICLE BY

Peter Friedenberg
OF
Sherin and Lodgen LLP

It Depends: The Top 3 Inherently Gray Areas of Employment Law

Barnes Thornburg

Fact-specific.

 Case by case.

 These are just two of the terms that stand for one of the frustrating (for employers) truths of many areas of employment law:  there are few black and white answers. There are endless shades of gray, and in honor of this week’s letter of the law (G), we recognize three common gray areas and some specific questions that must be asked when addressing situations under each. The fact that there are so many questions that need to be answered under each explains why they are gray areas!

The Letter G

1. Is a noncompete agreement enforceable?

  • What duties did the employee perform for the previous employer?

  • What duties is the employee performing for the new employer?

  • Did the employee engage in any underhanded behavior while still employed by the previous employer (such as copying confidential documents)?

  • What have been the previous employer’s practices and track record in enforcing noncompetes in the past?

  • What state’s law does the agreement say will apply?

  • What state is the employee located in now?

  • Does the contract specify where any disputes must be litigated?

2. Does an employer have to provide a particular reasonable accommodation under the disability discrimination laws?

  • What efforts have been made to communicate with the employee about the situation?

  • Has the employee been cooperative in responding to inquiries?

  • Do you have a medical assessment of the employee’s ability to perform his/her job?

  • Do you trust that assessment (or do we think the physician’s assistant filled it out the way the employer wanted him/her to)?

  • How unique are the employee’s job duties?

  • What are the job duties?

  • Which job duties do you thing are not being adequately performed?

  • Do you question the employee’s efforts in attempting to work, or do you think the employee is to any degree malingering?

3. Is a worker an independent contractor or an employee?

  • Is there any written agreement with the worker?

  • Are there are other workers performing the same or similar tasks, and are they considered employees or contractors?

  • How much direction is the worker receiving from the company on the details of performing tasks?

  • Does the worker provide services for other companies?

  • Is the worker full time or close to it for your company?

  • Does the worker provide any or all of the tools need to perform his/her work?

  • How long has the worker been working for your company?

These issues are like snowflakes. With so many questions (and these are not intended to be exhaustive lists), no two sets of answers will be exactly alike. That can be frustrating, because it is easier to administer rules with clearer thresholds: Two weeks of vacation. No flip flops at work. The work day is 8:30 to 5:00 with a half hour lunch break at noon. Those rules are usually pretty easy. Like it or not, though, what employment lawyers and employers spend most of their time on are the snowflakes, and carefully working through the situations to manage them as cost-effectively as possible.

What gray areas are you spending your time on this week?

ARTICLE BY

William A. Nolan
 
OF
Barnes & Thornburg LLP