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The Department Of Homeland Security Proposes New Rules Affecting Federal Government Contractors

This week, the Department of Homeland Security (“DHS”) issued three proposed rules expanding data security and privacy requirements for contractors and subcontractors. The proposed rules build upon other recent efforts by various federal agencies to strengthen safeguarding requirements for sensitive government information. Given the increasing emphasis on data security and privacy, contractors and subcontractors are well advised to familiarize themselves with these new requirements and undertake a careful review of their current data security and privacy procedures to ensure they comply.

Privacy Training

DHS contracts currently require contractor and subcontractor employees to complete privacy training before accessing a Government system of records; handling Personally Identifiable Information and/or Sensitive Personally Identifiable Information; or designing, developing, maintaining, or operating a Government system of records. DHS proposes including this training requirement in the Homeland Security Acquisition Regulation (“HSAR”) and to make the training more easily accessible by hosting it on a public website. By including the rule in the HSAR, DHS would standardize the obligation across all DHS contracts. The new rule would require the training to be completed within thirty days of the award of a contract and on an annual basis thereafter.

DHS invites comment on the proposed rule. In particular, DHS asks commenters to offer their views on the burden, if any associated with the requirement to complete DHS-developed privacy training. DHS also asks whether the industry should be given the flexibility to develop its own privacy training. Comments must be submitted on or before March 20, 2017.

Information Technology Security Awareness Training

DHS currently requires contractor and subcontractor employees to complete information technology security awareness training before accessing DHS information systems and information resources. DHS proposes to amend the HSAR to require IT security awareness training for all contractor and subcontractor employees who will access (1) DHS information systems and information resources or (2) contractor owned and/or operated information systems and information resources capable of collecting, processing, storing or transmitting controlled unclassified information (“CUI”) (defined below). DHS will require employees to undergo training and to sign DHS’s Rules of Behavior (“RoB”) before they are granted access to those systems and resources. DHS also proposes to make this training and the RoB more easily accessible by hosting them on a public website. Thereafter, annual training will be required. In addition, contractors will be required to submit training certification and signed copies of the RoB to the contracting officer and maintain copies in their own records.

Through this proposed rule, DHS intends to require contractors to identify employees who will require access, to ensure that those employees complete training before they are granted access and annually thereafter, to provide to the government and maintain evidence that training has been conducted. Comments on the proposed rule are due on or before March 20, 2017.

Safeguarding of Controlled Unclassified Information

DHS’s third proposed rule will implement new security and privacy measures, including handling and incident reporting requirements, in order to better safeguard CUI. According to DHS, “[r]ecent high-profile breaches of Federal information further demonstrate the need to ensure that information security protections are clearly, effectively, and consistently addressed in contracts.” Accordingly, the proposed rule – which addresses specific safeguarding requirements outlined in an Office of Management and Budget document outlining policy on managing government data – is intended to “strengthen[] and expand[]” upon existing HSAR language.

DHS’s proposed rule broadly defines “CUI” as “any information the Government creates or possesses, or an entity creates or possesses for or on behalf of the Government (other than classified information) that a law, regulation, or Government-wide policy requires or permits an agency to handle using safeguarding or dissemination controls[,]” including any “such information which, if lost, misused, disclosed, or, without authorization is accessed, or modified, could adversely affect the national or homeland security interest, the conduct of Federal programs, or the privacy of individuals.” The new safeguarding requirements, which apply to both contractors and subcontractors, include mandatory contract clauses; collection, processing, storage, and transmittal guidelines (which incorporate by reference any existing DHS policies and procedures); incident reporting timelines; and inspection provisions. Comments on the proposed rule are due on or before March 20, 2017.

Other Recent Efforts To Safeguard Contract Information

DHS’s new rules follow a number of other recent efforts by the federal government to better control CUI and other sensitive government information.

Last fall, for example, the National Archives and Record Administration (“NARA”) issued a final rule standardizing marking and handling requirements for CUI. The final rule, which went into effect on November 14, 2016, clarifies and standardizes the treatment of CUI across the federal government.

NARA’s final rule defines “CUI” as an intermediate level of protected information between classified information and uncontrolled information. As defined, it includes such broad categories of information as proprietary information, export-controlled information, and certain information relating to legal proceedings. The final rule also makes an important distinction between two types of systems that process, store or transmit CUI: (1) information systems “used or operated by an agency or by a contractor of an agency or other organization on behalf of an agency”; and (2) other systems that are not operated on behalf of an agency but that otherwise store, transmit, or process CUI.

Although the final rule directly applies only to federal agencies, it directs agencies to include CUI protection requirements in all federal agreements (including contracts, grants and licenses) that may involve such information. As a result, its requirements indirectly extend to government contractors. At the same time, however, it is likely that some government contractor systems will fall into the second category of systems and will not have to abide by the final rule’s restrictions. A pending FAR case and anticipated forthcoming FAR regulation will further implement this directive for federal contractors.

Similarly, last year the Department of Defense (“DOD”), General Services Administration, and the National Aeronautics and Space Administration issued a new subpart and contract clause (52.204-21) to the FAR “for the basic safeguarding of contractor information systems that process, store, or transmit Federal contract information.” The provision adds a number of new information security controls with which contractors must comply.

DOD’s final rule imposes a set of fifteen “basic” security controls for covered “contractor information systems” upon which “Federal contract information” transits or resides. The new controls include: (1) limiting access to the information to authorized users; (2) limiting information system access to the types of transactions and functions that authorized users are permitted to execute; (3) verifying controls on connections to external information systems; (4) imposing controls on information that is posted or processed on publicly accessible information systems; (5) identifying information system users and processes acting on behalf of users or devices; (6) authenticating or verifying the identities of users, processes, and devices before allowing access to an information system; (7) sanitizing or destroying information system media containing Federal contract information before disposal, release, or reuse; (8) limiting physical access to information systems, equipment, and operating environments to authorized individuals; (9) escorting visitors and monitoring visitor activity, maintaining audit logs of physical access, and controlling and managing physical access devices; (10) monitoring, controlling, and protecting organizational communications at external boundaries and key internal boundaries of information systems; (11) implementing sub networks for publically accessible system components that are physically or logically separated from internal networks; (12) identifying, reporting, and correcting information and information system flaws in a timely manner; (13) providing protection from malicious code at appropriate locations within organizational information systems; (14) updating malicious code protection mechanisms when new releases are available; and (15) performing periodic scans of the information system and real-time scans of files from external sources as files are downloaded, opened, or executed.

“Federal contract information” is broadly defined to include any information provided by or generated for the federal government under a government contract. It does not, however, include either: (1) information provided by the Government to the public, such as on a website; or (2) simple transactional information, such as that needed to process payments. A “covered contractor information system” is defined as one that is: (1) owned or operated by a contractor; and (2) “possesses, stores, or transmits” Federal contract information.

ARTICLE BY Connie N Bertram, Amy Blackwood & Emilie Adams of Proskauer Rose LLP

Fair Pay and Safe Workplaces Final Rule Presents Challenges to Government Contractors

Last week, the FAR Council released its Final Rule implementing President Obama’s 2014 Fair Pay and Safe Workplaces Executive Order. At the same time, the U.S. Department of Labor released its Final Guidance on the rule. Contractors need to take action immediately—the Final Rule goes into effect on October 25, 2016.

The proposed rule was issued back in May of 2015 and there has been lots written about it (and more than 10,000 comments and responses submitted). In today’s post, we highlight some of the requirements that may present challenges to contractors. Remember, once the rule takes effect, contractors will be required to report certain details about their labor law violations.

Public Disclosure of Labor Law Violations

Actually, contractors will be required to disclose violations of 14 federal labor laws and executive orders and state equivalents. Those laws range from the Fair Labor Standards Act and the Occupational Safety and Health Act to the Service Contract Act, the Davis Bacon Act and the Family and Medical Leave Act. The E.O.s include E.O. 13658 (Establishing a Minimum Wage for Contractors) and E.O. 1124 (Equal Employment Opportunity). The Final Rule also requires contractors to update their reports every six months. And, all disclosures under the new rule will be public.

Phase-In Periods

That’s probably one of the main takeaways here—the rule will be “phased in” over time. Starting on October 25, 2016, the disclosure requirements will become effective as to prime contracts valued at $50 million or more. By April 25, 2017, those requirements will apply to prime contracts valued at $500,000 or more. Subcontracts are not covered by the rule until October 25, 2017. Initially, the disclosure rules only will look back one year, but that “look back” period will stretch to three years by October 25, 2018.

Paycheck Transparency and Arbitration Restrictions

Starting on January 1, 2017, the “paycheck transparency” provisions take effect. Among other things, starting in 2017, contractors will be required to provide notices to workers about their status as independent contractors and whether they are exempt from overtime pay. Those notices will be particularly problematic for contractors who have not previously focused on proper classification and for all contractors in light of new overtime regulations and DOL’s increased attention to alleged worker misclassifications.

Subcontractor Reporting Directly to DOL

The Final Rule includes one significant change from the proposed rule and requires subcontractors to report directly to the Department of Labor rather than to the prime contractor. The rule also includes a contorted pathway for consideration of subcontractors’ disclosed violations, bouncing from DOL back to the sub and then up to the prime and then to the contracting officer. It remains to be seen how that process will work and if it will work efficiently.

Reporting Does Not Extend to Affiliates

The text of the Final Rule makes it clear that the reporting requirements do not extend to corporate parents, subsidiaries or affiliated companies. Instead, it is limited to the contracting party only.

Perhaps it is a silver lining for prime contractors that they will not be required to report on their subcontractors’ and their own affiliates’ labor law violations. But the new rules contain many new requirements and contractors should get ready now for the implementation to begin on October 25, 2016.

OFCCP Reduces Veteran Hiring Benchmark

On June 16th, Office of Federal Contract Compliance Programs, OFCCP, announced that, effective March 4, 2016, the annual hiring benchmark for veterans pursuant to Vietnam Era Veterans’ Readjustment Assistance Act, VEVRAA,regulation is 6.9%. This is a slight decrease from last year’s 7.0% benchmark.

As part of the release OFCCP clarified that

“Contractors who adopted the previous year’s national benchmark of 7 percent after March 4, 2016, but prior to this announcement may keep their benchmark at 7 percent.”

The agency noted that going forward the effective date for the annual benchmark will match the date the Bureau of Labor Statistics publishes the data from which OFCCP calculates the benchmark. This usually takes place in March every year.

ARTICLE BY Laura A. Mitchell of Jackson Lewis P.C.

FBI’s Choice of Contractors Not as Good as Its Crime Solving/Terrorist Tracking

fbibuilding jedgar hoover.jpg The FBI is very good at tracking down terrorist threats and catching criminals. It appears, however, that it needs some help in choosing contractors to support its mission.

The FBI wanted a contractor for its Name Check and Freedom of Information Act (FOIA)/Declassification programs. Specifically, the FBI needed personnel to conduct research and to provide analysis and reporting services. The FBI decided to procure these services under the Federal Supply Schedule (FSS) using streamlined procedures. So, the FBI issued a Request for Quotations (RFQ) with these labor categories: research analysts; program managers, general consultants; and legal administrative assistants. That much is clear.

The rest is less clear. Apparently, the FBI selected a contractor that did not have the required personnel. Instead of personnel with experience in paralegal, records management and declassification review, the FBI got personnel with capabilities in the development of business methods and identification of best practices. That’s according to the Government Accountability Office (GAO) decision in US Investigations Services, Professional Services Division, Inc., B-410454.2, Jan. 15, 2015, 2015 CPD ¶ 44.

That case was cited by GAO’s general counsel, Susan A. Poling, recently in the GAO Bid Protest Annual Report to Congress for Fiscal Year 2015. Ms. Poling cited to US Investigations Services as an example of GAO’s Most Prevalent Grounds for Sustaining Protests. GAO notified Congress that “unreasonable technical evaluation” was no. 5 on the list and described the decision as follows: “finding that the agency erred in concluding that the labor categories included on the awardee’s Federal Supply Schedule contract encompassed the requirements of the task order.”

Contractors can learn valuable lessons from this case. First, don’t leave the Government hanging. Make sure the labor categories in your proposal match the categories listed in the Solicitation. If there is not a direct match, make sure you explain how your personnel fit the requirements. For task orders under FSS contracts, the law is clear. All solicited labor categories must be on the successful offeror’s FSS contract. Here, maybe the awardee was surprised that it won. More likely, the awardee just failed to explain what it was offering. That was fatal. If you can’t explain how your labor categories fit the RFQ requirements, maybe you should take a pass on the bid.

For protesters and disappointed bidders, this case demonstrates a solid ground for protest. In truth, you probably already know what your competitors are offering, at least when it comes to FSS contract offerings. A quick check on www.GSAAdvantage.gov after you receive an award notice is always a good idea.

Footnote: Although GAO sustained USIS’s protest, the FBI had overridden the automatic stay of performance. Thus, GAO made alternative recommendations to the FBI. Under one scenario, the FBI could consider awarding the task order to USIS but first it had more work to do. That is because in a different protest GAO had questioned an agency’s affirmative determination of USIS’s responsibility in the face of fraud allegations against USIS’s parent company. So, if the FBI was to select the “next in line” bidder, it would have to be careful that the bidder was eligible to perform the work. Otherwise, it could be back to the drawing board.

Article By Michael D. Maloney, Charles R. Lucy & Diego G. Hunt of Holland & Hart LLP

Wasn't That Supposed to be Made in the USA?

Made in the USA.jpg Despite the existence of long-standing U.S. laws strongly favoring the purchase of domestic products for use by governmental entities, in governmental programs and particularly the fulfillment of Department of Defense (“DoD”) contracts, a surprising number of companies still attempt to circumvent these laws. They do so at their own peril. Recognizing the harm likely to befall American workers as a result, an increasing number of employees and former employees have “blown the whistle” on these practices in recent years and teamed up with the U.S. Government to curtail this trend.

The Buy American Act, 41 U.S.C. §§ 8301–8305, (“BAA”) was enacted in 1933 under President Hoover as part of New Deal legislation intended to help struggling American depression era companies. The BAA superseded an 1875 statute that “related to preferential treatment of American material contracts for public improvements.” (1933, Sect. 10). The law carried with it a very simple idea: require the government to exercise a clear preference for US-made products in its purchases to bolster the American economy.

To this day, the BAA continues to require federal agencies to purchase “domestic end products” and use “domestic construction materials” in contracts exceeding certain dollar amounts performed in the United States. Unmanufactured end products or construction materials qualify as “domestic” if they are mined or produced in the United States. Manufactured products are treated as “domestic” if they are manufactured in the United States, and either (1) the cost of components mined, produced, or manufactured in the United States exceeds 50% of the cost of all components, or (2) the items are commercially available off-the-shelf items.

Exemptions and exceptions to the applicability of the BAA exist. For example, the BAA does not apply if the purchasing agency determines “it to be inconsistent with the public interest, or the cost to be unreasonable.” Furthermore, the U.S. Trade Agreements Act of 1979 authorizes the President to waive any procurement law or regulation that accords foreign products less favorable treatment than that given to domestic products in foreign lands. Additionally, purchases from Canada and Mexico are exempt from BAA prohibitions under the North American Free Trade Agreement. Other treaties and agreements also limit the BAA. Despite these, the BAA continues to cast a wide liability net for those that seek to willfully or knowingly circumvent it.

Similar to the BAA, the Berry Amendment was passed in 1941 to promote the U.S. economy through the preferential purchase of certain U.S. goods. The Amendment was eventually codified as 10 U.S.C. 2533a in 2002. The law prohibits the Department of Defense (“DoD”) from utilizing any funding available to or appropriated by the DoD for the purchase of the following end product items from “non-qualifying countries” unless these items are wholly of U.S. origin: food; clothing; tents, tarpaulins, or covers; cotton and other natural fiber products; woven silk or woven silk blends; spun silk yarn for cartridge cloth; synthetic fabric or coated synthetic fabric (including all textile fibers and yarns that are for use in such fabrics); canvas products, or wool (whether in the form of fiber or yarn or contained in fabrics, materials, or manufactured articles); or any item of individual equipment manufactured from or containing such fibers, yarns, fabrics, or materials; and hand or measuring tools. Noticeably absent from the definition of “qualifying country” are China, Japan, Thailand and Korea- among others.

Congress revised the Berry Amendment for fiscal years 2007 and 2008 with National Defense Authorization Act. The revised statute, 10 U.S.C. 2533b, declares that the DoD is prohibited from acquiring specialty metals or component parts for the use in the construction of aircraft, missile and space systems, ships, tank and automotive items, weapon systems, or ammunition unless the DoD itself acquires those materials directly. In other words, contractors engaged in the production of these items must use American made specialty metals or require that the DoD obtain these materials and component parts for use in any such fabrication and manufacturing.

Despite the existence numerous limitations with the Buy American Act, Berry Amendment and Trade Agreements Act, as discussed above, the United States Government and private citizen plaintiffs (known as Relators) have recently collaborated in bringing numerous False Claims qui tam actions against companies seeking to profit at the expense of the American Taxpayers. In the majority of these cases, contractors attempted to pass off foreign goods as made in the U.S.A. Examples of these include: MedTronic (relabeled Chinese devices allegations – $4.4 million settlement); ECL Solutions (conceal country of origin-$1.066 million civil forfeiture); Invacare (wrongfully certified as American Made- $2.6 Million settlement); Staples (foreign made goods- $7.4 million settlement), Office Depot (foreign made goods – $4.75 million settlement) and Office Max (sale of goods not permitted by Trade Agreements Act results in $9.72 million settlement).

According to Justice Department statistics released last week, whistleblowers filed 638 False Claims Act lawsuits in FY2015. Because these cases remain under seal sometimes for years, we do not know how many involved violations of BAA or related laws. We are aware from conversations with the Justice Department of an uptick in these claims, however.

Whistleblowers who bring claims under the False Claims Act can earn up to 30% of whatever the government collects from the wrongdoer. To qualify, one must have original knowledge or information about the fraud. Successful whistleblowers are usually current or former employees but anyone with inside information can file.

Article By Brian Mahany of Mahany Law

Wasn’t That Supposed to be Made in the USA?

Article By Brian Mahany of Mahany Law

OFCCP Releases Disability Self-Id Public Service Video

As part of its ongoing effort to provide employers with tools to educate and inform employees and non-employees about affirmative action obligations, Office of Federal Contract Compliace Programs, OFCCP, has released a new disability self-identification public service-like video entitled Disability Inclusion Starts With You.

Coinciding with its recognition of National Disability Employment Awareness Month, the Agency invites employers and community organizations to download the video and use it as a way to inform employees (and potential employees) about the importance of self-identification. The video also explains the regulatory obligation employers have to request this information and emphasizes the voluntary nature of the process.

The video and additional information can be found of OFCCP’s webpage.

Article By Laura Mitchell of Jackson Lewis P.C.

Making a Claim against a Payment Bond Posted by a General Contractor or Sub-Contractor

In construction projects that are performed either on behalf of a municipality or a state agency, a general contractor and potentially a sub-contractor are typically required to post payment and/or performance bonds with the county or municipality. A general contractor or sub-contractor is required to post a payment and/or performance bond, because this ensures that sub-contractors or suppliers are paid, and enables the Township or state agency to have the work completed should the contractor fail to do so in a timely fashion. As a supplier or sub-contractor on such a municipal or state project, it is important to know your rights with regard to making a claim against a payment bond.

The most important thing that any sub-contractor or supplier must do prior to providing materials or services for a public contract is to provide the proper notice as required by N.J.S.A. 2A.44-145. This strict notice requirement specifies that the sub-contractor or supplier notify the party who posted the payment bond for the project in writing via certified mail of their intent to provide materials or services for the project. This is a prerequisite to being able to make a claim against the bond, or to receive a payment for materials and services with regard to the project if they are not paid by the sub-contractor or general contractor. As such, it is very important that any sub-contractor or supplier provide the appropriate notice to the party that posted the bond prior to performing any work or providing any materials.

If proper notification has been sent and a sub-contractor or supplier did not receive payment for materials or services provided, they may make a claim against the bond posted by the general contractor or the sub-contractor. It is always suggested that a sub-contractor or supplier obtain a copy of the bond posted by the general contractor or sub-contractor before providing materials or services. This is to ensure that any claim against the bond is made in a timely manner and is not forfeited by failing to comply with the terms of the bond, which require that a claim be made within a certain specified period of time.

Assuming that you have complied with the time requirements of the bond, a sub-contractor or supplier would first send a Notice of Demand for Payment to the bonding company with a copy to the contractor who posted the bond. Typically, the bonding company will require the production of any and all documents which justify the payment sought by the claimant that was not tendered by the sub-contractor or general contractor. Upon receipt of this information, the bonding company will make a determination whether payment is due for the materials and services which were provided.

Article By Paul W. Norris of Stark & Stark

President Obama Drafts Executive Order That Would Require All Federal Government Contractors and Their Subcontractors to Provide Paid Sick Leave

President Obama recently drafted an executive order that would require companies that contract with the federal government to provide paid sick leave to their employees. Under the draft order, federal contractors and their subcontractors would be required to provide at least 56 hours (7 days) of paid sick leave per year to employees. medical, doctor, healthcare, sickness, medicine, paid sick leave Employees would be able to use such leave for the following reasons:

1. For their own care;

2. To care for a family member, including a child, parent, spouse, domestic partner or other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship; and

3. To seek medical attention, obtain counseling, seek relocation assistance from a victim services organization or to take legal action if the need for such services or leave relates to domestic violence, sexual assault or stalking.

In addition, paid sick time accrued by a former employee would need to be reinstated to the employee if he/she is rehired within 12 months after separating employment.

Under the draft order, the Secretary of the Department of Labor would be required to publish detailed regulations implementing the order by September 30, 2016. The order would generally apply to contracts solicited or entered into on or after January 2017.

A copy of the proposed order can be found here (New York Timessubscription may be required).

ARTICLE BY Rufino Gaytán & Deborah Rehorst of Godfrey & Kahn S.C.

Proposed Labor Violation Reporting Rules Target Government Contractors

Proposal makes agency allegations of employment law violations reportable events that could result in denial of federal contracts or termination of existing contracts.

Executive Order 13673 (the Order), signed by US President Barack Obama in July 2014, imposed three new requirements addressing the labor and employment practices of federal contractors and subcontractors: (1) an obligation to report employment law violations, which would be used by contracting officers to determine whether to award a new federal contract or terminate an existing contract; (2) a requirement to provide notices to workers about their Fair Labor Standards Act (FLSA) exemption or independent contractor status; and (3) a requirement that federal contractors agree that claims arising under Title VII or any tort related to or arising out of sexual assault or harassment by their employees and independent contractors will not be arbitrated without the voluntary postdispute consent of an employee or independent contractor, with certain limited exceptions.

E.O. 13673 directed the Federal Acquisition Regulatory Council (FAR Council)—which consists of the Administrator for Federal Procurement Policy, the Secretary of Defense, the Administrator of National Aeronautics and Space, and the Administrator of General Services—to publish implementing regulations through the Federal Acquisition Regulation (FAR) system. The Order also directed the Department of Labor (DOL) to publish guidelines that address transactions deemed to be reportable employment law violations, as well as how contracting officials should use such reported information to determine whether to award a federal contract (or terminate an existing contract). The Order, while effective upon issuance, expressly applies to all solicitations for contracts only as set forth in any final rule issued by the FAR Council.

On May 28, 2015, the FAR Council published a Notice of Proposed Rulemaking implementing E.O 13673.^[1] On the same day, the DOL published proposed guidance.^[2] The proposed rule and guidelines contain many potentially alarming provisions for employers seeking federal contracts, some of which appear to violate contractors’ due process and Fourth Amendment rights. If adopted, the proposals would impose administrative burdens on contractors, increase the complexity of obtaining and keeping federal contracts, and likely lead to an increase in bid protests and litigation.

The proposals offer employers a 60-day period to submit comments in opposition to these provisions. We strongly encourage employers that have or may seek federal contracts to take advantage of this comment opportunity. If you are interested in sponsoring comments, please contact us in the near future; the period for filing comments only runs through July 27, 2015.

Proposed Implementation of the Employment Violation Reporting Obligations

E.O. 13673 requires employers who are prospective awardees of federal contracts to report certain labor law violations that occurred within the prior three years. Awardees of federal contracts must submit reports of labor law violations every six months during the performance of the contract. The reportable violations include “administrative merits determinations,” “arbitral awards or decisions,” and “civil judgments” involving claims or enforcement actions under many federal employment laws.^[3]

The proposed guidelines define “administrative merits determinations” by reference to the specific types of determinations made by a federal enforcement agency, such as the Wage and Hour Division (WHD), Office of Federal Contract Compliance Programs (OFCCP), Occupational Safety and Health Administration (OSHA), Equal Employment Opportunity Commission (EEOC), and National Labor Relations Board (NLRB). Reportable determinations also include, broadly, complaints that a federal enforcement agency files and administrative orders issued through agency adjudication. However, complaints that private parties file with enforcement agencies or in court alleging employment law violations would not trigger a reporting obligation.

Under the proposed guidance, “administrative merits determinations are not limited to notices and findings issued following adversarial or adjudicative proceedings such as a hearing, nor are they limited to notices and findings that are final and unappealable.” Thus, contractors will be required to report mere agency allegations, such as OSHA citations, WHD investigation finding letters, OFCCP show cause notices, EEOC reasonable cause determinations, and NLRB complaints. These disclosures are required even if a contractor is challenging an allegation through formal proceedings. If, at the time of the required reporting, the enforcement agency allegation is withdrawn or reversed in its entirety through additional proceedings in the matter, then there is no reporting obligation.

The DOL will publish additional proposed guidelines that address administrative determinations that state enforcement agencies make under laws that DOL deems to be equivalent to the above-referenced federal laws.

The proposed DOL guidelines define “civil judgments” as any judgment or order entered by any federal or state court in which the court determined that an employer violated any provision of the above-referenced employment laws or enjoined the employer from committing a violation. Civil judgments include orders or judgments that are not final and are appealable, and the employer must report such judgments even if an appeal is pending. Consent judgments are subject to the reporting obligation if they contain a determination that an employment violation occurred or enjoin the employer from violating any provision of the employment laws. However, a private lawsuit that a court dismissed without a judgment would not be a reportable event.

The proposed DOL guidelines define “arbitral awards and decisions” as any award or order by an arbitrator or arbitral panel in which the arbitrator or panel determined that an employer violated any provision of the above-referenced employment laws or enjoined the employer from committing a violation. Arbitral awards include awards and orders that are not final and are appealable, and the employer must report such judgments even if an appeal is pending. Arbitral awards and orders must be reported even if they are subject to a confidentiality agreement.

Under the proposed DOL guidelines, the same alleged violation may trigger several successive reporting obligations. Each transaction must be reported even if the same alleged violation was the basis for a prior report. For example, where an initial agency allegation was reported, the same allegation must later be reported if it is sustained through an administrative order, and must be reported yet again if a federal court affirms it in a review action. However, if the initial reported transaction is reversed or vacated in its entirety through later proceedings, there is no obligation to continue to report the initial transaction in any future contract bid.

The proposed FAR regulations simply incorporate the DOL guidelines by reference and do not modify or expand on the definitions regarding reportable events.

Mechanics of the Contracting Process Under the Proposed FAR Rule

Prior to awarding a government contract, a contracting officer is required to make an affirmative responsibility determination that includes a determination that the apparent successful offeror or bidder has a satisfactory record of integrity and business ethics. The proposed rule requires that the contracting officer consider a prospective contractor’s labor violations in determining whether that contractor has a satisfactory record of integrity and business ethics. Under the proposed FAR rule, all employers bidding on a federal contract would initially provide a representation that there have been or have not been reportable employment law violations. Thereafter, once the contracting officer has initiated a responsibility determination for the prospective contractor, if the employer has indicated covered employment law violations, that employer would be required to enter detailed information describing the violations in the System for Award Management (SAM), including (1) the employment law that was allegedly violated; (2) the relevant matter or case number; (3) the date that the determination, judgment, award, or decision was rendered; and (4) the name of the court, arbitrator(s), or agency that rendered the decision. Further, the contracting officer would be required to solicit from the employer additional information that the prospective contractor views as necessary to establish affirmatively its responsibility, such as mitigating circumstances; remedial measures, including labor compliance agreements; and other steps taken to comply with labor laws.

The contracting officer would review the data provided, and, in consultation with agency Labor Contract Advisors, would determine whether the employer is a responsible source eligible to receive the federal contract. The proposals contemplate that most entities would not be deemed nonresponsible, but instead would be required to agree to a “labor compliance agreement” as a condition of award of the federal contract. The proposals provide little discussion or framework for labor compliance agreements, apparently vesting broad authority in enforcement agencies, the DOL, agency Labor Contract Advisors, and contracting officers to develop, negotiate, and monitor such agreements. Employers should pay particular attention to these proposals because they would place powers in the hands of federal regulators to extract extra-legal “remedial actions” by leveraging an award or continuation of federal contracts. The outlook for those prospective offerors found nonresponsible is equally grim; the likelihood of successfully challenging contracting officer responsibility determinations in the procurement process is very low given the high level of deference accorded such determinations by both the Government Accountability Office (GAO) and the Court of Federal Claims (COFC). Moreover, because the proposed regulation’s definition of “administrative merits determinations” effectively includes notices or findings that amount to little more than alleged violations, it is unclear whether GAO or the COFC could readily find a determination of nonresponsibility to be without a rational basis, even if that decision was predicated on alleged violations that, after contract award, may not be proven.

Post-Award Implications of Labor Violations

Employers awarded contracts would be required to enter current information regarding labor violations in SAM on a semi-annual basis. If, based on this information, the Labor Contract Advisor determines that further consideration or action is warranted… click to continue reading Proposed Labor Violation Reporting Rules Target Government Contractors

ARTICLE BY

William E. Doyle, Jr. & E. Ruscus of Morgan, Lewis & Bockius LLP

Tag: government contractors

The Department Of Homeland Security Proposes New Rules Affecting Federal Government Contractors

Privacy Training

Information Technology Security Awareness Training

Safeguarding of Controlled Unclassified Information

Other Recent Efforts To Safeguard Contract Information

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Fair Pay and Safe Workplaces Final Rule Presents Challenges to Government Contractors