Agenda

> SCA

> Overview

> Issues & Best Practices

> SCA Enforcement

> MAS Contracting

> Equal Opportunity Compliance

> Regulations

> Enforcement Environment

> Internet Applications

> Best Practices

> Executive Orders

> Minimum Wage

> Compensation Data Collection

> Non-Disclosure of Compensation Data

> Affirmative Action

> Fair Pay and Safe Workplaces\

> Sick Leave

Service Contract Act (SCA)

> The McNamara-O’Hara Service Contract Act of 1965 (SCA) requires contractorsand subcontractors to pay their service employees no less than the minimummonetary wages and fringe benefits found prevailing in a particular locality inaccordance with the applicable wage determination or collective bargainingagreement.

> The SCA applies to contracts:

- in excess of $2,500 with Federal Government

- performed in the U.S., its territories and possessions

- principally for services performed through the use of service employees

> SCA coverage is triggered via inclusion of the SCA clause (FAR 52.222-41) andone or more incorporated Wage Determinations (“WDs”)

Act intended to remove wages as a bidding factor in the competition of federal service contracts and to provide wage protection to service employees.

Overview of the Act: Employee Coverage

> SCA coverage applies to “service employees” – historically non-exempt, “blue collar” workers

– All contract employees may not be covered

> Recent DOL actions highlight a shift to include more professional services under SCA

> Determination of coverage is primarily based on job function, secondarily salary tests

> SCA does not apply to contracts where non-exempt employees are a minor factor in contract performance (29 CFR 4.113(a)(3))

– DOL applies a 10 – 20% range

Overview of the Act: Exempted Employees >Service Contract Act does not apply to the following classes of

employees as defined by 29 CFR Part 541: – Executives/Supervisors: salaried (minimum $455/wk), supervise two or more

workers, exercise authority, and spend most of their time doing so

– Administrative/Managers: salaried, make decisions of importance and significance using independent judgment and discretion, and spend most of their time doing so

– Professionals: salaried or fee-based; perform work primarily requiring advanced knowledge, predominantly intellectual, customarily acquired by a prolonged course of specialized intellectual instruction (e.g., college-level); and exercise independent judgment and discretion

– Primary Duties Test applicable at least for now: Means you must look at all the “facts and circumstances,” no bright-line rule

– The “salary basis” test is going to change soon! See Proposed revisions to the Fair Labor Standards Act

SCA Compliance Issues

> Compliance with SCA seems straightforward at face value, but implementation is far more complex

> Contractors face a host of SCA compliance challenges such as:

– Making determinations on SCA coverage of a given contract

– Navigating simultaneous compliance with other labor laws (e.g., Davis Bacon Act)

– Identifying covered personnel

– Properly mapping internal labor categories to Wage Determinations

– Recognizing positions exempt from SCA (e.g., professional employees)

– Calculating fringe benefits in compliance with the regulations

SCA Enforcement

> DOL has sole enforcement authority

> Investigation procedures – Complaints are confidential

– DOL will information and records requests

– Confirm that contract contains SCA clauses and appropriate WDs

– Maintain log of contact with DOL during investigation

SCA Enforcement

> Potential Penalties and Sanctions – Contract terminations and

– Liability for any resulting costs to the government,

– Withholding of contract payments in sufficient amounts to cover wage and fringe benefit underpayments,

– Legal action to recover the underpayments, and

– Debarment for up to three years.

> Contractors and subcontractors may challenge determinations of violations and debarment before an Administrative Law Judge. Appellate review available.

MAS Contracts With SCA

SCA appears in a number of Federal Supply Schedules including:

> IT Schedule 70

> Mostly exempt labor categories, but help-desk and web development may not be

> Mission Oriented Business Integrated Solutions (MOBIS), Professional Engineering Services (PES), Financial and Business Solutions (FABS), Human Resources and Equal Employment Opportunity (Schedule 738X)

> Most receive professional exemption; administrative personnel are generally covered

> Temporary and Administrative Professional Staffing (TAPS), Allied Healthcare (VA Schedule 621 I)

> VA has stated that doctors are the only exempt classifications among medical community

> Security (Schedule 84), Logistics Worldwide (Schedule 874V), Facilities Maintenance (03FAC), Office, Imaging, and Document Solutions (Schedule 36)

> Significant SCA coverage of labor categories offered

SCA in MAS Contracts

> SCA and MAS contracts have inherent complexities for service contractors on their own

> Compliance with SCA within an MAS contract raises a number of additional complexities unique to this contract environment

– E.g., SCA affects pricing within a contracting vehicle intended for commercial items and services (but SCA is not found in the commercial marketplace)

> The Department of Labor has not issued guidance on how to deal with these increased complexities

– GSA quietly issued internal guidance December 2013

– Recently issued guidance reverting back to previous approach – coverage determined at the Task Order level

Equal Opportunity Compliance

> Office of Federal Contract Compliance Programs (OFCCP) monitors and enforces compliance with:

– Executive Order 11246 (EEO)

– Section 503 & 508 (Disability)

– Vietnam Era Veterans Readjustment Assistance Act

Current Enforcement Environment

Office of Federal Contractor Compliance Programs

> In FY 2014 OFCCP completed 3,987 compliance evaluations (93% of its goal) – $11.9 million in back pay to more than 23,000 victims of

discrimination

– Created nearly 1,300 job opportunities

> The FY 2016 request for OFCCP is $113,687,000 and 660 FTE – Dedicated funding of $3,300,000 for the continued development of

an improved enforcement case management database system

– $1,147,000 and 10 FTE for targeted work to identify and address pay discrimination.

Audit Focus Area – Internet Application

> EO 11246, Rehabilitation Act and Veterans Act all require tracking of employee characteristics beginning at the time of application. How does DOL define an applicant? – The candidate expresses interest in the job

– The candidate possesses the basic qualifications for the job

– The employer has considered the candidate for the job

– The candidate has not withdrawn interest in the job

OFCCP Best Practices

> Create, document, and communicate company selection policies and processes

> Create, document, and communicate clear definitions of Expressions of Interest and Considered

> EEO collection in the initial application flow > Basic Qualifications = Minimum Qualifications* > Link between qualifications and job performance > Basic qualifications on all job descriptions and on templates and

requisitions > Prescreening questions with automatic scoring > Document and communicate evaluation criteria and process > Require candidate affirmation on corporate policy and privacy

agreements > Require candidates electronically sign their applications

Minimum Wage for Federal Contractors (EO 13658)

> Establishes a minimum wage for federal contractors ($10.10 per hour for 2015)

> Applies to (1) new contracts issued after January 1, 2015 and (2) bilateral modifications of existing contracts where remaining duration exceeds 6 months

> Covered contracts include Service Contract Act (SCA) and Davis Bacon Act (DBA) contracts

Minimum Wage for Federal Contractors (EO 13658)

> Covered employees include: – Service Contract Act Employees

– Davis Bacon Act Employees

– Employees who spend >20% of their time “in connection with” a covered SCA or DBA contract

• In other words, intentionally intended to cover “indirect” employees

• 20% factor is calculated on a week by week basis

• Does not expand SCA or DBA H&W requirements to these indirect employees

> Estimated to affect more than 200,000 employees nationwide

Minimum Wage for Federal Contractors (EO 13658)

What does it mean for contractors? > Contractors must ensure that all covered employees, on

covered contracts, are paid in excess of $10.15 per hour > Requires a careful review of all new contracts & RFPs

> Due to procedural requirements surrounding the preparation of Wage Determinations (WDs), WDs will continue to reflect wage rates less than $10.15 per hour

> Affected labor categories will be identified with a highlight, intended to identify the impact of this new regulation

> Does not relieve contractors from compensating employees at any higher wage rate set by either a WD or by state or local law

> Does not relieve contractors of separately paying H&W benefits where required

Minimum Wage for Federal Contractors (EO 13658)

> What does it mean for contractors? – Contractors must identify all employees who support a covered

contract in excess of 20% of their time

> At least three challenges – Identifying potentially covered employees

– Determining if the employee spent more than 20% of their time in a given week in support of a covered contract

– Tracking time since most indirect employees do not track their time by contract.

> Lack of records could present a compliance problem (and an enforcement opportunity)

Minimum Wage for Federal Contractors (EO 13658)

What does it mean for contractors? > Annually, contractors may request price adjustments for contracts

affected by changes in the minimum wage based upon the Consumer Price Index for Urban Wage Earners and Clerical workers > DoL notification of increase to be published 90 days before the 1/1

effective date > Adjustments must be prepared on a contract by contract basis – including

GSA contracts > Price adjustments are not “phased” – all contractors must submit at the

same time > Will likely overwhelm contracting officers in geographies most affected by the minimum > Unprocessed price adjustment requests do not relieve the contractor of paying increases

in minimum wage

> Potentially requires contractors to submit TWO price adjustment requests per year per covered contract

Advancing Pay Equality through Compensation Data Collection (Presidential Memo) > Final rule was expected May 2016 with 2017

implementation date

> Supplements EEO-1 report with summary information on compensation – Consistent with W-2 reporting

– Broken down by sex, race, ethnicity and job category

– Includes hours and number of employees

> Will allow OFCCP to direct enforcement resources – OFCCP expects regulations to deter non-compliances

Advancing Pay Equality through Compensation Data Collection (Presidential Memo)

> What does it mean for contractors? – Report compiles summary data which could trigger reviews

and audits due to its lack of specificity • Report aggregates exempt and non-exempt labor categories.

• Provide hours worked and number of employees

> DoL anticipates the report will be a “critical tool” in eradicating pay disparities – Will be used to identify bad actors and direct enforcement

activity

Advancing Pay Equality through Compensation Data Collection (Presidential Memo) What does it mean for contractors?

> OFCCP’s plan to compare contractor data by industry will likely result in increased audit activity – Summary data does not allow explanation or description of the

many differences in employee labor classifications

– Does not take into account variances in length of service and meritorious performance

> Contractors should be prepared to maintain significant documentation detailing pay practices, including information justifying employee labor classifications and salary differences

Non-retaliation (EO 13665)

> Amends the Equal Opportunity Clause of Executive Order 11246.

> Effective January 11, 2016 > Prohibits contractors and subcontractors from

discharging, or otherwise discriminating against, employees or applicants who inquire about, discuss, or disclose their compensation or the compensation of other employees or applicants. – Excludes employees or applicants who make the disclosure

based on information obtained when performing essential job functions.

> Belief is that pay secrecy leads to disparity of pay

Non-retaliation (EO 13665)

What does it mean to contractors?

> Requires that Federal contractors incorporate the nondiscrimination provision into their existing employee manuals or handbooks.

> Contractors must disseminate the nondiscrimination provision to employees and to job applicants.

Affirmative Action (EO 13672)

> Interim FAR rule issued 4/10/15 – Applies to solicitations and modifications issued on or after

this date

> Clarifies that EO 11246 includes protection from discrimination related to “gender identity” or “sexual orientation” – Previous language “race, color, religion, sex and national

origin”

> Does not redefine these terms but relies upon DOL OFCCP definitions

Affirmative Action (EO 13672)

> What does it mean to contractors? – Does not significantly change reporting requirements for

contractors – Unlike other categories covered by EO 11246, the Final Rule does

not require contractors to collect any information about applicants’ or employees’ sexual orientation or gender identity or perform data analytics

– Contractors are not prohibited from doing so BUT they need to be aware of state and local laws which may prohibit doing so

– Information gathered may not be used to discriminate against contractors

> Could present logistical issues for contractors – Contractors must carefully consider issues such as bathroom facility

access

Fair Pay and Safe Workplaces (EO 13673)

> Final rule issued August 24, 2016

> Effective date is October 25, 2016

> Otherwise known as “blacklisting rule”

> Many parts of the proposed rule remain unclear > As a result, the implementation of the rule will be phased in

over time

Fair Pay and Safe Workplaces

• When bidding on covered federal contracts, contractors will be

required to attest to whether they have had violations of the covered

labor laws resulting in any “administrative merits determinations,

civil judgments, or arbitral awards or decisions” issued within the

preceding three years. – DOL has a broad interpretation of labor law decisions that must be reported, including

findings that are not final or remain subject to appeal or further review.

• Paycheck transparency requirements

– Wage statements to covered workers, giving them information concerning their

hours worked, overtime hours, pay, and any additions to or deductions made

from their pay.

– Provide to workers treated as independent contractors a document informing

them of their independent contractor status.

– Written notice to inform workers if they are exempt from overtime pay.

• Limitations on Arbitration

Fair Pay and Safe Workplaces

> For the first year that the regulations are effective (beginning

October 25, 2016), only prime contractors must make disclosures.

> Subcontractors will not be required to start making disclosures

until October 25, 2017.

> For the first six months that the rule is effective, disclosure

requirements will only be included in solicitations valued at $50

million or more.

> Disclosure requirements will be included in solicitations valued at

$500,000 or more beginning on April 25, 2017.

> The initial period for which labor violations must be disclosed is

limited to one year and will gradually increase to three years by

October 25, 2018.

> The rule’s paycheck transparency requirements will become

effective January 1, 2017.

Paid Sick Leave for Government Contractors (EO 13706) • Final Proposed Rule Issued February 25, 2016

• Executive Order requires certain parties that

contract with the Federal Government to provide

their employees with up to 7 days of paid sick

leave annually, including paid leave allowing for

family care. The Executive Order directs the

Secretary of Labor to issue regulations by

September 30, 2016, to implement the Executive

Order’s requirements.

Paid Sick Leave for Government Contractors (EO 13706)

• Executive Order 13706 applies to new contracts and replacements for

expiring contracts with the Federal Government that result from

solicitations issued on or after January 1, 2017.

• Coverage of contracts and employees under the proposal is nearly

identical to coverage under the regulations implementing the Minimum

Wage Executive Order, except that this proposal also covers employees

who qualify for an exemption from the Fair Labor Standards Act’s (FLSA)

minimum wage and overtime provisions.

• Under the proposal, Executive Order 13706 applies to four major

categories of contractual agreements: – procurement contracts for construction covered by the Davis-Bacon Act (DBA);

– service contracts covered by the McNamara-O’Hara Service Contract Act (SCA);

– concessions contracts, including any concessions contracts excluded from the SCA by the

Department’s regulations at 29 CFR 4.133(b); and

– contracts in connection with Federal property or lands and related to offering services for

Federal employees, their dependents, or the general