Why Federal Contractors Will Probably Be Working This Labor Day

By John Stanford, WIPP Government Relations

The Department of Labor and FAR Council issued final regulations that require federal contractors to disclose labor violations from the past three years. This blog updates an earlier edition with what you need to know. For more details or if this impacts your business, I encourage you to read official guidance here.

Ahhhh, Labor Day. The unofficial end of summer. A century-old government-granted day off to squeeze in another day at the pool, buy the last of the school supplies (who really needs a protractor anyway?), see the grandparents, and now – for federal contractors – an opportunity to review your company’s legal history.

It doesn’t sound quite right, does it? But for thousands of federal contractors, that is exactly what newly finalized regulations mean. I will get into to the details and timeline of the new requirement in a moment, but first, a little history on a change WIPP has watched closely.

In 2014, President Obama issued an Executive Order with the goal of barring bad companies from winning federal contracts. The following summer the Labor Department (DOL) and the FAR Council (overseers of contracting rulebook, “the FAR”) proposed how this could be achieved. Last week, final rules were published – and contractors nationwide let out a collective groan.

You see, excluding companies with a history of bad acts from winning government work – a generally universally accepted idea – is not easy. WIPP said just that in our formal comment last year. We agreed that companies that follow the rules should not have to compete against companies that break them for federal contracts. But the proposed system would place burdens on women-owned contractors and dump paperwork requirements on contracting officers.

Our comment, along with hundreds from individual business owners and other trade groups, did little to sway the government from moving forward. The new requirement detailed below goes into effect on October 25, 2016.

The regulation requires federal contractors and subcontractors to disclose violations of 14 federal labor laws and the equivalent state laws from the previous three years. Exemptions were provided for companies with contracts valued less than $500,000. Prospective federal contractors will need to declare if they had labor violations in the previous three years when submitting an offer. During an initial evaluation, contracting officers will see that declaration (a simple “yes” or “no”), without any additional detail or explanation.

Later, if a contractor were likely to win an award, the contracting officer would have to decide if the contractor is a responsible company (a requirement of all government contracts already). It is in this phase that details like appeals, remediation, or mitigating factors could be explained. Contracting officers will attempt to identify companies with “serious”, “willful”, “repeated”, and/or “pervasive” violations and not award them contracts. Companies with minor violations could still be considered responsible and win contracts.

In what the government views as a compromise since their initial proposal, the system will be phased-in over the next two years. The DOL released the following timeline:

Phased-In Implementation Schedule

  • Week of September 12, 2016:Preassessment begins, through which current or prospective contractors may come to DOL for a voluntary assessment of their labor compliance history, in anticipation of bids on future contracts but independent of any specific acquisition.
  • October 25, 2016: Thefinal rule takes effect. Mandatory disclosure and assessment of labor law compliance begins for all prime contractors under consideration for contracts with a total value greater than or equal to $50 million. The reporting disclosure period is initially limited to one (1) year and will gradually increase to three (3) years by October 25, 2018.
  • January 1, 2017: The Paycheck Transparency clause takes effect, requiring contractors to provide wage statements and notice of any independent contractor relationship to their covered workers.
  • April 25, 2017: The total contract value threshold for prime contracts requiring disclosure and assessment of labor law compliance is reduced to $500,000.
  • October 25, 2017: Mandatory assessment begins for all subcontractors under consideration for subcontracts with a total value greater than or equal to $500,000.

 

Needless to say, our concerns remain. And before I go into a few of them, I would point out that the $50 million threshold sounds like a lot. It includes, however, companies on a multiple award contract with a ceiling amount above $50 million. Meaning a company that wins a BPA or IDIQ valued above $50 million, though not necessarily the amount of work the company will actually perform, will face the October 2016 deadline.

On a broader level, the rule simply is not ready for primetime. The Labor Department and FAR Council chose not to include what state labor law violations must be reported. It is impossible to gauge the impact of a regulation when missing significant portions.

What is in the rule, however, is equally concerning. In some cases, violations that require reporting will not be be fully adjudicated. That is, companies would have to report decisions against them that may ultimately be overturned – as nearly a third of NLRB decisions have been.

This is compounded by WIPP’s worry that simply having violations on record will “blacklist” companies without providing any opportunity to offer explanation. With limited resources and time, contracting officers may elect to avoid companies with any disclosed violations, despite the intent of the order to only bar violations of a certain severity.

Burdens on subcontractors are also being created. They must report violation history as well – directly to DOL. This was a notable change in the final rule, by making the subcontractor and the Labor Department engage each other, and not put the responsibility on the prime contractor.

At the same time the government has admitted it lacks the resources to answer all questions about weighing different labor violations from hundreds of thousands of subcontractors. Ultimately, this change could be the most damning, as many of these companies are unaware of the new requirements because they never sought business with the government in the first place.

Finally, the Fair Pay and Safe Workplaces requirement is one of many in a disconcerting trend of new regulations that specifically target federal contractors. Earlier this year, regulations raised the minimum wage solely for workers on federal contracts. New requirements regarding sick leave were also released. These make contracting with the federal government more onerous, particularly for women entrepreneurs seeking to enter the market. At a time when we want more competition and innovation in government, policies impacting only federal contractors put up barriers for entry.

Without question, WIPP supports efforts by the federal government to rid the contracting environment of businesses with a history of abusive and neglectful violations. In doing so, the government levels the playing field for the millions of businesses playing by the rules. But the government already has those tools and this rule will not achieve this goal. Instead, it will be harder to be a contractor, pushing the innovative products and services of women-owned businesses out of the federal market.

So to the federal contractors out there gearing up for a warm holiday weekend, fire up those grills, wear that final white outfit, and head into the office – it’s going to be a busy day.

 

John Stanford is part of WIPP’s Government Relations team in Washington, D.C., specializing in federal procurement and healthcare policy. When not bothering lawmakers about needed changes, he can be found in the woods at local golf courses.

FCC Set Top Box Hearing – Move Towards Good Direction

This week, WIPP kept a close eye on the House Energy and Commerce Committee’s oversight hearing of the Federal Communications Commission.  The hearing had a major focus on the Commission’s proposal to regulate set-top boxes which has received much criticism from since its release earlier this year.

More than 190 Members of Congress from both sides of the aisle and several advocacy groups and industry leaders have spoken out against how the proposal could negatively affect media diversity and consumer privacy. We at WIPP expressed our own concerns about how the proposal could specifically harm women and minority programmers in the media marketplace.

Under the FCC’s proposal, the playing field would be stacked against minority programmers in tilted in favor of tech giants.  These large companies would be able to take content from independent and minority programmers and redistribute it without having to pay the content creator.  As a result, these programmers would lose revenue that is necessary to maintaining and funding the creation of new quality content for their audiences.

This past February, 18 independent programmers and content creators wrote a letter to Congress expressing concern about the “devastating and lasting harm” the proposed regulations could have on media diversity and their businesses.  They stated that “It’s clear that the independent programming landscape would quickly become a ‘race to the bottom’ if this rule were to pass.

Fortunately, the video industry recently came up with an alternative to the FCC’s proposal that would protect the copyrights of programmers’ original content. Under this plan, pay-TV providers would offer apps that can be used on third-party boxes or streaming devices.  This way, content creators remain in control of how their programming is distributed and consumers are able to access their favorite shows on the device of their choice.

It seems that after months of debate, the Commission is moving forward in a positive direction.  During this week’s House hearing, Rep. Marsha Blackburn asked the FCC Commissioners if they believe their original proposal to regulate set-top boxes is flawed.  All Commissioners acknowledged that the original proposal needs improvement and that the video industry’s proposal is potentially a better approach.

Commissioner Jessica Rosenworcel and Commissioner Mignon Clyburn further stated that the Copyright Office voiced concerns with the FCC’s proposal and that copyright security and privacy must be put in place.

We strongly encourage the FCC to move forward with this apps approach.  This alternative offers a constructive solution for all content creators, especially women and minority businesses enabling them to continue doing what they do best: providing consumers the diverse content they demand.

New Overtime Regulations to Take Effect December 1, 2016

By Marina Burton Blickley, Esq., Centre Law & Consulting LLC

A draft of the Department of Labor’s final revised regulations covering white collar exemptions was just released and is set to become effective December 1, 2016 – right after elections.  The final rule sets the new salary threshold for exempt executive, administrative, and professional employees at $47,476 annually and $134,004 for exempt highly-compensated employees.  This is a dramatic increase from the prior levels of $23,660 and $100,000.  Now that the final salary levels are known companies should be reviewing their employee classifications and making adjustments where necessary to be prepared to be in compliance come December 1, 2016.  Government contractors with contracts covered by the Service Contract Labor Standards (formally Service Contract Act) should also perform an analysis to ensure employees performing services on those contracts are being provided appropriate wages and health and welfare benefits since the FLSA overtime exemptions are used to determine coverage under that Act.

There have been a number of recent updates to the employment laws governing employers generally and, in particular, government contractors.  WIPP’s Give Me 5 recently hosted a webinar covering these and other changes.  To learn more, please listen to the podcast available here –

 

Give Me 5: Where Human Resources and Government Contracts Intersect

Guest Speakers:  Barbara Kinosky, President and Managing Partner, Centre Law & Consulting and Marina Blickley, Associate, Centre Law & Consulting

Federal contractors are subject to a unique set of rules, laws and regulations.    Many of these laws and regulations also apply to subcontractors.   This session covers the more complicated areas where HR and government contracts intersect.  Topics include:

  • OFCCP – latest news on increased HR compliance requirements
  • Executive Order actions and recent regulatory changes
  • Common challenges to complying with the Service Contract Labor Standards/Service Contract Act
  • Tips for handling whistleblower and relator complaints
  • Handling mandatory disclosures
  • Changes to implement now

Listen to the Podcast View the Presentation

 

Did You Really Mean That FCC?

 

This week, the House Energy and Commerce Committee held a hearing on a bill, HR 2666, which would prevent the FCC from regulating broadband rates. In fact, the FCC’s Chairman Tom Wheeler is quoted as saying “Let me be clear, the FCC will not impose ‘utility style’ regulation…” when
issuing the Commission’s decision to subject broadband service providers to regulations that govern telecommunications services – Title II of the Communications Act.

 

That begs the question, why pass a bill that reiterates what the Chairman promised? There are a couple of reasons why. First, FCC Commissioners do not have permanent appointments—they arinternet.jpge appointed by the President and serve five-year terms. While we doubt anyone questions Chairman Wheeler’s integrity, the next set of Commissioners may not hold the same view. Second, regulating rates in utility- style fashion does not really fit the fast moving technological changes that come with the industry providing internet services. Third, talk about a damper on investment – subjecting broadband networks to the government’s slow ratemaking process would surely have a negative effect.

 

As we understand this issue, no one is purporting to restrict the FCC’s ability to protect the consumer with respect to broadband access or technology companies who rely on an open internet to conduct business. Women-owned businesses have much to lose if the government does not properly balance internet access with regulation.

 

We are keenly aware that according to the SBA Office of Advocacy, “Small businesses, defined as firms employing fewer than 20 employees, bear the largest burden of federal regulations. As of 2008, small businesses face an annual regulatory cost of $10,585 per employee, which is 36 percent higher than the regulatory cost facing large firms (defined as firms with 500 or more employees).” Small businesses are usually the losers when it comes to more regulation.

 

The Congress ought to pass this bill. Broadband access is a critical lifeline to all businesses. Business certainty resonates throughout our economy—especially small companies. Putting the FCC intent into law with respect to broadband rate regulation is a good idea.

Regulation or Innovation? Congress Will Weigh In On FCC Regs That Can Impact Advances In Technology And Wireless Access

19109887010_40b0dfa987_mOn November 17th, all five FCC commissioners are scheduled to appear at a Congressional hearing during which they will discuss the Commission’s work including the upcoming incentive auction and the open Internet order passed earlier this year.  This hearing is a very important opportunity for Congress to ensure the FCC’s recent actions on these issues serve the interests of the American people and our economy.

The economic landscape has changed drastically over the past few decades.  Advances in technology and broadband are changing consumer demand, and businesses and entrepreneurs must evolve in order to compete and thrive in today’s marketplace.  However, current FCC regulations are failing to keep up with these changes, and as a result are interfering with competitive industries’ efforts to innovate and grow.

For business owners, access to high-speed broadband enables increased efficiency of business operations, improved customer service, reduced cost, and the ability to reach new customers and markets.  Entrepreneurs also gain the flexibility to start and grow their businesses, whether they are working from an office, their home, or on the move.

The benefits of today’s broadband technology exist because of the hands-off regulatory approach the government applied to the Internet over twenty years ago.  This framework has a proven record of increasing private investment in new networks, enabling innovation to thrive, and expanding access to the highest quality broadband services to more consumers and businesses.

Unfortunately, the FCC could hurt this track record of success by changing course and adopting old regulations that were meant for the old telephone monopoly.  By saddling the Internet with price regulation micromanagement, among other things, the FCC is discouraging companies from building out their broadband infrastructures.  Similar policies have failed in Canada and the European Union.

The FCC’s regulatory overreach is a high-risk gamble. It puts consumers and businesses in harm’s way, risking the choice and lower costs we have experienced and benefitted from in the modern, broadband-connected world. Instead, we need to maintain the long-held, light touch policy. This approach will generate even more innovation and investment in our broadband infrastructure, crucial for business owners throughout the country.

Congress needs to hold the FCC to a high standard this Tuesday and ensure its actions help foster an innovative and competitive business environment.  This is the only way wants to provide consumers and business owners with access to the high-quality, affordable broadband services they need, while helping to grow our overall economy.

From The Hill: Dodd-Frank’s Impact on Small Business Lending

By Jake Clabaugh, WIPP Government Relations

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Women entrepreneurs face unintended consequences of wall-street reform. According to a House Committee hearing yesterday, the Dodd-Frank Wall Street Reform and Consumer Protection Act, introduced in an effort to prevent another financial crisis, is contributing to small businesses’ inability to access capital from banks.

WIPP’s Access to Capital Platform has cited some of Dodd-Frank’s regulations as a contributing factor to the decrease in small businesses lending. Capital access is a lifeline for small businesses. It is essential for entrepreneurs to have access to sufficient capital to found and grow businesses.

DF picThe House Committee on Small Business convened lenders and experts to discuss how Dodd-Frank has affected the ability to provide entrepreneurs with critical capital. Access to private capital, including bank loans is a primary concern to women entrepreneurs as women-owned small businesses receive only 4% of private sector lending dollars. Additional regulatory burdens could be exacerbating this problem.

The hearing touched on many of the difficulties WIPP members have experienced when trying to access to capital. The Committee cited increased administrative burdens as a significant cost for small and community banks, a primary lender to small businesses. These regulations have increased the cost of making loans and therefore made it more difficult for banks and borrowers. The result is less capital for entrepreneurs.

The hearing also cited the direct impacts on borrowers. Many that would have qualified pre-recession are no longer able to obtain loans from banks due to tighter lending standards. WIPP’s platform advocates for modernized credit scoring that would level the playing field for women business owners.

Until Dodd-Frank is fully implemented, its complete impact will remain unclear. WIPP continues to review ongoing regulations as well as work with Congress to scale back unnecessary barriers to capital access for women entrepreneurs.

Overtime Rule is Over The Top

By John Stanford, WIPP Government RelationsOvertime pic

The Department of Labor, it would appear, is working overtime. Two weeks ago, WIPP responded to the agency’s proposal to require labor history for federal contractors. Now, WIPP is addressing a different proposed regulation – this one making changes to overtime pay. Both proposals were well intentioned, and both pose risks to women entrepreneurs.

Disclaimer: this blog is a brief summary, so if your business may be affected I encourage you to read WIPP’s comment in its entirety.

It all began last spring, when President Obama directed the Labor Department to update overtime regulations, saying the standards for some employees had “not kept up with the modern economy.” Specifically, the so-called white-collar exemption was out of date. The exemption allows employers to avoid paying overtime (required anytime an employee works more than 40 hours a week) for executive, administrative, and professional employees because they typically have better pay, benefits, and privileges.

The exemption has three criteria. First, the employee must be salaried. Second, the salary must be above a certain threshold. Third, the employee duties must meet certain criteria – basically, you cannot just give someone a manager’s title and exempt them; they must be acting as a manager.

To answer the President’s call for modernization, the Labor Department proposed to update the second piece, the salary threshold, from roughly $24,000 to $50,440 and index it to economic growth. Essentially, this qualifies white-collar employees who make less than $50,000 a year for overtime pay if they work more than forty hours a week.

WIPP agrees with the President that our regulations do not match a 21st century economy, and we should work on updating these requirements for a fair and modern workplace. Moreover, companies that are purposefully skirting the rules on overtime pay and cheating otherwise qualified employees should be held accountable.

Nonetheless, simply doubling the salary threshold goes too far and achieves too little. While large companies in large cities may be able to afford a $50,000 salary floor, the entrepreneurial community is left with bad options: possibly cut employees to afford a minimum salary for others, or restrict working hours and set up an hourly tracking system. Notably, the Labor Department estimated only a quarter of employees will likely see higher paychecks. Others may see reduced hours.

In the comment, WIPP highlighted concerns about the cost to implement the rule, difficulties in application of the rule, and the dangerous impact on employee wages and benefits.

The Labor Department predicted that simply implementing this change would cost small businesses, including the vast majority of the nearly ten million women-owned firms, between $130-$180 million in the first year alone. That does not include the more than $500 million in increased wages small businesses are expected to pay. The Labor Department itself mentions that business could cut hours and benefits to make up for this loss.

Moreover, to ensure compliance with these new regulations, businesses will begin closely monitoring and tracking their employees’ work hours. Tracking and monitoring employee hours is very difficult, if not impossible, given the evolving dynamics of the workforce. Many white collar employees have flexible schedules, work from home, check and answer emails from smartphones or tablets and are no longer restricted by a rigid 9-5 schedule.

It also isn’t just companies. Non-profits face the same requirements. An exception for them (as well as small businesses) is so narrowly crafted it may not cover many mission-oriented organizations or the smallest of businesses. Both are places where working above and beyond forty hours a week may be more about commitment to a cause than a bigger paycheck. For this reason, WIPP asked that the exception be broadened to actually apply to small businesses and non-profits.

The idea that our regulations need to be updated is not political – it’s common sense. But often the regulatory pendulum swings too far as it has here. As proposed, women entrepreneurs could face the arduous tasks of transitioning current employees from salaried to hourly workers and possibly cutting benefits to make payroll all while tracking and limiting employee hours. Talk about working overtime.

“Fair Pay” Rules Just Aren’t Fair

women comp

By John Stanford, WIPP Government Relations

Women Impacting Public Policy (WIPP) recently submitted comments on proposed regulations that would require federal contractors to disclose labor violations from the past three years. This blog accompanies those comments as a summary of WIPP’s position. For more details or if this impacts your business, I encourage you to read the full comment here.

Last summer, President Obama issued an Executive Order with the goal of barring bad companies from winning federal contracts. WIPP, along with most in the contracting community, agrees that companies that follow the rules should not have to compete against companies that break them for federal contracts.

In May, the Labor Department and the FAR Council (overseers of contracting rulebook, “the FAR”) proposed how the President’s order would be implemented. It turns out, as with most things, the devil is in the details.

The proposed regulations require federal contractors and subcontractors to disclose violations of 14 federal labor laws and equivalent state laws from the previous three years. Exemptions were provided for companies with contracts valued less than $500,000. As proposed, prospective federal contractors would need to declare if they had labor violations in the previous three years when submitting an offer. During an initial evaluation, contracting officers would see that declaration (a simple “yes” or “no”), without any additional detail or explanation.

Later, if a contractor were likely to win an award, the contracting officer would have to decide if the contractor is a responsible company (a requirement of all government contracts already). It is in this phase that details like appeals, remediation, or mitigating factors could be explained. Contracting officers will attempt to identify companies with “serious”, “willful”, “repeated”, and/or “pervasive” violations and not award them contracts. Companies with minor violations could still be considered responsible and win contracts.

WIPP responded to the regulation during the public comment period expressing concerns with the new system and how it could negatively impact women-owned businesses, including those who had no history of unsafe or unfair work practices.

Notably, the proposals were incomplete as the Labor Department and FAR Council chose not to include what state labor law violations must be reported. It is impossible to gauge the impact of a regulation – the reason for comments– when missing significant portions.

What was in the proposals, however, was equally concerning. WIPP’s comment discusses how, in some cases, violations that require reporting will not be be fully adjudicated. That is, companies would have to report decisions against them that may ultimately be overturned – as nearly a third of NLRB decisions have been.

This is compounded by WIPP’s worry that simply having violations on record will “blacklist” companies without providing any opportunity to offer explanation. With limited resources and time, contracting officers may elect to avoid companies with any disclosed violations, despite the intent of the order to only bar violations of a certain severity.

The comment also considers burdens on subcontractors who similarly must report violation history, and the lack of resources the government may face to answer questions about weighing different labor violations. Moreover, the onus to collect and judge subcontractor violations falls to primes, a strategy the Labor Department itself questions.

WIPP’s final concern is that this rule is one of many in a disconcerting trend of new regulations that specifically target federal contractors. Earlier this year, regulations raised the minimum wage solely for workers on federal contracts. New requirements regarding sick leave are expected to come later this year. These make contracting with the federal government more onerous, particularly for women entrepreneurs seeking to enter the market.

Without question, WIPP supports efforts by the federal government to rid the contracting environment of businesses with a history of abusive and neglectful violations. In doing so, the government levels the playing field for the millions of businesses playing by the rules. But the proposals commented on will not achieve this goal. Instead, they will make it harder to be a contractor – pushing the innovative products and services of women-owned businesses out of the federal market.